HARARE – The Global Political Agreement (GPA) signed exactly four year ago in September 2008, is yet to bear much fruit economically.
The GPA was to give birth to an inclusive government four months later in February 2009 and try to turn around the country’s economic and political fortunes following a disputed run-off election in June 2008.
It was also meant to halt subsequent multiple threats to Zimbabwe’s socio-political and economic environment, after a decade of economic stagnation and hyperinflation.
According to Article 3 of the GPA, the agreement gives priority to the restoration of economic stability and growth in Zimbabwe.
“The government will lead the process of developing and implementing an economic recovery strategy and plan. To that end, the parties are committed to working together on a full and comprehensive economic programme to resuscitate Zimbabwe’s economy, which will urgently address the issues of production, food security, poverty and unemployment and the challenges of high inflation, interest rates and the exchange rate.”
To date, the inclusive government has managed to stabilise inflation at below five percent per annum as well as a stable exchange rate, largely due to adoption of a multiple currency regime that is largely dominated by the United States dollar.
In terms of economic growth, real GDP growth stood at 5,7 in 2009, estimated around 8,1 percent and 9,3 in 2010 and 2011 respectively.
The growth is expected to slowdown in 2012 on account of poor performance in agriculture and the diamond industry with government recently revising it to 5,6 from the initial projections of 9,4 percent.
Despite operating in a stable currency regime with stable inflation, interest rates on loans average 20 percent and go as high as 50 percent, according to Reserve Bank of Zimbabwe governor Gideon Gono.
Government is yet to secure significant investment to increase power generation capacity which industry says is a key enabler to recovery.
Currently the country generates about 1 400MW against rising demand of above 2 200MW.
As a result of a slowdown in agriculture after incessant droughts to an extent the country is relying on imports and food aid.
Recently the Zimbabwe Vulnerability Assessment Committee on rural livelihood assessment revealed the number of people in need of food assistance increased by 600 000 from last year to 1,6 million this year.
Due to erratic power supplies local industry capacity utilisation averages 60 percent.
Confederation of Zimbabwe Industries president Kumbirai Katsande said while capacity utilisation in the local industry had picked from 30 percent in recent years to over 50 percent last year, manufacturing is in a crisis and in need of government intervention.
Companies are also struggling to secure capital to retool after a decade long of economic stagnation largely due to an unpredictable policy environment, with particular fear of the indigenisation act.
Foreign investors are wary of losing their capital under indigenisation, which compels all foreign-owned firms to cede majority shareholding to locals Zimbabweans.
Economic Planning minister Tapiwa Mashakada recently said government had approved projects worth more than $6 billion by December 2011, but were still on hold as investors have adopted a wait-and-see attitude citing possible acts of expropriation.
Currently Indigenisation minister Saviour Kasukuwere is pushing for compliance in the banking sector after he completed implantation in the mining and manufacturing sectors.
Efforts to attract foreign investment have also been hindered by differences in government, with the three political parties being accused of pursuing narrow party interest at the expense of national good.
The country’s major investment since dollarisation, Essar Africa Holdings’ $750 million steel production partnership is yet to take off as government remains divided on whether or not it should relinquish Mwanesi iron ore claims, a key enabler to the steel venture, to the new company.
Another state ethanol production partnership with private investors, Green Fuel, is still to take off as the inclusive government remains divided on proponents of the deal, with others pushing for majority state ownership, as well as policies to support the venture.
Economists argue a decisive election could end bickering in government and bring policy certainty.
Anthony Hawkins, a top Harare-based economist, said while the impact of elections on the country’s economy depends on the conduct, a peaceful and well-represented polls could be a blessing for Zimbabwe.
“Elections may be able to give the country a government that is able to make decisions, unlike the current situation that we have and obviously investors will respond,” said Hawkins, who is also an Economics Professor at the University of Zimbabwe.