Agric, mining to anchor 2024 economic growth

MINING and agriculture are projected to remain key drivers of Zimbabwe’s economic growth this year despite the adverse impact of external shocks and the potential negative effect of the El Nino weather phenomenon, economic commentators have said.

This comes as the Government’s major policy interventions have restored stability, upended by inflation and exchange rate volatility in the first half of the year while the extension of the multicurrency beyond 2025, until 2030, has also boosted confidence.

To underpin macroeconomic stability, authorities rolled out a coterie of policy measures, among them a tight monetary policy that saw record interest rates, transfer of external payment obligations from the central bank to the Treasury and payment of royalties, duties, and taxes in local currency to improve its appeal.

In recent years, mining and agriculture have largely been pivotal in sustaining the country’s economy, which in 2022 grew by 6,5 percent while last year’s economic growth stood at 6,5 percent.

Zimbabwe’s economic growth is expected to fall to 3,5 percent in 2024 from 5,5 percent this year, mainly due to an anticipated drought caused by El Niño, Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube said last month.

The domestic economy has also proved to be resilient to external shocks such as the global supply chain disruptions brought about by the ongoing Russia–Ukraine conflict and the Covid-19 pandemic.

In light of the predicted impact of El-Nino on the 2023/2024 summer cropping season, the Government in collaboration with the private sector has put in place safety nets to mitigate the effects of the impending drought.

Such mitigatory measures include continued implementation of climate-proof agriculture concepts.

The World Meteorological Organisation (WMO) has warned about how the EI Nino conditions could severely impact farm output in Zimbabwe and some regional countries in the 2023/2024 summer farming season.

While the depressed mineral prices trend on the international market is seen continuing into 2024, potentially affecting revenue from the mining industry not only for Zimbabwe but globally, the Government has set sights on increasing mineral production and fostering value addition.

This would mitigate the adversarial impact commodity price depreciation on the international market will have on revenues from Zimbabwe’s mining sector.

Economic commentator George Nhepera said mining and agriculture were expected to remain key in driving Zimbabwe’s economy despite the obtaining situation, which is characterised by the ongoing depressed mineral prices on the world market and the impending drought due to the predicted El-Nino phenomenon.

“Our growth in 2024, will continue to come from two main sectors which are mining and agriculture — mining because we see a lot of discovery and investments in that sector like what this Australian company (Invictus Energy) has just done in Muzarabani where gas has been discovered.

“So, our key leverage for growth in 2024 will remain coming from mining despite the low prices on some of the minerals, but that’s just a temporary thing. Hopefully, prices will stabilise and have more from that sector.

“And the Government is putting in place issues to do with adding more value in that sector,” he said.

Mr Nhepera said the Government had made significant inroads in stabilising the exchange rate and inflation which have always remained an elephant in the room that has adversely affected planning and budgeting for citizens and the business.

“Our policies from the Central Bank, though we have seen the introduction of the gold coin and the digital token which were meant to help in the stabilisation of inflation and exchange rate, there has not been much progress in as far as that issue is concerned.

“Hopefully, in 2024 there will be other alternative policies that the authorities will come up with to help us in that regard. For example, as of now, you are aware that the black market exchange rate is spiralling versus the interbank rate which is trailing behind by a huge margin, so that 20 percent or less premium as expected by the IMF (International Monetary Fund), we are nowhere near that.

“That’s a policy issue that needs to be attended to,” he said.

In a separate interview, renowned economist Professor Gift Mugano said the developments happening in the mining industry through investments such as the US$1,5 billion steel plant in Manhize near Mvuma by a Chinese firm, Dinson Iron and Steel Company, was a potential game changer in cutting down the country’s import bill.

“The developments happening in Manhize are very positive in terms of cutting down steel imports and also generating exports of steel as well because we spend (at least) US$300 million per year importing steel.

“So, if it’s going to start producing we are going to cut down that steel import bill and also generate foreign currency in 2024.

“The activities in the mining sector are quite massive across a number of minerals — we see a lot of developments in the lithium sector (where President Mnangagwa commissioned several projects including (multimillion projects at Bikita Minerals, Prospect Zimbabwe’s Arcadia Mine and Max Mind Sabi Mine) and we like that because it helps us to build the much-needed foreign currency.

“What is very critical is to push the value addition agenda because of the importance of lithium and other minerals in the green economy,” he said.

Instructively, several other key projects commissioned by the President across key sectors, including multimillion RG Mugabe and Joshua Mqabuko Nkomo international airport upgrades, and major roads such as Beitbridge-Harare, have undeniably laid a firm foundation for sustainable growth and development.

Turning to the agriculture sector, Professor Mugano said the drive by the Government through the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development to promote growth and development of the sector was commendable, and going into 2024 this would see the sector remaining one of the key sectors of the economy.

“And the move to push more relevance in terms of commodity exchange is quite good where even maize, soya bean, and wheat are now part of the commodities which must be traded on the commodities exchange.

“It’s a good development in terms of policy perspective because we have always been raising concern that we need to create a viable market ecosystem for the agriculture sector to bring in the private sector in funding agricultural production and also marketing of the same commodities,” he said.

“It is clear that we experience drought after every two years of good harvest and we need now to be smarter and build surpluses in good years and build a strong strategic grain reserve which can take care of us for the next three years if we have drought,” he said.

The Zimbabwe National Chamber of Commerce (ZNCC) president Mr Mike Kamungeremu said fiscal and monetary authorities have worked throughout 2023 to tame the runaway inflationary pressures as well as stabilising the exchange rate.

This he said has been through various interventions that included continued implementation of a tight monetary policy stance, and introduction of the gold coins and gold-backed digital tokens to mop up excess liquidity.

“As we look forward to 2024, there is some optimism from industry and commerce.

“There is a positive sentiment across business people getting into 2024 mainly because of the extension of the multi-currency to 2030, it brought a lot of certainty in the market.

“While that optimism is there, we are aware that it has already been forecasted that there will be normal to below normal rainfall so there is likely to be a drought and that drought is going to affect business.

“At the same time, we also have the current situation where commodity prices are depressed and that is spilling into 2024 and will affect business.

“However, it’s good to note that the business people themselves are more optimistic of better prospects next year despite the impending drought because on the other hand, the Government and the private sector have collaborated to reduce the effects of the drought whose impact also spills to business particularly the agro-processing industry,” said Mr Kamungeremu.
-herald