eBusiness Weekly
Golden Sibanda
The outcome of Zimbabwe’s historic 2018 general elections, the first without long time leader Robert Mugabe who reigned for 37 years, will help shape the direction and pace of growth for the decades long battered economy, as the country bids to return to normalcy.
Zimbabwe’s economy — which contracted by nearly 50 percent in the decade to 2008 — realized some respite after dollarisation in February 2009 and has been growing at an average rate of six percent annually between 2009 and 2017.
Growth, which had gathered momentum after dollarisation in 2009 tapered off in 2013, following expiry of the Government of national unity morphed from three political parties following disputed outcome to the 2018 general elections, which went to a run off boycotted by the main opposition then led by the late Morgan Tsvangirai, after the poll failed to produce a clear winner.
In a demonstration that a free, fair and credible election has the potential for huge spinoffs, investor interest spiked on improved confidence after President Mnangagwa took over the reins in November 2018 from Mugabe, promising widespread economic reforms, a return to true democracy, free and transparent polls, rule of law and international reengagement among others.
More than $20 billion firm foreign investment commitments have been received while the Zimbabwe investment authority reported recently that it had approved over $16,7 billion in just six months of this year on strong investor interest, growth in confidence opening Zimbabwe up to outsiders.
The Ministry of Finance and Economic Planning has revised its projected economic growth rate from 4,5 percent stated in the 2018 national budget to 6 percent growth on strong performance in agriculture, mining and manufacturing.
Even more conservative but reputable global institutions like the World Bank, have revised upwards growth projections for Zimbabwe’s economy to 2,7 percent from an initial forecast of 1,8 percent.
In a report produced ahead of the 2018 harmonised elections, Emergent Research; a South Africa and Zimbabwe registered independent and integrated research house focused on Zimbabwe said that the election will be a defining chapter for the economy and nation of Zimbabwe.
“The outcome and more importantly the transparency and credibility with which the election is conducted will certainly have significant bearing on the entire investment landscape,” Emergent said.
Emergent has four years of conducting investment and asset class research and advising institutional investors on Zimbabwe, enabling it to provide an understanding on the local markets.
“A credible election will unlock foreign direct investment (FDI), portfolio flows and trade -while a disputed election, marred by irregularities and violence will exacerbate the economic pain currently being felt in the nation,” Emergent said.
Emergent said for the first time, the core messages of two main rival parties, which contested the 2018 election, have a common thread- attracting and retaining FDI and managing the economy prudently. This is a stark departure from the incumbent’s predecessor– Robert Gabriel Mugabe, who governed the nation with unsuccessful economic policies in the last half of his four decades of rein.
“It is this realisation, on both sides of the aisle that investor confidence and fiscal prudence are key to economic success that provides a glimmer of hope. “With a credible election (which has already witnessed peaceful, smooth and orderly voting) we are confident of a strong performance in the economy of Zimbabwe thereafter.”
Observers have endorsed poll process
While rowdy opposition supporters threatened to spoil what has thus been largely incident free electoral process by staging violent protests before all results are officially announced, observer missions have endorsed Zimbabwe’s landmark polls saying they were largely orderly and within the law.
The African Union, Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (Comesa) and the Commonwealth observers said on Wednesday that the voting process was largely free and fair.
Beyond the comfort of a promising economy, Emergent Research said, lies the question of where the greatest investment returns will be found should events go as hoped.
Harare based economist Dr Gift Mugano said that the electoral process was free, fair and credible is now a fact; a commitment he said was made by President Mnangagwa on his inauguration last year, which he has consistently stuck to, a process he said had been endorsed by all observers.
Possible 2018 election outcomes
The research, advisory and consulting firm said there were three possible scenarios to the outcome of the 2018 harmonised elections; a 35 percent credible election with a clear winner, a 45 percent chance of a Government of national unity if there is no one clear winner or a disputed election process and result.
A clear winner of a credible election endorsed by observers would see western governments, development finance institutions and lenders resume lending to the Zimbabwe government, companies and projects. Liquidity in hard currency will be enhanced, interest rates kept low in the short term and risk appetite rises.
A Government of national unity, Emergent opined, would likely see international lenders being measured in their lending to Zimbabwe while possible discord in government administration between different parties could stall projects and programme, but otherwise the economy would be on a growth trajectory.
A third outcome, disputed election not endorsed by regional and international poll observers, the economic research firm postulated, could result in perceived risks and sticky sanctions repelling any funding and lending. Current investors and lenders could seek to exit Zimbabwe; drying up credit.
“The difference between a well-accepted election process and outright disapproval will be vast and consequential. A smooth and internationally accepted election process and outcome will create conditions for lines of credit, improved liquidity and risk appetite which will boost economic activity and GDP growth,” Emergent said.
Dr Mugano said a free, fair and credible election was key, but not sufficient. He said such democratic process was critical as a foundation, but actions to be taken in terms of policy and caliber of people to manage key ministries and key parastatals was more important to take the economy forward.
Dr Mugano said based on the outcome of the national assembly elections, it was clear that there will be a clear winner. He also said a Government of national unity was not desirable due to likelihood of divergence of views, which would stall Government programmes due to bickering along party lines.
“What is not right is where people will be appointed on political merit and not technical merits. Government will need the right people in strategic ministries because (right) planning will be critical. Zanu Pf has many people with the expertise, it has many young vibrant people who can do the job,” he said.
Dr Mugano also said that with Government targeting middle income status by 2030, long term planning over 15 to 20 years was critical, which would see each ministries outlining its planned contribution to economic plans further broken down into targets to be achieved within five year timelines.
“Without that it will be difficult to attract investors. They want to see what your plan is and that gives confidence. We do not need GNU (Government of National Unit); you saw the bickering in government in 2008.”
If a similar GNU consummates, Emergent said it expects 2018’s growth to average 4 percent from 3,5 percent in 2017. Ensuing growth is forecasted to average 9,3 percent in the following four years.
In a clear winner and accepted election, Gross Domestic Product growth is expected to be oscillate around 6,5 percent in 2018 before going double digit to 15 percent in the following year.
The case of a disputed election ‘introduces a period of tepid growth starting with 2,5 percent in 2018. Any goodwill earned so far this year will be largely reversed by a contested result. Growth is projected to remain below 4 percent as in the period 2013 and 2016 where the 2013 results were generally disputed’.
“On the contrast, a credible election will boost confidence and likely see a fall in the exchange premium on Bond notes and RTGS balances against the US Dollar.
A cut in the exchange premium will lower the cost of imports and ultimately landing price of imports in Zimbabwe,” the Zimbabwe focused research firm said.
