The Outlook for 2007
We are now well into the wet season and it is possible to look at the
situation and begin to make some assumptions about the outlook for the
12 months. This could change and in some cases, dramatically, but I
this point in time the assumptions I have used are reasonable and the
estimates made are the best available at this time.
The first assumption I have used is that there will be no significant
in the overall political situation here. Zimbabwe will remain a pariah,
failed State with hostile relations with the majority of the rest of
world. The second assumption is that Zanu PF will follow through on
recent policy statements and we will see further hostile actions
private sector during the year. A third major assumption is that the
season is going to be inferior to 2005/06.
Reports coming into me from all over the country suggest that crop
have been similar or reduced compared to 2005. We know the tobacco crop
fall to below the 50 000 tonne threshold this year (the minimum crop
required to maintain the support infrastructure to keep the industry
intact), we also know that plantings of contract crops has declined due
uncertainties in the corporate sector that maintained this activity
In many areas crops have not yet been planted or have not yet
Recent heavy rains affected the southeast and the midlands (the Tokwe
the Lundi are in flood) but in the rest of the country crop development
well behind schedule. This suggests an even smaller outturn in 2007
2006 when only 700 000 tonnes of maize was grown. This is supported by
high prices being achieved for green maize at present. For all these
I think that agricultural output will decline again this year by at
per cent – maybe more.
In the mining sector virtually all major maintenance and expansion
has stopped. Suppliers to this sector report a sharp drop in buying
throughout the industry. The only expansion taking place is in the
sector where special conditions seem to prevail. The main concern being
threat to “take” 51 per cent control of all mines in the country. A
statement that the State will use this control to appoint new
now reinforced this threat. My prediction is therefore that mineral
will continue to fall. Certainly there will be no recovery in sales of
to the Reserve Bank until monetary policy is rationalized and as the
informal sector is now the subject of fresh attacks, this will reduce
illegal gold output and sales.
In the industrial sector the outlook is for accelerated decline in
industrial activity. The failure to adjust exchange rates on a regular
systematic basis is undermining the viability of many exporters and the
concomitant failure to make available foreign exchange to industry for
imports is impeding activity on a broad front. Even the State predicts
industry is going to continue to decline but recent actions by the
only make this prediction inevitable but have also increased the
of even more rapid decline.
The threat that the State will take 51 per cent of all foreign owned
is finding expression in many different ways. Zanu PF leaders – even
low level, are approaching owners and managers in industry with the
that if they do not co-operate they will be forcibly taken over. These
threats are being taken seriously.
Foreign owned companies occupy many of the key positions in local
manufacture and must be reviewing their activities with this threat in
Like the mining industry they may well decide to halt any expansion and
major maintenance work. This will inevitably impact on both current and
This generally gloomy outlook is compounded by the fact that the region
seems to be making no serious attempt to head off a shortfall in
energy supplies that has been predicted for the region for some years
scheduled to start impacting on supply in 2007. In Zimbabwe the
coal and foreign exchange for spare parts and maintenance of existing
will continue to impede supplies of electrical energy and this together
problems in the coal and liquid fuels market will make operating
for many companies more difficult.
The one sector that may see a slight recovery in activity is tourism
the regional boom in tourism (growing at 10 to 15 per cent per annum)
result in some recovery in tourist numbers at the major tourist
However it is unlikely that hotel occupancy will rise significantly
the levels maintained last year. Income from tourism will remain
as the switch from traditional tourism origins to the newer origins
at a lower level of per capita spending.
After a turbulent few years, the financial sector will remain
stable but critically dependent on Reserve bank policies. Wild swings
policy in 2006 have seriously undermined confidence and reduced the
of financial institutions to protect themselves and their viability in
otherwise distorted and declining economy.
The commercial sector of the economy will be maintained by the inflow
funds from the Diaspora now running at in excess of US$100 million per
month. These funds are directed mainly at paying school fees and
costs and supporting the cost of living for the majority of people
Zimbabwe. Converted at parallel market rates these inflows will
have a major impact on consumer spending and it is a pity that local
industry will not be able to take advantage of this because of their
constraints. This sector will be hampered by shortages and rapidly
As far as inflation is concerned and foreign exchange rates on informal
markets, both can be expected to rise even faster than in 2006.
set to exceed 2000 per cent shortly and will probably rise still
midyear. If government continues to insist on price controls this will
to company failures in the retail and manufacturing sector. The main
problem being cash flow constraints and an inability to finance new
Bulawayo January 4th 2007.