World Market Developments
We tend to be so preoccupied with our own problems and the economic
taking place here that we lose sight of what is going on in the world
us. In fact the changes in the global economy are startling and we need
know what is going on and how these changes might impact on us when we
finally claw ourselves out of the hole we are in.
Just this morning for example, we note that oil prices may break
US$100 per barrel barrier for the first time. This can be ascribed
the fall in the value of the dollar, which stood at 1.45 to 1 against
Euro today. When the Euro was first launched the rate set was 1 to 1
this is a huge devaluation in real terms and certainly in an historical
context. However itís also due to the gradual tightening of supplies
against rising demand. We must now accept that the oil era in global
markets is coming to an end. In this situation any threats against
immediately results in a sharp rise in prices. Instability in the Gulf
many other oil exporting regions are not helping.
But these shifts will raise revenues in oil exporting regions and
technologies and alternative energy sources. So we expect the Angolan
economy to expand 30 per cent this year over last - a huge jump in
activity driven by itís growing oil exports. World trade is also
rapidly - at nearly three times the average expansion in global
activity pointing to the continued intensification of globalisation
its attendant implications and stresses. Exports from Zambia will reach
billion this year - 7 times the total exports of Zimbabwe, just 7
our exports exceeded those of Zambia by 5 to 1.
Driven partly by the changes in energy markets, the prices of basic
have all soared this year and many have doubled in real terms. This
the markets for maize, rice, sorghum and wheat and despite the massive
increase in both prices and farm returns, stocks continue to shrink.
outlook for these basic foods is regarded as being very strong and this
serious implications for those importing countries that have a basic
deficit. Zimbabwe would normally stand to benefit from such a shift but
stands to suffer along with many other countries. I estimate that our
deficit in the next 12 months will be US$700 million, more if prices
the next few months.
Then there is the emergence of China and India as the new economic
powerhouses of the global economy. Both have economies that are growing
10 per cent per annum - an extraordinary achievement in economies of
size and diversity. Their growth in demand for raw materials is driving
metals and mineral prices to record levels - so we see copper trading
record prices, even gold is now over US$800 a fine ounce. Commodity
producers and exporters are all benefiting and we see the currencies of
these countries - like Australia and South Africa, moving to new
This in itself has grave risks for the countries concerned - strong
currencies means increased imports and invisible movements of foreign
Zimbabwe has not participated in these normally very favorable global
conditions - had we maintained our economy as it was in 1997 and
eased up on some controls, we would have seen very strong growth in our
exports and domestic economic activity. Instead our economy has shrunk
fast as the region as a whole is expanding - declining by 55 per cent
1998. Exports have declined from US$3,4 billion to US$1,4 billion
the massive rise in unit prices over recent years.
I think the situation here was totally predictable and understandable
is not so understandable is the slow growth of the South African
When I speak to South Africans or Zimbabweans going to visit South
the impression gained is that the economy is booming! Not so, despite
earnings from exports of all commodities, despite massive expenditure
infrastructural development throughout the economy and conservative
economic policies, South Africa shows no signs of reaching the sort of
growth figures that would enable her to reduce poverty or the gap
rich and poor. In fact they have reduced their forecasts of growth to
over 4 per cent - a modest figure that in my view should have sent
waves through Union Buildings.
Tito Mboweni spoke out in Tswane (Pretoria) recently and argued that
had 'contained' the contagion effect of the Zimbabwe crisis and
would not affect the South African Rand. In fact this statement was
misleading in many respects - Tony Blair had stated in his last visit
South Africa that in his view, the cost of the Zimbabwe crisis on South
Africa was equal to 3 per cent of GDP. British Prime Ministers do not
such numbers out of their thumbs - his staff advised him of that sort
number. I agree with the estimate.
It is a commonly held view that it is only a matter of time before
Africa starts to behave in a similar manner to the rogue regime in
That may not be true, but the perception alone is enough to ensure that
new wealth being earned from the surge in global commodity prices does
fund domestic growth in South Africa. Rather it funds new investments
in developed countries that are perceived as being a more secure haven
such resources. The strong Rand is a threat in itself - the massive
in foreign trade of South Africa is testimony to that - and South
industry is the loser.
In fact the only place where you see evidence of wealth in South Africa
in the glittering shopping malls of the cities where the new elite and
predecessors spend their money on imported goods and luxuries to the
of global exporters.
At the same time South African business is busy carving out a name for
itself in global markets - the little known group Nationale Pers now
third largest media group in the world, SAB is number 2 and might
number one beer manufacturer. Anglo American is in the top ten of
mining companies, Rembrandt is one of the top three tobacco companies,
Barlow Rand is a global cement manufacturer. The growth of these South
African multinationals is not taking place at home, where it matters.
Growth comes out of communities that have confidence in themselves and
country. It stems from thousands of small decisions every day. Earning
record sums from exports of basic commodities is simply translated into
imports of consumption items and not real growth if conditions are not
right. That is our challenge.
Bulawayo, 7th November 2007