Politics to Stall Economic Growth: MMC report

The Ministry of Finance projects the growth to be underpinned by strong performance in finance (23%), mining (15, 8%), tourism (13, 7%) and agriculture (11, 6%).

In its outlook for 2012, MMC Capital said Zimbabwe’s economic performance this year will be largely determined by political outturns.

“The lifespan of the government of national unity (GNU), whose creation is owed to the current economic and political stability is now coming to an end with elections expected either this year or in 2013,” MMC said in the Zimbabwe 2012 Equities Market Outlook report.

“Ahead of these elections, we expect political parties to invest more of their energies in preparing for elections than nurturing economic growth.”

Based on that MMC said it expects “more political energies to be directed towards electioneering than growing the economy” and as such it was taking a more conservative view on the 2012 growth rate than the 9,4% projected by the ministry of Finance.

It said with the debt issue unlikely to be resolved in 2012, it does not see an upsurge in foreign capital flows.

Zimbabwe’s external debt is over US$8 billion and despite cabinet agreeing to use traditional methods as well as debt relief to extinguish the debt, nothing has moved on that front. This means that the country cannot get the lines of credit needed to kick-start the revival of the economy.

However, the country has recorded a number of portfolio investors especially on the Zimbabwe Stock Exchange. Foreigner investors account for over half of the trades on the bourse. MMC said foreign portfolio flows constitute ‘hot capital” whose impact on the economy’s liquidity may not be sustained.

“Foreign lines of credit have remained elusive, with the few coming from regional financial institutions like AFREXIM Bank, PTA Bank and DBSA (Development Bank of Southern Africa),” it said.

‘The continued rollover of these lines will depend to a large extent on satisfactory performance by the borrowing industry. Recent indications from the banking sector on the ability of industry to service credit facilities have been far from satisfactory.”