eBusiness Weekly
Elias Pacheso
2019 has come and gone leaving behind a myriad of challenges for the ordinary man on the street. The challenges facing the economy stem from the readjustment of policies that sought to eliminate subsidies for basic commodities and services such as fuel and electricity.
A bad agriculture season has not helped the situation either. 2019 will go down as the year the cost of living went up leaving many people unsure of the future. The drought which appears to be replaying itself in 2020 will not help and this could mean that the economy and its citizens have to brace up for fresh challenges.
“Will 2020 be any better?” Being a leap year anything is possible. The challenges facing the economy are not insurmountable. Clearly the 2020 is a year where serious structural transformation of systems and processes is required if we are to start building on successes registered in 2019.
When faced with mounting problems it is very easy to forget and not build on any positive achievements. Back peddling could come back to haunt the economy as always happens when the going gets tough.
Many are asking, can things be any tougher than they already are or has the economy seen the worst. Looking back, it is not clear whether we have seen the worst. For an economy dependent on Agriculture and like many other African countries dependent on primary sectors, the weather continues to wreak havoc but it is important to mention and appreciate where the economy has come from.
What does the Government need to focus on in 2020?
Energy availability
Despite the increased use of solar energy in the economy, more needs to be done to encourage the adoption and use of solar power in households and businesses. Reliance on hydro power and thermal power in the short to medium term has placed the country at risk. The Ministry of Energy will do well to introduce additional incentives to drive up the use of solar energy solutions in the country. This will see the energy crisis being gradually resolved.
Access to food and
food security
Reliance on imported food at a time foreign currency is scarce is not good for the economy and the Government must ensure that the country saves foreign currency by utilising our many water bodies to grow crops. Renewed focus must be placed on ensuring that the water is used to irrigate crops and wean the country off unpredictable rain fed agriculture.
Increasing the value of the local currency (fighting inflation)
It goes without saying that the restoration of value in the local currency should be a top priority for the government in 2020. There are too many moving parts in this area, with the level of prices being the most important. As long as inflation continues to rise at an alarming rate in the country’s currency will continue to lose value. A decision must be made on whether or not to allow for the use of the foreign currencies alongside the local currency.
In practice, prices continue to be benchmarked against the United States dollar, while incomes continue to lag behind. This mismatch is clearly unsustainable and if there is no convergence in this area the country will be faced with growing challenges.
Connected to this inflation problem is the low disposable income levels in the economy which stem from high taxation rates and multiple taxes in the economy.
The government will do well to reduce this tax burden and leave consumers and corporates with more to spend in an economy that has limited spending power.
Youth unemployment
As with many countries in the world, the question of youth unemployment remains topical and the government will do well to further strengthen its initiatives in this area. Innovation is the answer to a lot of challenges facing the economy. Already the Government has announced the launch of the $500m venture fund.
Better regional integration
East African economies have been working hard on bringing down trading, people and capital movement barriers increasing the reach of companies operating in their countries. Zimbabwe will need to do the same in 2020 to take advantage of bigger markets and expand its reach to other countries.
As we look towards a better 2020, our own attitudes as citizens and economic players must change.
We cannot expect the economy to rise from the ashes without playing a part in its revival.
Clearly the problems facing the economy are many and complicated but if we remain focussed on them we will not move forward. As we experiment with policies mistakes will be made but corrections are key.
Continuing with bad policies and hoping change or improvements will not work. Zimbabwe must work smarter using its own competitive advantages.
On the economic front the market is waiting keenly for the first Monetary Policy Committee meeting of 2020.
The last meeting was on November 29, 2019 and urgent restraint on spending following the presentation of an expansionary fiscal policy by the Ministry of Finance.
On the currency front the Reuters System for foreign currency trading is still to come into place whilst the exchange rate has remained stable.
