ZIMBABWE’S economy is projected to miss government targets in 2024 due to headwinds posed by the El Niño phenomenon and the weakening of commodity prices on the global market, a new report by a local economic research firm has shown.
BERNARD MPOFU
Treasury sees the economy expanding by 5.5% in 2023 on account of better-than-expected output in agriculture, in particular tobacco, wheat, and cotton.
However, research firm Mark & Associates says economic growth is expected to slow down to 3.5% in 2024, mainly owing to the anticipated impact of El Niño in the 2023/24 summer cropping season on agricultural output, and declining mineral commodity prices attributable to the global economic slowdown.
Mark & Associates Consulting Group (M&A) is a strategic advisory firm focused on critical issues at the centre of economics, business, politics, and society.
The southern African nation has been battling a weakening domestic currency, high levels of inflation, de-industrialisation and unemployment.
Experts say structural weakness, policy uncertainty, corruption and international isolation have inhibited the Zimbabwean economy from performing adequately since the early 2000s, resulting in episodes of economic recessions.
“In 2024, the agriculture sector is projected to contract by -4.9% due to the anticipated normal to below-normal rainfall pattern,” Marks & Associates says in a report titled Zimbabwe 2024 Outlook and Strategy.
“Based on our estimates, we expect economic growth to be sluggish at 2.0% in 2024. The El Niño phenomenon which is associated with extreme weather patterns, is expected to undermine agriculture production, especially for maize. Low commodity prices also present downside risks for mining sector output.”
The researchers also warned that new taxes introduced by Treasury this year will push up the cost of living.
“Businesses should be prepared to enter uncharted economic waters in 2024 as it will be marked by policy shifts and uncertainty,” the report says.
“This will create both winners and losers. Already, the business community in Zimbabwe is seized with uncertainties around regulations, taxes and revenue measures introduced in the 2024 National Budget. While National Treasury has moved in to ‘fine-tune’ some of the measures (exemption of basic goods from VAT and reduction of Sugar Tax), the policy environment remains ambiguous. It is a fact that most African governments are squeezed between poor citizens and big financial holes in public coffers.”
With no budgetary support from international financial institutions, Zimbabwe has been introducing numerous taxes to fund its capital projects and for social spending, but critics say these funds are being misused due to high levels of corruption.
“It is also a reality that depending on aid or handouts alone will not do the trick and politicians across Africa are asking more of their tax collectors,” the report says.
“It appears that taxing citizens is the only feasible solution within their reach. We should expect a lot of altering of both fiscal and monetary policies in 2024 which would undoubtedly usher an unstable business environment. High levels of policy uncertainty will also lower investment, employment, and economic output.”
The research company says Zimbabwe’s wobbling economy will drive many into the thriving informal sector.
“Different economic shocks have impacted the structure and shape of the Zimbabwean economy. With limited formal employment opportunities (especially for youth), there has been escalation of self-employment with some citizens moving into vending and small businesses,” Marks & Associates says. “
There is clear evidence the Zimbabwean economy is now largely informal given a proliferation of informal tuckshops and roadside businesses (RSBs) in Zimbabwe. Our assessment of the business environment (taxes, cost of formalisation and regulations) suggests a trend of an explosion of RSBs as the informal economy becomes more entrenched in 2024 and beyond.”
