FINANCE minister Mthuli Ncube on Thursday told investors attending the Zimbabwe Investment Summit in Johannesburg, South Africa, that the country has had a stable financial system over the years, but his claim runs contrary to official statistics from the World Bank.
NATHAN GUMA
The summit was aimed at bringing together leading business figures to showcase the positive developments and investment opportunities in Zimbabwe.
In his speech, Ncube said Zimbabwe has maintained a stable financial environment.
“Ladies and gentlemen, despite the daunting circumstances globally, the Zimbabwean financial system has remained largely stable, albeit some risks that include climate change, the lagged impacts of the Covid-19 pandemic, exchange rate and interest rate risks, among others,” he said.
“Since 2021, the economy has been on a positive growth trajectory with real GDP growth of 8.5% in 2021, 6.5% in 2022, estimated growth rate of 5.5% in 2023 and the growth rate is projected slow down to 3.5% in 2024, owing to climate change disruptions resulting in drought and floods happening unprecedentedly.
“This growth trajectory is in line with our economic print, the NDS 1 targets, notwithstanding significant external global shocks which were experienced during this 3-year period.”
However, statistics from the World Bank have shown that Zimbabwe has been on a turbulent track since 2018, with consistency only being realised between 2010 and 2017.
In April, the government introduced the ambitious Zimbabwe Gold (ZiG) currency, backed by gold and other precious minerals.
However, the ZiG has plummeted on the parallel market, trading at US$1:ZiG21, while the official rate is pegged at US$1:ZiG13.56.
This is despite repeated shrill assurances by the authorities that the ZiG is backed by gold and foreign exchange reserves. ZiG has been received with widespread skepticism and cynicism, with the public saying it is just another Zimbabwean dollar version by another name.
The currency has suffered instant ridicule and rejection in the process, denting market confidence. Without confidence and trust, as well as key basic characteristics of money like convertibility and acceptability, the ZiG is doomed, analysts say.
“Government has recently introduced a structured currency anchored on the following policy measures: (a) adoption of a market-determined exchange rate system; (b) Efficient and optimal money supply management; (c) Introduction of a new structured currency; (d) anchoring local currency on reserves backed by gold and foreign currency balances; and (e) other support measures and obligations in response to market demands.
“It is envisaged that implementation of the policy measures will provide some resilience in the economy against both domestic and global shocks and headwinds, and ensure a continuous downward trend in inflation.”
As reported by The NewsHawks, while the authorities claim ZiG is backed by US$100 million in foreign exchange reserves and 2.5 tonnes of gold valued at US$185 million, they have been running around in panic mode to defend the currency which is fast-losing ground to base currencies, especially the United States dollar that overwhelmingly dominates the market.
Some of the rigid controls they have imposed in the market include a practically fixed exchange rate, aggressive mopping up of liquidity through market instruments, low bank withdrawal limits and virtual price controls.
Foreign direct investment
The country has been struggling to attract foreign direct investment, amid a deepening worsening socio-economic crisis that has seen a massive drop in standards of living.
For instance, in 2022, Zimbabwe attracted US$320 million in foreign direct investment, a drop from US$718 million in 2022.
Zimbabwe’s drop in foreign investment has been attributed to a lack of reform.
For instance, on 25 April, US public diplomacy officer Rebecca Archer-Knepper told journalists attending a data journalism discussion that progress in bilateral reforms between the United States and Zimbabwe require reform.
“There are currently 13 US companies based in Zimbabwe and another 20 companies have a US affiliation or relationship. US foreign direct investment in Zimbabwe in 2022 was US$238 million. That’s something, but not as much as many of Zimbabwe’s
neighbors, and frankly it is not as much as the United States and Zimbabwe used to enjoy,” she said.
“We welcome the opportunity to increase bilateral trade and investment with Zimbabwe, but progress requires reform. Some of the elements that create an enabling environment for foreign direct investment include respect for rule of law, effective measures to combat corruption, reforms for the free transfer of funds into and out of the country, and exchange of currency at market rate.”
Zimbabwe has also been seeking ways of making inroads into the Commonwealth, a bloc consisting of former British colonies.
The country quit the Commonwealth in 2003 after clashes between the club of mostly former British colonies and the late ex-president Robert Mugabe over policy conflicts, human rights abuses and violation of the group’s democratic values.
Mugabe, who had ruled Zimbabwe from Independence in 1980, came under criticism over disputed elections and violent land seizures from white farmers between 2000 and 2001.
The country has also been trailing regional neighbours, with South Africa attracting investment worth US$9.18 billion in 2022, while Mozambique attracted US$2.5 billion, according to statistics by the World Bank.
