In the present article we will try to cover the following issues:
● Zimbabwe Harmonized Elections 2018 results and new president’s program in respect to international relations and trade
● Analysis and facts of previous year situation with international relations and trade
● Stats with breakdown into countries (trade turnover)
● Any share of China and Russia?
Whoever wins the presidential elections, he won’t inherit a prosperous market and international relationships. Zimbabwe’s current economic thrust is driven by the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimASSET) economic blueprint. ZimASSET (2013-2018) is anchored on four clusters:
● food security and nutrition
● social services and poverty eradication
● infrastructure and utilities
● value addition and beneficiation.
This blueprint espouses inclusive growth aimed at broad based economic empowerment of citizens.
Zimbabwe’s environment possesses a number of challenges and opportunities for grassroot enterprise development. Some of the key economic challenges in the country include a tight fiscal space by government, ballooning public debt, low foreign direct capital flows, a high trade deficit from being a net importer, low domestic production as a result of company closures resulting in high levels of formal employment. Youth aged 15-34 years constitute 84% of the unemployed population and are engaged in the informal sector, characterized by insecure incomes, absence of social security, low skills, poor productivity and low earnings. More critically is the liquidity challenges in the economy which has resulted in lack of affordable credit facilities for enterprise growth. Cash shortages have prevailed for more than two years now, leading to distortions in the pricing systems.
The current administration is making the right policy pronouncements anchored on the “Zimbabwe is open for business” mantra, fight against corruption and promised for a credible election which will form a strong basis for economic transformation based on foreign direct investment inflows, increase in domestic production, import substitution and local employment creation. Current investment constraints as per KPMG’s report “Zimbabwe Economic Snapshot H2, 2017” :
● uncertainty regarding highly volatile national currency
● restrictions on expatriates
● intellectual property rights infringements
● trade logistics is limited by bad transport infrastructure, trade bureaucracy and low liquidity
● last two presidential elections are characterised by disagreements among the contestants
● judiciary is not impartial, judges are appointed for political reasons
In 2017 Zimbabwe manufacturing industry was operating only up to 45% Such continuous drop is explained by high production costs and shortages of foreign currency. The textile, clothing and footwear sector was the only industry with 4% capacity throughput improvement up to 50% in 2017. Employment totally decreased by 15%.
Based on a decade’s statistics, the services sector is increasingly becoming an important driver for growth and employment. In 2017, services sector contributed about 56.29 percent to GDP. Tourism is estimated to account for about 10% of Zimbabwe GDP and is important for generating foreign currency.
Share of economic sectors in gross domestic product (GDP) from 2007 to 2017 :
Emerson Mnangagwa, serving as the previous President, did not step into great legacy, but he took an effort to re-engage with the international business to revive Zimbabwe economy. He signed up few big deals with Belarus, Russia and China and supported a supply of numerous train cars and locomotives (USD 400M worth) to the National Railways of Zimbabwe.
Due to unstable and mostly negative business environment most investors commission projects in Zimbabwe only being brought through a political agreement. Genuine investors like Aliko Dangote leave due to unwillingness to fight local corruption. Dangote visited Harare in April 2018 again hoping for a better climate with Mnangagwa and to invest into mining and power generation industry. Most probably he is waiting for the presidential election results to see if the situation will be stable for the next 4-5 years.
Zimbabwe Harmonized Elections 2018 were triggered in relatively stable economic and financial background with a moderate increase in inflation (see the table below).
The Harmonized Elections 2018 results are currently considered by the Zimbabwe Court, so as of the date when this article is being written, we can’t for surely name the next President. Based on ZEC announced results, Emerson Mnangagwa won the challenge. During his presidential campaign he declared his intention to reestablish an international image of Zimbabwe and to restore international relations of the country. Zimbabwe desperately needs foreign investments and Mnangagwa is going to work on this issue including efforts to fight with corruption, to improve the investment climate and to secure foreign investments. Taking into account that the USA applied additional economic sanctions just few days before the elections, it seems that Zim will be trying to promote its relations with Russia and China. We shall note that within the week after the elections vice-president Constantino Chiwenga visited Russia and met with the Russian Ministry of Defence Sergey Shoigu and a few Russian investors.
If we have a better look at the Zimbabwe trading partners, Russia is out of Top-10, but China is climbing up to Top-3. See below the World Bank stats. In 2016 the key trading partner was South Africa.
Zimbabwe 2016 Import Partner Share
Zimbabwe 2016 Export Partner Share
In 2017 the situation did not change much. The major source markets for imports were South Africa (38%), Singapore (27%), China (11%), Zambia (3%) and Japan (2%). The major export markets were South Africa (67%), Mozambique (16%), United Arab Emirates (6.6%), Belgium (3.5%) and Zambia (3.1%).
The trade deficit is getting worse. The combined effect of higher imports (6.2%) and a reduction in exports (-8.6%) resultantly widened the trade deficit by 19.9% from USD 242.8M in May 2017 to USD 291.2M in June 2017 (Jun 2016: USD 253.1M).
Having a permanently degrading industry, Zimbabwe is focusing on export of raw materials. Talking about the goods breakdown, nothing has changed much during the last 3-4 years, with the main export goods being tobacco and precious metals.
Trade turnover 2017: China
Zimbabwe government was known by historical back-up by China. Same applicable for Mnangagwa, as Beijing showed its official support for Mnangagwa immediately after he became the state leader. There were strong rumors of Chinese intervention in the coup as China holds a high stake in Zimbabwean politics due to their business interests as well as the UK.
In 2016 trade turnover reached up to $1.1B:
Export: USD 387.4M. China was the largest buyer of Zimbabwean tobacco, as well as cotton and minerals (see the chart below, note that tobacco is shown within “food products”).
Import: USD 726.8M. Zimbabwe imported electronics, clothing, etc.
Exports by China to Zimbabwe, 2016 (USD 387M) :
Imports by China from Zimbabwe 2016
In 2017 China and Zimbabwe signed loan agreements worth USD 230M. The money will be used to fund the construction of the new Parliament Building, including USD 153M to refurbish Robert Gabriel Mugabe International Airport.
Last years Chinese state construction companies were engaged into infrastructure construction including USD 100M National Defence College.
Trade turnover 2017: Russia
As it was mentioned above Mnangagwa signed a memorandum with Russia to set up a free economic zone, but in 2016-2017 the trade situation was far from impressive. Russia-Zimbabwe trade turnover in 2017 dropped 20,81% in comparison with 2016 and totaled only USD 53M. Notedly Russia was a sponsoring trade partner with import share over 95%. Russia imported goods for USD 50,5M and exported for USD 2,4M. Import dropped 71%.
Major export goods, 2017 :
● Wood and paper goods – 52,85%;
● Chemicals – 22,53%;
● Agricultural rawstock and foodstuff – 22,13% (versus 98,74% in 2016).
● Machinery and vehicles – 2,48%.
Major import goods, 2017 :
● Agricultural rawstock and foodstuff – 99,44% (mostly tobacco (85%), coffee, tea).
Russia plays a big investment role in Great Dyke Investments (Pvt) Ltd. Darwendale platinum deposit project – USD 400M to be invested at first stage of construction of mining and processing complex.Over USD 60M were already invested during the design phase to complete an extensive geological exploration campaign to study ore concentration
Yanina V. Noel, AFRIC Observer
*Special thanks go to Frank Kundeya for contribution to this article