Economic prospects improving amid rains

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THE significant rainfall that the country has received since the end of last year is good news for the farming sector and the economy as a whole.
As a result, business confidence — the forward-looking expectations of companies — continues to perk up, as the negative impact of El Niño weather patterns on the country’s economy become less severe than was previously feared.
This comes after a prolonged dry spell for the current farming season, which stretched well into December last year, caused anxiety among both farmers and other experts over the impact of this on agriculture and the broader economy.

It also comes as agriculture remains a key pillar of the local economy. An estimated two-thirds of all working Zimbabweans are still employed in the sector, with agriculture accounting for about 30 percent of the US dollar value of total exports — second only to mining. Moreover, agriculture continues to play a critical role in food security and poverty reduction in the country.
The secretary-general of the Zimbabwe Farmers Union (ZFU), Paul Zakariya, told The Financial Gazette — the country’s number one business publication — this week that cropping activity had picked up significantly since the last week of December 2023.
“Since the beginning of the wet spell in December, a lot of planting activities have been taking place, while some farmers have been finalising land preparations. Those with irrigation facilities had planted early and some of that crop is coming up very nicely.
“The country saw a break in the rains for about a week, and this was good as well as it helped to establish crops. We are on a good course if the rains continue up to around early March,” he said.
The president of the Zimbabwe Commercial Farmers Union (ZCFU), Shadreck Makombe, also sounded upbeat about the prospects for the sector and the overall economy.
“To an extent, yes, the season can now be salvaged,” he said.
Economist Eddie Cross believed that the impact of the recent rains would be felt more in the energy space, feeding into other sectors including agriculture itself by providing power for irrigation for next year’s winter farming season. “If the season lasts into April, the cotton crop and late planted crops will be decent. The rainfall up to the end of December was well above normal and this will help with winter water levels and Kariba.
“If we can provide the electricity required, the winter crop will help us go through the year,” he said.

Economist Nyasha Kaseke said rains were always a cause for optimism among farmers, adding that the length of the rainy season would be critical.
“The performance of the agriculture sector will be based on the period that the country is going to receive rains.
“If the rains end in February, it will be a disaster and there will be less output, as most farmers depend on rain-fed production.
“If it ends in March, the better, as this will result in better output, which will positively impact agriculture production,” he said.
Another economist, Victor Bhoroma, also said there was now “hope” — although weather reports still pointed to a drought overall.
“Production will definitely be subdued compared to 2023, which will negatively impact food security and consumer demand for other consumables at household level.
“For the economy, this will mean increased food inflation, imported inflation on grain and food imports, and increases in the cost of food processing locally,” he said.
Economic analyst, Vince Musewe, pointed to the need to do more to climate-proof agriculture.
“The problem we remain with in Zimbabwe is that our agriculture sector is too dependent on the weather.
“By now we should have maybe 100 000 to 150 000 hectares of irrigated land for food security so that we will still be food secure when we have a drought,” he said.
On his part, Finance minister Mthuli Ncube has said that climate-proofing initiatives that had been carried out by the government in recent years would shield the economy from a sharp contraction this year, even if the rainy season was not as good in the end.

“We feel that our 3,5 percent GDP growth may turn out to be conservative because what we have done over the years is climate-proof our agriculture … it is not the same as the situation in 2012- 2014.
“So that climate proofing will cushion us against a much sharper growth contraction in GDP growth,” he said recently.
A fortnight ago, business said then that it was bracing for a likely tougher 2024 than last year, although it added quickly that “all is not lost”.
Captains of commerce and industry who spoke to The Financial Gazette then expressed “a glimmer of optimism” despite the economic headwinds.
They pointed to the policy measures that authorities had recently taken, including the extension of the multi-currency system to 2030, as being “very positive” for business and the broader economy.
Uncertainty in the key agricultural sector at the time due to delayed rains, the slump in the mining sector, and the relentless power cuts were among the top hurdles identified by economic experts in this regard as 2024 got under way.
“2024 is likely to be a difficult year,” the president of the Zimbabwe National Chamber of Commerce (ZNCC), Mike Kamungeremu, said.
He pointed to the government’s recent revenue-raising measures and the anticipated sluggish agricultural season as likely business dampeners that would negatively impact GDP growth.

“The depressed commodity prices on the international market will also affect business negatively.
“Ongoing power challenges are likely to continue to be a major issue, thereby also affecting business negatively.
“There is thus a need to invest in alternative power sources like solar in the private sector,” Kamungeremu said then.
The president of the Confederation of Zimbabwe Retailers (CZR), Denford Mutashu, also said 2024 was likely to be difficult for the retailer sector, which had experienced serious challenges in 2023.
“While the wholesale and retail sector is anticipated to experience a slowdown in growth in 2024, attributed to factors such as a projected weaker domestic demand resulting from the El Niño-induced drought and a general economic slowdown, CZR remains optimistic.
“In light of these challenges, CZR believes that businesses can still navigate the market effectively by implementing strategies that focus on cost reduction and sales optimisation.
“By identifying areas where costs can be streamlined, such as through efficient inventory management, improved supply chain processes and energy-saving initiatives, wholesalers and retailers can mitigate the impact of the economic headwinds and maintain profitability,” Mutashu said.
SMEs Association of Zimbabwe chief executive, Farai Mutambanengwe, was concerned about the new tax regime’s potential negative impact.
“Increased taxes, coupled with a potential drought year doesn’t bode well for 2024,” he said, highlighting the power crisis as another critical issue.
“So, it’s not looking like the new year will be off to a good start.
“We are also seeing challenges in terms of power at the moment, which may also dampen performance in the new year,” Mutambanengwe said.
Yona Banda, another analyst, saw “glimmers of hope” in potential monetary stability, but also believed that low agricultural output and weak commodity prices would “weigh heavily on economic growth”.
“The most encouraging development from last year was the reigning in of liquidity growth, and there is hope that we will see more monetary stability in 2024.
“The outlook for 2024 is mostly subdued, and we are expecting low agricultural output and weak commodity prices to depress economic growth.
“But increased dollarisation and potential Zim dollar stability should offer some support for aggregate demand.
“We need to see more decisive action this year in terms of the business and economic reforms needed to draw foreign and domestic investment,” Banda added.