Dumisani Ndlela,Deputy Editor-in-Chief
EVEN as he gave an enviable projection of economic growth chasing the double digit, it was evident that Finance Minister, Tendai Biti, was battling a nightmare.
Coming from a base Zimbabwe's economy had touched over a 10-year crisis precipitated by protracted political strife as well as economic mismanagement, the country's battered economy could only take an upward trajectory in stability as well as with austere fiscal measures.
As a self-described "hunter and gatherer", who ensured Zimbabwe did not exacerbate its economic woes by ensuring government did not widen its fiscal deficit by embarking on the "we eat what we gather" principle, it would be fair to give Biti the credit for sustaining that growth since taking over as Finance Minister in 2009.
But he has not yet won the battle in key areas. That is if he will.
According to his report, Zimbabwe has remained largely a retail economy as reflected by a negative trade balance during the period January to September 2011; imports during the period accounted for US$6,4 billion, against exports of US$3,2 billion. This represented a trade deficit of US$3,1 billion.
Of the total imports of US$6,4 billion, during the period under review, finished goods accounted for US$2,7 billion while raw materials, intermediate and capital goods amounted to US$361,4 million, US$2,5 billion and US$714,0 million, respectively.
"The high rate of consumption of imports against a sluggish growth of exports remains a challenge to the management of the current account and is not favourable for the recovery of the economy," said Biti as he presented his 2012 national budget.
"The influx of imported goods also poses immense competition to local producers, thereby denying the industry adequate latitude to rebuild and improve standards to world class levels," he warned.
Indeed, a large trade deficit would be a precursor to an economic disaster. But it does not look like Biti will manage to deal with this scourge through current measures.
Without doubt, the high import volumes of finished goods certainly crowd out productive activities in the domestic economy. This, therefore, should significantly concern him.
But you don't deal with the nuisance of flies in a room by beating them around - you have to clean the house of the mess that attracts the flies.
And yet this is exactly what Biti is not doing.
He has imposed 25 percent surtax on selected finished commodities, with effect from January 1, 2012.
The affected items include a selected range of yet-to-be-disclosed motor vehicles. The target, obviously, will be those cheap Japanese vehicles that have brought some comfort to ordinary folks. The guzzlers, including those that separate the fat cats in government from the rank and file, will obviously be unaffected.
Next year, the estimated requirement for vehicles by government to fulfill its contractual obligations with top civil servants is US$27 million. Biti has admitted government cannot accommodate this cost, and has proposed "to rationalise and stagger these requirements, taking into account our resource limitations and the need to prioritise other projects and service delivery".
But, already, Treasury has received bids for motor vehicle procurement to cater for newly appointed or promoted personnel, as well as replacement vehicles. He has already relented.
Other items that will be affected by the new, 25 percent surtax are selected electrical goods, soaps and cosmetics, milling industry products, fruits and vegetables (when in season), meat products, beverages, tobacco, sugar, dairy products and footwear and textiles.
It's hurray for the local manufacturing industry, but for the consumers, the battle has just begun.
The tragedy of the decade-long economic malaise that ended with dollarisation and formation of the inclusive government in 2009 was the decimation of local industries that created ground for swelling imports.
True, there is a compelling case to protect local industries that are still trying to bounce back after that hostile economic period, but such protection needs to be weighed against the compelling need for government to protect its citizens.
When Biti removed duty on selected basic commodity imports about five months ago, the market experienced a spike in prices. The erosion of incomes as a result of that response to Biti's policy measures may never be reversed.
Now, even after acknowledging delinquency on the part of manufacturers and retailers, all government can do is issue a less-than-stern warning without reprimand.
For a start, the 25 percent penalty charged on selected imports might not stop imports at all; instead, because of the poor quality of domestic products due to antiquated machinery, there has been growing demand for superior products by locals. So, importers will simply pass the cost from the surcharge to consumers. The effect: Increased inflationary pressure.
Moreover, Zimbabwe has no motor vehicle manufacturing industry to require punitive duty against motor vehicle imports - the few assembly plants sell their vehicles at exorbitant prices that even the middle-class citizens cannot afford. Besides, government ministers and their colleagues from Parliament, have shunned vehicles made locally.
The point is that Biti ought to aggressively push for the revival of local industries by arranging significant lines of credit to enable them to retool and compete with imports.
As noted by economists before, Zimbabwe has to quickly integrate with regional and international economies to attract foreign capital to stimulate growth.
Currently, low levels of domestic savings as well as inadequate supply of foreign exchange from exports and capital inflows are hampering economic growth.
Economists have made the point that economic recovery will have to be export-driven since domestic expenditure will remain well below the pre-crisis levels.
In other words, to drive the economy under a dollarised environment, Biti has to mobilise local industries to match international standards so that their products can compete on external markets to create the liquidity for the domestic market.
In a joint United Nations Development Programme (UNDP) working paper on foreign trade titled Comprehensive Economic Recovery in Zimbabwe - A Discussion Document produced in 2009, Dr Daniel Ndlela and Professor Tony Hawkins noted: "From a policy viewpoint, fixation with trade liberalisation, trade preferences and access to industrialised country markets should be replaced by a much tighter focus on domestic - behind-the-border - obstacles to export growth in the form of malfunctioning domestic institutions and markets, especially labour markets, weak infrastructure and low levels of productivity and competitiveness."
Biti's 2012 National Budget sought to increase support to the productive sectors through relief on customs duty on inputs and redirecting consumption of resources to the productive sectors.
But funding challenges will continue to constrain growth.
For example, the agricultural sector, which requires more than US$2 billion to meet its full potential and contribute meaningfully to growth, will be lucky to attract support of as much as US$500 million. As a result, the anticipation is that productivity within the agricultural sector will remain low in 2012, forcing the country to import significantly to meet national food requirements.
The manufacturing sector still depends largely on the performance of the agricultural sector, which implies raw materials meant to drive growth within the manufacturing sector will still have to be imported.
Over and above that, Biti acknowledges: "Challenges to be overcome (by the manufacturing sector) include mobilisation of additional lines of credit for industrial re-tooling and other working capital requirements."
Yet even facilities that had been put in place by government last year to help revive industries, such as the Zimbabwe Economic Trade and Revival Facility (ZETREF), have been disbursed at a pace that does not suggest urgency on the part of government.
Another facility, the Distressed and Marginalised Areas Fund, targeted at financing potentially viable companies in distress and those in marginalised areas, has been put in place to complement ZETREF and support anticipated recovery of the manufacturing sector.
While Biti projects maintaining "growth momentum" in 2012 at 9,4 percent, underpinned by further positive performance across various economic sectors, the trade deficit is likely to remain a major worry.
So far, the tragedy is concealed by the fact that the country is emerging from its worst crisis in history that makes the present pain a picnic compared with that of the past.
But when the fact that more companies are lurching into insolvency and unemployment remains too high or is growing is taken into account, it's difficult to think this as propitious omens.
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