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First Quarter Budget Perfomance Analysis: Parliament Budget Office










The Parliamentary Budget Office (PBO) is a non-partisan professional office of the Parliament of the Republic of Zimbabwe. Its primary function is to provide professional, independent and objective in-depth analysis of fiscal and other economic policies.


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1.         Introduction

This Budget Performance and Outlook Report is a review of the Budget implementation for the first quarter of 2017 aimed at enabling the Legislature and the public to understand and scrutinise how public funds are being spent and the impact of fiscal policy on the economy. This helps to increase transparency and accountability.

The total Approved Budget for the 2017 fiscal year is US$4.1 billion, premised on anticipated revenues of US$3.7 billion, and a projected domestic financing gap of US$400 million. Of the total Budget, recurrent expenditures (excluding employment costs) are estimated at US$400 million (9.76% of the total budget), while US$520 million (3.6% of GDP and 12.7% of the budget) was approved for development programmes. Projected employment costs are US$3 billion (73.2% of the budget).

2.         Global economic outlook

The International Monetary Fund (IMF) has revised upwards its outlook for global growth, citing a post-election surge in confidence in the United States, better prospects in large emerging markets and an uptick in global trade. The forecasted growth rate for 2017 is 3.5 %, up from 3.1% recorded in 2016. The US economy is projected to grow by 2.3 % in 2017 up from 1.6 % recorded in 2016. Developing nations are forecasted to expand by 4.5 %, a marked improvement from 4.1 % growth realized in 2016. The Chinese economy is forecasted to grow by 6.6 % compared with 6.7 %  in 2016 weighed down by the risks of relying too much on credit, especially on hard to pin down shadow financing to fuel growth. Despite an improvement if confidence levels, global consumption, investment, trade and productivity are still far from being strong and weighed down by by past norms and higher inequality.

Zimbabwe’s regional peers are expected to register growth above the Sub-Saharan Average of 2.6%. Botswana is anticipated to grow by 4.1% while Malawi, Zambia and South Africa are expected to register growth rates of 4.5%, 3.5% and 0.8% respectively.

3.         International commodity prices forecast

The World Bank’s Commodity Markets Outlook released in April forecasts higher prices for industrial commodities, principally energy and metals in 2017 and 2018.  Crude oil price for 2017 is expected to remain subdued at $55 per barrel, increasing to an average of $60 per barrel in 2018. Prices for energy commodities, which include natural gas and coal, are projected to increase by 26 % in 2017 and 8 % in 2018. Natural gas is anticipated to gain 15 % in 2017 while coal will climb 6% in due to earlier supply restrictions in China which consumes half the world’s coal output. Prices for non-energy commodities, which include agriculture, fertilizers, and metals and minerals, are forecast to increase in 2017, the first rise in five years. Among the components of non-energy commodities, the agriculture price index as a whole is expected to remain stable this year, as declines in grains are expected to be offset by price rises for oils and meals and raw materials. Beverages, which include coffee, cocoa, and tea prices, are forecast to drop more than 6 % in 2017 due to greater-than-expected supply. Metals prices are projected to recover by 16 % this year due to supply constraints and strong demand especially from China. Precious metals are expected to decline by 1 % in 2016 and 2017 respectively as benchmark interest rates rise.  

4.         The Macroeconomic and budget framework

The economy grapples with several challenges ranging from underproduction, unsustainable fiscal deficit, liquidity constraints, depressed international commodity prices, debt overhang as well as limited Foreign Direct Investment (FDI). As such, the 2017 Macroeconomic and Budget framework was premised on the following critical success factors;

  • Confidence building, underpinned by policy consistency;
  • Normal to above normal rainfall;
  • Addressing liquidity and cash challenges;
  • Positive developments from the reengagement process in order to access new financing;
  • An atmosphere of tranquillity, tolerance and minimum polarisation in the run up to the 2018 elections; and
  • Moderate improvement in international commodity prices implying improved earnings from commodity exports

It is pleasing to note that the country is on course to exceed the anticipated growth target buoyed by the successful agricultural season after the country received above normal rainfall. Commodity prices have moderately recovered and that is expected to add another impetus to the growth target. With regards to reengagement efforts, not much progress has been recorded in the first quarter as the reengagement with the Bretton Woods institution is hinged upon Zimbabwe repaying over $1.8 billion it owes to the World Bank and AfDB over and above other conditionalities of economic reforms. The country also owes $ 2.2 billion to the Paris Club and $1.1 billion to non-Paris. The country still grapples with liquidity challenges manifested trough acute cash challenges with no solution in sight. Confidence among economic players is still low and this is exacerbated by continued inconsistencies and unpredictability with regards to policies despite the assurance in the 2017 Budget that the Office of the President and Cabinet will be coordinating policy pronouncement as well as any required clarifications to avoid conflicting interpretations of policies by different Government Ministries and Departments. The Office has not moved in to clarify Government policy on use of South African rand and repealing of SI64 despite numerous conflicting press reports. Moreover, no movement has been recorded with regards to amendment of the Indigenisation and Economic Empowerment Act to bring it in line with a policy clarification issued by the President in April 2016.


5.         2017 Finance and Appropriation Acts

The Acts were gazzetted on 24 March 2017 thus giving effect to Government proposals for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure as proposed in the 2017 as well as giving power to the Treasury to withdraw funds from the Consolidated Fund for meeting the expenditure as outlined in the Appropriation Act during the 2017 financial year. Some of the proposed changes that have taken effect include; -

        i.            Downward review of presumptive taxes and change of the payment period from quarterly to monthly basis for different categories of omnibuses and driving school vehicles;

      ii.            Imposition of $10 presumptive tax for every chair in every salon per month instead of $1500 for every saloon per quarter;

    iii.            Deduction of 5 % Health Fund Levy on all airtime purchases to raise funds to acquire drugs and equipment under the theme, ‘Talk-Surf and Save a Life’ thus taking the special excise duty on airtime to 10%;

    iv.            Upward review of duty on textiles in order to level the playing field;

      v.            Rebate of duty on selected raw materials in order to enhance local industry competitiveness;

    vi.            Removal of laggageware, wheat flour and school uniforms on the OGIL;

  vii.            Extension of 15% platinum tax reprieve.

The implementation of Statutory Instrument 20 (SI20), which imposed 15% VAT on rice, meat, potatoes, margarine, cereals and mahewu with effect from 1 February 2017 was reversed by the Ministry of Finance after a public outcry and the Minister decided to give consultations a chance. Despite the reversal, the price increases as a result of the tax have not been reversed accordingly.

6.         Economic growth

The Ministry of Finance has bullishly revised upwards the 2017 growth rate initially projected at 1.7% in the 2017 budget statement to 3.7% buoyed by the successful agriculture season. Anticipated growth in the mining sector benefitting from anticipated moderate improvements in international commodity prices, fruition of planned mining investments as well as benefits from the ease of doing business reforms is also expected to push up the growth target. The IMF, on the other hand, has also revised upwards its growth forecast for Zimbabwe from -2.5% to 3.5% in its Global outlook report released in April 2017. The World Bank’s Global Economic Prospects report released in January also forecasts that the Zimbabwean economy will grow by 3.8 percent.

Despite these bullish prospects of growth, the economy still grapples with the following challenges:

§  Shortages of foreign currency to fund critical inputs in most sectors of the economy;

§  High cost of production which has eroded competitiveness;

§  Unsustainable Government wage bill;

§  Trade deficit; and

§  Unsustainable debt stock of about 80% of GDP.

According to the RBZ, the services sector accounted for most growth witnessed from 2010, which is not sustainable in the medium to long term as the productive sectors with the exception of mining and lately agriculture in 2017 remain subdued.

Figure 1: Sectoral contribution to growth 2010-1017



7.         Revenue Performance


Source: MoF

Revenue performance of US$ 869.2 million was realized in the first quarter of 2017 against a target of US$885.1 million. Revenue performance was 1.8% below target. It is encouraging to note that a number of tax heads exceeded their targets unlike previous years when only VAT on Local Sales would meet the target. The combined effect of automation, enhanced enforcement and efficiency measures, have led to the improvement. Non tax revenue, however, is a cause for concern as it was 27.7% below target. During the quarter under review, in addition to VAT on local sales, other tax heads such as VAT on Imports, Company Tax, Mining Royalties and other Indirect Taxes exceeded their Q1 2017 targets. The improved performance of VAT on Local Sales and Company Tax is attributable to the thrust in automation, audits and compliance checks. Automation has enabled ZIMRA to bring in more taxpayers into the net. It has also enabled ZIMRA to notice under-declarations.


Source: MoF

The tax collector, Zimra surpassed its revenue target for the first quarter by 6% after gross collections totalled $862,47 million. In 2016, Zimra missed its targets after collecting $3,462 billion, 4 % below target of $3,607 billion. This upward trend is a result of a battery of revenue enhancement measures implemented by the tax collector which include automation, greater enforcement and the anti-corruption thrust. Government has expanded its reach to the informal sector after the Finance Act of 2017 brought into being taxes for most informal businesses such as taxi cabs, commuter omnibuses, and hair dressers, cross-border traders among others. Revenue performance is expected to improve after Government has commissioned a $1.2 million electronic cargo tracking system to help reduce transit fraud and dumping of goods on the local market. A long term solution to improving revenue performance however is to fix the economy because the major driver to revenue collection is always the performance of the economy.  

8.         Expenditure

Actual expenditure outturn in the first quarter of 2017 was US$ 1.052 billion against a target $US 983.4 million. A budget deficit of US$ 182.8  million was recorded and was financed largely through domestic borrowing. Of this expenditure, US$879 million (83.5%) was on recurrent expenditure while US$166 million (15.8%) was on capital expenditure. Employment costs constituted 66.5% of total expenditure and 79.6% of recurrent expenditure. In 2016, employment costs were at 17% of GDP.



Source MOF

It is however pleasing to note that US$ 166 million was spent on capital projects representing approximately 15.8% of the budget. The declining share of employment costs to total expenditures gives a ray of hope on Treasury intensions to reduce employment costs to below 70% of the wage bill by year end which reduces the crowding out effect of employment expenditure on other non-wage capital and social spending, key for stimulating growth and reducing poverty.  Unbudgeted bonus payments are however going to widen the deficit initially projected at 400 million.  Moreover, not enough resources have been set aside for preparation of elections to be held in 2018.

9.         Inflation developments

Zimbabwe’s year on year inflation rate for the month of March and April stood at 0.21 % and 0.48 % respectively   from 0.06 %, recorded in February 2017. On a monthly basis, consumer prices rose by 0.05% in April after increasing 0.03 % in March.  Inflation entered the positive territory since February 2014 and is expected to average 1.1 % in 2017. Inflation Rate in Zimbabwe averaged 0.85 percent from 2009 until 2017, reaching an all-time high of 5.30 percent in May of 2010 and a record low of -7.50 percent in December of 2009.The major factors behind the upward trend in inflation include: -

·         The shortage of foreign currency to import critical raw materials that led to high premiums being charged on hard currency. These premiums are being passed on to the consumer resulting in inflation;

·         Increased demand for consumer goods following the opening of the tobacco selling season;

·         The imposition of VAT on meat, rice, Maheu, Margarine cereals and potatoes in February 2017 under SI 20 of 2017. Although VAT has been reversed, the prices did not immediately follow suit.


Source: Zimstat




10.     Food Security and Nutrition Cluster

10.1          Agriculture

The sector is projected to rebound in 2017 with an anticipated growth of 12% driven by higher output from major crops such as maize, cotton and tobacco, as well as milk production. The command agriculture scheme initiated by Government has recorded notable successes and the total land contracted under the scheme as at 9 February 2017 was 246035.5 ha and the total number of farmers was 36 472. According to the Minister of Finance, Zimbabwe expects to harvest in excess of 2 million tonnes of maize this year driven by the successful command agriculture scheme. The record highest maize output was in 1984 which recorded 2.95 million tonnes Government reported that it has mobilized funds to pay for 1.3 million metric tonnes of maize and is mobilizing additional resources. Storage facilities to handle 700 000 metric tonnes of maize have been secured while funding has been secured from the private sector to renovate grain storage facilities at the GMB. Government is extending similar programmes to cover livestock, wheat, soya beans, fish and cotton among others.

The need for irrigation development in the country cannot be downplayed. Zimbabwe is currently irrigating between 159-160 000 hectares but needs at least 300 000 hectares under irrigation to guarantee food security. On the other hand, ARDA has increased its capacity utilisation from 15% to around 75% on the 22 estates it owns around the country on the strength and success of its adopted PPP model.

The tobacco-selling season opened on 15th March 2017 and indications are that both the quality and volumes have markedly improved compared to last year. By 16 May 2017, 119.7 million kgs had been sold at an average price of $2.84/kg, 2c lower than $2.86 per kg last year. The highest price recorded was $6/kg. About 41.7 million kgs had been exported at an average export price of $4.70 which is 19% lower than the 2016 average export price of $5.79/kg thus racking in US$206 million. The 2017 average selling price to date ranged between US$2.61/kg and US$6/kg compared to US$2.48/kg and US$5.60/kg for the same period last year (Tobacco Industry and Marketing Board TIMB). Government is anticipating a growth of 1.3% in tobacco deliveries the 2016/17 season. As at 30 December 2016, a total of 80 745 farmers had registered as growers, a 15% increase from the 2015/16 growers. Figures from the TIMB also show that as of January 5, tobacco area planted for the 2016/17 season stood at 91 805 hectares from 87,755 hectares last season. In this regard, indications are that the 2017 targets of 205 million kgs will be met despite the challenges being faced specially with regards to payments to farmers. In 2015, TIMB statistics show that 29,164,5 million kg of tobacco valued at US$933,6 million was exported to various destinations across the globe as of December 2016. It will be however difficult to eclipse a record high of 236,13 million kg marked in year 2000.

With regards to winter wheat production, a total of US$140 368 320 is required to support 70 000 ha of winter wheat production which translates to 350 000 mt at an average yield of 5 mt per hectare. Zimbabwe’s winter wheat production this year is projected to reach over 200 000 tonnes from about 10 000 tonnes in 2016. This self-sufficiency will curb wheat flour imports, which have since been removed from the Open General Import Licence. Zimbabwe consumes between 400 000 tonnes and 450 000 tonnes of wheat annually. At its peak, wheat production in Zimbabwe stood at 325 000 tonnes in 2001

The Agricultural Marketing Authority estimates that around $US45 million was invested by cotton companies and Government in cotton production in the 2016/17 season. An output of 110 000 tonnes is expected and the government has issued a stern warning to cotton merchants who buy cotton from farmers whom they didn’t support that they will face the full wrath of the law. However, the set price of US45 c per kg may trigger side marketing. National requirement id 400 000 tonnes and has the potential to grow 600 000 tonnes of cotton per annum. Zimbabwe produced the highest output of 353 000 in the 1999/2000 season.

With regards to livestock, The Department of Livestock and Veterinary Services anticipates that livestock population has fallen by 40 000 beasts compared to 2016. Cattle population is anticipated to have fallen by 0.69% from 5 528 242 to 5 489 720 beasts in 2017.

Government is planning to roll out a  training program for Command Fisheries in each of the country`s provinces to impart knowledge to fish farmers on fishery management. 1.2 million fingerlings will be distributed to each province through the Ministry of Environment, Water and Climate.

Table 1: Area planted for the 2017/17 farming season as at 27 January 2017


2017/17 SEASON

2015/16 SEASON



1 243 624

773 968



188 430

86 409


Pearl Millet

124 088

56 201


Finger Millet

37 511

24 381



206 997

151 030



41 444

21 881



155 056

105 918


Soya Beans

17 032

29 730



3 657

1 998


Sweet Potato

18 721

10 237


Sugar beans

8 024

6 595



30 791

16 162


Irish Potato

19 920

18 517


Curcubis (Melon, Pumpkin, Squash, Marrows, Butternut)

15 159

13 789


Cabbage and leaf vegetables

9 415

9 364



13 824

15 430



4 728

4 389


Source: Ministry of Agriculture


11.     Value Addition and Beneficiation Cluster


11.1          Mining

Marginal output gains in such minerals as gold, platinum and nickel are expected to underpin a modest growth of 0.9% projected in the mining sector in 2017. Gold production target for 2017 is 25 tonnes and will largely benefit from price recovery resulting in improved viability and expected increase in output by gold producers, emanating from expansion projects as well as gold mobilization initiatives by Government.  Gold deliveries to Fidelity printers dipped 2.74% in the first quarter of 2017 compared to the same period in 2016.This is despite a 5% increase in deliveries in February and March 2017 to 3.1 tonnes buoyed by tight monitoring of leakages of the yellow metal by regulatory authorities.  Cumulative deliveries by April 2017 totaled 4.63 tonnes compared to 4.71 for the same period last year. This is largely due to drop in small scale miners’ deliveries by 0.55 % due to incessant rains the country received from February to April. Large scale deliveries however increased by 10.9%. The deliveries surpassed volumes of the yellow metal supplies for the same months since the inception of a multi-currency regime in 2009 where deliveries were averaging at least 1,1 tonnes per month. In 2016, 23 tonnes of gold were produced of which 21.4 tonnes were from primary and small scale producers with the remaining 1.6 tonnes from Platinum Group of Metals (PGMs).

Zimbabwe’s platinum output for 2017 is expected drop by 10% in 2017 to 440 000 ounces according to the World Platinum Council. Global demand, on the other hand is expected to drop by 6% to 7795 Koz owing to decline in industrial and investment demand.

Chrome exports significantly improved to $28 million and $42 million in January and February respectively, up from $7 million and $10 million in the same period last year on the back of increased output. This initial indication may be testimony that all is on course to reach a target of 300 000 tonnes of high carbon ferrochrome and 550 000tonnes chrome ore exports worth $300 million by year-end. Meanwhile, the government has seized 50% (21 170 hectares) of chrome ore claims held by Zimasco, which are now being parceled out to small-scale chrome miners as special grants. Chrome producers in 2016 contributed $30 million to the fiscus, translating to 1% of Zimbabwe’s mineral value.

Coal production, however, has plummeted to unprecedented levels, crippling thermal electricity generation in the country. Coal production was at 2,7 million tonnes in 2017, representing a 38 % decline from 4,3 million tonnes in 2015. The slump in production has been blamed on working capital constraints, increased production costs and a general decline in global commodity prices. The country has two major coal producing mines namely Makomo Resources and Hwange Colliery Company (HCC). Coal production at HCC has shrunk from 300 000 tonnes to about 30 000 tonnes a month due to capital constraints while at Makomo it has gone down 40% from about 215 000 tonnes per month. Prospects are however positive with the coming in of a new player, Tuli Coal mine to be established near Beitbridge in the Massabi Coal Field in Matabeleland South.

The mining sector contributes about 10% to GDP and 60% of exports The sector however continues to face acute capital shortages and delays in procurement of critical inputs. Government is in the process of discussing the feasibility of command mining with a Fund of $100 million allocated for utilisation by small scale miners.

11.2          Manufacturing

Glowing on the success of SI 64 which resulted in gains in capacity utilisation across several sub-sectors, the manufacturing sector is projected to register modest growth of 0.3% in 2017. The subdued growth is attributed to the diminishing buying power, company closures, subdued FDI and turmoil on the equities market. CZI anticipates capacity utilization to increase from 47,4% in recorded in 2016 to 65% in in 2017 on the back of an improved agricultural season. This would be the highest level of industrial capacity utilisation since dollarisation in 2009, after a peak of 57,2% reported in 2011 by the CZI.

However, to achieve this mark, government would need to deal with issues of corruption, policy inconsistency, lack of access to cheap finance, competition from imports and low demand for domestic products, which are impediments to the growth of the manufacturing sector. The sector is currently grappling liquidity challenges and foreign currency shortages which have caused a backlog of payments for critical raw materials. This is however expected to ease after the injection of the $70 million nostro stabilisation and the impeding bumper harvest which will see increased inflows from tobacco exports.

Globally, output is expected to increase just 3.4 % in 2017, according to the International Monetary Fund. Growth is dampened by Brexit concerns and political uncertainties created by some governments, including the United States which is threatening to undermine the free flow of goods.

The sector remained subdued in the first quarter of the year compared to the same period last year with trade volumes for companies lower by between 5 and 10%.  This performance pointed out that liquidity challenges, outdated technology, structural bottlenecks that include infrastructure deficits, corruption and a volatile, fragile global financial environment continue to dampen prospects of a rebound. It is however worth mentioning notable investments done in the first quarter of 2017. These include the $80 million PPC cement plant in the Sunway Industrial Park area of Harare and Willowton cooking oil and detergents manufacturing Plant in Mutare.

The worsening liquidity situation during the first quarter of 2017 has had negative impact on procurement of imported raw materials and capital equipment thus eating into the gains of SI 64 of 2016. To complement SI64, Government is developing long term sustainable measures including is formulating a local content policy which stipulates thresholds for goods to qualify as locally produced to support local production. Government is also working to promote business linkages in various sectors which has started bearing fruits e.g. Anchor yeast and the Arda Trek partnership. With regards to ease of doing business reforms, significant progress has been noted with the promulgation of the Special Economic Zones (SEZ) Act, the Judicial laws amendment Act and the Procurement Act to promote ease of doing business. Moreover, twelve main pieces of legislation with a bearing on the doing business environment have so far been reviewed with eight having been forwarded to Parliament. A lot of administrative procedures, timelines and costs have also been reviewed and streamlined to facilitate the Ease of Doing Business for example:

          i.            Reduction of the number of days to obtain a construction permit from 448 to 120 days within the City of Harare

        ii.            Property Registration now takes 14 days from the previous 36 days;

      iii.            Reduction of the number of days to obtain a shop license from 56 to 5 within the City of Harare; and

      iv.            The computerization of the NSSA processes reduced the manpower registration turnaround time from 14 days to 1 day.


11.3          Tourism

With the thrust on promoting and improving the Zimbabwe Brand as a competitive tourist destination under the theme International Year of Sustainable Tourism for Development, a 0.8% growth is projected for 2017. Tourist arrivals in Zimbabwe are estimated to reach over 2,2 million by the close of 2017, a development in line with global trends projecting tourism to be the fastest growing economic sector internationally. In 2016, the country received 2 167 686 tourist arrivals, 5% up from 2 056 588 received in 2015. The sector also generated an estimated $886 million receipts in 2016 and is estimated to contribute 10,9% to the gross domestic product. This compares favorably with Zambia which earned US$660,1 million.

Meanwhile, the renewed interest by aviation industry players to service Zimbabwean routes is a reason to celebrate. Kenya Airways and Ethiopian Airways in April introduced direct flights to Victoria Falls from Nairobi and Addis Ababa respectively. On the other hand, Rwandan Airlines, which introduced the Kigali-Harare direct flights in April and the Turkish Airlines have indicated that they might soon be flying into the newly refurbished Victoria Falls International Airport. The Airport is poised to attract increased air traffic after it underwent a $150 million facelift which increased passenger handling capacity to 1,5 million per year, up from 500 000. South African Airways introduced its new Airbus A330-300 aircraft on the Johannesburg-Victoria Falls route after the upgrading.

Meanwhile, the National Social Security Authority has started re-developing its $49 million Beitbridge Hotel into a mixed use asset with shops, offices and residential units. The hotel has been vacant since June last year following the exit of Zimbabwe’s largest hospitality group by market capitalisation, Rainbow Tourism Group. The group had run the property for two years and exited due to recurrent losses amounting to $2 million.

A decision however has to be made to reduce the number of non-security/crime roadblocks on Zimbabwean roads if the tourism sector is to be revived. Insistence on multiplicity of roadblocks without regard to easing the doing business environment can dent the country’s image in the wake of stiff competition regionally from countries with similar tourism products.

12.     Infrastructure and utilities

The marked improvement in dam levels after the above normal rainfall received in the first quarter of 2017 has led to an improvement in power generation which will impact positively on economic growth. The 2017 power production target, set at 7822.05GWh is a 15.38% increase from the 2016 level of 6779.16 GWh. This is attributed to a 50% increase in water allocation at Kariba to 15 billion m3 in 2017. This comes at a time when construction of 2 new Power generation units at Kariba South which will add 300 Mw to the grid is almost 80% complete with one unit generating 150 Mw expected to be commissioned in December 2017. Currently, the country is generating a total of 1170 Mw with Kariba generating 650 Mw against installed capacity of 750 Mw while Hwange with installed capacity of 920 Mw is generating 520 Mw. Harare, Munyati and Bulawayo   with generation capacity of 60mw, 90 Mw, and 100 Mw respectively are currently at zero generation. Peak power demand in Zimbabwe is 1600 Mw, a fall from 2200 in the previous years due to massive deindustrialization. The difference between generation and demand is imported from Mozambique and South Africa.

The greatest news in the transport sector is that the first phase of the 2.7 billion dollar 897 km stretch Beitbridge-Chirundu road dualisation project is expected to be commissioned in May by the President. The tender for the Beitbridge Harare phase costing nearly $ 1 billion was awarded to Geiger of Austria which is expected to complete the project in 3 years under a 25-year BOT arrangement. The second phase covering Harare-Chirundu will be financed by a loan whose modalities will be announced in due course. The road is expected to generate much economic activity for surrounding communities and local contractors after the Government insisted that 40% of the project must be awarded to locals. The President is also expected to commission the largest inland dam, Tokwe-Mukosi with a holding capacity of 1.8 billion m3 constructed at a cost of US$260 million. The dam is already 70% full and is expected to ignite agricultural and tourism activities in Masvingo province.

Zimbabwe has an infrastructure gap of close to US$33 billion, according to the Infrastructure Development Bank of Zimbabwe (IDBZ). This is a huge requirement considering that Zimbabwe is a $14-billion-dollar economy. The heavy rains received in the country however have dealt the country’s infrastructure a big blow and left a trail of destruction in terms of infrastructure damage (schools, roads, bridges, communication equipment e.t.c) estimated around 500 million.

13.     Social services and poverty eradication cluster

The Africa wealth Report compiled by Afrasia Group, a Mauritius based financial services group ranked Zimbabwe among poorest countries in Africa with an income per capita of US$200. Mauritius was ranked the highest with per capita income of $25700. According to Zimstat, incidence of poverty in Zimbabwe is multifaceted and occur in various dimensions including income level, health, education and employment. Zimstat data shows that over the last decade 63% of Zimbabwean households are deemed poor while 16% are cartegorised as extremely poor.

Meanwhile, the Consumer Council of Zimbabwe (CCZ) research has indicated that a family basket has decreased to $579, 15 in April from $582,92 in March due to a number of promotions by retailers, which saw a decrease in the prices of basic commodities. Despite this decrease, the majority of families remain below the poverty datum line with over 70% living on less than a dollar a day, according to latest statistics provided by Zimbabwe National Statistics (Zimstat).  The above normal rainfall the country received induced floods which killed 246 people and left nearly 2,000 homeless since December 2016.  The floods were declared a national disaster and the country appealed for international aid. Rescue efforts for marooned villagers were difficult as flooding rivers wiped out bridges and roads mostly in the south of the country damaging 74 schools and causing 70 dams to burst.

On the health front, a crippling strike by government doctors caused hundreds of patients to endure long hours waiting in casualty units at Zimbabwe’s state hospitals in February. The doctors were demanding that call allowances be raised to a minimum of $10 per hour up from $1.20, that government guarantees jobs for junior doctors after internship or allow junior doctors who can’t find jobs to start private practice.  Meanwhile, the Harare City Council driven by the desire to give communities adequate health care has embarked on a programme to upgrade Council Polyclinics into hospitals after equipping them with state of-the-art ultra sound scans, radiological services as well as introducing Caesarian operations. The project was piloted at Mabvuku Poly Clinic which has been upgraded to a hospital.  Mabvuku hospital will operate round the clock and will offer minor surgeries and dental services. The project, which began in 2015, has seen the addition of 10 more consulting rooms, a theatre, two more delivery rooms, extra maternity beds, a pharmacy, X-ray unit, laboratory and dental unit. The Hospital has already conducted successful caesarian operations, dental services, laboratory services, manipulating fractures and other radiology services. The upgrade was funded by ZimHealth, a non-governmental organisation of doctors based in Switzer- land.

14.     Debt

Zimbabwe has been in debt distress for a long time and as at 31 March 2017, the country’s public debt stood at US$11.6 billion or 82% of GDP, of which US$7.5 billion or 53% of GDP is external debt while US$4.3 billion, representing (30% of GDP) is domestic debt. Of the US$7.5 billion external debt, US$5.2 billion is in arrears. The country was estimated to have about $2.1 billion worth of treasury bills in the market as at 28 February 2017, issued to bridge the government’s funding gap and clear the central bank’s debt. The government’s decision to pay the unbudgeted 2016 bonus after pressure from employee unions is likely to worsen the situation as Treasury Bills worth $180 million are expected to be floated in the market to finance these bonus payments. This comes just after the Government decided to clear its contribution arrears to National Social Security Authority (NSSA) spanning from June 2013 with Treasury Bills worth $180.9 million with tenure of 7 years and a coupon rate of 5% per annum.

The Reserve Bank in January informed the nation that Government has issued TBs under the following four categories; -

     i.         Long-dated TBs of US$549 million issued to banks for the acquisition of non-performing loans by the Zimbabwe Asset Management Corporation (Zamco)

   ii.         Long-dated TBs amounting to US$300 million issued for the capitalisation of institutions that include the Reserve Bank, Agribank, IDBZ, ZB, Cottco and Caps.

 iii.         Medium to long-dated TBs amounting to US$780 million issued under the Reserve Bank Debt Assumption Act for the central bank debt taken over by government.

 iv.         Short-to-medium-dated TBs in an amount of US$450 million issued to finance the gap between expenditure and revenue collection by government.


15.     Trade balance

Zimbabwe’s trade deficit stood at US$576.6 million in the first quarter of 2017.  Zimbabwe’s exports grew 15 % in the period January to March 2017 compared to the same period last year. Trade deficit in the first quarter of 2016 stood at $685 million. According to Zimstat, imports for January to March 2017 amounted to $1,3 billion against $723.8 million exports, which remain heavily skewed towards consumptive products. In the same period last year, the country’s imports were $1,3 billion against exports of $617 million. Most of the imports in the first quarter of 2017 were consumptive products such as maize, rice, bottled water, sugar, soap, cellphone handsets, electronics, vehicle spares, vehicles, generators and second hand vehicles. Exports in the period under review included beef, tobacco, wines, minerals and scrap metal. Some of the goods which the country imported in three months included maize ($119 million), durum wheat ($34 million), rice ($24 million), crude soya bean oil ($24 million), unleaded petrol ($102 million), diesel ($190m), electrical energy ($52m). Exports included tobacco ($203m), semi-manufactured gold ($182m), nickel ore concentrates ($85m), ferro-chromium ($85m). Zimbabwe however registered a trade surplus of $42 million against its biggest trading partners, South Africa after imports were recorded at $519 million against exports of $561 million.



Source: Zimstat


Exports have remained subdued due to loss of competitiveness, reliance on primary products and falling commodity prices against high import bill due to high propensity for imported goods, low domestic production and cheaper imported alternatives.









Figure 7: Zimbabwe trade balance 1997-2016


Source: RBZ


Figure 8: Zimbabwe main exports and imports by cartegory


Source: RBZ






16.     Banking sector

The country continues to grapple with liquidity challenges manifesting through acute cash shortages.  A study done in March by the Reserve Bank using the Kalman Filter estimated that at least 900 million in cash with bond notes and coins worth $136 million is circulating in the country. Moreover, Bank deposits are reported to have increased from $6.14 billion in September 2016 to $6.51 billion in December 2016 due to improvement in exports, remittances and reduction in grain imports. Best practice is such that cash should be 10-20% of total deposits. Fiscal indiscipline, cash hoarding and externalization are the main culprits that continue to curtail market liquidity. In response, The Reserve Bank has set a maximum cap on cash back facility at $20 while outlawing multiple pricing. All retailers and wholesalers are expected to bank all excess cash collections within 24 hours as stipulated in the Bank Use Promotion Act (Chapter 24.24). The Central Bank has reported that it is importing between US$10-15 million every week.

Figure 9: Bank liquid assets as at 31 March 2017


Source: RBZ


The market grapples with low levels of notes and coins, low balances with foreign banks and lack of a vibrant market for securities (TBs).




Of concern is the rapidly increasing stock of deposits held by Zimbabweans in Bank for International Settlements (BIS) reporting banks as shown on figure 11 below.

Figure 11: Offshore deposits held by Zimbabweans


Following the increased foreign exchange earnings from agriculture, mining and the Nostro stabilisation facility availed by the African Export-Import Bank (Afreximbank), the Central Bank has, since the second week of April 2017, been able to allocate US$100 million into the national economy on a weekly basis to meet various foreign exchange demands that include essential imports and payments, feedstock for industrial production and discharging outstanding foreign payments obligations. These supplementary allocations of foreign exchange by the Bank are over and above the US$1.2 billion of foreign exchange made available by banks to the various sectors of the economy during the period January - April 2017. There was notable improvement in cash deposits at banks from the end of March 2017. The US$ cash deposits and the foreign exchange held in Nostro accounts are over and above the $140 million of bond notes, $23 million bond coins and an estimated US$400-600 million in circulation in the economy.

It is pertinent to note that the long term solution to the liquidity crisis is increasing production and exports to earn foreign currency. There is an urgent need for the nation to look at the local cost structures (labour including executive packages, utilities, and the myriad of levies which exist currently). Government must also seriously look into the retail and importers mark ups. This is not a call for price control but a rudimentary check on the factors which impact negatively on Zimbabwe’s capacity to increase production and exports.

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