Agriculture is key to economy: Muchemwa
http://www.theindependent.co.zw
By The Independent on August 10, 2012 in Business
AGRICULTURE remains the key component in the performance of the economy and
should be the basis for any recovery programmes that might be adopted by
government, economist Brains Muchemwa told an Ernst & Young Tax and Economic
seminar in the capital this week.
He attributed Zimbabwe’s slump in economic growth this year to the poor
agriculture season and lack of investment in the sector. The 2011
agricultural season was characterised by lower than expected maize and
tobacco output and revenues, resulting in the downward revision of the
growth of the sector.
Last month, the ministries of Finance and of Economic Planning revised the
Gross Domestic Product rate downwards to 5,6% from 9,4%, citing poor
performance by the key agricultural sector and low revenue collection.
The majority of developing economies still heavily depend on primary
commodities from agriculture and mining. In sub-Saharan Africa, agriculture
generates at least 30% of GDP, 40% of exports and more than 70% of
employment.
Economists say increased agricultural production leads to increased demand
for processing facilities, giving the industry a high multiplier effect.
Figures from the International Food Policy Research Institute show that the
multiplier effect of agricultural growth in Africa ranges from US$0,60 in
non-agricultural income for every US$1 increase in farm income in Niger, to
a near doubling effect in Burkina Faso of US$1,88 in additional income
outside the sector for every $1 increase in agricultural income.
In Zimbabwe the impact of a poor agriculture season has been strongly felt
in the retail sector. OK Zimbabwe CEO Willard Zireva recently told an annual
general meeting that consumer spending will most likely decline owing to the
generally poor harvest and delays in the commencement of the cotton
marketing season. The same sentiments were echoed by Delta CEO Pearson
Gowero who said that the decline in cereal output had resulted in a marginal
decline in volumes for sorghum beer.
Muchemwa has disputed official GDP figures, saying his own calculations
showed the size of the economy was 30% less than has been officially given.
He said GDP was US$6,9 billion in 2011 and would only rise to US$7,2 billion
this year and not from US$10,1 billion (2011) to US$10,6 billion as has been
officially stated. The country’s Medium Term Plan sets a 7% growth rate,
which is expected to lead to a US$9 billion economy by 2015.
The growth rate is expected to slow down to levels of between 3 to 4% next
year because of elections, which are traditionally characterised by low
levels of investment, and due to policy misalignment within the GNU.
According to the African Economic Outlook, Zimbabwe’s GDP will decelerate to
4,4% this year from 6,8% in 2011, owing to challenges facing the economy,
which include lack of liquidity.
The decline in growth is attributed to the high cost of capital and
inconsistencies, especially on the indigenisation regulations, the report
said.
It also said obsolete technologies as well as power and water shortages
militated against the growth of the economy.
“These downside risks are further exacerbated by the disputes among the
government partners on the new constitution, the pending national referendum
and national elections,” the report said.
The International Monetary Fund recently said the country would register
real GDP growth rates of 4, 7% and 6, 3% this year and 2013 respectively. —
Staff Writer.