‘Diamonds no longer major export’

As the country reels from persistent economic turmoil, with countless companies shutting down and thousands of workers losing jobs amid worsening poverty, the need for an economic turnaround has never been greater and so urgent. Zimbabwe Independent business reporter Taurai Mangudhla (TM) yesterday interviewed Macro-Economic Planning and Investment Promotion minister Obert Mpofu (OM) on economic issues, command agriculture, diamond mining and progress made in establishing Special Economic Zones (SEZs). Below are excerpts:

TM: There has been a lot of talk about SEZs and plans were unveiled. What is the latest?

OM: Following the enactment of the SEZs Act on 31 October 2016, significant progress has been registered by government as we implement SEZs in the country. For instance, in line with Section 5 of the SEZs Act, government is working on the finalisation of the appointment of board members for the SEZs Authority to pave way for the establishment of the SEZ Authority. The authority is the administrative arm of the SEZs which will be responsible for all the operations in the SEZs.

Pilot SEZs identified by government are: Sunway City Integrated Industrial Park, Bulawayo Industrial Zone and the Victoria Falls Tourism and Financial Hub.

TM: Have there been any enquiries around SEZs?

OM: The ministry has started to receive expressions of interest from potential developers and operators of SEZs. This is very encouraging as it indicates that SEZs are going to be popular with investors and hence the country is bound to realise increased inflows of investment through these SEZs.

TM: Still on SEZs, there have been a number of incentives including tax breaks proposed to investors. What informed the choice of incentives being extended through SEZs?

OM: Government came up with a package of proposed comprehensive incentives that will apply to SEZs licenced investors and developers. These were informed by extensive research on regional and international best practice and extensive consultations of relevant stakeholders.

TM: We have seen Zimbabwe host a number of business delegations/indabas, but the feeling is that very little if anything at all has materialised from these. Is there a plan to get results from these engagements?

OM: Zimbabwe indeed has registered an increased interest from investors as witnessed by the number of delegations hosted by the country to date. Let me assure you that there are some projects that are in the pipeline currently which will soon take off once the consultations that are taking place are concluded.

You will agree with me that for an investor to commit capital in any country he/she will have to do a lot of analysis which involves some feasibility studies and hence there will obviously be a time lag between the engagement and the actualised investment.

TM: So far, have there been actual commitments made?

OM: Indeed, there are developments to note in terms of actual investments that have taken off. These include the Kariba South Power Station Expansion that will see a boost in the country’s power generation capacity, the re-opening of the Willowvale Mazda Motor Industries which will be involved in car assembly under a joint venture arrangement, successful public-private partnerships in the transport sector which saw the rehabilitation of the Plumtree-Bulawayo-Harare-Mutare highway as well as in the agriculture sector where there was a resuscitation of 18 out of 21 Arda (Agricultural and Rural Development Authority) estates. These are a few highlights that indicate that investment is happening on the ground.

TM: What is your plan to maximise by way of getting as much investment as possible out of these events?

OM: Plans to realise more investments include the establishment of Special Economic Zones which are meant to attract investment into the country’s strategic sectors.

The operationalisation of the One-Stop Investment Centre which is responsible for the expedited facilitation of investment approvals as well as the doing business reforms which are meant to improve the ease of doing business in Zimbabwe.

The recent launch of the Invest in Zimbabwe Handbook greatly assisted to demystify the negative perceptions by some niches of investors through painting a positive picture about the country’s investment environment and opportunities.

TM: In as much as all these efforts are being made, the elephant in the room remains the indigenisation policy with a rather half-hearted approach on rectifying the problems coming from the policy. What is government’s position on the Act given some circles believe the Act must simply be repealed to improve the investment climate?

OM: As you may be aware, President Robert Mugabe clarified this legislation. The Act is currently being amended in order to effect these clarified changes.

TM: Government adopted a Look East policy more than a decade ago. In your view, has the Look East policy delivered or should we now start to look at other regions?

OM: No doubt the Look East policy has yielded positive results as we will witness that the mega projects signed by President Mugabe and his Chinese counterpart have taken off in the form of the Kariba South Power Station Expansion Project, the TelOne broadband expansion and many other projects which are in the pipeline.

Government will continue with this Look East policy as it is yielding results. Recently, a South Korean delegation was also in the country in search of investment opportunities, which is testimony that this policy is working. China and other countries from the East have also been a source of knowledge on the establishment of SEZs.

The country, however, continues to focus on other parts of the world and is open to partner with any investor from anywhere in the world. Let me inform you that we have also had engagements and enquiries from other parts of the world such as Canada, Portugal, Cyprus and Germany among others.

TM: We are four months into the year, the first quarter of the year has already passed, are we on course in terms of our revised economic growth forecasts of 3,7% in 2017 and what are the key drivers?

OM: In November 2016, the Macroeconomic Working Group, chaired by my ministry, which comes up with economic projections for the national budget, estimated that the economy will register a 1,7% growth rate in 2017. The initial projections were underpinned by positive growth rates from agriculture of 12% and mining of 0,9% as supply-side stimuli measures were to be implemented by the government, namely command agriculture and recapitalisation of mines through joint ventures.

However, the command agriculture output has surpassed the target and the growth rate has been revised from the initial 12% to to 21,3% in agriculture for 2017. This emanates from a massive increase of maize output from 511 000 tonnes in 2016 to reach 1,977 millon tonnes in 2017. Furthermore, command farming is being replicated in wheat winter farming hence output is expected to increase from 61,7 tonnes in 2016 to 120 000 tonnes in 2017.

As a result much of revised growth rate of 3,7% for 2017 will emanate from increased output in the agriculture sector from maize, wheat, tobacco, cotton and small grain crops as the country registered above normal rainfall resulting in bumper harvest.

With regards to the mining sector, all the minerals are projected to register an increase in output owing to the government measures being put in place. As such, the mining sector growth has been revised from 0,9% to 5,1%.

TM: You have spoken about command agriculture, to what extent will the economy benefit from command agriculture?

OM: Command agriculture will immensely benefit the economy in terms of reduced grain imports as the expected output is above the country’s national requirements. This will result in excess supply being exported and earning the country the much-needed foreign reserves. Furthermore, command agriculture will result in creation of jobs in milling industries, bakery industries and other industries. Furthermore, stockfeeds will be locally available hence increased production of livestock.

TM: On mining, can you speak specifically about diamonds given that production has gone down, what can be done to revive the sector?

OM: The details of what needs to be to the diamond industry can best be obtained from the relevant ministry.

However, from a macro-economic perspective production needs to be enhanced as soon as possible.

TM: From an economic planning perspective, just how significant is the diamond industry to the economy?

OM: Diamonds are one of the most lucrative precious stones in the world, yet now in Zimbabwe it is no longer significant considering that, for the period January and February 2017, diamond exports contributed 4% of total exports.

TM: Finally, the World Bank has repeatedly said there is need for a new economic development plan for the country. What is government’s view on this?

OM: Government is aware of the fact that the current economic development plan, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) 2013-2018, is now coming to an end. Government is also aware that there is need for coming up with a new successor plan in time to succeed ZimAsset before its expiry. In line with this, work is already underway to produce the ZimAsset successor plan.