Zimbabwe economy needs extensive structural reforms says Biti

FINANCE Minister Tendai Biti says the economy requires extensive structural reforms to remove bottlenecks  that recently forced him to cut the 2012 growth forecasts. Addressing delegates at a high-level economic forum here yesterday, Minister Biti said the forum sought new ideas to bring back growth to levels achieved three years ago.

"Apparent structural challenges are arresting economic growth and only a mad person can continue doing the same things over and over again," he said.

"We need to take a step back and refocus . . . and) I hope by the end of the forum we will be able to come up with a list of things we will be able to do about the economy and at least four scenarios (to build the economy)."

He said the findings from the ongoing economic discussions would be presented to principals in the inclusive Government, the Cabinet and Parliament.

The findings would also guide the formulation of the 2013 National Budget Statement.

Minister Biti was forced to revise this year's growth forecast from 9,4 percent to 5,6 percent due to underperformance in key sectors such as agriculture as well as poor revenue inflows.

The budget was also reduced from US$4 billion to US$3,4 billion.

Structural challenges cited as stalling economic growth include the US$10,4 billion national debt overhang, cyclical politics, a dual enclave economy (urban and rural extremes) and low gross capital formation.

There is also poor infrastructure, outdated accumulation models based on resource extraction, lack of competitiveness, lack of a common vision, lack of regional integration and the breakdown in the social contract, critical for peace and stability.

Minister Biti said there was need to address these structural challenges to spur economic growth and development, as the majority of Zimbabweans remained trapped in poverty.

Zimbabwe has a per capita income of about US$320 against the US$600 considered globally to be above the poverty levels.

At 5 percent to 5,4 percent growth rates the country needs 15 years to break the poverty chain, but could breach the streak by 2019, if it registered consistent annual growth of 15 percent.

Citing the levels of poverty brought about by structural constraints, such as high levels of poverty, the minister pointed out that 37 percent of the population had no clean water supply, 45 percent have no access to ablution facilities while less than 50 percent had access to electricity supply.

But he said the country could rebuild on its educated and skilled human resources, good climate for agriculture, productive land, strategic geographical location in Sadc, a fairly young population and huge appetite for ICTs.

Officially opening the forum, Prime Minister Morgan Tsvangirai said the country's growth potential was on a leash due to policy inconsistencies, unpredictability, mixed messages and political discord.

This, he said, was despite the business confidence that ensured formation of the inclusive Government in 2008.

"Our potential is on a leash," he said. "But over the past three and half years I have attended several conferences in and outside Zimbabwe and was heartened by renewed business confidence in the country.

"A lot of foreign investors are keen to explore (business and economic) opportunities in our country."

Professor David Hulme of Manchester University told the forum that Zimbabwe had recorded one of the biggest declines in human and economic development across the globe.

This was based on an evaluation of all countries, except those in war situations.

He said the country needed to adopt strategies and policies that ensured sustainable and cross segment economic growth.

Factors that determined growth or failure included the geographical location of a country, the culture of its people, ignorance of critical needs and nature of key institutions.