In its latest monthly review of economic issues in Zimbabwe, the African Development Bank has focused in particular on Zimbabwe’s continuing negative trade balance. The Bank emphasises the need for Zimbabwe to develop policy strategies to incentivise value addition for exports. For the period 1 January – 2 March 2012 the value of export shipments increased by 6,2% over the same period the previous year. But it is the mining sector that is driving this. Mining contributed over 70% of these exports and the growth in mining sector exports grew by 23,4% from the first two month period on 2011 to the same period in 2012. In other words, non-mining exports are in relative decline. Tobacco exports declined by 42,6% and horticulture exports declined by two-thirds over the same period. Manufacturing exports increased by nearly 57%, but only contributed 8,1% of total exports. The Bank comments that this demonstrates limited value addition by local industries.
On the agriculture sector, the Bank noted that some 45% of the maize planted this season was written off due to irregular rainfall and drought in parts of the country. This is expected to lead to a deficit of one million tonnes in the country’s maize requirements for the year. With maize the biggest problem remains not so much drought but low productivity and low yields. The average yield for maize grown in Zimbabwe remains at about 750 kg per hectare. Good farmers do achieve yields in excess of 5 tonnes per hectare and some achieve yields as high as 10 – 13 tonnes per hectare. But the average yield remains appallingly low – for a number of reasons including reliance on inputs supplied by Government which are usually late or insufficient and lack of technical and extension services, as well as poor weather. If the average yield could merely be doubled to 1,5 tonnes per hectare, Zimbabwe would be easily self-sufficient in maize.
The tobacco sector is doing well this season, with 36,4 million kg having been sold through the auction floors at an average price of US$ 3,70 per kg as at the end of March 2012, compared to 30,1 million kg at an average price of US$ 3,03 per kg in the same period the previous year.
Gold deliveries grew at an average rate of 5,8% for the first three months of 2012 to reach a cumulative total of 3 127 kg. This represents an increase of 21,6% over the same period the previous year. The Bank attributes this partly to the more positive macroeconomic outlook in the country.
Interest rates for borrowing remain high in the financial sector. The commercial bank weighted average base lending rate over the period February 2011 – February 2012 was 12,1% per annum. The average base lending rate from merchant banks over the same period was 20,4%. The average rate of interest paid on 3 month deposits over the same period was 8,8%, reflecting the shortage of long-term deposits in the banking system. The savings deposit rate remained low at 2,3%. Banking sector deposits reached US$ 3,38 billion at the end of February 2012, of which long-term deposits made up only 8,8%. 59,6% of deposits were demand deposits. The average bank loan-to-deposit ration declined to 82,2% in February 2012, compared to a peak of 88,9% two monthe previously. As the major international banks in Zimbabwe tend to be cautious in their lending, this would indicate that there are banks in Zimbabwe with loan-to-deposit ratios in excess of 100% – not a healthy position to be in!
The Bank noted that Zimbabwe is the third largest country in respect of tourism receipts in Southern Africa, after South Africa and Botswana. As such the country needs to increase its infrastructure and tourism products.
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