Eddie Cross's Website

The Outlook for 2006

As we come to the end of 2005, we might find it difficult to look ahead and ask ourselves what might be in store for those of us who live and work in Zimbabwe. 2005 has been very tough - inflation has soared to new heights, the economy has shrunk again - the 7th year in a row since 1999. In fact it might be argued that the economy has been in decline since 1998 as 1997 was the last year during which we experienced any sort of real economic growth.

Our currency has lost 99.9 per cent of its value and over 80 per cent of our population is now classed as being absolutely poor. Human flight has, if anything, accelerated and it is now estimated that a third of the total population lives in self imposed exile. Hundreds of thousands are dying each year - from Aids, dysentery, tuberculosis, malaria, malnutrition, hunger and the collapse of our health system. 2005 will go down as a miserable year for millions with many now homeless and destitute after Murambatsvina (remember what that means - "drive out filth").

It will also go down as a year of failure - failure of the regional community to face up to what is going on here and to tackle the crisis, the failure of Mbeki's "quiet diplomacy" and the failure of the international community to make progress in resolving the plight of the many who live in the "outposts of tyranny".

For the Zimbabwe government it has also been a year of failure - failure of the much talked about "economic recovery", failure of their agricultural policies, failure to get any sort of growth and recovery in the mining and tourism industries. To this we might add the failure to halt the slide in the public service and in all social sectors.

And so we come to Christmas 2005, hungry, angry and disappointed. Disappointed with our leaders and disappointed with ourselves for having achieved so little when the needs around us are so great. I think this is going to be the worst Christmas ever for most Zimbabweans.

But while we bemoan our condition we must now look into our proverbial crystal ball and ask ourselves "what does 2006 hold for us". In business we can hardly plan for tomorrow, how to plan for the next year is something we do not even want to think about - yet we must. I am the proverbial optimist so all my friends will take what I have to say with the proverbial pinch of salt, but since they will not put their necks on the block - why should I not have a go?

The first thing we can say about next year - is that we have had the best start to a wet season that I can remember for a long time. Last year at this time we had 50 odd mls. of rain in October, none in November and then a very wet December. That is about as bad a start to the season as you can have in this part of the world. Crops planted with the early rains died in November and those planted in December were too late to really perform and got wet feet.

This year, as if on a schedule, we have had 85 mls. in November - soft rains and perfect planting weather. Now in December it has rained continuously for a week and we are already up to half our last years total rainfall. The only problem is that there are no crops in the ground. A handful of large-scale commercial farmers are left and they are again under siege. Money is tight, costs are in the stratosphere and inputs almost impossible to find. Even the peasant sector has very little in the ground and we can forecast an even worse outturn for the crop season just starting, than last year when Mugabe stated in the famous interview that we had grown 2,5 million tonnes of grain and instead we reaped a paltry 600 000 tonnes.

In last weeks budget statement the Minister of Finance predicted a strong growth in agricultural output next year - well you can put that down to the mad musings of Made (our nutty Minister of Agriculture). But while we are likely to go hungry again next year it is possible that other sectors might start to show signs of recovery.

In the mining industry we have had a fantastic year on international markets - gold is over US$500 an ounce, Platinum over US$1000 and all other base metals and minerals are at record or near record levels. If we can get a policy framework in place (and one already exists) which will give investors confidence, then I would predict a veritable gold rush next year in the precious metals industry. Already the rapid depreciation in the official exchange rate coupled to the strong rise in world market prices and demand, means that gold producers are at last making some real money here.

In other sectors it is more difficult to see progress but I am sure that we are about to see a major turn around by the State in the field of economic and political policy. The signs are already there that the Government is preparing to allow the re-emergence of free market forces in all sorts of fields - fuel and food among others. This will allow the market to overcome current shortages in many areas plagued by bad decisions and poor policy making. Exchange rates are gradually (some would say rapidly) being allowed to rise to free market levels and this will have all sorts of implications for the economy. Minimum wages are already poised to go through the Z$5 million a month barrier and will reach Z$7 million by March or earlier. While this is being driven by inflation it also reflects employers willingness to adjust wages more realistically than in the past when low earnings from exports were crippling the productive sector.

These policies will halt the decline in exports and allow some recovery in industrial activity - but they will not be enough to turn the tide altogether. That will depend on political events and the future of the SA/G8 loan agreement talks and negotiations. In this respect I think we are in for a surprising 2006, I think we might see the early retirement of Robert Gabriel Mugabe and the adoption by the succeeding regime of many of the reforms demanded in the SA/G8 loan agreement. We may see the Daily News back and there is widespread talk that the State is going to reverse itself on land - allowing title deed owners to reclaim their properties and resume farming.

If that happens then we might see the resumption of inflows of much needed foreign assistance - the UN seems set to feed the country this summer, Mbeki 's loans will overcome the current critical shortages of fuel and electricity. If that happens then anything is possible - we might even see a resumption of real economic growth. If this does not happen then I am afraid we are in for another tough year. My money is on the positive outlook and I am going to put some into the local stock market in the New Year. I did well this year there and cannot see any reason why next year should not be better.

Eddie Cross
Bulawayo, 8th December 2005