Why rebasing the Zimbabwe economy is crucial

By Bernard Bwoni

The rebasing of the Zimbabwe economy is a long overdue necessity and of benefit to the country. Rebasing or reassessment of the national accounts entails replacing an old base year with a new base year to be precise. The future values of the Gross Domestic Product (GDP) will be compared and contrasted with the old base year which acts as the source point. It is imperative to rebase or re-benchmark the Zimbabwe economy to ensure that the country’s national accounts statistics and figures present the most current and accurate assessment and indication of the economy. The key here is to get a more accurate set of economic figures and statistics that offer insight into the actual and current realities on the ground in the Zimbabwe economy. Just to simplify matters the GDP is the value of the goods and services produced within the country and that is the standard measure of the size of the economy. The more developed economies of this world reassess GDP statistics and sector priority every five years.

Currently the national employment/unemployment and GDP figures in Zimbabwe do not reflect the highly informalised economy in the country. The way the country’s economy is structured is such that there is a scattered informal economy existing alongside the mainstream formal economy. The current GDP estimates in Zimbabwe have not sufficiently indicated the soaring contributions of the informal sector which has grown notably in terms of total value and ‘informal employment’ as well as formal employment generation. Thus through rebasing of the country’s economy it would be possible to obtain a more precise set of economic data indicative of the present realities and an accurate estimate of the size and structure of the economy by absorbing new and old economic activity which were not captured before. Once the country starts factoring in the informal sector and start incorporating the figures into GDP and employment statistics this will reveal a much larger economy on a sound backdrop of an economically empowered indigenous majority population. The trickledown effect of an economy propped up by indigenous stakeholders is that they have a higher propensity to invest back into the country unlike former minority investors and multinationals who abandoned Zimbabwe in her most time of need.

The reassessment of the Zimbabwe economy is critical to the success of the Zimbabwe Agenda for Socio-Economic Transformation (ZimAsset) economic blueprint in that it will support government initiatives to address the challenges of a growing economy under the prevailing microeconomic and macroeconomic conditions as this will give a clearer picture of the country’s economy, what drives the growth of each sector of the economy and identify which sectors are lagging behind and what level of support and resources to be redirected towards those ailing sectors.

It is imperative that formal studies are carried out to determine the actual size of the Zimbabwe informal economy and GDP in nominal terms and integrate that into the national economic figures. The statistical reassessment of the Zimbabwe economy will more than likely see a significant increase in the size of the country’s GDP. The Zimbabwe economy is definitely worth more than the current GDP of $10 billion and that is why rebasing is urgent. This anticipated sharp rise in GDP will largely be driven by a thriving informal economy, a resurgent agriculture sector, mining and there are initial signs of the manufacturing base slowly recovering. Let this be emphasised, slowly showing signs of recovering. Agriculture remains at the core of the Zimbabwe economy and its contribution to the GDP has remained quite significant. Mining contribution to the GDP has also been increasing recently and it is manufacturing that has continued to lag behind. This is where the value addition and beneficiation as set within the ZimAsset economic blueprint becomes critical. Beneficiation and value addition are important components to the country’s economic recovery.

The country’s economy is currently anchored on raw materials exports and this is not a long term solution for economic revival. The country’s economy is prone to shocks such as fluctuating commodity prices, declining commodity prices all which will have negative effects on trends in economic growth and economic revival.  The country currently has a negative trade balance as a whole with more imports than exports. The re-benchmarking of the economy is likely going to give a better indication of the contribution of this previously overlooked informal sector and other new sectors in the economy. All that money is not filtering into the formal banking systems and hence the distorted trade balance figures. Again rebasing of the economy does not in any way suggest that Zimbabweans are going to be any better off or that this is the panacea to the country’s economic challenges. What rebasing does is that it minimises instability and variations that may prevail from using very old base years. Economies by their very nature are constantly changing, growing, declining, changes in various sectors, addition of new products and the impact of technology and changes in consumer behaviour. Thus with rebasing of the economy we can take into account the impact of all these changes to give a more accurate and up to date reflection of the economy and realities on the ground.

It is important to estimate the size of the entire economy of Zimbabwe taking into account all the formal sectors, new sectors that have more recently become significant and factor in the thriving informal sector. Through incorporation of the informal sector figures Zimbabwe’s GDP would more likely more than double.

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