Agriculture is key to Africa economy
Tag: Africa economy, Africa economy key
Summary: AGRICULTURE remains the key component in the performance of the economy and should be the basis for any recovery programmes that might be adopted by government, economist Brains Muchemwa told an Ern…
Agriculture remains the key component in the performance of the economy and should be the basis for any recovery programmes that might be adopted by government, economist Brains Muchemwa told an Ernst & Young Tax and Economic seminar in the capital this week.
He attributed Zimbabwe’s slump in economic growth this year to the poor agriculture season and lack of investment in the sector. The 2011 agricultural season was characterised by lower than expected maize and tobacco output and revenues, resulting in the downward revision of the growth of the sector.
Last month, the ministries of Finance and of Economic Planning revised the Gross Domestic Product rate downwards to 5,6% from 9,4%, citing poor performance by the key agricultural sector and low revenue collection.
The majority of developing economies still heavily depend on primary commodities from agriculture and mining. In sub-Saharan Africa, agriculture generates at least 30% of GDP, 40% of exports and more than 70% of employment.
Economists say increased agricultural production leads to increased demand for processing facilities, giving the industry a high multiplier effect.
Figures from the International Food Policy Research Institute show that the multiplier effect of agricultural growth in Africa ranges from US$0,60 in non-agricultural income for every US$1 increase in farm income in Niger, to a near doubling effect in Burkina Faso of US$1,88 in additional income outside the sector for every $1 increase in agricultural income.
In Zimbabwe the impact of a poor agriculture season has been strongly felt in the retail sector. OK Zimbabwe CEO Willard Zireva recently told an annual general meeting that consumer spending will most likely decline owing to the generally poor harvest and delays in the commencement of the cotton marketing season. The same sentiments were echoed by Delta CEO Pearson Gowero who said that the decline in cereal output had resulted in a marginal decline in volumes for sorghum beer.
Muchemwa has disputed official GDP figures, saying his own calculations showed the size of the economy was 30% less than has been officially given.
He said GDP was US$6,9 billion in 2011 and would only rise to US$7,2 billion this year and not from US$10,1 billion (2011) to US$10,6 billion as has been officially stated. The country’s Medium Term Plan sets a 7% growth rate, which is expected to lead to a US$9 billion economy by 2015.
The growth rate is expected to slow down to levels of between 3 to 4% next year because of elections, which are traditionally characterised by low levels of investment, and due to policy misalignment within the GNU.
According to the African Economic Outlook, Zimbabwe’s GDP will decelerate to 4,4% this year from 6,8% in 2011, owing to challenges facing the economy, which include lack of liquidity.
The decline in growth is attributed to the high cost of capital and inconsistencies, especially on the indigenisation regulations, the report said.It also said obsolete technologies as well as power and water shortages militated against the growth of the economy.