By ETimes
Before we move into the questions of 2023 that should be answered by industry and government, we at ECONOMIC TIMES would like to wish you a HAPPY NEW YEAR and thank you for your continued support in the year before us.
The year of 2022 was a year of two halves in the financial sector with a tumultuous first seven months marked by press conferences by the President trying to cool the economy and market, to a last third of somewhat calm and refreshing end to the year.
Is inflation going to remain on a falling trend?
Inflation has been a story of this economy since 2019 when the monetary authorities decided to revert to monocurrency, using the Zim Dollar ending its 10-year hiatus. In 2022 the monster ran wild in the first half of the year but has since been on a 5 month run of cooling, leading to the Reserve bank of Zimbabwe.
The fear is of it being an election year and the history of going off course that has been the norm since the 2000 elections. With more spending needed, will the RBZ wake up the printing machine in order to meet government demands? Only time will tell.
Prof. Mthuli Ncube has been a resolute sound shepherd of the financial sector, but the limit of his power might be tested in the next six months. We ought to wish his power within the ranks is massive and he will be able to withstand the urge to overspend. Without that, we might be in 2020 all over again on inflation.
Will the energy sector support production?
It’s absurd to hear someone say the energy sector will have some wins in 2023, because it doesn’t look like it will happen at all. However, the wins will most likely come in the fuel and gas sector with prices likely to cool off a little bit during the year.
In the electricity sector, it’ll be a mixed year in our view. With Kariba waiting to be fed by its catchment area in the next 4-6 weeks to start seeing an improvement in live water levels and the synchronisation of Hwange 7&8 we might see the return of loads heading later in the week.
However, we will need an increase in coal production in order to meet demand of our generators in order to reduce the demand – supply gap in the country. The commencement of Hwange 1-6 refurbishment should also begin this year in order to help with the situation at a later stage.
In 2023, power issues will be with us and we might see the same cycle as last year with increased loadshedding in the last quarter of the year.
Will industry capacity utilisation reach a 14 year high?
In all fairness, industry did everything correct in 2022, but external pressures and local shortcomings did hit the industry hard.
The Russia – Ukraine war, global inflation, local dollar depreciation and energy problems derailed their efforts to continue on a winning part. Given enough support by monetary authorities and the energy sector, 2023 can be the year of a higher capacity utilisation.
Infrastructure and Mining sector growth in 2023?
Arguably the best performing sectors of 2022 and they look set to continue the trend in 2023 as they seek to meet their own targets of growth.
With the mining sector only 11 months away from its US$12bn sector valuation deadline, it looks like it will be a busy year for the sector. Investments have been mooted from all corners of the world, and recently, Botswana Diamonds said it is still keen to invest locally despite a failed attempt recently.
Despite the new investments, some mines invested in new machinery and equipment as they aim to increase production. This will be a plus in their bid to be a US$12 billion industry by close of the year.
Global commodity prices might be a threat to the sector as they are expected to cool off as economies recover. But despite that, the sector is expected to grow locally in the year.
Infrastructure boom, is only not seen by those who choose to ignore it. Be it in the smaller towns like Marondera, Chegutu and Mvuma or the capital city structures are being built.
Even construction related companies have reported a boom in earnings and demand in the past six months. And with most projects coming to completion this year, we anticipate the sector to see more growth in the year 2023.
Aggregate demand, what will happen?
It is an election year and spending is what will happen in the economy, hence aggregate demand will definitely be on the rise. Be it from incentives, political parties beefing up their campaigns and salary adjustments in order to keep the nation happy in a voting year.
Conclusions
The year 2023 will be a year of rapid expansion in the mines and infrastructure sector, both driven by the need to give the impression of development to the voting caucus. This will lead to either inflation if not managed well, or increased aggregate demand if well managed.
