Zimbabwe's economy begins to recover: minister

The recovery follows an effective dollarisation of the economy, which has helped spur foreign investment and prompted the large Zimbabwean exile community to send more remittances home, planning and investment minister Elton Mangoma said.

"When we came into office in February, we had employment of six percent and capacity utilisation of less than 10 percent," he told Reuters during a mining conference in London.

"Our production capacity has now gone up to between 20 and 30 percent and employment is now around 15 percent, and those who are employed are a lot more secure because they can see that the companies are a lot more steady," he said.

Since the new unity government under Prime Minister Morgan Tsvangirai took office in mid-February, inflation has fallen rapidly from its once astronomical 200 million percent, while growth has begun to pick up.

"This year we are looking at growth rates of anything between three and five percent," said Mangoma, a businessman before joining the government after a power-sharing agreement was struck between Tsvangirai and President Robert Mugabe.

"From next year onwards, we are looking at double digit growth from a very low base. At least for the next 10 years, we can look at double digit GDP growth rates."

The country would stabilise with an inflation rate of "no more than three percent" by December. "That will be a sustained rate," he said.  

Interest rates have come down, with the highest rate at 15 percent and broad borrowing costs at around 8 percent.

"As the risk factor goes down, the interest rates will come down with it. So in fact, I don’t expect there to be any pressure on inflation because of interest rates," said Mangoma.

STOCK-MARKET BOOM

There are between three and four million Zimbabweans living outside the country, mostly in South Africa and Britain. The diaspora helped prop up the economy during the worst of the economic crisis under Mugabe and is helping out again now, with remittances rising.

Mangoma said it was hard to quantify the amounts exiles send home, but put it at between $600 million and $1 billion a year.

The swearing-in of a unity government after a disputed election in March 2008, together with the dollarisation, has helped shore up Zimbabwe’s credit lines, allowing money to flow in and inject life into an economy that remains deeply damaged.

Mangoma said Zimbabwe now had credit facilities of around $2 billion, money that was being poured into retail for restocking of shelves with goods, into production for raw materials and to an extent into capital equipment.

"There are people who were sitting on the fence who are now coming in," said Mangoma. The stock market in particular has shown rapid growth, with mining stocks up more than 240 percent since February, he said.

Foreign investors are also looking anew at mining opportunities in the mineral rich country, especially deposits of platinum, gold and diamonds. While some have ventured back, others are waiting for the legal framework to be strengthened.