OUR domestic investment (gross fixed capital formation) in proportion to our annual gross domestic product (GDP) is extremely low in comparison to the world average of 20% and to our regional peers. This is concerning — without significant domestic investment, it is not possible to attain an upper middle income status as envisioned by Zimbabwe’s Vision 2030.
The Brett Chulu Column
Post-Government of National Unity (GNU), our country has been investing domestically an average of 9% of its annual income (GDP). Historically, our country’s habit of domestic investment in proportion to our national annual income (GDP) has risen and fallen like a wave. Since 1960, five distinct troughs and crests are discernible. Between 1960 and 1975, our domestic investment peaked at 20,2% (1960) and 21,5% (1975) of annual national income, with a low point of 10,6% of annual income in 1966.
The next peak after 1975 was in 1995, with 24,6% of our national income allocated to domestic investment. Between 1975 and 1995 (excluding the peaks), average domestic investment in relation to national income was 15,2%.
The next peak after 1995 was recorded in 1998. In 1998, 20,6% of national income went to domestic investment.
The next peak was in 2010, two years into the GNU. In that year, 17,0% of our national income was allocated towards domestic investment. Between 1998 and 2010, average annual domestic investment (excluding 1998 and 2010), as a fraction of our national income, was 7,3%. This average of 7,3% masks the extreme lows of 3,2% in 2005 and 2,0% in 2008.
We now compare our current domestic investment rates with our regional peers. Botswana allocates 32% of its national income towards domestic investment. Tanzania sits at 35%. Zambia spends 35% of its annual income on domestic investment. Ethiopia channels 38% of its annual income towards domestic investment. These African countries have experienced good and consistent real economic growth rates. They spend four times their annual national income as domestic investment as compared to Zimbabwe.
We need to look at the gross national savings rates of these countries in comparison to Zimbabwe.
Gross national savings are savings from households, government and corporates put together. Zimbabwe has a gross national savings rate of 23%. Botswana has a gross national savings rate of 40%.
Botswana utilises 80% of its national savings towards domestic investment. Zambia’s gross national savings rate is 38% of national income.
Zambia utilises 92% of its national savings in domestic investment.
Tanzania has a gross national savings rate of 25%; she utilises 140% of her annual national savings in domestic investment — she draws down from current and past national savings.
Ethiopia has a gross national savings rate of 32% of national income; she utilises 118% of her annual national annual savings towards domestic investment.
Zimbabwe utilises 39% of her annual national savings towards domestic investment. There is a sizeable pool of investible surplus in Zimbabwe that is not finding its way into domestic investment. It is clear from the data, at face value, that Zimbabwe has the potential to drive sustainable good economic growth from savings generated domestically. Zimbabwe is positioned more favourably than most of its regional peers in terms of economic growth potential. Botswana and Zambia, with much less diversified economies, have been enjoying good economic growth rates for over a decade. Tanzania’s agricultural sector contributes 25% to national income.
Zimbabwe has a very high potential in agriculture. Zimbabwe, starting from the UDI period has had its economy driven mainly by agriculture, mining and manufacturing. Agriculture and manufacturing have fallen in terms of their contribution to national income.
