eBusiness Weekly
Muhammad Umar
Finance and Economic Development Minister Patrick Chinamasa presented his 2018 National Budget yesterday, which brought in an air of expectation, showed a fine balancing act and was a sense of optimism bellow. It should resonate among a nation and must positively impact every Zimbabwean and those beyond our borders, including but not limited to diasporans who have a major role to play in the re-building of our nation. Below is the thrust upon which judgement will be passed in so far as the budget satisfies and recognises the needs of every Zimbabwean and is all-embracing:
Thrust
1. Arrest the economic malaise, in particular corruption (repatriation of externalised proceeds and or laundered proceeds and corruption within the public sector).
2. Industrialisation.
3. Fiscal discipline — Fiscal deficit to be in line with global trends — 3percent. Public debt to GDP to be at 70percent, employee costs — 65 percent in the medium term, Fiscal deficit to fall under USD1b in 2018.
4. FDI’s.
5. Expenditure management (tone at the top has been set by reduction cabinet numbers, consolidation of jobs and tasks within and among ministries should be encouraged, efficiency and effectiveness should be the standard and benchmark, temporary freeze on hiring, voluntary retirement scheme, early retirement, benefits rationalisation, reduction in delegations and necessity for such attendances by all and sundry without value addition, wide expansive cost cutting measures).
6. Jobs/employment.
7. Macro-economic imbalances.
8. Budgetary imbalance.
9. Engagement of multi-lateral finance organisations, including re-instatement of corresponding banking relationships.
10.Management of public character organisations.
11. Production, industrialisation and export levels.
12. Protection of foreign investments.
13. Support for developmental and social projects.
14. Policy consistencies ( legal regulatory framework).
15. Sustainable growth (Line ministries to ensure that fiscal discipline is encouraged (presentation of zero based budgeting to treasury, treasury to have access to funds raised by line ministries, accountability and responsibility towards discipline should be monitored by treasury and the OPC).
Global and regional outlook
In spite of achieving a growth rate marginally across the expected for the continent there is room to achieve at least early double figure growth in 2018 with optimal fiscal and monetary policies and on the back firming commodities prices. Possibly a cautious and prudent expectation but certainly one that is attainable possibly by half year 2018.
The challenges faced by other continental nations of the rising debt burden may be diametrically opposite in Zimbabwe wherein, there is expected to both developmental financing and relief aid financing mainly aimed at infrastructure development and humanitarian assistance
It would be critical that over-reliance not be placed on finite, non-renewable resources but rather on resources that have the capability of being re-generated (industry, manufacturing, farming, services, IT and technology development). The human potential and critical mass in that sphere are sufficient to ensure that Zimbabwe re-claims its standing among the financial heavyweights of not only the continent but stakes its claim among the colossus of the nations of the world.
There is an urgent need and necessity to ensure that some form of reversion is had to the notion of, having as store of value, for the benefit of the nation a reserve of gold and or other bankable resources to ensure that in the event of a turn in fortunes the country can withstand the shock and repulsions of the debilitating consequences of such occurrences. The American example is apt in this instance.
Oil present in the US, as abundantly as it is available is not fully utilised and they rely pre-dominantly on imports of the commodity to protect and retain their reserves. And these can be bankable in one form or another. Over-reliance on trading precious or base metals is the fact that control and determination of such prices is beyond the realm of one singular country and, as was the case in Zambia in respect of copper prices, one shock and the waves were felt in every sector.
Agriculture — 15 percent, Mining — 7,5 percent, 2,5bn, Gold 2bn, 25,2 percent of exports (represents an over-reliance on precious metals rather than on manufacturing, services et al).
Gold
Incentives to small scale farmers who represent the majority of miners in the sector.
Industry
1 percent is too low, 2,1 percent is not ambitious. There is scope for it to grow to the early double digits in the short-term by virtue of it being the backbone of the revival effort. Export incentives and tax breaks have to be afforded to this sector to bring down the negative balance of payments and cease at the earliest possible time the heavy and in some instances total reliance on imports. This has a cascading effect on the rate of lending and is unsustainable in the long term since the deficit has to be financed and may be costly.
Financial Sector
Re-capitalisation of these institutions, rigid monitoring and compliance, implementation and enforcement of anti-money laundering and terrorist financing mechanisms, capital adequacy, review of the cost and charge-out structure, management and governance all need to be incorporated in the DNA of the sector to ensure the vibrancy and more importantly ensure that public confidence is restored and legacy maintained. The move towards e-money should not be punished by charging high costs but rather should be promoted by being attractive to customers and corporates to curb the rampant capital flight.
There has to be a viable, enforceable mechanism championed by the government to ensure that lending and maintenance rates are minimised to the maximum possible by passing binding legislation and also to curb financial sector malfeasance and predatory charges on depositors.
Further, the extension of a corporate governance mechanism should be extended and made mandatory for the financial sector and should form part of their reporting procedures.
Cash crisis alleviation
The consideration of the needs of vulnerable groups (rural dwellers, informal sectors and those with little access to security) and those with limited access and knowledge of such mechanisms have to be accorded top priority and cognisance.
Parallel market activities
Such activities have the potential to cripple the economy as witnessed in the hyper-inflationary regime and in the current economic spectrum. A long term solution to the cash impediments needs to be developed, including the adoption of a substantive Zimdollar. This can only be achieved once macro-economic fundamentals have been correctly embedded.
Inflation has an enfeebling and adverse chain reaction throughout the economy and the necessity to obtain a permanent and conclusive solution at the earliest opportunity possible is crucial for economic stability and growth
Administrative levies
Have the potential of inflationary pressures across the value chain and they may have a negative impact on the most vulnerable. Consideration of alternatives and or scrapping of such levies except for possibly those with the capacity to withstand such cost push measures
Public sector projects
Projects of national status should be reviewed regularly to ensure that they are corruption free, efficient and for the benefit of the citizenry. A lot of financial resources are sunk in particular with regards to overstatement of input cost and inefficiencies are encumbered on treasury. Thus, with the scrutiny of treasury of all projects, this will be minimised and resources will be allocated more efficiently. Cost overruns should not be tolerated and contracts should be fairly appraised to include less prominent but ably capable entities.
Re-capitalisation of public entities
A justification for such measures and motivations for such assistance must be criteria by which such an exercise must be undertaken as opposed to merely being reliant on government. Partnership to capacitate certain public sector entities should be sought from foreign partners, which will be mutually exclusive, without losing our identity and ethos.
A firm commitment and direction of state enterprises has been forwarded- perform or shut down or be privatised. There can be no more tolerance of failed institutions and the possibility of prosecution of economic malfeasance and dereliction of duty must be applied.
Enhancement and compliance with corporate governance regulations must be monitored and failure to comply must be a punishable offence, without exception.
Foreign Direct Investment
The President was and has consistently been unequivocal and unyielding that Zimbabwe is an integral component of the world and that those with genuine business interest are ever so welcome. Investors are above all considerations driven by consistency in their decisions and as such they expect a replication and reciprocity form the host nation. To put it mildly the budget represents a paradigm shift, a seismic manoeuvre and more importantly a welcome development for one and all.
The major stumbling block, being uncertainty in scope, inconsistency in application and non-uniformity in utilisation have contributed to investor doubt and incertitude. Prima facie it appears that all concerns have been addressed by the Minister and appropriate application of the new regime will be an end to the achievement of economic growth for the benefit of all Zimbabweans
Further all directives issued by international organisations like the OECD, IMF, EU and WTO should be incorporated in our law to ensure that we have a truly international business scope and focus. This will further enhance investor participation in the development and growth of the country.
Repeal in great part of the Indigenisation Act
This was a prominent issue of discussion, emotion and antagonism and it is laudable that the Minister has tackled this head on. Natural, non-renewable resources should be for the benefit of all Zimbabweans and we should develop the capabilities to extract such resources, add value to them and create a sovereign wealth fund which preserve value and enhance reputation on the international stage. Zimbabwe is endowed with an abundance of resources and they should be controlled and maintained for the development of the country.
The clear stance of repeal for all other sectors will be greeted with great cheer from far and wide. Compliance should also not be burdensome and cumbersome and should be monitored directly by the responsible ministry to keep in line with the purport and objective of the provisions.
Ease of doing business
Clear targets should be set to ensure that Zimbabwe makes at least the top 100 by the end of 2019. This will instil confidence in the economy and will translate into economic milestones on the ground. Labour market flexibility is a welcome development and should be adopted consistently and be even-handed. This will provide certainty to those utilising the services of labour without being unjust or inequitable to those providing labour.
Promoting domestic industry
In addition to the ease of doing business, productive industry needs to be nursed back to financial well-being and operational efficiencies. Incentives on imports of machinery and raw materials should be extended across all sectors to ensure that entities re-tool, mechanise and structure towards greater efficiency. Further, tax breaks and concessions may be afforded for a limited period within which they should achieve sustainability financial stability and operational efficiency.
Auditor Generals reports and compliance with such
There is a widely held conception that recommendations forwarded by the auditor general are treated lightly and or avoided altogether. This renders effectually the services of such an august arm purposeless. Without the will and drive to enforce and monitor progress, economic recovery and rehabilitation will result in nought. Failure to comply with the recommendations within a reasonable time must be punishable.
Export incentives
The rationalisation and minimisation of export requirements and documentation must be achieved within a justifiable time-frame so as not to in essence “burden those bringing in the much needed foreign currency”. This needs to be achieved in the 100 day programme since foreign currency is critical for the optimal functioning of the economy.
Mineral beneficiation
Export of raw form minerals provide yields that are not optimal and maximise profitability and this can be an area that will ease budgetary constraints if value is maximised in their processing.
Agriculture
Mechanisms should be in place to ensure that maximum benefit is derived from the land and that we aim to be self-sustaining and net exporter of various agricultural products and by-products. Security of tenure should be the first port of call to ensure that these are bankable and financial institutions have adequate substantial security to extend financing. 0ffer letters need to rationalised and formalised to be accepted as a medium of security that can truly provide and be used for the purposes intended.
Respective measures need to be taken in response to those possessing redundant farmland, underutilised land and or multiple farms. Productivity should be the criteria of being a recipient and ownership of multiple farms should at face value be frowned upon but the greater good (productivity) should be encouraged to ensure a vibrant agricultural sector to ensure food and nutrition security and sustainability.
Training and re-training of new farmers in modern farming techniques is an inextricable and concomitant necessity to ensure optimal harvests at the cheapest possible cost and outflow of resources. The importance of small holder farmers and subsistence farmers should not be underplayed in the wider socio economic perspectives and should rather be encouraged to ease the pressure on fiscal revenues.
Farmers who benefit from the command agricultural scheme should honour their obligations and commitments to the nation and government.
Revenues
It should be standard of measure that business contributes the largest portion to the fiscus for all its relevant tax heads. This is not so with regards to corporate tax at only 11.6percent of revenue for one of many reasons, the most prominent being the profitability of enterprises (the life blood of private organisations and rationale for their existence). There is potential to grow this tax head and ease budgetary constraints in the long term which will be premised on ensuring that businesses regard investment in Zimbabwe as a venture of worth.
Donor contributions to budget
Zimbabwe has a self-sustaining budget wherein the entire budget is funded from within. This is not the norm for any developing nation and donor support for certain aspects of the budget is key in alleviating poverty, provision of health services and empowering disadvantaged and marginalised sectors of the nation. Donors have expressed their commitment to this cause and this avenue should be valued and utilised. It will ease the budgetary constraints and assist key sectors of the economy and ensure inclusivity and a voice for all.
Expenditure
The gap between expenditures needs to be narrowed vis-a-vis revenue generation. Requires it to be tightly monitored and controlled to ensure a balanced budget and economic independence. Although the major cost contributor has been identified, it must aggressively and substantially be reduced to a maximum of 50percent in the long term. Grant aid institutions should be independent, self-sustaining entities and arrangements must be made which are less burdensome on government since these, for example tertiary institutions are in most instances fairly liquid and churn a surplus year on year. Bonuses and 13th cheque provisions should be re-visited in the short term although it is important that we reward outstanding and meritorious achievements.
Ministries should also be encouraged to live within their means by implementing regularisation strategies and those that do not unnecessarily burden the central government and consequently the drain on the fiscus resulting in legacy debt. Treasury bills in themselves obligate the government and are only a short term measure. Further, they are only effective in environments that are relatively stable and return a profit to government programmes
Social sector infrastructure requires a substantial allocation compared to its current outlay to ensure a balances economic program that affects positively all under-priviledged and vulnerable. This includes education, health, social amenities, housing, provisions of water and sanitation, social welfare programs and child welfare and community programs. Education will only be is the largest consumer of the public wage bill and although it is envisaged that reduction in Government wage bill be effected, at the very least it is going to a valuable endeavour.
This must be replicated with the health sector budget which is a mere 11percent and should take cognisance of the adage that a “Healthy nation is wealthy nations”.
As Mahatma Ghandi opines. “The true measure of any society can be found in how it treats its most vulnerable members”.
So the matter seizing us is … did the budget presentation achieve its zim-centrism and inclusivity that was anticipated and hoped. It surely set the right tone, import and direction of the intentions of the government but requires further action and bold steps to propel it to fruition.
All hands on deck, ladies and gentlemen, fellow citizens of Zimbabwe. As the adage goes “so much to do, so little time/so little done”.
