eBusiness Weekly
Tawanda MusarurwaHARARE – Industrialists have given mixed reactions over the 2019 National Budget, highlighting the need for greater financing for productive sectors and effective prioritization of foreign currency allocations.
Last Thursday, Finance and Economic Development Minister Mthuli Ncube announced his inaugural National Budget Statement that balanced austerity and revenue boosting measures.
In an interview with on the sidelines of a Confederation of Zimbabwe Industries (CZI) Post-Budget breakfast meeting last week, Alliance Holdings executive chairman Dr Joseph Kanyekanye said he expected more from the 2019 Budget Statement in terms of funding.
“I expected, personally, a stimulus from some of the 2 percent tax being applied to deal with problems of over-expenditure. Clearly we have a difference of opinion with the Minister.
“I also certainly expected much more resources for sectors like tourism. I feel that the allocation was not adequate given that they are issues that need to be dealt with. We are selling a product which is competitive in terms of destination, but in terms of pricing there are issues. The prices of our telecommunications, our food among other things are out of this world.
“I also believe that rather than just focus on the ease of doing business that we have seen I still think there is capacity to deal with competitiveness because the Minister admits in the Budget that we are not competitive and we need to retool but we understand that it will funded through the private sector, local banks and so forth. I have a problem with that because most of what must come for retooling should come from external sources. To a large extent, you can do it through external lines of credit, or perhaps you do through some, he (the Minister) spoke of some Venture Capital Fund. I would have wanted a little more flesh into it,” he said.
Presenting the 2019 Budget Statement Minister Ncube said the budget primarily targets macro-economic and fiscal stabilisation and implementation of high impact projects and programmes, “which lay a solid foundation for a private sector led growth.”
Kanyekanye acknowledged some of these initiatives and measures, but highlighted that more could have been done.
“There are some positives that have come from the budget. There is an issue where we see clear attention to move away from the evils of a fiscal deficit and a trade deficit. I think there is also an issue where funds are being channeled through the Consolidated Revenue Fund, and that’s a good improvement.
“Our view is, with respect to Zimbabwe Asset Management Company (ZAMCO) for example, because these were none performing loans we believe that there should be a swap for debt in those entities and allow Zimbabweans to buy those companies and turn them around. The Minister mentioned that, but will likely refine it further on.
“In terms of some of the projects, particularly on the agricultural side we probably would have wanted specific projects that would address the unnecessary use of foreign currency, we all agree that we generating a lot of foreign currency but I think the way we are using it suggests that there is not enough foreign currency even as we have done more,” he said.
“We have done more in terms of exports than we have ever done before so one would like to believe that part of the reason is to try and see how we can reduce the demand for foreign currency in this economy. And one them is, for instance, if you take the soya-bean cycle value chain, you could literally give farms for the growing of soya beans because you have the climate that allows that and get to a situation where after a period of two to three years there won’t be any foreign currency allocation in the Reserve Bank for importing soya because we would be making it locally.
“But by and large I think there more that should have been done. There have been some attempts to reducing employment costs. But we see scope for doing more. I believe that while allowances are part of remuneration if you are doing austerity you need to cut back on some these allowances so that you have an impact on employment costs because however you look at it, employment costs are still the dominant expenditure issue on our budget.
Meanwhile industry sees some of the measures proposed by Minister Mthuli as increasing the cost of doing business in the country.
Among other issues Tanganda Tea Company finance director Henry Nemaire said the increase in customs duty for diesel in particular will drive up firms’ operating costs.
“We expected the Minister to address the key issues obviously the fiscal deficit and also the trade deficit. We have raised the outstanding issues in terms of avocado production being exempt, but we want them to be zero-rated. We have also raised the issue of duty because of the past years we have been fighting to reduce the cost of doing business, which culminated in the New Dispensation reducing duty, but on Thursday the Minister reversed that increasing petrol and diesel so I still feel that is an area where we have taken a step forward and a step back.
“But broadly I think Government has shown some positive action by cutting salaries. I think it’s a good gesture, which is a good thing from the President and the Finance Minister. So I think we have to implement some of these measures.”
Some key highlights of the 2019 National Budget include: a 5 percent salary cut on senior Government staff; customs duty on motor vehicles and selected goods to be paid in foreign currency; tax free threshold reviewed to $350 from $300, an upward review (to 7 cents per litre) of excise duty on diesel and paraffin, and to 6,5 cents per litre excise duty on petrol, and an increase on excise duty on cigarettes to $25 among others.
Confederation of Zimbabwe Industries (CZI) economics and banking committee member and economist James Wadi lauded the measures but highlighted the need for effective implementation of the proposed policies.
“I think it (the 2019 Budget) sets the tone but there is a lot that needs to be done. Most of these ideas are in place but what we have always lagged behind is implementation. These are some of the measures that are very good for the economy, but if we don’t implement them we have a challenge.
“So the confidence that the market awaits is not from the Budget Statement but from the course of action the Government will take. My feeling is that going forward you don’t want a situation where continuously we announce targets that we miss,” said Wadi.
“Even when you look at the deficit for last year the initial budget deficit was $672 million now we anticipating $2,8 billion. This wide margin shows that we have been setting benchmarks which we do not honour. Our first step is to ensure that we honour those benchmarks.
“For me what is key is that whatever foreign currency is coming through let’s put it to good use. It seems like overtime there has been a gap. During the first six to seven months, the economy performed exceptionally well from a foreign currency perspective and we should not be scrambling.”
