eBusiness Weekly
The 2019 National Budget is likely to be presented next week, and the general expectation is that Zimbabwe will have its first balanced budget, at the very least for recurrent expenditure, and that the fiscal sloppiness of so many years will cease, allowing the economy to enter a prolonged spell of sustainable growth.
It has been clear for decades that our rate of economic growth is far too low and at times has gone into reverse. And a lot of that can be placed firmly at the door of a Government that had to raise State expenditure and imposed little fiscal discipline on its ministries and units. The problems could be sorted out “later”.
Well now it is later.
Some of the rise in expenditure was inevitable. The switch at independence from an economy providing decent services to a minority and very little to the majority to one that benefited all imposed major budgetary burdens. We cannot escape from the requirements that all our people need access to effective health care and access to education for their children.
The dying efforts of apartheid in South Africa meant that its neighbours had to maintain large defence forces, and those had to be maintained for some years afterwards as we cleaned up the mess that still existed after democracy came to that country.
The sanctions imposed at the beginning of the century hit Zimbabwe and continue to hit us, although we must be careful not to blame all our troubles on these. Droughts are a regular extra burden, since we cannot let people starve, and we have seen other climatic disasters, including cyclones riding into Zimbabwe. We have to recognise our vulnerability to climate change and make provision, rather than relying on a temporary massive burst of borrowing.
But at the heart of our budgeting process must be the simple recognition that there is no such thing as a free lunch. Someone has to pay. We either pay by paying taxes or we pay by watching our economy undergo cyclic collapses as we wreck it through over-borrowing or printing money.
It is clear that President E. D. Mnangagwa and the technocrat he brought in as a Finance and Economic Development Minister, Prof Mthuli Ncube, understand that we need to end the cycles of collapse and slow recovery with little net gain over the decades. The President has been preaching the need for austerity in the short term and has backed the determined efforts of the Minister who, within a few weeks of his appointment, introduced that “2c tax” as a measure to close the gap between what the Government gets in revenue and what it has to spend on services. That new tax had the extra benefit of telling everyone, at home and abroad, that the old days were over.
There are those who have other suggestions. “Cut the civil service” is one cry. Yet 77 percent of civil servants are in education and a good fraction of the rest in health. Even the small pool left is mostly doing essential jobs. So the room for cuts is limited. It might pay for people who think there is slack to think more. The Finance Ministry is obviously one of the essential ministries. But there are probably more civil servants teaching in Mbare, a single Harare suburb, than pacing the corridors of the wing of the New Office Complex where the Treasury operates.
The uniformed services, that other block on the Government payroll, is dominated by the police. Again an essential service. We would agree that now Zimbabwe is surrounded by friendly countries we could take a good look at defence, and perhaps the President might now consider a formal defence review before the last large block of war veterans move into retirement to see what the future requirements might be. We suspect a modest well-equipped professional defence force might be the choice with perhaps reserves available for unforeseen emergencies. It would not be unreasonable to expect all police officers under 25 to spend 30 days a year training as that reserve.
But even if there are cuts to the State payroll, most of these would be a combination of retirements with lower recruitment. And here we need to remember that, unlike the bulk of the private sector, the Government does pay retired State workers a survivable pension. Moving a civil servant from the active list to the retired list does not eliminate all costs, although there is a reasonable reduction.
This is why Minister Ncube will need to retain his 2c tax, or find a replacement that brings the same revenue and is equally small and equally wide in its reach so it is payable with little grief. He will need, as he has promised, to ensure that other taxes are collected. Most people will dodge taxes if they can. Making that more difficult is a required policy. The Minister may even want to re-examine the presumptive taxes, those supposed to be paid by the upper end of the informal economy, to make sure they fit the changed circumstances and are actually collected. But anyone expecting a tax cut next week can probably improve their health by smoking less illegal substances.
The other half of the Minister’s job is making sure his colleagues accept fiscal discipline and probably disappointing them, this year, when they present their spending bids. But Finance Ministers, like company accountants, need to be respected, not liked.
He can offer a ray of hope. When the economy starts growing he will collect more tax and some plans can then be funded. A growth rate of 7 percent a year compounded for three years comes close to 25 percent, and since the State share remains about the same fraction that means Prof Ncube can do more then if his austerity measures work now
The third requirement, that the Government is efficient and incorruptible, is not the Finance Minister’s job. But the President has stepped in there quite decisively, from the little things, like everyone starting work on time and putting in a full day’s work for a full day’s pay up to his very clear policy that the corrupt cannot and will not be protected. The people will accept some austerity, so long as they are sure that there is no waste and no inefficiency, which is why that range of reforms from the President’s office are so vital.
We all look forward to the budget, but the excitement is going to be in the totals, not in any grand plans of tax abatement or dramatic spending. The Minister will be fixing the fiscal mess, so we can advance, not indulging in spectacular showmanship.
