Zim govt should remove 75 000 ghost workers from its payroll: Bloch

Eric Bloch says government's fiscal pronouncements do not aid economic recovery and are actually an impediment.

Although Finance Minister Tendai Biti had identified some of the key challenges confronting Zimbabwe's economy as political uncertainty, absence of fiscal space, alternative financing instruments, and an unsustainable debt, he failed to identify the negative consequences of overspending and the manner in which Zimbabwe is pursuing its indigenisation programme.

"Irresponsible overspending had been a Zimbabwean government characteristic for many years, vigorously pursued long before the inclusive government came into being, and therefore symptomatic of the Zanu PF fiscal policies. Therefore, a divide between the leaders of Zanu PF and its partners in the so-called inclusive government was assured," Bloch said last week.

According to reports, Biti has allegedly incurred President Robert Mugabe's wrath with his proposals for spending cuts in defence, police, foreign affairs, intelligence and international travel.

Bloch says Mugabe's government has been guilty of "gross over-spending" on these areas to the detriment of other sectors and it was foolhardy to pursue such a programme as empowerment when the country's land reform was yet to take effect.

This had also led to international as well as economic isolation.

"And whilst a minister of finance cannot alone bring about the policy changes necessary… (for) meaningful recovery, instead of only very nominal and marginal economic growth, and that growth being at great risk of being reversed in the absence of the necessary policy changes, his mid-year budgetary measures did naught to prevent that reversal," he said.

Bloch also attacked Biti's fixation with the mining sector's "over-accommodating tax structure" and said the contention had no basis.

Although mining companies are beneficiaries of a lesser rate of income tax than pertains to other sectors, they are subjected to many other taxes such as licence fees, royalties, withholding taxes and many other direct, and indirect taxes building up to 68 percent of their income.

He also said Saviour Kasukuwere's "recurrent emphatic insistence" on a 51 percent localisation threshold for mining would "grievously curb" a sector, which had progressed significantly since 2009 and Biti's repeated hints that taxation would be increased compounded "intensive investor reservations and reluctance to increase production as well as develop new mines".

Bloch also attacked Biti's policy on other critical sectors such as textiles and manufacturing.

"Months ago, he reduced the customs duty on textiles, clothing and footwear… (to curb a flood of imports).

That is unsurprising, for the reduced duties enhances import product competitiveness, but nothing was proposed in the fiscal review to address the industry's crisis circumstances," he said, adding Zimbabwe must adopt a dual strategy of higher duty rates - as he had done with food manufacturing - and strong anti-smuggling measures.

More importantly, he said Biti must not bother struggling local businesses with his fiscalised cash registers to "minimise tax evasion",  but vigorously ensure that government removes 75 000 ghost workers from its payroll with $17,6 million monthly saving being ploughed back into treasury.

"Saving such amount should have greater urgency than forcing private sector to install unaffordable fiscal devices," he added. "These, and many other defects, rendered the review appallingly abysmal.

Virtually the only redeeming features were that the minister has confirmed the critically necessary continuance of the multiple currency system, the intention being to compensate for demonetised Zimbabwean currency… and the prescription that all traders must transact at the daily official cross rates," Bloch said.

However, he said he understood Biti's limitations with the president and his cabinet colleagues over plans to contain the state's expenditure ' whose consequential effect or deficit did little to promote "oppressed, survival-endangered commerce and industry".