Eddie Cross says mining output will be affected by decline in international commodity prices

The MDC-T MP Eddie Cross has said mining output is going to be affected by the serious continuing decline in international commodity prices and he do not see any prospects of recovery in 2016.

"Therefore, I assume,  that the mining industry output will also fall in 2016. Tourism is going to be affected by the devaluation of the currencies around us," he said.

"We have a massive devaluation of the South African Rand, but we often ignore the fact that the Metical in Mozambique and the Kwacha in Zambia have declined in value by more than 50% in 2015 and therefore, all the destinations around us are going to be significantly cheaper than Zimbabwe which is operating in a hard currency environment, especially with the United States Dollar. Therefore, I think that tourism is going to have a difficult year."

Cross said construction is likely to be maintained by the continued emphasis of the diaspora on the construction of housing.

"It is interesting to note, that even though we have not committed any resources at all to housing in this country, there is in fact a housing revolution underway. It is principally funded by the international diaspora, but they too are affected by the disparity in currency values, especially in South Africa where 1 000 rands is only worth US$45 in Zimbabwe," he said.

"There is the question of our internal reform programme and the efforts by the Government to stimulate FDI. I must say, I see no chance whatsoever of these reforms having any kind of significant impact on economic activity in 2016. I cannot see any significant growth in FDI. My conclusion therefore, is that growth is unlikely. Instead, we must brace ourselves for further reduction in tax receipts. Tax receipts have declined now, in 2014 and 2015 and I personally am expecting a further reduction in tax receipts in 2016. I see this as being unavoidable."

He said people were being asked what are the prospects for increasing taxation levels.

"We are already one of the most heavily taxed populations in the world. The official figures in the budget show that taxes in Zimbabwe generally collect about 28% of our GDP, but that is only a small fraction of what we actually collect in taxes. The AIDS Levy is a tax, the NSSA charges are a tax, the ZINARA charges are a tax, police road blocks and fines are a tax. They are all means of collecting money from individuals in the Zimbabwean economy," he said.

"If you aggregate all of these informal and formal taxes on the population of Zimbabwe, we are in fact collecting 35% of the GDP. I just want to say that that is completely unsustainable. It also results in a whole lot of other adverse side effects. It makes Zimbabwe one of the most expensive countries in the world in which to operate as a business."

He said it increases the cost of employment by a third without any impact on the incomes of the individuals who are working and so, "you can carry these implications across the whole country."

"There is no prospect whatsoever, of us raising additional money from the existing tax base in these circumstances. In fact, I think ZIMRA does an amazing job. If you read the annual report of ZIMRA, I think they have really done very well under very difficult circumstances," he said.

"Now, we have to turn to the prospects for cost reductions. There is absolutely no room for the Minister to reduce the cost of Government. Our employment costs are $3.2 billion. Our fixed recurrent cost is nearly $300 million. That is $3.5 billion. In my view, that is already in excess of the revenue that we are likely to accrue in 2016. In other words, without providing for any capital expenditure or any other demands being made on Government, we will be operating next year on a deficit basis. We will have to borrow money simply to meet staff and other recurrent costs."