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Mthuli Ncube attempts a Houdini act

by Staff reporter
10 Nov 2019 at 08:23hrs | Views
Finance and Economic Development Minister Professor Mthuli Ncube this week unveils his second National Budget statement in which he is expected to announce far-reaching interventions to soothe a nation that has been under austerity measures for over a year.

Following a year of negative growth characterised by frenzied inflation, declining incomes, shortages of basic goods and volatile currency movements, many have naturally found survival tough going. Austerity has, however, had its share of positives including containment of the national current account and fiscal deficit, including achieving budget surpluses during the first half of the year.

However, these positives have had negligible trickledown effect to the ordinary people, hence the disenchantment.

Government, on its part, argues that its plans were thrown off the rails by last season's drought – the worst in two decades – and the Cyclone Idai disaster which hit three provinces. The effects of the drought also manifested through power shortages as water levels in Kariba Dam dwindled to historically low levels.

Previewing his Budget statement in a recent interview with The Sunday Mail, Prof Ncube said the forthcoming statement would be different from his maiden one and will mark the transition from austerity to growth.

"Away from austerity, productivity is the theme in the new Budget that we are going to be announcing for 2020," said Prof Ncube.

"It is about growth, productivity and improving the environment for ease of doing business.

"I will have a budget on supporting productivity within industry as a whole.

"Secondly, supporting productivity in the rural areas; where there is a possibility for investing in the rural areas, we will give an incentive for that. But also, I want to focus on job creation. In the Budget, I will have a proposal to reward the creation of new jobs."

Stakeholders who spoke to The Sunday Mail in separate interviews emphasised the need to step out of austerity to stimulus.

 Industry

Confederation of Zimbabwe Industries (CZI) president Mr Henry Ruzvidzo said Minister Ncube might need to recalibrate taxation thresholds in order to allow breathing room for struggling industries.

He said authorities needed to arrest rampant money supply growth as this was fuelling inflation.

"We expect measures to address decisively the unstable macro-economic environment," said Mr Ruzvidzo.

"Money supply growth cannot be allowed to play havoc with all the economic fundamentals. We look forward to incentives that will stimulate production, industry can readily double output provided the right policies are in place.

"Taxation is a heavy burden, the doing business environment presents many challenges and the instability increases business risk.

"The economy is using foreign currency for products it has capacity to produce. Thus, the Budget must address this anomaly which has been persistent. Confidence must also be built around our currency and the economy through policy clarity and consistency."

Mining

Zimbabwe Chamber of Mines chief executive officer Mr Isaac Kwesu said the mining sector presents Zimbabwe with quick wins.

He said Government needed to follow through with policy proposals contained in the strategic roadmap to the achievement of a US$12 billion mining industry by 2023.

President Mnangagwa recently launched the roadmap which is projected to increase mining revenue by 344 percent from the US$2,7 billion achieved in 2017.

"We need to address trajectory issues and challenges affecting viability of the sector so that the sector is placed on a path to sustainable growth," said Mr Kwesu.

"The issues include resuscitating closed mines, expanding current operations, and developing new mines requires mobilising adequate funding. We need to address the critical enablers, specifically power outages, so that production is enhanced because without power we cannot produce.

"There is need to address issues to do with foreign currency retention; we need retention levels that allow the mining industry to have sufficient foreign currency to acquire critical imports such as equipment for expansion, consumables and spares.

"There must be timeous payment for deliveries especially for gold. There is need for monetary and tax breaks that make us competitive in attracting manpower from other countries."

Agriculture

Zimbabwe Farmers' Union executive director Mr Paul Zakariya said Government needed to consider securitising land tenure to enable farmers to access private funding from banks. He said Government-led funding model under the Smart Agriculture programme should be fine-tuned to allow easier access, by farmers, to inputs directly from suppliers.

"The best incentive for farmers to be more productive is putting up what they value the most, their land, as security for loans from the banks," said Mr Zakariya.

"If a farmer knows the risk of losing land, then they will invest more to produce and make a profit.

"There must be an introduction of a voucher input scheme comparable with the Zambian input scheme model, which uses an e-voucher system.

"The farmer has a swipe card into which the government loads the loan. The farmer then redeems the loan at participating agro dealers by selecting the inputs that they need. This takes care of the different farmer input needs."

Mr Zakariya said Government should scrap Statutory Instrument 145 of 2019, which criminalises holding of large maize stocks and establishes the Grain Marketing Board as the sole buyer of maize in the country.

He said such policies were inimical to grain production.

"The decree makes it a criminal offence to even 'possess' maize in contravention of the regulations, which puts farmers who keep their maize to hedge against currency depreciation at risk of committing an offence," he said.

"It creates a ridiculous situation where a farmer who has toiled all year to produce the crop is criminalised for making an economically rational decision to hedge against losses."

He said late payments for grain deliveries by the GMB resulted in farmers getting only a fraction of what they were initially supposed to get owing to the volatile currency movements.

Outlook

Economist Mr Persistence Gwanyanya said transitioning from austerity to growth would require increased Government spending, particularly on quick responsive sectors.

He said while austerity had helped rein in Government spending it had failed to stabilise the economy.

"The policy thrust that underpinned austerity was management strategy to achieve surpluses," said Mr Gwanyanya.

"Going forward, that management strategy is changing to achieving some deficit, but within acceptable levels. By doing that, there is a measure of acceptance by Treasury that we need to stimulate the economy. But stimulus will have to be supported by some measure of financial injection.

"This year, we were expecting a budget deficit of around 4 percent of GDP and we are moving away from surpluses that we achieved in the first half of the year of $803 million, but this year were expecting upwards of $4 billion in terms of a deficit. This means that the thrust of the minister is to move away from the surpluses to deficits which is consistent with the thrust of moving away from austerity to stimulus.

"The stimulus measures are going to see an increase in money supply in the economy, but this will be supported by a measure of deficit within acceptable levels. There should be a balance of stability and stimulus. For stability, we have to inject money in a measured manner.

"As we construct a deficit we should do that in a more responsible manner always remembering that we have not yet stabilised the economy. The minister should now identify the areas that have quick and effective responses in stimulating the economy."

Source - sundaymail

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