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Unpacking ZimAsset Part 1

30 Nov 2017 at 09:35hrs | Views
It is critical that we always debate issues from a position of understanding and deep knowledge of the subject matter. Many a time citizens debate issues without having a good grasp of the subject matter.

Personally, I have always said that ZimAsset is not a bad plan at all, what is key is its effective implementation and the underlying value system which will drive it.

The overall assumptions of the ZimAsset Plan are as follows;

Improved liquidity and access to credit by key sectors of the economy such as agriculture, establishment of a Sovereign Wealth Fund, improved revenue collection from key sectors of the economy such as mining ,increased  investment in infrastructure such as energy and power development, roads, rail, aviation, telecommunication, water and sanitation, through acceleration in the implementation of Public Private Partnerships (PPPs) and other private sector driven initiatives, increased Foreign Direct Investment (FDI), establishment of Special Economic Zones, continued use of the multi-currency system, the  effective implementation of value addition policies and strategies and finally improved electricity and water supply.

What is missing from these assumptions are improved fiscal discipline and accountability.
In this first instalment. I want to focus on these assumptions and test their credibility and validity. This is simply because if assumptions are invalid, it makes the whole plan invalid.

1. Improved liquidity and access to credit by key sectors of the economy such as agriculture;

ZimAsset assumes that there is improved liquidity and access to credit by key sectors but is that fact? That is certainly not the case now, in fact the opposite is true. So if the plan is going to be successful, urgent attention must be paid to this assumption.

The President has already assured us that he is going to focus on this issue as a matter of urgency. We must see better regulation and monitoring of banks who are key facilitators. We must plug leakages of resources from the country so that money is retained and utilised in the country. The need to bring back externalised funds is one key action but more important how do we stop externalisation in the future? We must deal with smuggling and corruption and also increase confidence levels and reduce perceived country risk. We must also earn more dollars as a country which requires that we increase export earnings and therefore increased inflows of cash into the country. We must see fiscal discipline where the government does not crowd out the private sector by excessive borrowing for unproductive consumption.

2. Establishment of a Sovereign Wealth Fund (SWF);

The assumption here is that we have a well-managed and viable SWF whose resources can then be deployed for economic development. The SWF legal framework was enacted in 2014 but the fund has not yet been operationalised due to lack of fiscal space. It will be primarily funded by 25% royalties from mineral exports and special dividends in sale of diamonds, gas, granite and other minerals through ZMDC while RBZ will be custodian of the fund. To date the SWF has not been operationalised.

The President needs to pay attention to this matter otherwise ZimAsset will remain a good dream and nothing else.

Action plan; Increase liquidity and access to credit for key sectors. Operationalise an effectively managed SWF.

I will stop here for now. I will continue to deal with the other assumptions above in my next instalment

Vince Musewe is an independent economist. You may contact him on vtmusewe@gmail.com


Source - Vince Musewe
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