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Apparently budget presentation was relatively good, but lacks clarity

26 Nov 2018 at 10:18hrs | Views
From Hand to mouth
As a development practitioner, my strong analysis is as follows, it appears the current budget presentation is a reflection of hand to mouth approach. I thought the minister was going to touch on critical sectors of the economy mainly production, infrastructure development, food security, tourism, mining and agriculture. Fine Agric received major boost of about 900 million, but I thought, how the expenditure will be re-directed to turn around the economy and spur growth. This is what we want to hear. It should not be about figures but productivity. The level of consumption is very high in Zimbabwe, but focus should be on production. Do you know why we are in this state, it is because we largely depend on imports, and we have reduction in exports. So what we must fight for is exports. We need to increase our exports so that we exceed or surpass the balance of payment by increasing exports and reducing imports. That is why SADC countries surrounding us are happy with our situation, our main problems, be it politics or economics, it is largely on TRADE. They benefit from the mess. We must produce, and this should be our major focus and core-business.

As a development practitioner, apparently it is an improved budget in comparison with previous budgets. From an academic point of view, with an overview and oversight of the current economic impasse, I think we can give it a credit for now though there are several grey areas which needs a strong introspective from an academic point of view. It was fine, but lacks clarity, which can be very difficult to restore confidence especially with investors. What you may need to understand for now is we need to work hard on grey areas so that investors are confident with what we are doing. For example he was silent on the issue of bond notes which have flood the market, together with RTGs and other electronic transfers, how then do you justify the issue of multi-currency system, when we don't have a strong back up facility in place? We must and we have to acknowledge what is relatively good. The austerity measures were generally good and electric. For me I will restrain myself from politics, because when a budget presentation is made, its developmental and economical, you can't play dirty politics on such projections. However they are few grey areas which needs to be tackled. For example he didn't talk about financial sector, reforms which are necessary in the RBZ and finance ministry, though he acknowledged that we are in a mess because of our past and appetitive for expenditure. I think if Muthuli does not get any disturbances, this is the inception of good thoughts and ideas about our country. He did his best. Our major challenge is expenditure, which I feel must be restrained so that we can meet our economic projections.

MIDDLE CLASS 2030
A good idea to have economic targets if they are implemented. We don't want a pile of documents that won't take shape. The middle class economy target is met, if we implement economic and institutional reforms he mentioned in his earlier presentation. Foreign direct investment will flow if we respect the rule of law, property rights for investors and also have a review of empowerment laws. I suggest they should be revised so that we can have proper projections. Another idea which Muthuli Ncube forgot to mention was the issue of "one stop over issue". When you want to do business in Zimbabwe, why would you wait for 14 days, I suggest this must take place within 24 to 48 hours. Investors must not face challenges when coming to open companies. Business must flood to Zimbabwe. They need to revise that, yes we are aware that we are desperate for revenue, but on that one it must be revised.

Cutting expenditure
He mentioned a number of economic measures which enhance development. He talked of cutting the number of foreign missions which is apparently good. We have a huge expenditure on foreign missions. In fact I would suggest that, instead of ministers carrying a number of entourages going outside the country on Government business, we can make use of foreign missions to cut costs. Those foreign missions will simply represent our country very well.

5% cut on salaries
The olive branch was extended to senior Government officials and presidium. That's good. A pay cut is important, but I th0ught he would talk of cutting allowances for Government officials, and avoid globe-trotting for senior officials. The 5% is a starting point, but if allowances are not blown then they will not feel the effects of the measure.

Investments
We can't run a country without investments. We need investors. Foreign direct investment is critical to any given country (FDI). Muthuli Ncube acknowledged the issue of investors but he mentioned that we must respect property rights, this is an important and critical aspect. We have to respect the rule of law. The idea of grabbing properties must cease and ensure investors are in the safe zone. I think, with the pace he is moving with, we can expect some meaningful foreign direct investment in the country. Do away with road blocks, inflammatory statements by senior officials, this is what investors look at. Muthuli Ncube talked about the issue of research and development which is a good idea for Zimbabwe. We need a research institute which establishes facts, it must be on a fact finding mission, causes of deficit, expenditure issues, economic fundamentals and other issues which contribute towards economic growth.

Corruption
Our major problem is corruption in Zimbabwe. So the minister must get to the bottom of corruption and deal with corruption decisively. It is very important and key. I thought he would mention the issue of controller auditor general, the office of the auditor general should be empowered with all resources and cyber security equipment so that we can avert leakages and root out corruption. Nothing much was said about corruption, we are in this deep mess because of corruption. I thought Muthuli was going to touch on the fundamentals of corruption and at the same time equip the state organs which are supposed to deal with corruption for example the auditor general's office and Zimbabwe Anti-corruption Unit (ZACC). I suggest in his monetary review, he can clarify on those areas.

Policy consistency
Now there is a green light over policy pronunciation but lacks clarity on areas which needs consistency. Don't forget investors are sitting on the fence, they were keen for this budget pronunciation because to them it means either loosing or gaining opportunities. There was need for investment laws, refinement of financial and institutional reforms, the 51% empowerment threshold which was later revised at some point, investors' needs clarity on policy frameworks. I blame, policy makers who did not put their input on such presentations. There was need for proper consultation especially on revised laws and bills which draws the attention of investors and international community.

Confidence in the market

I think Prof you need to work hard to restore confidence. Any policy shifts whether good or bad, it is high likely that they will attract condemnation, as the major reason is the previous arrangement was associated with major challenges which makes the process to be gradual. To be honest, most people, business community are withholding cash because there is no confidence yet. I would rather suggest, more work needs to be done, especially consultations with major stakeholders, business community and the public, to assure them that their investments and money is safe. Once confidence is restored in the market it won't take even a week to restore confidence in the market.

Budget deficit
We have a huge budget deficit amounting to 6 billion, what does this mean? It's a clear indication that we have so many debts hanging around our neck. Debt is a wrong impression of expenditure and living beyond our means. We must eat what we kill and at the same time, be honest to ourselves that we don't have money. We have a huge deficit because of our appetite for expenditure. We must reflect and teach ourselves the correct path to follow. Such scenarios are not a good reflection for investors who are eager to partner with us in development.

Privatization of state entities
That's a good move, which we commend. Job well done Prof Ncube. These companies were a lot from the fiscus. You earlier mentioned that the following will undergo through privatization scheme, Tel-one, Net-one, Zim Post, Telecel and POSB. This is a very good move. I think there is need for proper consultation on whom to partner with and at the same time, reforms are necessary by removing a big chunk of politicians who were occupying executive roles in those entities and drawing huge allowances from them. No proper audits were done, so I think it is important to audit them first and come up with comprehensive reports in parliament. It is also important for the public and parliament to debate before major deals are done.

Salary cuts and import duty (Excise duty)
You earlier on mentioned 5% salary cut for senior Government officials and executive. You did not make it clear how much you will raise from that measure, what you would want to achieve, and at the same time I was going to suggest 50% salary cut. I thought the major issue was on allowances not salaries. What chews Government expenditure is expenditure and allowances which are huge. On excise duty the measure was immediately effected which then cause unnecessary problems to those who had already acquired motor vehicles from outside. In comparison with the salary cut it was extended to January 1, 2019. This is a burden and inconvenience to the majority who rely on hard earnings. My argument is that in your monetary policy review and budget presentation, you earlier on mentioned that excise duty will be paid in foreign currency, yet you announced that bond note and (transfers) is equivalent to 1:1 concept. So what made you to charge duty in foreign currency if the exchange rate is the same?

Budgetary allocations
Defense was allocated over 500 million when in fact our priority is production. Industry was allocated less than 30 million? So where is our focus as a nation? I thought our top priority is to improve the livelihood of the majority? I think Agriculture was allocated too many resources considering that we have the controversial command agriculture which remains a public mystery. Promotion of agriculture is good but I think, there is need to empower ministry of lands and agriculture so that they will be responsible for disbursement of Agric inputs and other necessities. I thought energy sector is a critical area which needs recapitalization. I was surprised that it was allocated 16 million. This is an important sector which needs mobilization of resources for employment creation and lubricating the economy. Is 3.8 million enough for the construction of new parliament? I suggest the figure should be revised to 10 million unless there is a supplementary budget for that project.

Exciting moments on devolution of power
I think this is the first budget to address the issue of devolution. Provincial and local authorities were allocated over 300 million. This gives the responsible provinces the ability to empower themselves. Resources and disbursement of resources will be decentralized. In fact allocation of resources will then be decentralized. My question is then directed to the minister of finance, why is it that devolution is majoring on local authorities only? I thought this was a constitutional matter for all Government resources and the national cake to be shared equally? Devolution and decentralization was supposed to be done to all Government ministries and departments? We need to improve the state of our cities, towns and infrastructure country wide and this can only be implemented through devolution of power. An applaud on ghost workers and civil service audit.This was a good move to remove ghost workers especially who were draining a lot from fiscus

Good thoughts on provincial councils

The minister did a sterling job on provincial councils by allocating 300 million. Devolution and decentralization is very important, but I think he must have extended the olive branch to all ministries. My suggestion, he was supposed to decentralize all Government resources by making a pronunciation for all ministries by devolving power to all provinces. It is very important to share the national cake. It is ideal to allow provinces to delegate their own work and use their own resources. Resources would be allocated to provinces using their GDP percentage contributions. Provinces will then be empowered to mobilize their own resources without political interference. This will give provinces the chance to come up with initiatives that can spearhead an economic development agenda.

Tinashe Eric Muzamhindo writes in his personal capacity as an academic writer and policy maker. He is studying PhD at Women's University of Africa. He can be contacted at tinamuzala@gail.com


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Source - Tinashe Eric Muzamhindo
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