HomeOpinionGovt doles out money it doesn't have

Govt doles out money it doesn’t have

Shakeman Mugari

RECENT moves by government to pour money into troubled parastatals and the expropriation of private businesses is unsustainable and likely to bloat the national debt, analysts have said. It is also likely to put paid to what prospec

ts for foreign investment remained.

The analysts say the government is draining its coffers, which are already running dry due to over-expenditure and fiscal indiscipline, in a bid to prop up parasitic state corporations that have a record of non-performance. They have also castigated the move to take over troubled private companies, arguing that the government has proven that it is not capable of running a viable business. The chaos in the debt-ridden parastatals gives credence to their concerns.

Business analyst Anthony Hawkins says the government is making a huge mistake by dishing out unbudgeted funds to parastatals and troubled private companies.

“It is clear that the government will have to print more money in order to sustain this level of expenditure,” Hawkins said. He said this would push inflation up and further drag the country into recession.

“We are grappling with a suffocating debt and these loans will only make it worse.”

Over the past three months more than $2 trillion has been advanced to the productive sector and other troubled companies, a move which government says is meant to boost an economy which is in its fifth year of recession.

Last week government ratcheted up its debt by giving $50 billion to Zesa Holdings, the power utility which has been struggling to find its feet. The troubled Zimbabwe Iron and Steel Company (Zisco) also received a $30 billion lifeline from government.

Many more parastatals are likely to feed from the same trough on the grounds that they are being “turned around”. Already Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono has promised to give the Agricultural and Rural Development Authority $25 billion, the National Railways of Zimbabwe $20 billion, Zupco $10 billion, Air Zimbabwe $7,5 billion and Zimbabwe Broadcasting Holdings $7,5 billion.

Local authorities are entitled to $20 billion each for infrastructural development. All these companies and local authorities are unlikely to pay back the money if past experience is anything to go by.

Zupco and ZB Holdings have also successfully lobbied government to take over their crippling debts. As has become the norm since Independence, the government willingly took over Zupco’s $30 billion debt to Metropolitan Bank and ZB Holdings’ arrears to local banks. Another $100 billion has been doled out to Shabane Mashava Mine (SMM), the hub of Mutumwa Mawere’s business empire, which has become the latest takeover target for government.

But analysts have said this level of corporate indulgence is a recipe for disaster, as it will sink the country deeper into debt and add to the burden on taxpayers. Latest figures from the Reserve Bank of Zimbabwe show that domestic debt is hovering around $1,4 trillion and is likely to increase drastically if the government continues to bail out state companies.

The foreign debt has also continued to soar as Zimbabwe lags behind with its arrears to multilateral organisations like the Bretton Woods institutions. The country owes US$290 million to the International Monetary Fund. The Reserve Bank has said that 30% of the US$778,6 million that came into Zimbabwe through Homelink and export revenues was used to service debts.

The budget deficit has also increased on the back of over spending. Currently Zimbabwe has a budget deficit of $830 billion. Government anticipates GDP will shed a further 5% but independent analysts believe it will shrink by 8%. About 70% of the population is said to be living below the poverty datum line.

Parastatals account for a large chunk of the debt. Priscilla Misihairabwi-Mushonga, the chairperson of the parliamentary Public Accounts Committee, says parastatals are draining the fiscus. She blamed government for continuing to tolerate maladministration and corruption in the parastatals. This, Misihairabwi-Mushonga said, had seen the government abusing taxpayers’ money through loan advances and guarantees to the companies.

“It’s a waste of national resources to give money to parastatals that are riddled with corruption and mismanagement,” she said. “Most of these monies were unbudgeted for and it means borrowing from local banks or printing notes all of which lead to debt and inflation. This is abuse of taxpayers’ money and should not be allowed to continue.”

A debt management report compiled by the Public Accounts Committee in 2002 reveals that parastatals are at the core of the country’s debt crisis. There are more than 30 state companies all of which benefit from the fiscus in one way or another. The report recommended, among other things, that government stops being the guarantor for parastatal loans. It also recommended that these companies be made accountable for their losses.

As if to show that it has learnt nothing from previous mistakes, the government has started nationalising Mawere’s companies under the guise of saving jobs. This is likely to see the government digging deeper into its pocket to prop up these companies, a scenario which analysts say only worsens the country’s debt problem.

The analysts say instead of injecting funds the government should have identified new investors to save the companies. Misihairabwi-Mushonga said that government sought to maintain a dead man’s grip on industry instead of playing a facilitator’s role in economic development.

“This is a control man-ia government which does not realise that by seeking to take over companies through injection of capital, it is only piling up debts. The government cannot run a business. Their role is to facilitate business development and not run them,” she said. Government has failed to run its own businesses due to bureaucracy and political interference.

The Zimbabwe Min-ing Development Corporation (ZMDC), a state-affiliated mining company which used to own a number of mines in Zimbabwe, has gone under. Sabi Mine, a state company in Mberengwa, has also collapsed. It is these clear examples of failure that have led to widespread protests from economists and business community whenever government wants to take over a company. An economist with a local bank said this was the same impulsive spending that worsened the budget deficit.

“We have a government that is desperate to be seen to be doing something. And to give this impression they spend more than they have,” the economist said. “The victims of this uncontrolled spending are the taxpayers. No wonder we are heavily taxed. It’s not a government debt but a national one. Government has no money of its own. That money comes from the taxpayer.”

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