HomeOpinion2010 Economic Recovery Budget

2010 Economic Recovery Budget

PROVIDED that there is no last minute rescheduling, Finance minister Tendai Biti will be presenting his proposed 2010 national budget to parliament next Thursday, and Zimbabwe awaits that budget with great anxiety. 

The ongoing recovery of the economy, so very desperately needed, is largely contingent upon that budget, albeit that of even greater import for that recovery is ongoing and substantive, positive political transformation.

In his first nine months as financial czar in Zimbabwe, much that Minister Biti has done, in extraordinarily constrained circumstances, has been most commendable, and a great contributant to the first phases of economic recovery that have been progressed in 2009.  But very, very much more is needed.

A key requisite of a significant upturn of the economy is major enhancement of productivity throughout all economic sectors, and especially so within the manufacturing field.  Greater production minimises inflation, increases numbers employed and concomitant downstream economic activity, maximises exports, and minimises imports, as well as diverse other economic benefits.

However, the manufacturing sector has been tragically afflicted by innumerable constraints over the past 10 years of consistent economic downturn, only very partially ameliorated in 2009, and the 2010 budget is an opportunity to give that sector a greatly needed stimulus.

First and foremost, government needs to address the unfair competitive advantages of imports over local production.  Zimbabwean industry must not be protected against legitimate imports, but manufacturers need to be accorded a level playing field upon which to compete.

For many products this is not the case, as not only do manufacturers in other countries benefit from economies of scale, but also in many instances from immense export incentives and subsidies provided by their governments.

This is exacerbated by many products produced in the Far East entering Zimbabwe disguised as having been manufactured within Sadc, without genuinely conforming with Sadc rules of origin, and thereby avoiding the incidence of Zimbabwean custom duties.

Moreover, to some considerable extent it is possible that many products are entering Zimbabwe through unofficial channels, circumventing the incidence of customs duties and other import imposts.  Minister Biti needs to resort to twofold actions, being increases in duty levels to an extent as eliminates unfair advantage, concurrently with ensuring that the Zimbabwe Revenue Authority (Zimra) intensifies its verification of compliance with Sadc rules of origin, and of containment of smuggling.

At the same time, Minister Biti needs to introduce export incentives (not of a magnitude that Zimbabwean industry has unfair competitive advantage, but to an extent that motivates and facilitates penetration into export markets).

In addition, recognising the initial need for growth in employment, in view of the present paucity of formal sector employment, the manufacturing sector, the economy, the populace, and government, would benefit from the establishment of employment incentives.  The cost of such incentives to government would be more than exceeded by the direct and indirect taxes accruing from the increased economic activity and employment.

The minister also needs to review rates of taxation, income tax thresholds, and tax bands.  It is incomprehensible that most Zimbabwean taxes are higher than prevailing within other countries in the Region.


Excessively great taxation is a major deterrent to investments, and is one of the many motivations for Zimbabwe’s immense brain drain.  The ongoing exodus of skilled Zimbabweans is a major contributor to Zimbabwe’s economic ills.  Concurrently with a review of taxation rates, the tax threshold and bands, and tax credits, minister Biti should also restore levels of tax-free bonuses, as prevailed for many years.

This should be implemented with immediate effect, ahead of 2009 year-end bonuses.  In addition, realistic revision of tax payment dates is essential.  It is grossly inequitable that Commerce and Industry must remit Value Added Tax (Vat) to Zimra long ahead of collection thereof from customers.

This requirement precludes many from extending credit to customers, which in turn impacts very negatively upon trade volumes.  In like manner, the quarterly payment date requirement on corporate tax effectively prescribes payment on unrealised, and potentially unattained, profits.

Recently there has been much talk by government of intents to increase very considerably the rates of mining royalties, to a grossly unrealistic extent.  Doing so will constitute the death knell of development of the mining sector.


Whilst there is justification for some royalties to compensate for the progressive reduction of mineral resources, royalties of punitive magnitude, markedly greater than applied by other counties with like resources, can only cause contraction of what could be one of Zimbabwe’s greatest economic contributors.

Whether it be direct taxation, indirect taxation, royalties, other governmental charges, or parastatals’ charges, government needs to be conscious of the law of diminishing returns.  Gargantuan and punitive levels of taxation can only result in reduced revenue flows to the state, in contradistinction to the enhancement of such inflows as could emanate from economic growth.

On non-taxation, but other fiscal issues, the minister of Finance needs to:

  • Make a very affirmative, convincing statement, that there is no possibility whatsoever of an imminent reintroduction of Zimbabwean currency, and that that will not occur for at least two years, following comprehensive and sustainable economic recovery.  This must be done if Zimbabweans are to have any confidence in the banking sector and therefore be willing to deposit their foreign currency in the banks, which is one of the prerequisites of money market liquidity;
  • Reiterate, with convincing emphasis, an absolute intent of government speedily to progress the privatisation of parastatals, wholly or partially, including Zesa, TelOne, Air Zimbabwe, National Railways of Zimbabwe, and others enabling infrastructural rehabilitation and meaningful service delivery, recapitalisation, access to strategic technical skills, and capital inflows to the state;
  • Further to stimulate investment, and to restore Zimbabwe’s international credibility, Biti needs to give convincing assurance of Zimbabwe’s determination to respect its Bilateral Investment Promotion and Protection Agreements (Bippas), and to honour obligations in terms thereof.

These are but some of the many constructive needs for inclusion in the 2010 budget, necessary for the Zimbabwean economy to go forward.


Eric Bloch

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