Govt oblivious to economic realities

A MAJOR contributor to the economic ills which continue to confront Zimbabwe is the magnitude of governmental policies pursued solely for their perceived objectives, with total disregard for the negative consequences.

Recurrently, in pursuit of policies which are generally — but not always — of good and sound national intent, government demonstrates total oblivion to many adverse repercussions of its policies.  The prejudices of such adverse repercussions are of such magnitude as to negate objectives.

 

Examples government’s one-track thinking are so innumerable that they could fill not only this column, but a very comprehensive book. Thus only a few examples can be cited here, but indisputably most of commerce and industry, other economic sectors and the populace at large could cite many more. To emphasise the immense harm inflicted by government on Zimbabwe and its people by its myopic failure to consider associated consequences of policies are the following examples:

Justly determined to enforce tax compliance and contain pronounced tax evasion, government legislated that all enterprises as are Vat registered, and having sales revenues of US$240 000 or more per annum, must operate fiscalised electronic registers or memory devices which would have direct data feed to the Zimbabwe Revenue Authority (Zimra).  A similar statutory requirement exists in many developed economies, and recently in several of Africa’s developing economies.

 

From the points of view of private enterprise probity, and enhancement of greatly needed governmental revenues, the requirement of modern electronic technology cannot be faulted. However, to impose such obligation upon business enterprises when the economy is yet to recover meaningfully from its prolonged moribund state is incomprehensible and economically counter-productive.

The harsh fact is that most of Zimbabwe’s financially and operationally distressed enterprises do not have the resources to fund installation of the statutorily required electronic devices.  They are devoid of the funding required to purchase, install and operate the fiscalised registers, and are therefore forced into discontinuance of operations. Concomitant consequences are greater unemployment, reduced downstream economic activity, and lesser inflows to the impoverished Fiscus.

 

Admittedly, the legislation does empower Zimra to grant extensions of time for compliance, but the period of such extensions — 30 days — is a miniscule and meaningless.  Moreover, only two suppliers of the fiscalised registers and devices have to date been approved by Zimra, resulting in the absence of price competitiveness, and an insufficiency of supplies to service the needs of the whole economy even if enterprises did have the requisite financial resources to purchase the equipment.

If government, in general, and the Minister of Finance Tendai Biti, have any real concern for the country’s economic recovery and growth, they would suspend the legislation to a more propitious and realistic date (probably in 2012).

There is thoughtlessness applied to the legislative requirements for re-registration of all motor vehicles, including issuance of new number plates.  On the one hand, a charge of US$160 for the re-registration and number plates is incomprehensibly excessive and, on the other hand, many did not (and do not) have the funds necessary to comply, notwithstanding their ownership of vehicles.

 

Such ownership does not necessarily evidence wealth and cash liquidity, particularly so in the case of enterprises with large operational fleets, and of pensioners and others with aged vehicles.  They are dependant upon those aged vehicles, but do not have the wherewithal to fund the exorbitant charge.  The probable real cost of the plates cannot exceed a maximum of US$40, unless suppliers or government is guilty of gross profiteering.  Allowing for a governmental administration cost of, say, US$10 per vehicle, the maximum justifiable charge for the reregistration of vehicles and issue of new plates should have been US$50.

Yet another example of destructive thoughtlessness was the reduction, in the 2011 Budget, of the rates of customs duties on clothing and footwear. A significant element of Zimbabwe’s economy has, for many decades, been the manufacture of such products.  The textile, clothing and footwear manufacturing sector has been one of the biggest employers of Zimbabweans, has contributed substantially to the country’s economy, has been a major source of direct and indirect tax revenues for government and been a key economic foundation.

 

However, in recent years, the sector has been critically affected by Zimbabwe’s very negative economic circumstances, and the hardships faced by it were intensely compounded by the magnitude of competition from imported products which have been smuggled into Zimbabwe without payment of duty, and by many such products having gained from excessive export subsidisation by exporter countries, and by disguised origin in order to attain preferential duty-free importation.

Instead of addressing the survival needs of this key manufacturing sector, government has seen fit to worsen its lot, and jeopardise its survival, by lowering the rates of customs duty.  How thoughtless and foolhardy can a government be? Yet another example of governmental policies anathema to economic wellbeing is the continued alienation of foreign investment.  Government has repeatedly, and voiciferously, acknowledged the need for such investment as a prerequisite to economic development and growth.

 

But, concurrently with doing so, it not only legislates for 50% Zimbabwean control over all enterprises, but also threatens expropriation of 90% of equity in all foreign-owned businesses that do not publicly condemn the allegedly “illegal” international economic sanctions (which do not exist, being only certain restrictions upon specified governmental individuals, government itself, and its underlying entities). At the same time, it fails to comply with the Bilateral Investment Promotion and Protection Agreements into which it has entered, whilst concurrently concluding new such agreements.  Steadfastly, despite its protestations to the contrary, government alienates investment, instead of motivating and attracting it.

It is long overdue that government gives substantive and constructive fore-thought to its policies.  government needs to learn that it must “look before it leaps”!

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