Sources said the most vocal officials at the gathering included Emmerson Mnangagwa of Defence, Saviour Kasukuwere of Youth, Indigenisation and Empowerment, Vice President Joice Mujuru and Prime Minister Morgan Tsvangirai.
The meeting was convened to discuss the slowdown in the economy, which has been blamed for underperformance in tax revenues resulting in budget downward revision.
Finance minister Tendai Biti presented a report on the state of the economy and proposals to deal with leakages in revenue collection and wasteful expenditure by VIPs, among other issues.
So tense was the meeting that some ministers passed notes to each other accusing Biti of being “insensitive” and “vicious”, and described parts of his presentation as “outright cruelty”.
This, sources said, was after Biti had proposed the introduction of land tax to increase productivity on land as well as penalise those holding idle farms. This was rejected by Zanu PF ministers, who said Biti should instead provide funding for farmers.
The sources said Mnangagwa took umbrage to dismiss Biti’s allegations that the ministry had illegally recruited 10 000 staffers, among them 4 600 soldiers, through the Public Service Commission (PSC) between January and May this year.
Biti had proposed that the PSC freeze all new appointments. Kasukuwere, whose indigenisation policy came under attack, spoke about the Zimbabwe Mining Development Corporation (ZMDC) Joint Ventures Model, disposal of government assets, foreign direct investment (FDI) and the proposed establishment of a national investment company, sources said.
On FDI, Kasukuwere said his ministry had injected more than US$30 million into the economy through the youth empowerment fund. What seemed to have irked Kasukuwere, the sources said, was Biti’s assertion that indigenisation and economic empowerment legislation is perceived as a risk to FDI.
Kasukuwere accused Biti of seeking to attract FDI at all costs, irrespective of the meagre benefits accruing to the country. He said Biti’s push for FDI just to create jobs and generate revenue for government through taxes without meaningful participation by indigenous Zimbabweans was premised on a neo-colonial development paradigm.
Kasukuwere said conflicting messages on indigenisation is what really scared FDI, and not the programme itself. As a result, potential investors adopted a wait-and-see attitude hoping for regime change and policy reversal.
Kasukuwere was opposed to the establishment of a national investment company, saying it would duplicate roles with the National Indigenisation and Economic Empowerment Fund (NIEEF), which he said was being deliberately undermined to ensure it fails.
He said in the 2011 budget, the NIEEF was allocated US$5 million, but Treasury released US$1,5 million, and this year only US$400 000 has been disbursed out of an allocation of US$6,4 million.
NIEEF currently warehouses Blanket Mine, Zimplats, Mimosa and Unki shares on behalf of the state. Zanu PF ministers are said to have also complained about alleged bias in budgetary allocations, accusing Biti of favouring ministries under his MDC-T party.
However, Biti fought back and the ministers agreed to implement a wide-range of proposals and upheld the shareholding structure of 51% to locals and 49% to foreigners, community trusts and youth empowerment.
Biti won the battle on diamonds as it was agreed all proceeds from mineral sales should go to Treasury after he complained only US$40 million from an anticipated US$600 million in diamond revenue had been remitted.
Cumulative revenue for January to May 2012 stands at US$1,274 billion against a target of US$1,469 billion. The meeting agreed this was a reflection of under-performance by the Zimbabwe Revenue Authority as well as diamond dividends.
They agreed to comprehensively review revenue streams such as VAT, corporate tax, pay as you earn, import duties and other non-tax revenue sources with a view to enhancing revenue collection and plugging existing leakages.
The meeting resolved to review import duties on luxury goods, such as vehicles, as well as excise duties. A policy enabling the ZMDC or any future diamonds agency to have a 50% shareholding in existing diamond houses similar to the Anjin model would be formulated.
The meeting also concluded government should review and renegotiate some of the agreements with mining companies to address the gap between income accruing to them and the benefit to the country.
The ministers also proposed securitisation of minerals, like in the DRC, Sudan and Angola saying this would be used to source funding for economic development.