HomeLocal News2014 budget: A tale of missed targets

2014 budget: A tale of missed targets

WHILE 2014 will be mostly remembered for political manoeuvres that resulted in unprecedented purges of senior Zanu PF officials including Vice-President Joice Mujuru and 15 ministers, the economy was the biggest casualty as evidenced by several missed targets presented in the 2014 national budget.

Kudzai Kuwaza

There is little hope that 2015 will bring a halt to the sliding of the economy as there are no indications government is making serious efforts to stem the haemorrhage, suggesting it lacks the political will and courage to do so.

The recent clash within government over relaxing the controversial indigenisation policy — blamed for spooking investors — which played out in the media is a case in point.

A US$100 million interbank programme supported by an international bank, the African Export-Import Bank as a guarantor, which Chinamasa said would be operational with effect from April 1 2014, is yet to take off.

The delay has affected the resuscitation of the troubled financial sector that has been hard-hit by the liquidity crunch, with several indigenous banks closing while others remain in deep trouble.

The banking sector has been operating without an active interbank market under the multi-currency regime introduced in 2009 due to the absence of acceptable collateral. This has resulted in the market being segmented, with some banks having huge surpluses while others face severe liquidity challenges.

Demonetisation of the Zimbabwe dollar balances of January 2009, which would restore some of the public’s damaged confidence in the banking sector, remains a pipedream despite Chinamasa’s undertaking that the process should be completed by March 31 2014.

The issue remains a major headache for government more than five years after the introduction of the multi-currency regime.

As if that was not enough restoration of the Reserve Bank as lender of last resort with up to US$200 million capitalisation is likely to remain a pipedream as there has been little movement towards the realisation of this target.

Chinamasa’s growth target of 6,1% also presented another miss due to various economic bottlenecks such as liquidity shortages, antiquated plant and machinery, cheap imports, high cost of production and job losses resulting from company closures and retrenchments.

At least 6 000 workers have been retrenched with about 52 companies laying off workers.

Hundreds more jobs have been lost through company closures. Chinamasa revealed in his 2015 national budget presentation that 4 610 companies have closed shop throwing 55 443 workers onto the streets between 2011 and 2014. The overall picture is even gloomier with more companies awaiting permission to retrench or close shop.

This has led to reduced revenue for government’s severely depleted coffers, with Zimra raiding and garnishing companies starting in the first half of last year but to little avail as government coffers remained parlous, with government no longer able to guarantee civil servants’ pay dates.

For the first time since Independence government has failed to pay bonuses on time, instead staggering them.

This trend of company closures and job losses is going to continue this year and the numbers are likely to increase if government, as is expected, remains clueless over ways to resuscitate the economy.

The proposed labour reforms, which will make it easier for employers to retrench workers, will exacerbate the situation for the workers.

Economist Godfrey Kanyenze said the missed 2014 budget targets are an indication of the depth of the country’s economic crisis.

“The state of the economy is really precarious,” Kanyenze said. “This could be a fiscal cliff situation and we are in serious arrears such that issues such as restoring the RBZ’s status as lender of last resort become luxuries.”

He said Chinamasa’s budget pronouncements are now “a game of hit-and-miss characterised more by enthusiasm than success”.
“The would-be dragon-slayer appears to have collapsed on his own sword,” Kanyenze said.

The targets set by Chinamasa in his budget presentations would largely remain unachievable due to the lack of political will and courage to tackle substantive reforms necessary to breathe life into the comatose economy, he said.

Chinamasa’s task to meet the targets he set in the 2014 budget has been made even more difficult by the brutal factional fights that engulfed Zanu PF for the better part of last year in which government ministers contradicted each other on crucial economic policies such as the indigenisation policy.

This led to an exasperated Chinamasa telling delegates at a business forum held last year that it sometimes seemed as if they (ministers) were operating from different governments.

The Zanu PF purges which claimed the scalp of Mujuru and ministers who include Webster Shamu (ICT), Olivia Muchena (Higher Education), Francis Nhema (Indigenisation) and Dzikamai Mavhaire (Energy) on allegations of plotting to topple Mugabe from power left the economy on the backburner.

Economist Takunda Mugaga believes that the lack of political will coupled with international isolation will remain major obstacles to the targets set by Chinamasa in his 2015 budget statement last year.

He said successive Finance ministers have talked of plans to privatise parastatals such as the National Railways of Zimbabwe but due to lack of political will, this remains a pipedream.

And without vital foreign direct investment, the government will continue missing targets set in budget presentations.

“With international isolation and the lack of political will, the 2015 budget will just be another religious statement,” he said.

Mugaga added that the budget shows that government knows what needs to be done, but that there is a huge difference between knowing what needs to be done and implementing it.

Chinamasa has also talked of cutting the public service wage bill this year, and has announced that he will retrench civil servants to reduce a bill which gobbles a massive 82% of government’s revenues.

However Chinamasa recently disclosed to senate he had no idea how he was going to cut the wage bill and appealed to all Zimbabweans to help him with ideas on how to solve the problem which has left the government with little revenue to meet other pressing needs of the country.

“Cutting down the wage bill is going to be a process, but currently I do not have ideas on how we can tackle it, but I am provoking debate on the issue,” Chinamasa said.

However, it is doubtful he will carry out this objective if Mugabe’s last cabinet reshuffle is anything to go by.

Despite Chinamasa repeatedly bemoaning the huge wage bill, Mugabe last month added three more ministries including a new Ministry for War Veterans and Political Detainees.

This will further increase the burden on the country’s fiscus, putting in serious doubt whether Chinamasa can fulfill the targets set for this year.

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