Little is expected from Finance minister Patrick Chinamasa in terms of breathing life into the comatose economy when he presents his mid-term fiscal policy statement on Thursday next week, given the continued toxic government policies and inertia on promised reforms.
There have been no significant benefits from the measures he put in place to help revive the economy when he presented the 2015 national budget in December last year.
Chinamasa increased duty on edible meat offals and dairy produce, vegetables and miscellaneous edible preparations, beverages, mineral products, perfumes, cosmetics, soap and furniture with effect from October 1, 2014.
But the measures have failed to reduce the inflow of imports. If anything, imports have actually increased as shown by trade figures, with Industry minister Mike Bimha confirming that even toothpicks are no longer exempt from the import bill.
Chinamasa’s failure to reduce imports is further evidenced by startling revelation that the country is spending over US$1 million per month to import toilet paper as well as other types of paper such as newsprint and cigarette paper.
The country’s total imports for January 2015 stood at US$538m, an increase of about 10% from US$487m recorded during the same month last year, a reflection of how futile the interventions to reduce imports have been at a time the economic is choking under the vice-grip of a liquidity crunch and de-industrialisation.
Despite the amendment Chinamasa made to the much-maligned indigenisation policy, primarily giving line ministers power to approve indigenisation plans for sectors under their purview with the Indigenisation ministry only issuing compliance certificates on the recommendations of line ministers after their assessments, the country has remained a hard-sell to investors.
This has not had the desired effect of allaying fears over the indigenisation policy thus attracting more critically-needed foreign direct investment (FDI) inflows as reflected by the continued dearth of investment in the country, especially when compared to neighbouring countries.
FDI increased from US$400m in 2013 to US$545m last year, but still fell far behind most regional countries, according to latest statistics from the United Nations Conference on Trade and Development. South Africa recorded FDI inflows of US$5,7 billion, Mozambique US$4,9bn and Zambia US$2,4bn.
Numerous business delegations from various countries such as France, United Kingdom, United States, Russia, China and Scandinavian nations have expressed willingness to invest in Zimbabwe, but continued to voice deep concerns over the indigenisation policy despite government’s clarifications on the policy.
Addressing National Defence Course students recently, Economic Development minister Simon Khaya Moyo said government was working on ratifying indigenisation laws.
“Work is also underway to review the country’s labour and indigenisation laws to be competitive and assist in attracting investors,” Moyo said.
It would be interesting to see if this is reflected in Chinamasa’s mid-term policy statement, or is it once again a case of the bark being worse than the bite.
Despite Chinamasa’s alarming revelations in the 2015 budget that the public service wage bill was gobbling up more than 80% of the government revenue, very little has been done to address this serious anomaly.
While a wage bill committee was set up in March this year, there are still no concrete measures to address the situation crowding out crucial capital and social service expenditure. Given the political sensitivities around laying off civil servants in the face of the ruling Zanu PF party’s electoral promise to provide 2,2 million jobs, it is unlikely Chinamasa will announce measures that will result in a reversal of company closures, retrenchments and economic bleeding.
At least 7 000 were retrenched last year from at least 52 companies. A further 1 011 were laid off in the first quarter of this year from more than 60 companies.
As if that was not enough, a Supreme Court ruling last week that allows companies to terminate contracts on three months’ notice has resulted in hundreds more being rendered jobless from companies such as Steward Bank, TN and Pelhams.
The failure by government to privatise loss-making parastatals that are a perennial burden on the fiscus despite Chinamasa’s declaration in the 2015 budget presentation that government was seized with the issue, drains hope that Thursday’s presentation will be more than the usual talk but little action.
The parastatals earmarked for restructuring include the Agricultural and Rural Development Authority, Cold Storage Company, Grain Marketing Board, Air Zimbabwe, TelOne, Civil Aviation Authority of Zimbabwe, National Railways of Zimbabwe, Industrial Development Corporation of Zimbabwe, Zimbabwe National Water Authority and Zimbabwe Power Company.
However, given that parastatal restructuring has been on government’s agenda since the early 1990s when the Privatisation Agency of Zimbabwe was formed, doubts abound on whether there will be any significant development in that direction.
For former Zimbabwe National Chamber of Commerce president Oswell Binha, the mid-term fiscal policy statement presentation will be “nothing to write home about”.
“For me the presentation is a non-event because the minister would be trying to balance what cannot be balanced,” Binha said.
He said the country’s economy is highly informalised, thereby severely depleting government’s revenue base. Zimbabwe’s unemployment rate is widely believed to be north of 85%.
But there may be light at the end of the tunnel yet. Vice-President Emmerson Mnangagwa’s remarks in an interview during his recent visit to China, however, indicate that government might have experienced a damascene moment as far as toxic policies are concerned.
Speaking in an interview with CCTV — the Chinese national television broadcaster — during his week-long visit to the Asian country, Mnangagwa said government will have to “bite the bullet” for the country to catch up with its African peers.
He said government was “working on a massive reform process”, including social and legislative frameworks, “to bring Zimbabwe back to the table of nations”.
“We must know that investment can only go where it makes a return so we must make sure we create an environment where investors are happy to put their money because there is a return,” he said.