BUSINESS sector representatives yesterday met President Robert Mugabe at State House in Harare to propose measures to address the deepening economic crisis, including ensuring policy coherence and consistency.
By Kudzai Kuwaza
This comes at a time when the ailing economy has been characterised by a debilitating liquidity crunch, acute cash shortages, dwindling investment inflows, widespread company closures and massive job losses.
In a 17-page document, gleaned by the Zimbabwe Independent, which was prepared by business for yesterday’s meeting with Mugabe, business membership organisations implored the government to embrace critical reforms, among them improving the investment environment, fiscal sustainability and financial sector stability, state enterprise renewal and stamping out corruption in both the public and private sectors.
On the establishment of Special Economic Zones (SEZs), business said while these have the potential of improving investment and increasing foreign direct investment, it is important to create a national investment framework backed by policy consistency.
“It is important that a national investment framework be established as an anchor for investment to guide investment across the country. It is also important that such a framework be harmonised with Sezs thrust of government,” the document says.
“Most important is the need to ensure policy coherence and consistency so, as to entrench macro-economic stability fundamentals for the country.”
Business also appealed to Mugabe to work towards promoting investment. According to the United Nations Conference for Trade and Development, foreign direct investment (FDI) has tumbled from US$545 million in 2014 to US$319 million last year.
“There is need for government to prioritise investment, harmonising investment laws, creating a viable and active one-stop shop and promptly addressing whatever nuances, as may be identified by investors,” the document says.
They gave examples of countries such as China, Indonesia, Malaysia, South Korea and India which have benefitted from “the capacity to harness a growing tide of both domestic and FDI through deliberate policies that were continually refined overtime, but expressly designed to attract foreign direct investment”.
Business called on Mugabe to ensure comprehensive changes to the current legislation relating to indigenisation and economic empowerment to reflect the official position as clarified by the nonagenarian leader in April last year.
In their prepared document, business tackled the issue of state enterprise reform.
“There is need for definitive action by government towards state enterprise reforms to ensure sustainable fiscal policy. Over the years, many state enterprises have continued on a ‘Business as Usual Model’ draining state resources on an ongoing basis,” it says. “There is need for government to operationalise state enterprise reforms to ensure that state enterprises contribute to the fiscus through comprehensive reforms, including commercialisation and where necessary strategic private sector partnerships.”
Business also placed strong emphasis on the need for fiscal sustainability and financial sector stability.
“Fiscal sustainability and financial sector stability are like Siamese twins and for Zimbabwe, long-term financial stability is, premised on fiscal sustainability,” the document states. “The current levels of the fiscal deficit and the mode of financing, against diminished fiscal revenue sources, is measurably unsustainable. In addition, the expenditure composition, at over 95% recurrent expenditure, this has also underpinned high consumption levels, with correspondingly high imports of consumption goods, depleting both scarce foreign currency and local production capacity.”
It adds: “This scenario invariably leads to an unsustainable domestic debt build up, with significant adverse implications on the banking sector stability, where a large segment of balance sheet assets of banks is in terms of Treasury Bills, whose value recedes with debt build up. In addition, this not only crowds out productive sector financing, but raises the premium costs for Zimbabwe in accessing regional and international lines of credit, leading to elevated and higher domestic financing costs, at a time when government is actively working towards reduction in the overall costs of financing.”
On the issue of the multi-currency regime, business cautioned against the introduction of a local currency, pointing out that present conditions do not support such a move.
“The current liquidity challenges can be resolved in the medium and long term through growth of exports, which is a function of production and productivity. Hence the need to review the costs of doing business to enhance competitiveness, production and productivity growth,” the document says.
“Over the past 18 months, the US dollar has appreciated over 40% against most major currencies and this has considerably undermined the country’s exports growth potential.”
Regarding foreign exchange and incentivising exporters, business pointed out that the large current account deficit has adversely impacted on the country’s capacity to build up foreign exchange reserves for imports.
“As a result of the current foreign exchange shortages, industry imports requirements are now subject to a long waiting list, often for several weeks before approvals. This has impacted on production and productivity in key sectors that were now experiencing increased production due to the promulgated SI (Statutory Instrument) 64 (of 2016),” business pointed out.
“Going forward, these initiatives to generate foreign currency through exports growth need to be expanded for sustained growth of the economy. The focus must be on productive sectors and productivity. This will also sustain the multi-currency system.”