Editor’s Memo..Faith Zaba
FINANCE minister Mthuli Ncube will next week present the 2020 National Budget, which he said will target enhancing revenue collection, effecting tax cuts, social safety nets for the poor and vulnerable groups, as well as implementing job-creation strategies.
He stated in a pre-budget strategy paper that next year’s revenues are projected at ZW$24,8 billion (11,8% of the GDP), while expenditures are estimated at ZW$28,5 billion (US$ 1,8 billion at interbank rate and US$1,5 billion at the parallel market rate, which is 3,6% of GDP). This is a pittance comparing to the budget size at the height of the government of national unity, hovering around US$4 billion. We are far from prosperity if the national budget has shrunk in real terms.
Ncube told editors at a luncheon in Harare that: “We have gone through austerity, prosperity is still coming.”While the end of austerity proclamation would have, under normal circumstances, brought relief to the long-suffering Zimbabweans, there is no reason to celebrate since the 2% intermediated money transfer tax remains in place. Austerity measures were one-sided. They brought more misery on the already burdened majority. While bearing the brunt of high taxes, ordinary citizens have to also contend with skyrocketing prices of basic commodities. In addition, the incessantly rising fuel prices and the recent electricity tariffs hike have brought more misery.
The 2% tax suffocating ordinary people is inflationary. It is increasing the cost of business, which, in turn, further pauperises the poor by pushing prices up; hence the majority of the people are choking in economic doldrums.
While Ncube is optimistic that prosperity “is coming” and that his message to ordinary Zimbabweans is “patience, patience, patience”, there is a general sense of hopelessness in the country.
Indeed, when Ncube started his tenure, he rebased the economy, bringing in the vast swathes of the economic activities undertaken in the informal sector. The argument was that the tax-to-GDP ratio was below acceptable benchmarks. This justified the introduction of the indiscriminate 2% tax. Ncube is on public record asserting the income from the tax would be channelled towards capitalising productive sectors. This is how Ncube created budget surpluses of over ZW$800 million, in addition to trying to entrench fiscal stability.
Unfortunately, the Finance minister has dismally failed to channel proceeds from the 2% tax towards tangible production. Instead, he blames exogenous factors such as Cyclone Idai and drought. His argument is that he had to repurpose the use of the 2% tax towards social safety nets, including subsidising urban transport, assisting victims of the cyclone and starving Zimbabweans.
A total of 8,5 million Zimbabweans are reportedly food insecure. The World Bank says 5,7 million are now living in extreme poverty. The national statistical agency, ZimStat, puts the number of people living in poverty in at least 70%. The country is in a mess, with power cuts of up to 18 hours a day stifling production. Gold deliveries have declined by over 30%. Diaspora remittances have declined by 13%.
Tobacco output and prices are expected to plummet next year. Agricultural productivity is low, with farmers failing to deliver one million tonnes of maize to the GMB. We cannot envision prosperity when the nation cannot fend for itself.
The World Bank has downgraded Zimbabwe from lower middle-income status to low-income status. Multilateral institutions are now projecting that the country’s GDP for 2019 will decline by at least 10%. The future looks bleak.
Cyclone Idai and drought alone cannot justify why GDP is nosediving. Namibia, with a naturally drier climate than ours, is producing maize yield per hectare that is double that of Zimbabwe. Zambia, with whom we share a similar climatic pattern and source of power generation, is making great strides in maize and wheat farming.
Ncube should focus more on investing in irrigation infrastructure for medium-scale farming, the heartbeat of Zimbabwe’s agriculture.
The single biggest indicator of failure of the “austerity for prosperity” plan is the runaway year-on-year inflation, hovering above 300%, according to Independent estimates, negatively impacting on individuals and companies. At this rate, prosperity is a pipedream.
However, Ncube’s hands are tied considering that critical reforms required to move the country forward are beyond his purview, among them, restoration of secure land tenure in farming, fulfilling Zimbabwe Democracy and Economic Recovery Act pre-conditions and tackling corruption.