HomeCommentBudget fails to address industrial crisis

Budget fails to address industrial crisis

A WORRYING projection from the 2022 national budget presented by Finance minister Mthuli Ncube yesterday was that he will spend more on recurrent expenditure than capital projects. In the same manner that economies with no spending consumer base find it difficult to grow, governments that expend more on consumption are always in trouble.

In Zimbabwe, history has demonstrated this clearly but it appears Ncube and his team have not learnt from past mistakes.

When the government in 2014 spent around 96% on salaries for civil servants, hundreds of firms collapsed, resulting in thousands of workers losing their jobs. Instead of spending more on capital projects such as dams and road construction, the previous government spent a huge chunk of the budget on a bloated public service.

Construction firms struggled to operate and remain afloat. Many folded, as a result. Many companies that feed into construction were badly affected and also collapsed. More workers were sent packing.

The chain of disaster was gruesome. It is commendable that Ncube has brought down the civil service salary allocation to 40% of the budget. However, the figure is still high. This should be cut down to 30%, and hopefully, we will get there. The allocation of 13,4% of GDP to needless expenses like travel, compared to only 5% for capital projects, cast Ncube’s plan in bad light. Zimbabweans expected a budget that fights unemployment, a budget that creates opportunities for the private sector to grow and an economic blueprint that plugs economic decline. These vagaries, which are expected to continue in 2022, can only be addressed once the economy returns to production.

Across the world, state-funded projects underpin industrial growth. This can be demonstrated by PPC reports this week, which acknowledged that volumes growth in the past nine months were led by State funded projects in Zimbabwe. But this is not only the problem with yesterday’s budget. Ahead of the announcement, experts had implored Ncube to make decisive actions and address growing poverty levels in Zimbabwe.

The country’s situation is unique — shocking levels of poverty, usually associated with Africa’s rural poor, has hit households in urban areas, most of whom are living on one meal per day.

The unemployment levels have risen, and incomes for formally employed individuals are being shared across extended families, adding burdens for the working class. That is why economists and organisations like the Confederation of Zimbabwe Retailers called for significant improvement on tax free thresholds to increase consumer spending power.

The economy has experienced volatility for several months; prices have been increasing and parallel forex market activities have eroded workers’ earnings.

Tax free thresholds of between ZW$40 000 (US$3800 and ZW$50 000 (US$476) suggested by economists would have ameliorated suffering in the short term but Ncube pegged it at $30 000 (US$285). It means workers struggle still continue.

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