Zimbabwe 2014 Budget: Hope renewed?

By Vince Musewe

If there is anything Patrick Chinamasa, the Minister of finance, achieved on Thursday, it was the acknowledgement of the fundamental problems faced by Zimbabwe today, the avoidance of introducing the Zimbabwe dollar and the clarification of the issues around indigenization.

Well done to the minister for at least sticking to the main issues and not being a maverick or boring us with the usual rhetoric.

However, the budget clearly avoided the contentious issue of addressing the fundamental issues faced by agriculture with regard to security of tenure and access to finance for new farmers. Zimbabwe cannot progress until we address this.

We need a comprehensive policy that deals with the compensation for repossessed farms, the tenure of security and the production of food crops to achieve food security. Agriculture is the trigger to economic recovery and we can no longer continue to avoid this truth.

I am happy that indigenization has now been left to the market where the government will not play the “big brother” role but a facilitation one if needed. Zimbabweans must take advantage of this. Indigenization in the resource sector still needs some intelligent solutions we are all ready to offer our views. Overall, there is still clarity needed on who is indigenous and who is not.

The addressing of the structural issues in the financial services sector is a step in the right direction; particularly with regard to the role of the RBZ as the lender of last resort and the establishing of a vibrant interbank lending market.

I however doubt that the USD 100 million availed for this purpose will be adequate. The adoption of the RBZ debt of about USD 1, 3 billion by cabinet releases the bank from unmanageable liabilities. However, it is imperative that the taxpayer knows how this debt arose and how the government intends to finance it.

With regard to international debt arrears, the minister insisted that this sits at about USD 6 billion and not USD 10 billion. This is much of a much-ness, our concern is that, as long as we are in arrears we are unlikely to access new money which we desperately need.

We must reengage the international community and negotiate with them as opposed to insulting them at every turn. The minister acknowledged this, but actions speak louder than words. The President must now take a lead on this issue and be circumspect in his approach. That’s what I would do.

Transparency in the resource sector particularly diamonds is something Zimbabweans want to see. So much corruption and secrecy has been going on and we all sincerely hope that diamond proceeds will begin to benefit the average Zimbabwean. The jury is still out on that.

Small scale miners are playing a positive role in spreading benefits and broadening ownership in the minis sector. The budget seeks to support them with regard to access to finance for equipment, but the minister avoided dealing with the damage to the environment from this sector that will affect long term sustainability.

The minister acknowledged the inevitability of the informal sector and a vibrant second economy mainly due to the decreasing opportunity space in the formal sector. We must encourage entrepreneurship, creativity and innovation; the budget did not address these matters at all.

Local manufacturing of goods and services is critical to limit imports and create jobs. The problems of inconsistent power, out-dated technology, cheap imports and inconsistent government policy are not going to disappear in the short term and we need a holistic and collaborative approach to solve them. The minister must do more homework, engage industry and work with them and not be prescriptive as has been ZANU (PF)’s tone to date.

The tax concessions in the budget on the import of raw materials to encourage local production are a positive move. However tax concessions alone will not create new jobs, foreign investment will. We need more comprehensive measures to revive industry.

Thank goodness finally Diasporans have been acknowledged as a potential source of new capital. They must now be enfranchised and included in the dialogue about the future. Zimbabweans in the Diaspora can indeed play a very decisive and constructive role going forward, but we must create an environment that acknowledges them as important stakeholders. They must be given the right to vote and we need to embrace their knowledge and experience to accelerate economic development.

The minister was rather silent on which currencies will be included in the basket of currencies, but keeping a multi-currency regime is an imperative that is critical to economic revival. On this, he kept his promise.

Job creation and the increase of disposable incomes for ordinary Zimbabweans was not adequately addressed or emphasized as per ZANU (PF) manifesto. The promise to increase civil servants salaries was not kept.

The minister has postponed this by stating that these will be staggered. Over what period, nobody knows. I am sure that civil servants are not happy with this development. Keeping election promises is important and I am rather disappointed that this has been postponed.

On beneficiation of resources and value add, it is clear that, although this is desirable now, it will take time to find the right balance. I suspect that the large mining houses are dealing with this matter. My views are that this indeed is the right thing to do, but we need to be clinical and smart so that we do not destroy value in the short term. We must incentivise companies to move in this direction and not penalise them.

The GDP growth projections announced by the minister are rather optimistic particularly due to world commodity prices that are likely to be subdued in 2014.

We must attract foreign investment given that we are not saving enough locally. The removal of red tape, delays and ruthless attention to corruption remain challenges for the future.

There are no surprises with regard to revenue expectations and government expenditure. We are still spending too much on recurrent expenditure and not investing in our productive capacity.

In conclusion, Zimbabwe has so much potential going forward and I appeal to all Zimbabweans to realise that we really all want Zimbabwe to be a success. For far too long politics has limited our potential. Selfishness, greed and the pursuit of material gratification at all costs continues to arrest development.

Racism, short sightedness, entitlement to power or position, leadership arrogance and lack of accountability can never build a developed and equitable economy. Let is for once unite and work together for the common good for there is nothing more profitable and edifying than that.

The people come first!

Vince Musewe is an economist and author based in Harare. You may contact him on [email protected]