Zimbabwe sending negative messages

By Brian Sedze

A sizeable number of our government ministers and other senior government officials operate within the paradigm I define as “the Law of Diminishing Intelligence”.

If these ministers haven’t said something illogical, self-contradictory, physically or financially impossible, historically inaccurate or just outright stupid, you haven’t listened to them long enough; therefore, have patience and wait they will eventually hang themselves if you give them enough rope.

Just keep them talking! Evidence is that their intellect is inversely proportional to the length of the conversation. They become confusing and confused without any shred of policy consistence. You will think they are from different governments or political parties.

Their contradictory pronouncements show lack of comprehension, care and attention to the country’s economic blue print (ZIMASSET), law and a plethora of government policies. Unfortunately the economy isn’t exactly satire or is it?

The stunning tragic ignorance and arrogance to policy consistence isn’t exactly what the country need to stem alarming levels of deindustrialisation, massive retrenchments, humongous unemployment, and influx of foreign goods, low investment and almost a pariah state in international finance.

I often find myself staring at the TV screen or newspaper with mouth agape in utter disbelief at the things that are vomited by these bureaucrats because surely some of it is an exercise in caricature much to the detriment of the economy.

Zimbabwe is resource rich yet harbours one of the world’s greatest poverty stricken people who desperately need new investment inflows beyond pies in the sky deals if the people are to extricate themselves from the economic abyss.

I chronicle hereunder some of the inconsistencies that show clearly that to a large extend some bureaucrats act inconsistently simply to put an albatross to any prospects of economic revival:-

• A plethora of measures were pronounced in the 2015 budget statement by the minister of finance to incentivise reindustrialisation. It is shocking that the same minister barely two months after the budget pronounces new measures to tax fuel more.

The urge to run out and tax energy more got me to think about the fixed costs and how they will impact costs and pricing structures for industry and commerce .Fuel is a major cost driver for industry. When viewed from this light you will be forgiven to believe that the government is 360 degrees opposed to re-industrialising the economy.

It is all happening because we have become comfortable with the prospect of borrowing without limit, or believing that there is no limit to the ability to tax (whether through new taxes or “fees” or via increases in the current structure).

And  this travesty is all happening while another minister from the same government is frothing, panting and on over drive threatening unspecified action if fuel prices are not reduced and another one wishing he was the minister of energy to specifically force fuel price reduction. How does that work? And are these ministers from the same government?

The government is giving a negative message that industry does not matter and that budgets are only an act in fooling citizens, industry therefore should never use national budgets for financial planning purposes. It’s unfortunate however that those taxes are not unlimited.

Its further unfortunate that Zimbabwe industry will have higher costs of production compared to the region as it occurs that whilst the bureaucrats have unfortunately decided to levy additional duty on fuel most other regional fuel players have reduced fuel prices significantly.

• Zimbabwe government credo has till recently been that it had abandoned centrist command economy which was prevalent in the hyper inflationary era. Industry and Commerce ministry pronouncements are that it no longer has appetite for price controls and will allow dictates of competition, demand and supply to determine price of goods and services.

At cross path and tangent with that ministry the energy ministry openly threatened energy companies with unspecified action if there was no price reduction on fuel. POTRAZ went a step further to dictate the actual price ceilings for mobile communication companies. How do ministries from the same government give conflicting indications as to what exactly is the government policy regarding price controls.

It is also close to impossible to set a price ceiling at the end of the chain without setting price ceilings along the supply chain. The negative message to potential investors is that Zimbabwe has an appetite for a command economy, that they cannot be trusted with the free market economy mantra and that there is no policy consistence.

It further gives credence that Zimbabwe has no trust for its institutions as accusations of collusion in fuel and telecommunication sectors can be easily handled by the Competition and Tariffs Commission. Zimbabwe is in competition with other destinations for investment and these inconsistences and command economy tendencies are not exactly a great way to attract investment.

• Monetary policy clarity is integral to the country’s economic health and financial planning .The country waited with some level of uncomfortable impatience for the maiden monetary policy of the new man at the helm of the central bank because it was generally expected that it will indicate the general direction of monetary dynamics for the duration of his term in office.

The country was relieved when in his maiden monetary policy the Reserve Bank governor Dr John Mangudya made it clear that there was no chance of the immediate return of the Zimbabwe dollar. This position was very simple and clear to all Zimbabweans. We took it there were economic conditions and benchmarks to be achieved in order to reintroduce the local currency.

The relief was short lived as the same man announced the introduction of “bond coins” which is another word for Zimbabwe dollars. This is the time you stare at the TV screen or newspaper with mouth agape in utter disbelief at the things being foisted upon the nation by the bureaucrats that contradict their earlier pronouncements and at odds with the solutions required by the nation.

A man is as good as his word. Reintroducing the Zimbabwe dollars is move is an exercise in caricature much to the detriment of the economy. The message to the world is that Zimbabwe has appetite for its still worthless currency.

In addition it gives a message that if you have foreign currency keep it as far as possible from Zimbabwe because the indications are that your currency may be turned into Zimbabwe dollars without sufficient notice. In any case these forced conversions have been done before.

• Vice President Emmerson Mnangagwa statements hinted at the relaxation of the Indigenisation laws, because practically in the present form that piece of legislation is one of the biggest impediments to foreign direct investment.

Consistent with the VP sentiments the finance ministry directed for devolving indigenisation implementation to line ministries and using a sector based indigenisation approach as opposed to a one size fit all. It didn’t take long for the government to do a complete summersault through the Indigenisation ministry when it said the indigenisation drive actually made investors “lucky” and in his view 99% indigenisation was a possibility.

Would-be investors have previously criticised the government for sending out conflicting signals on indigenisation. The signal and negative message being sent to the investment world is that the Zimbabwe government is not yet sure of the way forward hence a wait- and –see approach is the right way. The economic revival of the country will be a tall order with this kind of inconsistence approaches.

• On many occasions pre, during and post national budget presentation it was mentioned countless times that tourism has potential to be the largest employer of choice and that the sector must be supported by tax incentives to make the Zimbabwe a destination of choice using the cost differentiation strategy.

We applauded the ministers of finance and tourism for acting in the best interest in supporting what could be an industry with the largest potential to grow GDP. To the surprise of a neutral observer a few weeks later Zimra decided on a blitzkrieg tax collection drive on tourism operators and further decided to impose the very taxes that should have been eliminated.

One is often left wondering if these bureaucrats work for the same government. It’s as if they want to prove each other wrong or just show they are centres of power. The message is that tourism doesn’t matter, that Zimbabwe cannot be a destination of choice and that if you want to see the majestic Victoria Falls you better go to Zambia.

Taxes have long been seen by our politicians as a limitless supply of cash. Just “soak the producing” is the populist cry. I would argue that it is far from a limitless credit card .At times taxes must be foregone to create greater good like in tourism.

• Against all factual data, the latest meme from our strategic direction is that “we aren’t broke!” But the truth is we are broke and we need to exercise prudence in our expenditure. Further tax increases in an economy in intensive care will be a death nail to the it and borrowing is not a viable option.

The country has negative credit rating and credit status and it can’t borrow in the external markets. Raising money on the domestic market is near impossible as years back during the Zimbabwe-dollar casino economy era we reached a point where the bond interest yield curve intersected the risk curve resulting on governments bonds issued being junk.

Against all the factual data the government decides to increase capital expenditure in purchasing cars and other non-value adding recurrent expenditures. The government further allocates meagre resources to the economic cluster. The message is that the economy is not at the forefront of government initiatives and that it’s not serious about economic recovery.

• The often repeated chant is that small and medium scale enterprises are the backbone, largest employer and future of the economy and must be given utmost government support. The implementation of the sentiments however seem like the government and its tax agent are bend on destroying the sector.

The government has no innovation funnel for SMEs, no incubator programmes, no investment in building SME production & marketing infrastructure, no training and development programmes, no curriculum development to distil entrepreneurial skills, no financial support to promising enterprises and no tax incentives. T

he tax authority has actually shown it has nothing to do with the drive to grow the sector. It views the sector as its piggy bank through countless raids and punitive presumptive taxes. These taxes are imposed without any research on revenue, cost and profit matrices but just through mere thumb sucking.

The negative message is that the government believes that anyone who has ability to make money must be taxed till the last cent and the government must just do nothing but get showered with other people’s money.

• It is always convenient for the government to pronounce that agriculture revolution and innovation should spur not only food security but also economic growth. Agriculture is on cluster one in Zimasset showing its critical importance and this could be for the good reason.

Zimbabwe was at one point the break basket and jewel of Africa in terms of agriculture productivity and reclaiming that position is a possibility. However there is nothing to celebrate as an arm of government takes farmers maize then fails or refuses or neglects to pay for the produce. The clear message is don’t invest in Agriculture.

So what do we do?

We need to get back to agreed economy blue print and reign in on our senior government officials who treat this great nation as satire.

We don’t need trained theoretical economists for this – the guy who runs the local corner shop, the store manager at a supermarket, or the guy who runs his own gardening business understands these basic principles better than theoretical economists.

We simply need consistence in interpretation and application of policy, economic blue print and the law. It will be a great start if our ministers speak from one book.

Brian Sedze is an author on Innovation, President of Free Enterprise Initiative and Chairman of Africa Innovation Hub. He can be contacted on [email protected]