By Chenayi Mutambasere
The National Development Strategy NDS(1) reads like a Christmas Wish List. It’s comprehensive enough and all encompassing with plausible economic objectives. However they mostly cease to be Zimbabwe centric and are not agnost of the prevailing pandemic era.
For instance one of the minister’s key objectives is to increase the upper middle income group. This appears topsy turvy if not bizarre given the percentage of the population currently below the poverty line and an almost absent middle income group with civil servant salaries being a key case in point.
The NDS1 should be unashamedly focused on Covid recovery, poverty reduction and investment creation. All forms of economic jargon should lead to explaining how these fundamentals which have not been addressed by TSP will be addressed by NDS1 . If the reader takes this perspective the NSD programme is inadequate in terms of measurable tangible actions to address these.
Wat I am saying to the audience prefix each action statement with Covid 19 recovery , Poverty reduction and investment creation will be achieved through ….. If it doesn’t make sense then discard that statement.
That said there are some welcomed statements;
Welcome looked at land policy it will be interesting to see what the new land policy will present . agriculture being a long term relationships land security is paramount.A new land policy should give better tenure arrangements for all Zimbabweans participating in this sector.
It is however worrisome to see the Compensation Deal is being used as evidence of reducing the country’s risk. It is only a facet with other factors having more importance such as Denial of Justice which has become a persistent issue observed and highlighted internationally.
This leads me to page 12 section 81 to 83 which really should have been key drivers infact the bedrock through which NDS1 is built upon . Property Rights , Rule of Law and Combating corruption are key dependencies.
For Zimbabwe’s economic recovery.
The appearance of these in the latter part of the document highlights some fundamental truths on the country’s poor delivery of justice . Sadly the key actions are condensed to mere bullet points thus not clearly spelling out the actions that will be taken to address this and how the impact of these actions will be measured.
An admission not to be missed on point 343 stating the strong economy during dollarisation. This should have been viewed in tandem with points towards a stable exchange rate . Clearly the minister understands the winning formulae and yet isn’t interested in applying this.
Zimbabwe continues to suffer from multi currency inspite of governments denial. The currency auction is not achieving maximising performance with delays on release of money persisting . It is obvious that getting a stable local currency should not and can not precede the achievement of an assured stable economy.
The Budget Statement continues follows the same delinquencies of the NDS1.
For starters the statement fails on a fundamental technicality. All values are represented in ZWL this currency is fast depreciating with an inflation value well over 400% in 3 months time majority of these figures will be rendered meaningless. The use of such a volatile currency introduces administration inefficiencies particularly in relation to tax thresholds.
The budget statement talks makes reference to reducing tax administration inefficiencies but majority of these arise particularly for income tax wen the thresholds set become redundant over a relatively short period of time due to inflation. So it’s important for budgets to be set in a stable currency.
The budget also ignores completely the economic activity of the majority Informal trading population who form nearly 60% of trading activity in Zimbabwe. For context Zimbabwe is recognised as now having the largest informal trade market in Africa. This population is largely unbanked a reported 30% of adults relying on fintech banking through ecocash.
The statement highlights an awareness of this but fails to articulate the scale and indeed impact on financial statement.
From this perspective the ‘well performing new RBZ Auction house becomes a little less significant as it serves less than 50% of commercial traders in Zimbabwe. this means the idea that the auction house can address the parallel market is a far placed reality.
Informal traders who are faced with barriers to entry from the Auction House will continue to sustain the parallel market. Infact the real rate of exchange currently real being the one used by the majority is 1:110 opposed to the ‘stable’ 1:81 referred to in the budget statement.
The budget statement must address both informal and formal economies. The auction house must be run as a competitive flow that brings together buyers and sellers across the piece.
Zimbabwe’s mining sector continues to underperform against global trends. Gold is a reported as a safe haven for global investors its surprising that Zimbabwe is reporting a decline in gold exports.
This is no doubt aligned to gold leakages especially through the unregulated informal mining sector. Again this sector remains ignored no clear plans on how investment in the mining sector will support small scale miners who form the informal mining sector to protect their trade in an equitable sustainable manner.
Its hard to overlook the Security Budget a whooping ZWL 47.4billion for a peace loving country that has not been at war for more than 40 years. For perspective in the same budget a meagre 3.9 billion is allocated to Dam projects and 14.4billion for Ministry of Higher and Tertiary Education.
Given the prevailing climate it is more prudent or justified to focus on basic priorities such as health and education as well as other key income generating sectors of which security hardly fits the bill .
Important to note that reading between the lines the nation is likely heading towards another season of cash shortages.
Banks have been given an extension to 2021 on meeting adequate capital ratios, while there is no indication of income recovery for the informal ‘forgotten’ sector in both rural and urban Zimbabwe who have been hard hit by the covid pandemic a situation which may extend into early next year.
Persistent arrears on debt continue to accumulate interest and penalty charges which makes the country’s borrowing capacity almost untenable. With that means increased deficit reduced investment opportunities which will render the budget an unredeemable wish list … the positive current account balance means very little when aligned with the increasing arrears and penalty charges on external debt.
It’s disappointing that investors and the general populous are left to guess on the severity of the impact of covid-19 on aspects of the economy such as job losses or exports.
One can speculate that if South Africa is predicting contraction in industries that rely on high consumption spending then It is probable that Zimbabwe is going to be just as hard hit. This will have a gross adverse impact particularly for those in the low skills bracket who are also unlikely to manage the working from home culture.
I suppose a befitting final note is to say brace yourselves folks the driver is determined to drive up a steep hill with flat tyres and a broken handbrake. Railroading the nation to a local currency ahead of addressing corruption and political reforms can only mean we are going backwards and not forwards.
Chenayi Mutambasere (Msc Development Economics and Policy) is the MDC UK and Ireland Province Secretary for Industry and Commerce. You can follow her on Twitter: @ChenayiM