The Sunday Mail
I, therefore, applaud the fiscal policy review statement for emphasising the need for beneficiation and value addition of our resources so that we can write price tags to our own exports. Right now, manufacturing represents just 13 percent of total exports.
The Mid-Term Fiscal Policy Review ambushed me.
I had given up hope of its announcement, assuring myself that the minister will skip it this time, just as the then Central Bank governor, Dr Gideon Gono, skipped the Mid-Term Monetary Policy Statement last year.
Finance Minister Patrick Chinamasa had already told us way back in June how busy he was.
“I am looking at whether it is necessary for me to do the Mid-Term Budget Statement because I had been away and it is a matter that I had not paid attention to.
“I will have to check whether I can use my discretion on the Mid-Term Budget Review and whether it is a statutory obligation,” he said then.
Section 7(2)(a) of the Public Finance Management Act requires him to “provide full and transparent accounts, from time to time, and not less than annually to Parliament, indicating the current and projected state of the economy, the public resources of Zimbabwe and the Fiscal Policy of the Government”.
And then Deputy Finance Minister Samuel Undenge told Mine Entra in July that Government had already commenced internal workshops on the 2015 National Budget.
Be that as it may; hardly a week after coming from China, the minister last Thursday presented this crucial policy statement.
There have been many developments since the announcement of the 2014 National Budget, such as failure to meet revenue collection targets for the first half of the year.
Skipping the Mid-Term Fiscal Policy review would have been akin to leaving the economy on auto pilot.
I, therefore, would like to applaud the Finance Minister for affording time and energy to do this.
The Mid-Term Fiscal Policy Review Statement is a crucial policy document reinforcing the National Budget.
The National Budget is fundamentally presented to allocate and distribute resources as well as foster stabilisation and development of the economy. The review is the interventionism that whips the National Budget into line and fine-tunes the economy in the context of actual developments that would have taken place outside initial projections and strategies.
The mid-term statement, therefore, influences the economic direction of our country by managing the shocks and balances.
However, the efficacy of this policy, in my view, also requires that it must be announced timeously.
We call it “mid-term” because we are reviewing the first half of the fiscal year. Traditionally, this policy is announced in July, meaning the minister is two months late.
Very soon, the 2015 National Budget will be announced, and the strategies of the mid-term review will be overshadowed.
Going forward, it will be critical to announce the Mid-Term Fiscal Policy timeously to allow the strategies time to have effect and for objectives of that fiscal year to be met.
This year’s National Budget was themed “Towards an Empowered Society and a Growing Economy”. The economy was initially projected to grow by 6,1 percent.
The weight of this theme has somehow been cut by half, with growth projections now projected at 3,1 percent thanks to under-performance by mining and manufacturing.
Mining contributes 52 percent to our total exports, and here we are talking about raw minerals. We are price-takers and accept any silly price on the international market.
I, therefore, applaud the fiscal policy review statement for emphasising the need for beneficiation and value addition of our resources so that we can write price tags to our own exports. Right now, manufacturing represents just 13 percent of total exports.
The minister highlighted that measures supporting industry’s competitiveness will take a sectoral approach, with priority support going to strategic companies. He made specific mention of motor industries, beverages, agricultural commodities and the clothing and leather industries.
My concern is the omission of other crucial sectors as identified by the Industrialisation Development Policy. These include pharmaceuticals, metals and the electrical sub-sectors.
Budget revenue projections have been cut by US$270 million but expenditure remains unchanged at US$4,12 billion. If proposed revenue collection measures do not work out, we are likely to face a huge deficit.
It is, therefore, important to make sure everyone does their job diligently.
It’s also pleasing to note recognition of the need to ensure early access to agricultural inputs. From the previous season, the Agriculture Ministry learnt that there is merit in financing local inputs manufacturers. This will allow them to produce the inputs competitively and adequately.
This will also ensure we will not unnecessarily import fertilisers when we have local manufacturers.
I applaud the minister for taking a bold protective stance by increasing import tariffs on meat and offals as well as dairy produce, vegetables and miscellaneous edible preparations, beverages, mineral products, perfumery, cosmetics and soaps, and furniture.
This will certainly ensure non-essential imports and products that are locally-available are not disproportionately displaced by imports. It is also in line with the Industrialisation Development Policy, which has proposed industrialisation on import substitution and tariff protection.
In addition, I think the protected companies should submit concrete plans to Government on how they plan on being competitive. Protection is not a lifetime thing, and we have to have a properly-monitored framework where we ensure protection achieves its intended results.
Import duty on buses with a carrying capacity of 26 passengers and above has also been increased from zero to 40 percent. This is happening at a time when Government is planning to phase out all kombis and replace them with buses.
One wonders if this will be done in a cost-effective way, given that those intending to import buses will now pay more money and the local prices of vehicle manufacturers is uncompetitive.
The budget has also proposed excise duty of five percent on airtime for voice and data with effect from September 15, 2014. It must be noted that a study by the Postal Regulatory Authority of Zimbabwe (Potraz) shows that mobile call tariffs in the country are around 30 percent too high.
I, therefore, would like to urge Government to swiftly reduce mobile phone charges at the same time it is going to levy the five percent excise duty, or not effect the excise duty at all, but get 30 percent of revenue from mobile phone operators since they are overcharging us by that much.
Why is clarity on the indigenisation policy, crafted more than half-a-decade ago, still popping up?
It was mentioned in the 2014 National Budget Statement, the recent Mid-Term Monetary Policy and this Mid-Term Fiscal Policy Review Statement.
The reason why the minister has increased excise duties is because we do not have enough FDI.
We need to seriously work on bringing clarity to our policies so that we can get the much-needed FDI.
The best way to deal with muddy waters, they say, is to leave them alone. Many foreign investors are unable to see our goodness through these muddy waters of our policies and will simply leave us alone, and go to clear waters.
It is, therefore, important to bring clarity to our policies.
Again, the minister made mention of demonetising the Zimbabwean dollar, but did not avail much details on the important issues such as the exchange rate, how to deal with those who were “burning” their money and the time-lines for such an exercise.
It is my view that these should be spelt out boldly and clearly.
