2023 Budget: Time to consolidate gains

20 Nov, 2022 - 00:11 0 Views
2023 Budget: Time to consolidate gains

The Sunday Mail

The national budget for next year is being presented in a few days and while we are unlikely to see much in the way of fireworks from an exceptionally careful Minister of Finance and Economic Development, we should see measures that consolidate the progress made since the mini-budget was announced mid-year and the results of the improving revenue from a growing economy.

Since he took over the job at the beginning of the Second Republic in 2018, Professor Mthuli Ncube has built a reputation, with Presidential backing, for making the right moves to ensure long-term sustainable development and accelerating economic growth.

But, while foregoing populist measures, the Minister has insisted that this sustainable development and growth not just includes everyone, but is, in fact, largely built on converting millions resigned to poverty into productive citizens earning incomes. That, in turn, when you look at the economic benefits behind the growing mass prosperity, creates the markets that are needed to accelerate growth. The whole process is what is known as a positive feedback loop.

Much of the heavy lifting was done in his first few budgets. From the beginning, he has insisted on fiscal discipline, that is, the Government lives off its own revenue, basically what we all pay in taxes, and we all pay taxes, even if it is only VAT when we buy something.

A bit of borrowing is allowed, but first, only just a little bit, and then only for capital spending that almost immediately results in guaranteed revenue that can service and pay off the loan. He has eschewed policies where our children and grandchildren are expected to pay for what the Government spends today, and printing money is seen as an evil that simply results in economic collapse.

His second major reform was to redistribute Government spending. At the start of the Second Republic, almost everything the Government received in revenue, plus most of what came in from the electronic printing of money, was spent on operating costs: salaries, fuel, stationary, subsidies, and everything else needed just to keep the Government ticking over and even then not particularly well. That was not going to create any growth, and, in fact, was just a recipe for decline. So, a respectable percentage of income had to go on capital spending, the creation, upgrading and replacement of assets. Quite quickly, capital spending became the second largest item in the budget, not far below the largest operating cost, staff remuneration in all its forms.

So, we started having the money needed to build dams, build and repair roads, upgrade hospitals, and invest in education and universities. Part of that rapidly upgraded capital budget was used in the devolution agenda, when this was converted from a Constitutional provision to something practical. Generally speaking, most people and most communities know exactly what they need, and when the spending has to be spread over several years, they know what they need first as they start ticking items of the long lists.

Even the budget for operating costs was upgraded. We are spending more on consumables, for example, drugs and other medical consumables that hospitals and clinics need. Even the staff costs showed a far greater emphasis on hiring the people needed to push development: more doctors, more nurses, more school teachers and more agricultural extension officers, and that done without increasing administration costs.

So successful was the policy that the Minister was able this year to start raising the percentage of his tax money spent on staff, from below 40 percent to around 44 percent. First, the growth in the economy gave him more money, so he could adjust spending levels without curtailing capital expenditure. Secondly, the civil service reforms meant the nation was getting a lot more done for each dollar spent on staff.

Subsidies, mostly hidden in the bookkeeping, were dumped and the few left brought into the books for what they were. Generally, the Second Republic reckons that people pay for what they get, although taxes can be adjusted as was done when fuel costs went through the roof, and those who do need help can be helped directly.

So, on Thursday this week we can expect some of the usual measures. For a start, income tax brackets are likely to be widened to match inflation, although, with inflation tamed, the widening will not be dramatic, but enough so we do not fall behind. We can expect more improvements in ensuring health and education are improved, with more precise assistance to those who might otherwise lose out.

We can expect the emphasis on production to be maintained, with the Government pumping more cash into the infrastructure to ensure producers can produce at ever growing volumes. Quite a bit of that capital expansion will come from the producers. If a company makes more stuff, its profits rise, and the Minister will take his cut and be able to ensure that the roads, bridges, power stations, water supply and the like needed for further growth are paid for.

At the same time, the major effort to uplift the majority just climbing out of poverty will be sustained. This not only fulfils primary development objectives, but is also partially self-financed. If almost everyone is growing their own food or earning enough to buy it, less needs to be spent on food aid. If more people have more money, then they spend it, and those who make and sell the things they spend it on pay more taxes, and the extra people they hire in the new jobs pay tax as well.

We need to remember that Prof Ncube does not operate in a vacuum. Behind him stands the President, and President Mnangagwa has a very clear vision of where he wants Zimbabwe to go. He wants a prosperous country, with that prosperity spread and every person, in every community, benefiting. He wants fast economic growth without growth in inequality. So, he appointed a team of high-powered technocrats, and backed them as they delivered, but delivery was the crucial factor.

Now, the budget reflects what was in the Zanu PF manifesto. It is the nitty-gritty that implements the political promises and does it properly, without trashing the economy. And this is good economics. The only way of achieving an upper middle-income country is to have almost everyone in the middle-income bracket.

People can still get rich, but by investing, creating lots of jobs and producing, not shuffling paper and speculating. That just needs a business-friendly environment.  More direct intervention is needed to move people out of poverty, and we can expect that in the budget along with everything else.

There will be changes, and the Government likes announcing the odd surprise, but generally we can expect an intensification of what we have already seen in the Second Republic, that major effort of growing our economy sustainably, improving services and ensuring that no one, and no place, is left behind as we move ever faster to rising prosperity and with everyone getting more prosperous.

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