Public sector value for money in fighting inflation and the black market

14 Aug, 2022 - 00:08 0 Views
Public sector value for money  in fighting inflation and the black market

The Sunday Mail

President E.D. Mnangagwa

Economy on growth trajectory

Figures just released by our monetary authorities are quite pleasing, and do point to an upward surge in the Economy. Export proceeds from January to June this year stood at more than US$5,4 billion, up from US$4,07 billion the same period last year. Exports dominated these earnings, suggesting greater activity in the economy.

This is hardly surprising.

Gains on value chains

During the same period, figures on foreign payments show greater importation of capital and intermediate goods, thus indicating our economy continues to retool, and to lean towards value addition in line with our policy towards greater beneficiation and domesticating value chains. Capital goods for the same period accounted for US$829,4 million, up from US$625,6 million used up on the same in 2021. Intermediate goods asked for US$609,8 million, up from US$328,2 million we spent in 2021. Statistics show a drastic reduction in importation of finished goods, showing that more and more, we are meeting our needs from local manufactures. This trend must continue into the future so we escape the curse of a supermarket economy which is stocked from elsewhere.

Spending within limits

A few days ago, I asked for monthly figures on our revenue performance to date. In January 2022, we managed to collect about $49 billion; we had a slight dip in February when we managed $47 billion. By March, the figure had risen to $77 billion, before coming down to $64 billion in April. May saw us getting $94 billion, a figure which rose to $157 billion in June, and to $158 billion in July. Of course, I am aware of pressure on the local unit, and the need to deflate these nominal revenue figures. However, I take heart from the fact that inflation, which had soared in the past few months, is beginning to come down, as, too, is the exchange rate. Our fiscal authorities continue to keep a tight rein on our spending so we do not return to budget overruns.

Strong response to indiscipline

The Second Republic vows to stabilise the economy, and to spare no tool towards realising this goal. Above all, under the Second Republic, the fight against economic destabilisation knows no sacred cows or hidden corners. My Government is determined to walk the whole length and expend every ounce of energy to ensure order and discipline returns to the National Economy. Let no one doubt our resolve.

Errant actors in mobile telecomms

The fight against economic destabilisation began with a determined crackdown on errant actors in the mobile telecommunications industry. Actors in this sector had taken advantage of a clear legal lacunae, and of our desire to use mobile platforms for financial inclusivity, to cause mayhem in financial markets. We acted against them. We continue to watch them so their actions and conduct remain proper and lawful.

We will come for you whatever your size

Always mobile and on the hunt for new loopholes, the same greedy and devious economic actors moved into our financial sector where they consorted with several banks and other deposit-taking institutions to resume their arcane, unlawful activities. In response, we had to take drastic actions this last May, including freezing all lending by all banks, so our Financial Intelligence Unit, FIU, could move in and carry out thorough investigations to account for all culprits, and for all those aiding and abetting them. Today, I can share with the Nation that out of the 16 deposit-taking institutions we have in our Economy, only five passed the integrity test, with the rest having been involved in activities that ran contrary to terms of their operating licences. Punishments have since been meted out. Let no one ever think that my administration will flinch from or hesitate to take corrective actions, however drastic. In addition, the size of offenders means nothing to us; we will come for you once you dabble in the unlawful and unethical. No one player is stronger than Government; or above punishment.

Risks of blacklisting

In the same spirit of taking bold, corrective measures, we have acted against big companies participating in lucrative Government tenders. In future, we will not hesitate to blacklist such wrongdoing companies from Government tenders. Their association with Government must place their actions above any reproach. No public resources will be used to finance economic hitmen and women.

Spotlighting the public sector

This week, my remedial searchlight beams on the public sector. Many things have been going wrong in that key sector, which must show the way, and whose buying power accounts for over 70 percent of the demand for goods and services in our Economy.

Much worse, it is the governing sector! With such a preponderant procurement role in the Economy, and such high responsibility to show exemplary conduct, it goes without saying that what the Public Sector does, or fails to do right, impacts the whole Economy, whether for better or for worse. I am determined that the impact of the whole Public Sector on the National Economy remains wholesome and supportive, indeed inspiring to all actors.

Use of revenue in the economy

Government collects more than $150 billion monthly, by way of revenue. Fifty (50) percent of this amount goes towards recurrent expenditure, principally salaries and wages for our public servants. The other 50 percent is split between public sector operations, which account for 20 percent, and for payment for infrastructural projects which we are implementing, which account for 30 percent. The last item is particularly noteworthy in that before the Second Republic, very little was going towards building infrastructure, which had come to a virtual standstill.

Public sector and the black market

By any count, what the Public Sector spends each month is quite huge; in fact, decisive to the direction our whole Economy takes. As a demander of goods and services, the Public Sector discharges huge sums of money into the Economy, which is why what it does matters to everyone. Ordinarily, the goods and services which Government demands should stimulate and promote greater activity in the Economy, thus ensuring rapid economic growth.

Sins of omission

Yet our latest investigations have shown that this is not always so. If anything, this huge demand for goods and services by the Public Sector has in fact been stoking the black market, leading to currency and price instability in the whole Economy. Thankfully, this has not been wilful in the majority of cases. The Public Sector has largely been guilty of sins of omission. We have not always been a prudent procurer, a weakness which has levied very costly consequences to the whole Economy.

Case One: Fuel procurement

Two examples suffice to illustrate this gross imprudence on procurement by the Public Sector. We use lots of fuel in the Public Sector, which is often bought from private fuel suppliers through a coupon system. This is in spite of the fact that we have in the Public Sector arms which dispense and sell fuel to the public.

Black market rates for pricing

A quick check has revealed the bulk of our fuel needs are being met from private players. Ordinarily that should not be a problem, provided the pricing is right. This has not always been the case, and in most cases has been grossly abused. The pricing of fuel coupons by these private players has been based on extortionate huge mark-ups, and on black market rates of anything between $900 to $1000 per USD. Meekly, the Public Sector, which accounts for over 70 percent of fuel purchases in the market, has been a price-taker! Even players who obtain their fuel from our NOCZIM at official rate and at prices gazetted by our own ZERA have been abusing ministries, departments and agencies using the same extortionate pricing formulae. That way, billions of dollars have been paid out to these devious suppliers.

Government as an unwitting accomplice

What these extortionate suppliers then do is to pay off NOCZIM at gazetted prices, and using the official exchange rate. The rest of the monies from such extortionate sales then find way into the black market, thus precipitating the exchange rate turbulence that has been buffeting the whole economy. Government has thus been an accessory in the flouting of its own laws in the market.

Case Two: Travel and hotel industry

Another illustrative abuse came from travel agents and hoteliers. In several instances, Government officials flying from Harare to Victoria Falls would be sold tickets for $699 000 or more a-piece. At the official rate, this amounts to more than US$1 500 a ticket to Victoria Falls! This is close to what it costs an air traveller in economy class to fly to Europe! Meanwhile, Air Zimbabwe, the sole carrier of Government delegations, only charges about US$300 a ticket! The issue is what happens to the huge difference? It finds its way into the black market.

Order to re-validate all invoices

A random check has shown that such abusive pricing in respect of procurements of goods and services by the Public Sector is more of a rule than an exception. That way, our financial services have been destabilised, with the Public Sector being an unwitting player.

I have now directed the Fiscal Ministry to send back all invoices from Government ministries, departments and agencies for thorough re-validation before payment. Any accounting officer who allows such pricing malpractices to escape their gaze will be deemed criminally negligent and thus personally liable in terms of our Public Finance Management Act (Chapter 22:19).

Invoking Government purchasing power

From now onwards, Government is going to be a prudent procurer of goods and services. That means flexing its purchasing muscle in the market, in the double sense of demanding favourable procurement terms and going as far as blacklisting suppliers who cheat and rely on extortionate black market rates for pricing. Such errant actors must be stopped from participating in the public procurement process. As already stated, the Public Sector accounts for over 70 percent of purchases in the economy. That preponderant power should now be used for greater good. We should, in the next few weeks or months, see a gradual return to normalcy in the economy; we just have to consolidate on the positive fundamentals that have not been that easy to achieve. Let us all play our part so we speedily reset our economy on an even keel, and on the path to durable growth.


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