The irony of profit centres asking for money

18 Sep, 2016 - 00:09 0 Views
The irony of profit centres asking for money

The Sunday Mail

Chris Chenga : Open Economy

Finance and Economic Development Minister Patrick Chinamasa has received his fair share of criticism for pursuing contractionary fiscal policy, yet being unable to incite adequate productivity stimulus into the economy.Simply, he has been on a consistent path of expenditure reduction without effecting sufficient allocations that increase revenues in the future.
The economic logic posed against him is sound, through cutting spending on recurrent expenditures, a government is not gaining more finances to spend on capital projects — especially a government already functioning on debt financing.
Recurrent expenditures and capital spending are not mutually exclusive.
When Government spends on recurrent expenditures, there is a benefit to the economy which satisfies similar need for capital spending.
Conversely, when Government spending on recurrent expenditures is ineffective or less than satisfactory, the need for increased capital spending is exacerbated.
As such, the consistent policy direction to cut recurrent expenditures must correspond with well-planned Government capital spending or private sector investment measures that effectively counter the opportunity cost of present recurrent expenditures, albeit their allocation to a relatively unproductive Civil Service.
Over the years, Minister Chinamasa has lacked potent Government capital spending or private sector investment measures of this nature.
However, what is greatly unfortunate is that in Zimbabwe, conventional thinking is that it is the Finance Minister’s task to fulfil alone. Perhaps this is why many observers perceived Cabinet’s intervention as announced by Media, Information and Broadcasting Services Minister Dr Christopher Mushowe as reprehensive to the Finance Minister.
That is a misleading narrative.
While some of the criticism towards Minister Chinamasa is indeed warranted, a lot of it must be shared amongst his Cabinet peers.
For instance, it is disconcerting that it is in the same Cabinet that we find Mines and Mining Development Minister Walter Chidhakwa, who recently conceded to the nation that he was unable to account for lost revenue in his portfolio, which then postures in defence of continued debt financing on an unproductive Civil Service.
As a nation, and governance, it should dawn on Zimbabwe that certain ministries are what private organisations would consider “profit centres”.
They must be contributing revenue to the Finance Ministry, not vice versa.
Inefficient and grossly misappropriated are some of these ministries that the Ministry of Home Affairs has become a profit centre in a ministerial architecture of which it shouldn’t be.
How can policing contribute revenue in a nation with abundant mineral resources?
Very few ministers in Cabinet have taken the initiative to assess their respective ministry’s structural design and organisation to ask themselves — how can I make this ministry a profit centre for national revenues?
Furthermore, in a time of fiscal difficulty, how can I make this ministry economically self-dependent?
A minister’s responsibility is not just to ensure public delivery of certain services or to regulate enterprises in given sectors, but their mandates are also to ensure resilient ecosystems which sustain both adequate provision of services and adequate economic growth to finance central Government.
This is what exceptional ministers do.
Zimbabwe’s fiscal squeeze has not only become a national financing issue, but less noted is that our fiscal squeeze has become a structural responsibility issue.
Ministers in respective portfolios discount their structural responsibility.
Consider criticism directed at Minister Chinamasa includes structural adjustments to state enterprises.
For instance, the minister is often perceived as having to finance the National Railways of Zimbabwe, Grain Marketing Board, and Zesa.
This is over-expanding his structural responsibility.
At what point do we hold the ministers of Transport; Agriculture, Mechanisation and Irrigation, and that of Energy and Power Development responsible for making their respective sectors the contributing profit centres that they should be?
Is it Minister Chinamasa’s fault that these sectors are not contributing to national revenues?
The irony is that by global benchmarks, energy, transport and agriculture feature among the fastest-growing sectors in Africa and most contributory to national GDPs.
They are becoming profitable to both private enterprises and governments.
What is the growth and revenue expectation retained in Zimbabwe towards these sectors?
At the current level of sectorial productivity, the Civil Service rationalisation measures proffered by Minister Chinamasa are necessary.
They are an unavoidable prescription to the current fiscal diligence of Cabinet.
Advisably, these Civil Service rationalisations cannot be pursued in the short term without productive counter-stimulus. However, it is incorrect to hold the Finance Minister accountable to that stimulus.
Cabinet’s announced position on rationalisation should not be interpreted as any assurance of more erudite economic prescriptions.
Instead, it was indicative of a deepening matter of concern.
There is a lack of structural responsibility in Cabinet.
It is an irony of profit centres that continually ask for money.
At what point shall Cabinet start generating national revenues from productive sectors?

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