Legislation alone not enough to solve economic problems

EVERY thinking person in Zimbabwe must be concerned about the state of our economy and in particular about the rapidly depreciating Zimdollar. The various measures adopted by the Finance and Investment Promotion ministry to halt the dollar’s slide — arbitrary fixing of exchange rates, managed currency auctions, gold-backed digital currency — have signally failed.

The lack of success of these measures suggests they were not carefully thought-out and debated before they were introduced — and that brings us to the topic of this Economic Governance Watch: How disparate economic measures are crammed into annual Finance Bills and passed through Parliament without adequate debate, in defiance of the precepts of good government, proper parliamentary practice and the Constitution.

The Finance Bill, 2023

The Bill that was passed by Parliament at the end of last year is a good example. Before the Bill was presented in Parliament, a departmental draft was circulated to some members of the National Assembly.

The departmental draft was skimpy compared to the final Bill and made no mention of new taxes the minister intended to introduce, such as the “wealth tax” on houses.

The final Bill was presented to the House on December 14, the last day the House sat before adjourning for the Christmas break. It passed all its readings that day, with virtually no debate.

Before the Bill was presented, the House had been going through the annual estimates of expenditure (the amounts allocated to ministries and departments) and during that time some of the tax measures in the Bill were considered, at least indirectly. But the Bill contained a ragbag of other measures which had little or nothing to do with taxes, for example:

• allowing civil penalties to be imposed for VAT contraventions;

• creating a category of strategic minerals that can be mined only by holders of special mining leases or special grants;

• prohibiting tributes (i.e. subleases) of mining locations for precious stones and strategic minerals;

• altering the composition of the board of Zimbabwe Revenue Authority;

• limiting the power of the Reserve Bank of Zimbabwe to borrow foreign currency;

• exempting public entities from the Public Entities Corporate Governance Act and the Public Procurement and Disposal of Public Assets Act;

• changing the composition and governance of the Sovereign Wealth Fund (which is renamed the Mutapa Investment Fund); and

• changing the composition of the International Financial Services Council under the Banking Act.

These important and contentious measures, stuffed into the Finance Bill, were not debated at all.

The measures, as we have said, had little or nothing to do with taxes, so they seem to fall outside the scope of the long title of the Bill which, like all Finance Bills, says its purpose is: “To make further provision for the revenues and public funds of Zimbabwe and to provide for matters connected therewith or incidental thereto.”

The only apparent reason of including them in the Finance Bill is to hurry them through Parliament as part of the end of year budget process.

We want to argue that tacking these measures on to the Bill was inimical to good governance, contrary to proper parliamentary procedure and, most important, was unconstitutional.

Good governance

The procedure for formulating and drafting government legislation in Zimbabwe is designed to ensure that the government speaks with one voice.

A ministry that wants to amend an Act it administers, or wants a completely new Act, has to get the principles of the proposed legislation, as well as the draft Bill, circulated to all other ministries and approved by the Cabinet Committee on Legislation and the Cabinet itself. Only when it has done this will its Bill be sent to Parliament for printing as a Government Bill.

This procedure ensures that all ministers and their ministries are informed of proposed Bills and have an opportunity to express their opinions on them. When a Government Bill is presented to Parliament, therefore, it can fairly be said to represent the considered views of the government as a whole.

Finance Bills

Finance Bills are an exception. Taxation proposals are formulated by the Treasury and drafted into Bill form by the Attorney-General’s Office without being circulated to other Ministers and without being approved by the Cabinet Committee on Legislation. The justification for this is secrecy: Tax proposals should be kept secret until they are announced by the Minister of Finance in his budget speech.

If they are disclosed too early, taxpayers may be able to avoid the new taxes, thereby reducing the government’s revenues.

The justification for keeping Finance Bills secret, however, applies only to their taxation provisions, so in the interests of good governance Finance Bills should be restricted to their proper purpose, namely the imposition and alteration of taxes.

If other provisions are tacked on to them — provisions relating to exchange rates, for example, or procurement or corporate governance — those provisions will not undergo the careful scrutiny that the normal legislative procedures ensure.