‘We have a common position with business’
FOLLOWING the May 7 Presidential Announcement to stabilise the exchange rate and rein in on rising inflation, there has been speculation that the government-business relationship is becoming strained. The Herald Correspondent Gibson Nyikadzino (GN) had a wide-ranging interview with Finance and Economic Development Minister Prof Mthuli Ncube (PN) in which he spoke about when banks will be allowed to resume lending, the common position shared between Government and business, the economic successes registered so far and if there is a possibility to adopt the Bitcoin as a stabilising currency. Below are the excerpts: ***
GN: In this environment, what mechanisms have Government placed to cushion the ordinary person from the current inflation and tax policies and at the same time protect their salaries?
PN.
Government is already doing something to ensure that the citizen is better protected. Making transportation available. President Mnangagwa announced that in addition to ZUPCO, that monopoly has been suspended and other operators will come in to create competition.
The second thing is that when it comes to the taxes, in terms of the tax bracket, in our last budget we had made sure that we raise the tax bracket ceiling where the citizens do not have to pay taxes, we will do more. Going into the mid-term budget review, we are looking at further raising that ceiling so that the citizens are cushioned against the income tax levels that are taxable.
As Government we have a robust social protection programme which has several aspects that include free education for children that come from vulnerable families through the BEAM programme.
The other one is food assistance for families and that programme is coming soon as we still have reserves in the GMB of 500 000 tonnes of maize which will assist the vulnerable.
We have the cash transfer programme which we are looking at increasing to make sure that the vulnerable are given cash transfers so that they afford some of the basics that are becoming expensive. This is unconditional. When we see the price increases then Government has to think about policies that can reduce prices in shops like opening up the borders to imports so citizens can then access cheaper products from other countries for consumption locally. Those are options available to us but we are not there yet, they are options we are considering. It is a myriad of policies that are available so that the citizens can be protected.
GN: Tell us about the Government-business relationship. From President Mnangagwa’s announcement on May 7, business has been complaining saying the measures are not ideal in the obtaining environment. But at the same time, businesses have increased prices of basic goods which is affecting ordinary citizens. Are you respectfully seeing things from each other’s point of view?
PN.
We have a common position with business which is, we both want to see a better performing economy. We want to see our companies growing as Government. They have been growing by the way to an extent when you look at the levels of capacity utilisation which is currently at 66 percent, a very sharp improvement in only two years from as low as 30 percent three years ago.
So clearly something is working. But then there is a situation when we have a speculative bubble which is caused by corporatised business and some caused by individuals. For instance, on the temporary suspension of bank lending, the aim was to prick the speculative bubble on the parallel market, but also to prick the speculative bubble on the stock market. We realised that the two (parallel and stock markets) are now related.
When that happens, Government has to act. It is also good for business to have a stable exchange rate, stable and not rising prices. They have to understand that we are pricking the bubble and once that bubble bursts, stability will open up bank lending. But we have a common view about the direction of building a strong, growing economy. This can be done by business with our support.
GN: A few days ago, there were discussions that the central bank was contemplating introducing a digital currency like in Nigeria and the Central African Republic recently adopted the bitcoin as a currency. Do you think we have right fundamentals to adopt bitcoin as a currency? Are there possibilities for us to adopt crypto currency because we hear finance
experts say it can stabilise inflation? PN. No. We will not adopt crypto currency as legal tender in Zimbabwe. Why? If you look at bitcoin, it is becoming clearer that bitcoin is nothing other than a technology stock (tech stock). It goes up and down. This is a thing that has its own value in the face which is not related to the fundamentals of a country. There is a disconnect and there is no relationship. How can it then be a currency?
But in terms of a digital currency by the central bank, there is no harm because this is an issue of convenience. But even then, the central bank is investigating this issue not that it is saying we are adopting it.
Central banks in the world are doing that and some have gone further such as Nigeria to introduce the digital currency. So, we are still going through the investigations phase, evaluation phase and see if there are benefits to it. But we are not going the route of adopting the cryptocurrency because that would not work for us. A digital currency is a possibility after thorough investigations and evaluations.
GN: The Government has been funding development programmes. What measures do you have to explain the extent of these successes? Are there proper economic development posts Zimbabwe can be proud of?
PN:
We are getting some positive gains from the programmes we have been implementing under NDS1. The road construction programme, for instance, which is a public sector investment programme, means we are investing into the future.
This is where economic growth comes from. But who have we empowered? We have empowered domestic construction companies and they are employing more people. Even insisting on female contractors being involved and so many other material suppliers are being crowded in by these programmes.
Same applies with the dam construction programmes where again they are supplying raw materials to that sector. This is happening and I do not recall at any time when we were this supportive of the construction sector and other related sectors as we have done now. We have been recording these successes. We also established the National Venture Fund which is now gaining traction and you will see it soon we will begin to extend loans especially to our youth and start up companies.
If you look at programmes to capacitate people like the Youth Bank, the Empower Bank. We have increased their capacity in the economy to reach many different groups.
There is a lot happening in terms of funding vocational training centres, universities which have introduced innovation hubs. All of that is through government and we see its impact right across the economy.
In agriculture, the Pfumvudza/Intwasa programme has empowered rural farmers. Rural incomes increased and actually doubled last year due to the success of this programme involving two million households. This is continuing and is efficient as we are dutifully funding climate proofed agriculture. The list is endless. The policies around supporting industry have been impactful in a positive way. The capacity utilisation that we have seen is due to those policies. Sometimes you impact with policies and not just funding.
GN. Is Government paying these construction companies using local currency or the US currency? There has been a lot of talk whenever the parallel market goes up, it is because those paid in local currency then come to the parallel market to chase the US dollar.
PN.
In the past when we used to pay them only in local currency, the companies would go to the parallel market, especially the foreign companies, to change the money to US dollars and that was causing trouble. We realised that as Government and now we are splitting the payment as 30 percent hard currency and the rest in domestic currency.
I have just signed off some big monies recently in hard currency for Zimunya dam, Gwayi-Shangani dam, Chivhu dam and Thuli-Manyange dam in Matabeleland South. These were hard currency payments. Yesterday (Wednesday) I signed off payments for contractors building those dams in hard currency because we do not want them to go to the parallel market. So, we split the payment.