. . . In­dus­tri­al­ists’ mixed re­ac­tions

The Sunday Mail (Zimbabwe) - - BUSINESS - Tawanda Musarurwa

IN­DUS­TRI­AL­ISTS have ex­pressed mixed re­ac­tions over the 2019 Na­tional Bud­get, high­light­ing the need for greater fi­nanc­ing for pro­duc­tive sec­tors and ef­fec­tive pri­ori­ti­sa­tion of for­eign cur­rency al­lo­ca­tions.

Last Thurs­day, Fi­nance and Eco­nomic De­vel­op­ment Min­is­ter Mthuli Ncube an­nounced his in­au­gu­ral Na­tional Bud­get State­ment.

The bud­get seeks to bal­ance aus­ter­ity and rev­enue boost­ing mea­sures.

In an in­ter­view with The Sun­day Mail Busi­ness, Con­fed­er­a­tion of Zim­babwe In­dus­tries (CZI) eco­nom­ics and bank­ing com­mit­tee mem­ber, Mr James Wadi lauded the mea­sures but high­lighted the need for ef­fec­tive im­ple­men­ta­tion of the pro­posed poli­cies.

“I think it (the 2019 Bud­get) sets the tone but there is a lot that needs to be done. Most of th­ese ideas are in place but we have al­ways lagged be­hind in terms of im­ple­men­ta­tion. The mea­sures are very good for the econ­omy but if we don’t im­ple­ment them, we will have a chal­lenge.

“So the con­fi­dence that the mar­ket awaits is not from the Bud­get State­ment, but from the course of ac­tion the Gov­ern­ment will take. Go­ing for­ward, we should not an­nounce tar­gets and then miss them,” said Mr Wadi.

“Even when you look at the deficit for last year, the ini­tial bud­get deficit was $672 mil­lion but now we are an­tic­i­pat­ing $2,8 bil­lion. This wide mar­gin shows that we have been set­ting bench­marks, which we do not hon­our. Our first step is to en­sure that we hon­our those bench­marks.

“What is key is putting any for­eign cur­rency that comes through to good use. Dur­ing the first six to seven months of the year, the econ­omy per­formed ex­cep­tion­ally well from a for­eign cur­rency per­spec­tive and we should not be scram­bling.”

Pre­sent­ing the 2019 Bud­get State­ment, Min­is­ter Ncube said the bud­get pri­mar­ily tar­gets macro-eco­nomic and fis­cal sta­bil­i­sa­tion and im­ple­men­ta­tion of high im­pact projects and pro­grammes, “which lay a solid foun­da­tion for a pri­vate sec­tor led growth.”

Speak­ing on the side­lines of a CZI Post-Bud­get break­fast meet­ing on Fri­day, Al­liance Hold­ings ex­ec­u­tive chair­man, Dr Joseph Kanyekanye ac­knowl­edged some of th­ese ini­tia­tives and mea­sures, but high­lighted that more could have been done.

“There are some pos­i­tives that have come from the bud­get. We see a clear in­ten­tion to move away from the evils of a fis­cal and trade deficit. Funds are be­ing chan­neled through the Con­sol­i­dated Rev­enue Fund, that’s a good move.

“Our view is, with re­spect to Zim­babwe As­set Man­age­ment Com­pany (Zamco) for ex­am­ple, there should be a swap for debt in those en­ti­ties and al­low Zim­bab­weans to buy those com­pa­nies and turn them around as th­ese were none per­form­ing loans. The Min­is­ter men­tioned that but will likely re­fine it fur­ther on.

“In terms of some of the projects, par­tic­u­larly on the agri­cul­tural side, we would have wanted spe­cific projects that ad­dress the un­nec­es­sary use of for­eign cur­rency. We are gen­er­at­ing a lot of for­eign cur­rency but I think the way we are us­ing it sug­gests that there is not enough for­eign cur­rency, even as we have done more,” he said.

“We have done more in terms of ex­ports than we have ever done be­fore so we need to try and see how we can re­duce the de­mand for for­eign cur­rency in this econ­omy. For in­stance, if you take the soya-bean cy­cle value chain, we need to grow more soya beans be­cause we have the cli­mate that al­lows that. If we do that, we will get to a sit­u­a­tion where af­ter a pe­riod of two to three years, there won’t be any for­eign cur­rency al­lo­ca­tion for im­port­ing soya be­cause we will be pro­duc­ing enough lo­cally.

“There have been some at­tempts to re­duce em­ploy­ment costs. How­ever, l see scope for do­ing more. I be­lieve that while al­lowances are part of re­mu­ner­a­tion, we need to cut back on some of them. How­ever you look at it, em­ploy­ment costs are still the dom­i­nant ex­pen­di­ture is­sue on our bud­get,” he said.

Some ex­pec­ta­tions not met

Dr Joseph Kanyekanye went on to men­tion that he ex­pected more from the 2019 Bud­get State­ment, in terms of fund­ing.

“I ex­pected a stim­u­lus from some of

the 2 per­cent tax be­ing ap­plied to deal with prob­lems of over-ex­pen­di­ture. I also ex­pected much more re­sources for the tourism sec­tor. I feel that the al­lo­ca­tion to­wards that is not ad­e­quate given that there are is­sues that need to be dealt with. We are sell­ing a prod­uct that is com­pet­i­tive in terms of des­ti­na­tion, but in terms of pric­ing, there are is­sues. The prices of our telecom­mu­ni­ca­tions, our food, etc, are out of this world.

“I also be­lieve that rather than just fo­cus­ing on the ease of do­ing busi­ness, there is ca­pac­ity to deal with com­pet­i­tive­ness be­cause the min­is­ter ad­mits in the bud­get that we are not com­pet­i­tive enough and that we need to re­tool. We un­der­stand that this will be funded through the pri­vate sec­tor, lo­cal banks and so forth. I have a prob­lem with that be­cause most of what must come for re­tool­ing should come from ex­ter­nal sources.

“To a large ex­tent, you can do it through ex­ter­nal lines of credit. He (Prof Ncube) spoke of some Ven­ture Cap­i­tal Fund. I would have wanted a lit­tle more flesh into that,” he said. Cost of do­ing busi­ness Mean­while, in­dus­try also thinks that some of the mea­sures pro­posed by Min­is­ter Mthuli will in­crease the cost of do­ing busi­ness in the coun­try. Among other is­sues, Tan­ganda Tea Com­pany fi­nance di­rec­tor, Mr Henry Ne­maire said the in­crease in cus­toms duty for diesel in par­tic­u­lar will drive up the firm’s op­er­at­ing costs.

“We ex­pected the min­is­ter to ad­dress the key is­sues, ob­vi­ously the fis­cal deficit and also the trade deficit. We have also raised the is­sue of duty. Dur­ing the past few years, we have been work­ing on re­duc­ing the cost of do­ing busi­ness, which cul­mi­nated in the new dis­pen­sa­tion re­duc­ing duty. How­ever on Thurs­day, Prof Ncube re­versed that by in­creas­ing ex­cise duty petrol and diesel. I feel that this is an area where we have taken a step for­ward and a step back.

“But broadly, I think Gov­ern­ment has shown some pos­i­tive ac­tion by cut­ting salaries. I think it’s a good ges­ture, which is a good thing from the Pres­i­dent and the Fi­nance Min­is­ter. We have to im­ple­ment th­ese mea­sures ex­pe­di­tiously.”

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