. . . Industrialists’ mixed reactions
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.”