Scores high on transparency index, but . . .

Every business aspires to be present in many countries. However, for that to happen, it is important to first succeed in certain markets.

Therefore, understanding requirements of the target market is important in the first stages of planning.

Here, an exporting business can have a better understanding of the market needs through structured market research.

The research should answer questions to do with trade policies and regulations, country features, busi

ZIMBABWE has improved significantly in terms of transparency with respect to the budget process, the Open Budget Survey (OBS) 2019 report shows. The report, released in March 2020 by the International Budget Partnership — a US-based advocate for transparent, inclusive and accountable budgetary processes — revealed that the country has an Open Budget Index of 49 (out of 100), having increased more than two-fold from a score of 23 in 2017.

The OBS assesses the budgeting process in different countries across the globe, with particular focus on transparency, public participation and oversight.

Transparency focuses on the extent to which governments release useful budget information to the public in a timely and comprehensive manner.

Public participation focuses on the extent to which citizens are empowered to use budget information to contribute to deliberations on budget information.

Oversight focuses on the extent to which legislatures and auditors check on the executive to ensure that budgets are implemented in line with their objectives. The report has been well-received by Government. However, despite the score falling in the “limited transparency” category, the score of 49 is an achievement from two perspectives.

First, this is the highest ever score that Zimbabwe has attained since 2012, when Zimbabwe was first assessed.

It also comes on the backdrop of a significant fall that had been recorded in the 2017 score of 23, down from 35 in 2015.

Thus, under the new Government, transparency has generally improved, as evidenced by a score which has increased more than two-fold.

Second, the score of 49 is also good relative to the performance of other countries in the world.

For example, Zimbabwe’s score is third after South Africa and Namibia in the SADC region, well above the Sub-Saharan Africa average score of 32 and above the global average score of 45.

Thus, Zimbabwe is generally doing well in comparison with its peers, which is quite commendable.

However, as already mentioned, there are three areas of importance within the context of open budget.

The 2019 scores for Zimbabwe show that the country has a score of 33 with respect to public participation and an average score of about 42 with respect to oversight.

Thus, the main area where the country is lagging behind is with respect to public participation.

The low level of citizen participation is well articulated in a recent publication by the Zimbabwe Coalition on Debt and Development (ZIMCODD).

It shows that during the pre-budget consultations, only 1,7 percent of the citizens would have had access to the pre-budget strategy paper, which is published by the Ministry of Finance and Economic Development

After completing an analysis of internal factors (assessing export readiness) and external review (investigation of the target market with regards to opportunities, challenges, competition, logistics and risks), the business should be able to establish a unique selling proposition to facilitate consultations.

Citizens generally feel that the document is too technical for the ordinary person to understand, calling for a less technical and simplified citizen version of the document. There is also little to no awareness about the budget processes, as only 3,8 percent of the citizens have knowledge of the budget presentation period.

About 57,3 percent of the citizens have never participated in pre-budget consultations, with about 56,1 percent believing that their contributions during the pre-budget consultations sessions will never be adopted even if they decide to participate.

Although there are regular performance reports by Treasury on budget implementation, only about 25,8 percent of citizens have access to such budgetary performance reports.

There is generally a lack of interest in searching for budget implementation or fiscal performance reports.

This is also true with respect to audit reports, as 2,4 percent of citizens have access to the Auditor-General’s report. Thus, efforts in enhancing public participation should be more confined in strengthening structures and institutions for citizen engagement.

There is need to build the capacity of residents associations on budgets and budget processes to enable them to mainstream public participation in budgeting into their programme areas.

The Ministry of Finance would then use residents associations and their structures in dissemination of the Budget Strategy Paper and in consultations to enhance access to citizens. Similarly, the Parliamentary Portfolio Committee responsible for conducting budget hearings should work with existing structures within residents associations in conducting public hearings on the national budget.

The set of documents used in international business are different from those used in domestic trade.

It is important for an exporter to know these documents and their uses to avoid unnecessary delays in shipment and payments.

All export transactions are based on a contract between the buyer (importer) and the seller (exporter),

They should also ensure that the hearings for the national budget are held in venues that are more accessible to the public, rather than hotels and other venues in the central business district.

Below are excerpts of some key highlights of the Economic Barometer, a flagship quarterly publication of the Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) intended to give an overview of the status of the Zimbabwean economy at a given time.

Global and regional economic developments

Due to the Covid-19 pandemic, it is expected that all economies across the world will register negative growth rates in 2020.

This will negatively affect Zimbabwe given depressed demand for exports as well as reduced supplies of critical raw materials and consumables which the economy requires. With the exception of gold, Zimbabwe will also be negatively affected by the suppression of mineral prices, which would reduce exports, given the dominance of minerals in the export basket.

The falling oil prices gave some fiscal space to Government as it was able to raise taxes without significant impact on consumers.

Zimbabwe’s inflation is now the highest in the region, hence disinflation policies should be the priority.

Major local economic developments

Cumulative revenue collection for the first quarter of 2020 amounted to $13,9 billion, which was about 149,5 percent above target. This was mainly due to inflationary pressures than expansion of fiscal space.

In the first quarter of 2016, Government expenditure exceeded total revenue, resulting in a budget deficit of

US$159,8 million (19,775 percent of total Government revenue).

This budgetary deficit was mainly financed by loans and Treasury bills from domestic sources.

On May 4 the Government unveiled a $18 billion Covid-19 economic recovery and stimulus package, which accounts for an estimated 9 percent of GDP.

However, given that the country is currently in a high inflationary environment, there is risk that the funds will be wiped out by inflation and may not be sufficient to stimulate economic recovery.

The loan-to-deposit ratio for the banking sector, the liquidity ratio, as well as the capital adequacy ratio show that Zimbabwe banks actually have the capacity to increase credit for economic expansion and growth.

The Zimbabwe Stock Exchange is no longer a preferred investment haven by foreign investors as reflected by a decline in the volume.

Important economic sectors

Government needs to incentivise tobacco farmers by increasing the foreign currency retention threshold.

There is also need to strengthen current Government efforts on climate change adaptation and agricultural financing to enhance food security.

Gold and platinum demand is expected to increase amid Covid-19-induced risk, hence the need to boost production. Gold is considered a safe haven, whereas investment in precious metals like platinum is more lucrative due to the increase in the global risk.

The Covid-19 pandemic caused difficulties in accessing imports, implying that methods and mechanisms for import substitution should be the topical issue for manufacturers.

The Post-Covid-19 Tourism Recovery Strategy should address a number of issues, including destination accessibility among others if tourism is to recover and become a key economic driver.

Zimbabwe registered an improved balance of trade deficit as well as a current account surplus due to reduced imports, while exports remained subdued. This is not likely to be sustained. Zimbabwe continues to be in debt distress, with a huge and unsustainable external debt of about US$10,5 billion as at September 2019, of which about 60,4 percent of the debt is in arrears.

The public sector debt-to-GDP ratio, including legacy debt and farmers’ compensation, is projected to be 101,6 percent in 2020, which is beyond the 70 percent debt threshold as espoused in the Public Debt Management Act and the Transitional Stabilisation Programme.

The projected public debt is expected to be unsustainable even up to the year 2029 at 83,8 percent of GDP.