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Finance minister Mthuli Ncube

Analysis

Treasury chief big on talk, sketchy on action

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ZIMBABWE’S Treasury chief Mthuli Ncube presented the 2021 national budget on 26 November last year under the theme “Building Resilience and Sustainable Economic Recovery”.

DUMISANI NYONI

The budget was anchored on the National Development Strategy 1 (NDS 1) pillars which are: inclusive growth and macro-stability; developing and supporting productive value chains; optimising value in natural resources; infrastructure, ICT s and digital economy; social protection, human capital development and wellbeing; effective institution building and governance; and international engagement and re-engagement.

We present below an assessment of each of the pillars to see how much ground has been covered so far.

Inclusive growth and macro-stability

The government wants to achieve inclusive growth and macro-stability but the reality on the ground is that the growth has not been inclusive.

Main policy measures for the pillar included strict observance of the budget and Public Finance Management (PFM) Act rules; borrowing only for budgeted expenditures and through the market; no recourse to central bank overdraft window; continuous review and rationalisation of public posts; rolling of PFM controls to all departments and local levels; managing employment costs; ensuring value for money for all expenditures; winding up retentions by line ministries; adherence to new procurement Act rules; minimising subsidies that are targeted and accommodated in the budget; complete migration to Public Service Pension Scheme from Pay-As-You-Go to defined benefit pension scheme; directing more resources to development programmes and social services delivery.

“Macro-economic stability has been achieved but growth has not been inclusive as we see a number of people are still without jobs, and a number of people still live below the poverty datum line of ZW$41 000. So the pillar there might be targeting growth but has not yet attained it. Yes, macro-economic stability is there,” said Stevenson Dhlamini, an applied economics lecturer at the National University of Science and Technology.

Productive value chains

On this pillar, Ncube said fiscal policy was targeting to limit government support to vulnerable households, extension services and other capital development, while private sector supports commercial farming; and establishment of a medium-term accommodation facility in support of productive sectors.

Dhlamini said the government invested a lot of funding into agriculture. This would boost or support the productive value chains, but there is still a lot of corruption, especially in the extractive sector.

“We have known from the past that some policy efforts that are made to support farmers have been susceptible to misuse by certain officials, but we are confident the performances of tobacco, cotton and other agricultural produce are consistent with the pillar of developing and supporting productive value chains,” he said.

Optimising natural resources value

There is still a huge gap in this pillar due to corruption involving government officials. Some of the forms of corruption in the mining sector established by the study conducted by the Zimbabwe Environmental Law Association include under-declaration of profits from mining companies, resulting in illicit financial flows (IFFs), lack of up-to-date geological data, and illegal selling of mining claims, among others.

“When you look at the Auditor-General’s report, we know that our natural resources, though they are plenty, are not fairly distributed. They are being exploited instead of being explored,” Dhlamini said.

Economic analysts say they were still looking forward to the government implementing policies that will ensure that the natural resources benefit the country’s economy instead of building other countries.

“So we are looking at the government implementing even value-addition programmes in the mining sector and other natural resource exploitation so as to boost domestic resource mobilisation and rely less on taxes which are hurting the average citizen,” Dhlamini said.

Independent economist John Robertson said gold miners and tobacco farmers were causing massive environmental damage and farmers have failed to feed the nation in 19 of the past 20 years.

“Our unemployment rate is more than 80% and thousands of factories are no longer in operation. Skilled Zimbabwean technicians, nurses, teachers, railway workers, pilots, accountants, lawyers, motor mechanics, hoteliers and chefs are now working in foreign countries, sending what they can save from their monthly wages to support their local families. I can see no sign that NDS 1 is making the slightest difference to any of these problems,” he said.

Infrastructure, ICT and digital economy

The Covid-19 pandemic has accelerated digital transformation across the board, with businesses shifting operations to cope with lockdowns, restricted movement of staff and supply interruptions.

Ncube said the first half of 2021 witnessed the completion and commissioning of the National Data Centre on 14 May 2021, which will act as a repository of all national data and ensure efficient and effective information sharing and communication by various government departments.

Furthermore, resources were also availed towards operationalisation and commissioning of 57 public finance management district kiosks with solar systems having been installed at these nodes to mitigate against power outages.

Resources were also availed towards the establishment of 38 community information centres (CIC), two of which have been commissioned at Nyachuru and Nyadire.

With regards the Zimbabwe Digitalisation project, Ncube said ZW$300.7 million was availed for the operationalisation of Eutelsat satellite service lease, and Aucom service-level agreements, installation of television studio equipment and a digital transmitter in Gokwe-Sengwa-Chitekete, revamping of frequency modulation (FM) transmitters and digitalisation of Mbare studios.

However, analysts said the pillar was still lagging behind as the country still needs a lot of investment in this area.

“We haven’t seen much resources being put there but now the government has committed to the deliberate process to improve infrastructure and ICTs and the digital economy because almost all businesses are now moving towards the digitalised economy. So it is very imperative that he implements that pillar. It’s very relevant,” Dhlamini said.

Social protection, human capital development

This is one of the most critical pillars because inflation has been undermining people’s incomes. Zimbabwe’s inflation is currently hovering around 56.4%, according to the central bank, having dropped from 837.5% in July 2020.

The Poverty Datum Line is around ZW$41 000 yet most civil servants are earning less than ZW$30 000 a month. The minister has committed to increasing the social grants in line with the changes in inflation.

“Human capital development and wellbeing are still lagging behind as we can see. Like I said, people are still living way below the poverty datum line and about 7 million Zimbabweans are said to be susceptible to dire need for food or drought. We still have a long way to go. We also expect that the minister is going to operationalise the budget by ensuring that these social protection grants are delivered on time before they are undermined by inflation,” Dhlamini said.

Robertson said preparing endless lists of projects and programmes has never resulted in the needed jobs being done.

“That is why a power station project approved in 2012 has yet to be started, an even older approved plan for a new Harare water-supply dam has yet to be built, why the national airways and railways are barely functional, and why the education system, formerly the best in Africa, is now struggling to match the pass-rates achieved elsewhere,” he said.

Effective institution building and governance 

That one is also very critical. Analysts say they have seen from the Auditor-General’s report that most institutions are failing when it comes to corporate governance issues and it is important for a country not to be run on the basis  of statutory instruments but through effective institutions that observe sound governance. This is critical also for ensuring smooth service delivery and attracting investment, Dhlamini said.

Last year, President Emmerson Mnangagwa’s administration promulgated a record 300 statutory instruments (SIs) and, in the process, violated laid down procedure on most of the subsidiary laws.

This year, the government has also gazetted a couple of SIs with the latest being the controversial SI 127 of 2021. The SI triggered massive price hikes for most goods and services in the country.

Finance minister Ncube defended the government’s repeated promulgation of SIs as a way of addressing multiple economic and political challenges facing the country.

Recently, the Auditor-General`s report on Covid-19 funds revealed that approximately US$89 million meant for vulnerable Zimbabweans heavily affected by the pandemic was looted.

The money was meant for cushioning the elderly, people with disabilities, child-headed households, food insecure households, chronically-ill persons as well as small and medium enterprises whose operations have been affected by lockdowns.

The Zimbabwe National Water Authority, on the other hand, is rocked by a US$109 million tender scandal for the construction of Kunzvi Dam which was controversially awarded to China Nanchang when there was a cheaper and more reputable bid at US$66 million from Sino Hydro.

This presents a variance of US$43 million which could have been channelled to the procurement of more vaccines as well as improvement of the living conditions of the masses by strengthening social protection systems.

Engagement and re-engagement

Consistent with NDS 1 and Vision 2030, one of the major pillars of the 2022 national budget is the international engagement and re-engagement process. Ncube said ongoing engagements with critical stakeholders should result in the development of a comprehensive programme that addresses key areas of concern covering both political and economic.

The government has formulated an Arrears Clearance and Debt Relief Strategy to assist the country regain access to new concessional financing from both multilateral and bilateral development partners, critical to the achievement of NDS 1 and Vision 2030 goals.

“The government has started to engage with the International Monetary Fund, and is still looking to other multilateral lending institutions. How is it attaining that? It is through creating policies that are favourably towards the demand of those institutions,” Dhlamini said.

“But we are hoping that these re-engagements will not increase the public debt and lead us to another legacy debt again in this new dispensation. But, yes, he has covered much ground but still he has room to engage, especially the issue of the informalisation of the economy, the issues of unemployment, they are still critical.”

“They need to be addressed more deliberately by the minister and we need to see the banks beginning to lend to firms because they are currently sitting on about 50% of their deposits are in forex, but they are not extending loans and that’s not good or healthy for an economy. So we expect the government to create incentives for our financial sector as well to start playing its role of credit creation in the economy,” he said.

Conclusion

Ncube has performed fairly on pillars such as inclusive growth and macro-stability; developing and supporting productive value chains.

More needa to be done regarding optimising value in the country’s natural resources; infrastructure, ICTs and digital economy; social protection, human capital development and wellbeing; effective institution building & governance; and engagement and re-engagement.

Robertson said the claims that government departments and agencies have aligned their strategic plans to the NDS 1 have not made the slightest difference as these strategies amounted to no more than a wish list.

By translating the NDS 1 into 14 languages, sign language and Braille, plus audio recording to cater for the visually handicapped, Robertson said the government has simply added to the administrative work, none of which will help make the wishes come true.

He said that would call for the commitment of skilled personnel who have been funded and authorised to get on with the job.

Choosing instead to fund outreach programmes that will disseminate NDS 1 to all parts of the country will waste many more months during which the momentum of the entire strategy will dissipate into nothing, he said.

“By uploading performance information into the whole of government performance management system, the completed drafts of provincial economic development plans will be seen to require redrafting and the funding will be siphoned away, as has happened with every other government plan, going back through more than 40 years of ineffective central planning,” Robertson said.

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