15 November 2012

Zimbabwe: Nation Banks On Biti

Photo: Cliff Owen/IMF
Tendai Biti, Zimbabwe's finance minister.

FINANCE Minister Tendai Biti is this afternoon expected to perform a delicate balancing act once again to satisfy the widespread competing needs of the nation when he presents the 2013 Budget against limited fiscal space. The Treasury head's job is certainly not an enviable one because his shoe string budget will certainly leave many a constituency bitterly unhappy.

While admitting the resource constraint the Treasury faces, industrial body the Confederation of Zimbabwe Industries, feels the Government has underestimated the economic crisis the country is facing and needs to act urgently.

It remains a matter of conjecture how Minister Biti can conjure up ways to jolt splattering economic growth, which saw him cut his initial growth projections from 9,4 percent to 5,6 percent. The economic growth rates may be further revised today.

Barring any last minute external pledges, Minister Biti is expected to present a budget slightly less than his initial budget for the current year of US$4 billion.

It should have been a little chilling for Minister Biti over the last few weeks to prioritise the many competing bids in the budget against US$3,8 billion projected revenue. While he faced a somewhat similar vexatious challenge in terms of the budgetary framework for 2012, the situation seems a bit trickier this year in light of the need to set aside resources for the referendum and elections next year.

So if Minister Biti had to revise downwards his initial 2012 Budget to US$3,6 billion on the back of poor revenue performance, it becomes a bit confounding how he will juggle the increased needs for elections and the referendum. Zimbabwe will almost certainly go for harmonised elections in the first quarter of next year, but a referendum on the constitution should come even earlier.

The two events will require funding running into hundreds of millions of dollars and with Zimbabwe still under international isolation it is hard to think donors will come by. And this is without running the risk of continuing to spun or ignore the demands of poorly paid civil servants who made shrill calls for better salaries for the better part of this year.

The issue of improved remuneration for civil servants and its unsavoury implications to the national budget could already be giving Minister Biti many sleepless nights. This is particularly the case considering that recurrent expenditure, with 75 percent of it being salaries for Government staff, is gobbling almost 80 percent of the budget.

Obviously, despite recurrent expenditure already accounting for most of the budget there are increasing demands in that area, especially regarding health and education. But the balance after these non-negotiable needs comes against increasing calls to allocate more to capital projects such as power, water and sanitation, roads and rail infrastructure, which has become a huge cost to business.

The capital projects range from the rehabilitation and construction of roads and dams to airports and energy projects remain incomplete, years after construction was started. In fact, availability of energy, at 1 400 megawatts against national peak demand of 2 200MW, could become the next Achilles hill to economic growth of the country.

The agriculture sector, an integral component of the local economy, will also definitely be looking for a dose of financial support amid expected negative growth this year.

Output from the sector is expected to decline by minus 5 percent this year after targets were missed in tobacco and maize, which lost 11 percent of the crop to drought spells. It is important to ensure agriculture performs considering its linkage with manufacturing, a sector so distressed the Confederation of Zimbabwe Industries has already declared a crisis and called for Government intervention.

CZI president Kumbirai Katsande admitted Minister Biti has to perform the hoodoo cat to get the balancing act right, but should address industry concerns by plugging loopholes and port of entry where imports are not paying duty, which is putting pressure on local industry.

"We see it in these companies folding up, declining capacity utilisation and declining employment levels. You just have to talk to NSSA, they will tell you how many companies are winding up," Mr Katsande said yesterday.

He bemoaned lack of support, especially from Government, which continues to import at the expense of local producers citing the high cost of locally produced goods. Mr Katsande said Government needed to show leadership, as the biggest spender by procuring its goods locally to support the recovery of distressed local firms.

Minister Biti can ill-afford to ignore the situation in industry and at the peril of the whole nation, as the ramifications of total collapse of the sector will be felt in a long time.

The industrial lobby group has also called for the creation of a whole new enabling environment for business to recover after a decade of economic instability. CZI reported last week that capacity utilisation had plunged from 57,2 percent in 2011 to 44,5 percent this year with leather, textiles and allied sectors the most affected.

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