The Herald (Harare)

15 November 2012

Zimbabwe: Biti's Nightmare!

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

Finance Minister Tendai Biti faces a daunting task this afternoon of tabling a budget that should breathe life into the economy while taking care of civil servants' salaries and other social and political issues that beckon for attention. The nation will certainly not be content with mere presentation eloquence or a rich diction from the Minister but anticipate something of substance. Something that will take the economy to the next level.

That 2013 is an election year, add to it the constitutional referendum and other demands compound the situation for him.

This is not an easy task by any measure given the meagre resources at his disposal versus the huge basket of demands. Not even an actuary can balance this equation.

There is also nothing much to kill so the "we eat what we kill" concept will also not work. The US$3,8 million set for allocation in the 2013 Budget is, therefore, a far cry of what is required.

Talk this week is mainly centred around the budget while certain decisions in companies and other institutions have been suspended until Minister Biti shows the way.

The stockmarket, which has been trading actively due to increased foreign interest in well-capitalised stocks such as Delta and Econet also expects to take a cue from today's budget pronouncements.

Civil servants are anticipating a significant salary increment. The bonus payments currently underway are not enough to appease the Government workers. Understandably so given the below poverty datum salaries that the bulk of them earn.

The ordinary man on the street anticipates news that will improve the standard of living and induce cash availability at a time the liquidity crunch is biting terribly.

All sectors of the economy need packages to kick-start and in some cases consolidate activity. Agriculture, now largely expected to register a negative five percent growth, will need stimulation although it might be too late for the 2012/2013 cropping season while the manufacturing sector will need its own rescue package to jumpstart production.

Imports have become the order of the day in this "supermarket economy" but this is not sustainable. We need to preserve all the foreign currency that is available and allow it to circulate internally instead of taking it outside the country.

The Confederation of Zimbabwe Industries recently warned that the situation in industry had reached dangerous proportions and nothing short of a miracle would rescue it. We thank God capacity utilisation still better than it was in 2009.

Measures will need to be put in place to deal decisively with imports of such products as tomatoes and chickens which have crowded out local farmers on the market.

It certainly is not an exciting day for treasury.

Government ministries also feel shortchanged by the Minister who has failed to disburse adequate resources for projects. It does not look like he will be anywhere near quenching their appetite for funds in the 2013 budget.

We understand that ministries have put forward requisitions of up to US$20 billion from a US$3,8 billion budget. This shows the extent to which available resources are a drop in the ocean. They can only meet a fraction of requirements to facilitate sustainable economic activity.

This period seems to be the toughest since the adoption of multiple currency system. Already economic growth projections have been revised downwards to 5,6 percent from 9,4 percent.

So Minister Biti has to summon all his intelligence and that which is resident in his ministry and in Government in general plus that which was harvested during the budget consultative process, to come up with practical solutions to the many challenges that confront the nation today.

Capacity utilisation in companies has gone down drastically to 44,9 percent from 57,2 percent at a time gains made in the past three years were expected to be crystallised. In terms of funds, very little has come from external partners while revenue inflows have remained far below demand on the expenditure side. He has a very limited fiscal space to manoeuvre.

A fiscal policy's primary role is to influence economic activity but Minister Biti's statement has struggled to do so effectively. He has been let down by depleted resources and empty promises from some of our external partners but he has also been found wanting in terms of aggressively looking for funds, particularly from those countries and partners who are friendly to us.

The current environment demands thinking outside the box and in some instances swallowing pride and subordinating political inclinations in pursuit of that which will ultimately benefit the nation.

Mineral-resource based packages could have been crafted to ensure the country benefits from its natural endowments. For instance finance facilities backed by our minerals could have been sought and secured for the good of the country.

Africa is so rich and yet so poor. The story is replicated in most countries on the continent including Zimbabwe. We have so much wealth underground which has not been turned into better living conditions for the people.

The economy is also carrying a heavy debt of about US$10,7 billion which needs to be tackled.

Diamond mining had largely been expected to ameliorate funding challenges but reports that earnings are drastically lower than had initially been projected have compounded the situation. We hope the markets will adjust and allow Zimbabwe to enjoy the benefits of this minerals.

We applaud the introduction of a quota system that stipulates that 10 percent of local diamonds will be cut and polished here as announced by President Mugabe at the just-ended Zimbabwe Diamond Conference in Victoria Falls.

This move will not only improve earnings from the sector but will create jobs. Reports are that already Zimbabwean diamonds have created 60 000 jobs in India so we hope we can also begin to enjoy the benefits here.

Only a measly 0,1 percent of diamonds produced here in 2011 were cut and polished locally. Zimbabwe's diamonds need to be given due market space to trade competitively for the country to fully benefit from them as clearly enunciated by the President.

Local production is expected to contribute 25 percent of total global diamond supplies by 2015 once all politically-motivated impediments are removed.

This makes Zimbabwe an important source for diamond hence the need to create the right environment on the international markets for the country to realise its potential.

The mining sector in general is largely expected to spearhead economic growth over the next few years.

Another form of budget financing is the issuance of such instruments as treasury bills but the resistance by banks to take these up has been unfortunate.

The central bank has come to the market thrice but it has found few takers for the bills. We applaud efforts by Minister Biti and Reserve Bank of Zimbabwe Governor Dr Gideon Gono to make the financial institutions see reason.

But for today, Minister Biti certainly needs divine intervention to come up with something sensible and practical. His work is certainly cut out for him.

Officials in this department do not get to sleep much in the run-up to budget presentation and we hope at the end of the Minister Biti will have put up a polished act and they will be able to sleep soundly with the rest of the nation.

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