HomeBusinessChinamasa’s damp squib

Chinamasa’s damp squib

Ordinary citizens have to wait a little bit longer to realise the benefits of the budget announced last week as the policies will require time to be implemented, a local analyst has said.

By Mthandazo Nyoni and Victoria Mtomba

Speaking on the sidelines of a budget renew meeting on Friday, BancABC group economist and researcher James Wadi, said the measures put in place by Finance minister Patrick Chinamasa in the 2016 national budget on pension commutation would benefit ordinary citizens immediately but other benefits would accrue later on.

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The Zimbabwe Congress of Trade Unions (ZCTU) acting secretary-general Enock Kahari said the lobby group was shocked with the 2016 budget as it had nothing for the workers.

Kahari said, “The budget framework is not for the poor or growth in terms of expenditure and recurrent expenditure and incentives. It makes the same mistake as last year of pegging unrealistic growth projections and focuses on arrears clearance.”

He said the $4 billion budget treated the situation in the country as business as usual and the firing of the Ziscosteel workers on three months’ notice was more worrying.

In his national budget speech, Chinamasa said in order to relieve retrenched employees who had not yet attained the prescribed retirement age, “I propose to exempt a minimum value of $10 000 or one third of the total value of the pension or annuity up to a maximum of $60 000.”

Over 75% of the working adults in Zimbabwe are in the informal sector and liquidity challenges have affected them due to the reduction of lending by the financial sector due to non-performing loans that reached a high non performing loan ratio of 20% by end of year 2014.

Addressing delegates at the breakfast meeting, Chinamasa said he did not worry much about figures but was concerned with policy framework.

He said the clarification of the indigenisation policy would be complete before Christmas.

Presenting an economic analysis of the budget, Wadi said credit to government since 2014 had been growing and it was associated with key events such as elections and payment of civil servants salaries.

“Loans to the private sector have been flat and that is a scenario that we have to avoid in 2016. We need a situation where credit to the private sector is growing,” he said.

Wadi said the economic headwinds for 2016 were huge and if the economy did not grow, there was a danger the target would not be met.

He also said domestic debt had been on the increase and it could continue to increase if parastatals continued to underperform. The domestic debt stood at $1,3 billion.

Industrialist Anthony Mandiwanza said there was need to address the demand and supply side of things because the economy was still experiencing challenges.

“Government bonds and borrowings are crowding out the private sector and that is not good for us to stimulate demand. There is a lot to be done and you cannot blame the minister. He has done his part from a policy point of view, but the devil is on implementation,” he said.

Mandiwanza said the economy was still under difficult times because little was being spent on capital projects.
The 2016 total budget stands at $4 billion and projected revenues are $3,85 billion.

However, economic analysts canvassed by The Standard said Chinamasa’s projection was not realistic given that the economy was imploding on a daily basis.

“I would certainly challenge the minister’s claim that there is likely to be growth next year and I would also challenge the assessment being made repeatedly that the economy has grown at all this year,” economic commentator John Robertson said.

“Agriculture is much more likely to see a significant decline. Seed and fertiliser sales are down and indicate a reluctance to pay for inputs, while a poor rainfall year is expected. The high production costs still affecting the country are making food imports a more attractive option,” he said.

Robertson said tobacco was doing well on the very few farms that could support irrigation and the late start to the rains had slowed the transplanting of a smaller seedbed crop to the lands.

“If the rains are poor, it is likely that only the irrigated crop will do well, but the irrigation requirements for the winter wheat will be affected by electricity. Unfortunately, more power cuts seem very likely,” he added.
Robertson said cotton had started the season on reduced hectares planted, depressed by low price forecasts as well as discouraging weather forecasts.

The livestock industry, Robertson said, appeared unlikely to see growth in production value terms because of reduced buying power. But in volume terms, it might see increased slaughter rates that would be caused by poor natural pasture and increased stock-feed costs.

As for mining, Robertson said the prices of gold and platinum were significantly lower than those of many years before and were not likely to permit growth forecasts to be realised.

“Ferrochrome production is restricted by power shortages and all the base metal prices are also lower than they were last year,” he said.

Robertson said growth from manufacturing was extremely unlikely as so many of the manufacturers had found it impossible to compete with the prices of imports.

He said tourism depended heavily on South African visitors, but the weaker rand plus the additional VAT on so many tourist services had made Zimbabwe an impossibly expensive destination for South African tourists.

“No growth can be expected from tourism,” he said.

Godfrey Kanyenze, a local economist, said it was very difficult to project any economic growth under such economic hardship.

“It’s very difficult to anticipate that the economy will grow by 2,7% simply because the situation is difficult,” Kanyenze said.

“Commodity prices are falling and drought is being anticipated. We have been told that there will be more power outages. The government has a task to clear arrears of $1,8 billion by April. Under such circumstances, it’s very hard to realise any growth,” he added.

Chinamasa said there were bottlenecks frustrating the economy that included infrastructure gaps, lack of liquidity, inefficient parastatals, low savings and rising corruption in both the private and public sector.

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