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Business Reporters
ALL is set for the 2014 national budget presentation by Finance and Economic Development Minister Patrick Chinamasa today amid high expectations from industry and the public that the fiscal policy should address economic challenges. From an industry point of view, the budget should come up with a raft of measures to address key issues threatening economic growth.
Such fundamentals include shortage of working capital, intermittent power challenges, antiquated equipment, and stiff competition from imported products as well as lack of vibrant infrastructure to support industrial activity.
Following the adoption of a multicurrency system in February 2009, the economy has been dogged by tight liquidity resulting in slow economic growth being realised.
This year, the situation seems to have taken its toll as evidenced by the decline in capacity utilisation levels in the manufacturing sector.
The Confederation of Zimbabwe Industries (CZI) manufacturing survey report released in September indicates that capacity utilization in local companies tumbled to 39.6 percent this year from an average of 44.2 percent in 2012.
The industrial body has attributed the uncompetitiveness of local industries to the abovementioned challenges.
Stakeholders also expect Minister Chinamasa to allocate significant amount of funding towards infrastructure rehabilitation projects as well as energy and power sectors.
Industrial activity has also been held back due to inadequate power supplies as the country was producing far much below the national demand of 2,200 megawatts.
The Zimbabwe Power Company indicated that as of yesterday, the country was producing 1,167MW.
Minister Chinamasa is also expected to announce economic policies that would significantly improve liquidity supply in the economy so that the country will not experience deflation going forward.
Economists have expressed concern over the continued downward trend of the country’s year-on-year inflation figures that stood at 0.54 percent in November shedding 0.05 percentage points in the October rate of 0.59 percent.
In the 2014 national budget, Minister Chinamasa is also expected to peg civil servants salaries in line with the Poverty Datum Line (PDL) at $547.
At the just ended Zanu-PF annual conference, the president directed Minister Chinamasa to ensure the fiscal policy was well funded so that Government employees earn salaries in line with the PDL.
At the moment, the lowest paid employee in the public service earns $297 a month while the PDL stands at $547.
Meanwhile, the CZI has urged the Government to establish measures to enhance the competitiveness of the manufacturing sector. In an interview, CZI president Charles Msipa said Government should address working capital constraints and power challenges to promote growth in the economy.
“Working capital constraints, power outages, ageing machinery and low domestic demand remain the major challenges hence the need for the fiscal authorities to create an environment which will stimulate productivity,” he said.
Msipa said Government through the Ministry of Finance and Economic Development needs to come up with ways of capacitating the Reserve Bank so that companies could access funding at concessionary rates.
“The minister needs to take measures of capacitating the Reserve Bank so that the companies and the industry will have access to affordable funds because most manufacturers are hamstrung by lack of affordable funding to retool and acquire raw materials to improve capacity utilisation levels,” he said.
He said Government should also come up with measures to upgrade investment in water and energy sectors as a way of mitigating water challenges and intermittent electricity supplies that have impacted negatively on industrial performance.
He bemoaned the effects of cheap imports and called on the Government to adopt statutory import control policies to reduce imported products.
He said this was imperative because the long-term solution to challenges facing the economy to a large extent lay in improving the competitiveness of the local manufacturing sector.
“Statutory import control policies should be put in place so that we reduce on imports, we should find ways of promoting local products and support our manufacturing sector rather than importing everything when we can produce on our own,” he said
However, he said the imports issues needed to be carefully handled to avoid shortages of some goods on the market.
Government has prioritised the revitalisation of industries under the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset).
Online Reporter