Half of capital expenditure still to be used

Figures from the 2012 budget presented by Minister of Finance Tendai Biti show that only 46 percent of last year’s capital expenditure (capex) allocation amounting to $551 million was utilised, of which only 27 percent was disbursed for development projects.
A breakdown of the 2011 budget shows that employment costs accounted for 52 percent of the total allocation, with operations coming in at 26 percent and capital expenditure at 20 percent.

This has raised the question of whether Zimbabwe faces a challenge of absorptive capacity in view of some apparent structural constraints.
The apparent poor absorptive capacity (reflected in the underutilisation of the capex budget) could also be largely attributable to the lingering restructuring of the country’s parastatals.
The Minister of Parastatals and State Enterprises has attributed this to the non-existence of a legislative framework for the State Enterprises Restructuring Agency, and lack of commitment on the part of line ministries. To offset the possible problem of absorptive capacity in the economy, economists have suggested that the Government needs to articulate specific policy actions on issues such as the creation of a viable middle income.

It also requires structural reforms necessary for enhanced supply response (including privatisation, commercialisation and civil service rationalisation), labour market reforms and access to international lines of credit.
Economist Mr Joseph Mverecha believes that although the Government has been progressively boosting capex since dollarisation, a major issue that requires attention is capacity constraints.
“The budget is steadily shifting resources more towards capital expenditure and infrastructure.

“This is critical for sustaining medium and long-term growth. The key issue, however, relates to absorptive capacity in the economy.
“There is need to further interrogate the process to establish the real causes of the slow utilisation and these have to be addressed ahead of the implementation of the 2012 budget to prevent recurrence of Public Sector Investment Programme (PSIP) under-performance,” he said.

The 2012 budget has been criticised for skimming over some areas that are considered endemic in the present economic environment.
Some of the issues which the budget gave peripheral reference include: improving doing-business conditions, zero tolerance for corruption, issues around bureaucracy and red-tape (for example at border entry ports), simplified tax laws, strengthening the Tripartite Negotiating Forum and external stakeholder engagement.

Legislation to reinstate rebate on capital goods for the tourism sector and suspension of duty on motor vehicles used by safari operators is now in force, the Ministry of Finance has said.
Finance Minister Tendai Biti announced the reinstatement of duty rebate on capital goods for the tourism sector and suspension of duty on motor vehicles used by safari operators in a move expected to induce growth in the tourism industry.

Minister Biti made the announcement during the 2011 Mid-Term Fiscal Policy review.
The decision to reinstate rebate on capital goods was taken after it emerged that operators in the tourism industry had not realised much benefit from the initial incentive for maintaining and upgrading facilities due to limited access to long-term financing.

The initial rebate of duty on capital equipment to support the expansion and modernisation of hotels and restaurants was introduced in March 2009 and expired in February last year.
In a statement, the ministry advised tourism operators the sector could begin to use the Statutory Instrument to effect the measures.
“The ministry is pleased to advise tourism operators that legislation to effect these measures is now in place.

“Tourism operators are advised to collect application forms from the ministry,” read part of the statement.
Safari operators require customised vehicles while hotels need equipment from cutlery to bedding and both need support to bring the goods into the country after years in which their pockets were choked by economic sanctions.

The tourism sector performed better during the first half of this year with tourist arrivals and bed occupancy rates having both registered a 14,3 percent growth compared to the same period last year. A total of 650 000 tourists visited the country during the first half of this year while average bed occupancy rate increased from 31 percent to 36 percent. — New Ziana.