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Conrad Mwanawashe and Enacy Mapakame
“Ethics or simple honesty is the building block upon which our whole society is based, and business is a part of our society, and it’s integral to the practice of being able to conduct business, that you have a set of honest standards,” Kerry Stokes, once said.
Mr Stokes, an Australian businessman whose interests span a diverse range of industries including electronic and print media, property, mining, and construction equipment, had his sentiments about honest standards corroborated by a local economist last week.
Reacting to the 2016 Mid-Year Fiscal Policy Review Statement announced by Finance and Economic Development Minister Patrick Chinamasa last Thursday, Dr Godfrey Kanyenze noted that the major positive was the Minister was upfront about the challenges the country was facing.
“He (Minister Chinamasa) was honest about the state of the economy and the outlook,” said Dr Kanyenze.
“Even from the 2016 budget, he has been saying the right thing.”
Minister Chinamasa was honest to tell the country that the economy was “still faced with a number of challenges, which cannot all be fully addressed over the short term”.
He also said: “the economy is facing strong headwinds, with major challenges being experienced in the economy and business activity during the first half of the year than what the 2016 National Budget anticipated.
“This primarily reflects downside risks associated with the impact of the drought on our agriculture, with attendant supply challenges along the agro-processing linkage value chain; depressed international commodity prices, particularly for our minerals; limited domestic and foreign direct investment, also associated with our debt overhang; the growing fiscal deficit, also impacting on the liquidity of the financial system, as well as on business activity; and the resultant overall fall in incomes and weakening of domestic aggregate demand,” said Minister Chinamasa.
“The above challenges are undermining performance of our key productive sectors, inclusive of agriculture, mining, manufacturing, tourism, construction and services.”
He acknowledged the external debt overhang which topped $7,5 billion as at end of June 2016, saying it weighed heavily on the country’s development needs and would continue to negatively impact on the country’s ability to significantly bring down levels of poverty.
In addition, the Minister noted the debt overhang militated against the country’s efforts to mobilise reasonably priced long-term lines of credit.
In light of this, clearance of arrears and unlocking of new financing will require that Zimbabwe builds capacity to honour old and new debt obligations to IFIs and other bilateral and new lenders.
And while Minister Chinamasa acknowledged the “strong headwinds”, he also highlighted key developments and interventions that point to a resurgent economy.
Even though he revised economic growth downwards he pointed out measures that will lead to growth going forward.
Some of the bright spots include an $85 million facility to fund the special maize production programme (Command Agriculture) targeting 400 000 hectares of land.
Economic commentators noted that honesty by Government would make all stakeholders realise the amount of work and commitment required to turn the country’s fortunes around.
The analysts believe that presenting the state of economy honestly helps industry strategise based on accurate information. Business can modify their medium to long term plans in line with current economic data provided by Government. But while the analysts and economists applauded Government’s honesty, they were quick to note that more needs to be done.
They want Government to walk the talk on issues such as corruption, improving the ease of doing business and expenditure restructuring, among others.
Economist Dr Gift Mugano said the budget sought to create a conducive environment for business which should increase productivity.
“This will also attract investors. There are a number of policy measures the Minister talked about to help companies improve productivity,” he said.
“The country is suffering from the disease of lack of competitiveness. Other countries have been through this road such as Georgia and Egypt and they have come up with competitiveness commissions to align cost drivers and production.”
Dr Kanyenze noted that Zimbabwe’s problems lay in the lack of structural reforms.
“If we are to think the medium to long term, we need to also think of structural reforms, deal with issues of productivity in agriculture, plugging revenue leakages and tightening expenditure,” said Dr Kanyenze.
Positives highlighted by the economists include operationalisations of the National Competitiveness Commission responsible for, among others, reviewing regulations on ease of doing business in order to enhance the competitiveness and attractiveness of the country to investors.
Already, board members comprising captains of industry have been identified and are offering guidance on competitiveness.
The commission will spearhead the continuous scanning of the business environment, monitor the cost drivers and advise on measures needed to address emerging challenges.
Another topic the Minister touched on relating to the mining sector, according to Dr Mugano, is the cost of electricity.
“This has been a problem for the sector with some mining companies reducing production due to high cost of electricity. The move by the Minister to reduce electricity (eight cents per KWh from 12 cents per KWh) for mining is excellent. It cushions the sector at a time global prices of commodities are depressed. This will also help attract investors,” he said.
While acknowledging the rationalisation of the civil service, a tough but necessary decision in the current economic environment, Dr Mugano said it was good that Government was looking at higher posts where remuneration and perks were more costly.
“What needs to be done also is remove certain ministries completely because there is a duplication of roles. There may also be need to remove certain positions, for instance, a principal director is just like a permanent secretary. It’s not necessary to have all such posts in an economy like ours,” he said.
On the local currency, the economist felt that there should have been clarity on the introduction of bond notes, although the Minister was applauded for allaying fears of the return of the Zimbabwe dollar.
“The issue of bond notes was not clarified. It would have been good if Minister Chinamasa talked about how they will work. We are coming from a history where people once lost their money which raises scepticism,” said Dr Mugano.
The continuation of the multicurrency system, according to Dr Kanyenze, should restore confidence.
Other commentators wanted more initiatives on combating corruption with some saying Government should walk the talk, particularly in public institutions.
In the public sector, the Auditor General has detailed rampant corruption and inefficiencies across Government ministries, departments and agencies. But there are no follow-ups on the recommendations.
“Government should seriously make a statement on corruption if it is to instil confidence,” one analyst with a local research firm said.
“A statement in the sense that we need to see people arrested and jailed if convicted. We cannot have a prospering economy when we continue protecting corrupt public officials. These public officials should be accountable. We need Government to walk the talk when it comes to corruption.”
Online Reporter