daniel chigunwe
Economy Uncensored with Tapiwanashe Mangwiro
As we look to the economic road ahead in 2025, the signs of wear on consumers, businesses and governments alike are unmistakable.
After three years of harsh economic conditions marked by inflation, sluggish growth and the aftershocks of global supply disruptions, policymakers now face a vital opportunity to establish a budget that promotes business activity, encourages consumer spending and provides much-needed relief to households across the board.
A balanced, pro-business budget would be a lifeline not only to struggling companies and overburdened consumers but also to the economic health of the nation itself.
Alleviating the tax burden and promoting business investment
The principle that “taxes, when excessive, destroy incentive” as noted by classical economist Adam Smith, has rarely rung truer. For many small-to medium-sized enterprises (SMEs) and large corporations alike, current levels of taxation are stifling.
With taxes being applied at multiple levels, often through double taxation policies that erode profit margins, the room for companies to reinvest or innovate is shrinking.
This is particularly problematic given the simultaneous squeeze on consumers, whose disposable income has taken a significant hit.
A relaxation of this multi-tiered tax framework in 2025 would provide businesses with the necessary breathing room to reallocate capital toward growth initiatives, job creation and productivity enhancements.
Moreover, there is a strong economic rationale for such a tax reprieve. John Maynard Keynes argued that “the boom, not the slump, is the right time for austerity at the Treasury.”
In other words, when economies are faltering, governments must spend to stimulate growth. Lower taxes encourage businesses to expand and invest, creating a positive feedback loop that boosts economic activity and strengthens the base of taxable revenue over time. This approach can spark the beginnings of a virtuous cycle that ultimately benefits all.
Reducing reliance on foreign currency for government payments
Another critical aspect of 2025’s budget reform should involve a transition to local currency for government payments. Over-reliance on foreign currencies particularly for a country that has struggled with currency depreciation only exacerbates economic strain, tying budget stability to the vagaries of foreign exchange rates.
By opting to settle government expenditures in the national currency, the administration can stabilise its fiscal outlook, reduce exchange rate pressures and lessen debt-service obligations tied to foreign-denominated liabilities.
A transition of this sort could also bolster confidence in the local currency. According to Milton Friedman’s concept of “monetary sovereignty,” countries should issue and utilise their own currencies whenever feasible.
This not only grants the government greater control over its fiscal space but also promotes economic resilience. While it is critical to approach this change cautiously to avoid domestic inflation, reorienting government payments to the local currency is a bold but necessary step.
Prioritising citizen welfare for a temporary reprieve
Another essential budget priority for 2025 should be a temporary shift in emphasis toward citizen welfare. After years of escalating living costs and decreasing purchasing power, there is a pressing need to ease the burden on consumers, if only for a year.
Relief measures could include targeted subsidies for essential goods, energy assistance programmes, or temporary tax credits. Such interventions, though typically costly, would offer invaluable breathing space to families who have faced unrelenting financial pressures.
In terms of economic theory, this can be viewed through the lens of Keynesian demand-side economics, which posits that increasing consumers’ purchasing power stimulates aggregate demand, leading to greater economic activity.
Through bolstering citizen welfare, the government would effectively enhance consumer spending power, which is especially important as a catalyst for growth in times of economic stagnation. With more money circulating, businesses will see increased demand, and, in turn, be encouraged to invest, hire, and expand.
Recalibrating agricultural funding and encouraging private investment
While citizen welfare takes a temporary front seat, another area ripe for reform is agricultural funding. Traditionally reliant on state subsidies, the agricultural sector should be opened up further to private financing and investment.
Private capital can introduce efficiencies, innovation, and new technologies that improve productivity far beyond what public funds alone can achieve.
Moreover, redirecting a portion of agricultural funding toward pro-business initiatives can lead to better economic returns in the near term, particularly if targeted at sectors that can drive growth and innovation in 2025.
The economist, Joseph Schumpeter’s concept of “creative destruction” aptly applies here, by allowing agriculture to innovate through private investment, the sector can evolve, removing inefficient practices and adapting to meet modern demands.
Private sector funding will push for more effective business models and incentivise innovation, potentially transforming agriculture into a far more resilient and productive sector over time.
Spurring consumer and corporate spending: A call for fiscal fasing
Finally, the 2025 budget should prioritise spurring both consumer and corporate spending. For companies, pro-spending policies might include investment tax credits or incentives for hiring and training employees. For households, income tax reductions and subsidies for essential services would help restore consumer confidence and boost demand.
This relief-focused, pro-business approach would deliver a pragmatic fiscal policy pivot, marking a critical departure from the past few years of austerity and high taxation. By taking these steps, policymakers can inject vigour back into the economy, laying the groundwork for a more resilient recovery.
In sum, the 2025 Budget presents a rare opportunity to reset the economy’s course by prioritising business growth, easing the tax burden, and supporting consumers. A budget that is “pro-business” and “pro-spending” aligned with classical and Keynesian principles could very well lay the foundations for a sustainable economic recovery.
Tapiwanashe Mangwiro is a resident economist with the Business Weekly and writes this in his own capacity. @willoe_tee on twitter and Tapiwanashe Willoe Mangwiro on LinkedIn
Bongani Ndlovu