By Lazarus Nyagumbo
Zimbabwe’s Mid Term Budget Review July 2024
Following the Mid Term Budget Review on 25th July 2024 by Hon Minister Prof M Ncube, below is an analysis by International Economist Lazarus Nyagumbo:
1. Converted 2024 National Budget, Table p10-11
a) The government need to increase vote appropriation on Ministry of Energy & Power Development currently ZiG$135.9m. Given the incessant load shedding and power deficit, it is imperative that more resources channeled towards this ministry to boost power generation, transmission & infrastructure rehabilitation- maintenance towards enhanced industrialization, real jobs creation, poverty alleviation- reduction.
b) Ministry of Health vote appropriation ZiG$9.4bn. This is a welcome allocation of resources towards the recovery of the public health sector to ensure the wellness and wellbeing of the citizens, human capital. A healthier society is paramount to sustainable economy recovery-growth and development. More accessible health care facilities must be provided in all remote areas where some people have to walk longer distances.
c) Ministry of Education national budget allocation of ZiG$15.4bn is commendable. This must contribute towards increasing access to quality and equitable education provision. Deliberate efforts to ensure all children have accessible educational opportunities is a must. There are some areas where students are still walking 10-15km to school. In such circumstances, the pass rate is very low due to weariness, poor attendance, poor resources, and possibly poor staffing. Such children are disadvantaged. Government must therefore provide equal opportunities to all.
d) Ministry of Public Service, Labour & Social Welfare vote appropriation of ZiG$243m during first half of 2024.
Given the debilitating El Niño induced drought, most low income and rural communities are facing dire food shortages. Government, development partners and diaspora are continuing to mitigate this disaster and it’s a welcome relief. We implore food aid agencies and administrators to distribute fairly, efficiently, effectively, equitably and transparently. In some areas, there are reports of corruption and nepotism in food aid supplies. Law enforcement agencies must ruthlessly deal with these incidents and malcontents.
e) Ministry of Transport & Infrastructure Development ZiG$4.2bn first half of the year.
It is a welcome good public sector corporate governance to note that the government continues to embed devolution agenda. Whilst some rural and urban councils are diligently using the devolution funds to upgrade basic infrastructure, other councils are sleeping on the job or are inherently incompetent because the general public is not seeing or feeling the benefits. Accessible transport network and systems are very critical to all communities whether urban, rural, regional and international sub sectors. High impact projects such as Harare-Beitbridge, Mbudzi Interchange, Harare-Kanyemba upgrades are positive developments noteworthy. We implore the ministry to ensure the same roads upgrades accelerate and cascade to Harare-Forbes Border, inner urban and rural tributary roads. In some both rural and urban areas, roads are potholed and inaccessible, bridges needs repairs and upgrades, to modernize and mitigate transportation woes towards enhancing economic development and prosperity for all, equitable and inclusive growth.
f) Water & Sanitation ZiG$382m disbursed during the first half of the year 2024.
In major cities like Harare, Bulawayo etc, water is increasingly becoming a scare commodity. In Harare, the greater part of the week, households and businesses are going without water supply. This is causing untold suffering and low productivity in many economic activities. Hygiene and sanitation is compromised with a high likelihood of disease outbreaks, unwellness and deteriorating well-being. We implore relevant authorities to undertake sustainable measures to enhance efficiency and effectiveness in water supply. It is quite disappointing and displeasing for many households and businesses to receive city councils bills for almost nonexistent water supply, refuse collection bills. Ultimately, this results in these economic agencies unwilling to pay utility bills with hideous economic implications on the same councils. People won’t pay for nonexistent services, it sounds sober rational.
g) Housing received ZiG$1.1m during the first half of the year 2024 – towards construction, upgrading and rehabilitation of residential and institutional houses.
A look at Mbare flats is a dispiriting eyesore. The government must deliberately task relevant authorities to upgrade these deplorable flats in the 21st Century. It is a health hazard to residents and greater society as no one is safe. People travel to and from Mbare for various reasons and consequently can easily become infected. Therefore, it’s not only good for Mbare residents but the whole country benefits from safer environment. This applies to all other similar places across the country where deplorable living conditions manifest themselves.
h) Promoting and Embracing ZiG
Since the introduction and inception of ZiG, it is generally a welcome development to note government reports that there is great deal of price and exchange rate stability in the economy. Such stability is good for households, private and public sector economic agents’ budget, spending and savings. We thus, welcome government continued thrust to promote the use of ZiG in payment of taxes and user fees. For instance, allowing companies to account for Corporate Income Tax in both local and foreign currencies on a 50:50 basis, or with the option to settle such obligations in line with the proportions in which income is earned. Or where a company’s revenue exceeds 50% in local currency, tax shall be payable proportionately in the currency of trade. These landmark fiscal –legislative measures will propel the demand and embracing of ZiG as a major medium of transaction in the economy.
Other measures government may consider to promote local currency include regulating local banks to scrap disincentives such as high bank charges incurred by the banking public whenever they withdraw their money in bank accounts, swipe in retail shops. The public don’t see the merits and rationale of being continuously swindled by these spurious bank charges. Banks must resort to their traditional sources of income from advancing loans. If these bank charges continues unabated and unchecked, it will be difficult for the banking public to use banks, and pillow banking may persist to the detriment of the same banks’ credit creation propensity and wider economy.
The public further welcomes, government proposed payment of import duty on selected items and user fees on public services exclusively in local currency, creating the much needed requisite demand for ZiG. i)- Value Added Tax on Livestock and Meat
Ever since the introduction of VAT on cattle sales, meat products were expensive, dampening consumer demand and consumption. Most low income households were finding it extremely difficult to purchase meat in this agro-based economy. Therefore, the public happily welcomes the scrapping and exemption of live cattle, pigs, goats, sheep, bovine semen, poultry meat and kapenta from VAT.
j) – Electronic Cargo Tracking System (ECTS)
Some unscrupulous “businesses” were abusing the system by fraudulently misleading the Customs and Clearing Authority (Zimra) that imported goods were in-transit to neighboring countries and get exemption of import duties under the Removal in Transit (RIT) but the offload these goods on the domestic market. This was causing deleterious national economic loss and disadvantaging Zimbabwe’s national purse due to non-payment of the requisite import duty. Such fraudulent illicit malpractices were prevalent in fuel sector.
The public, therefore, welcomes government’s proposal to secure import duty and levies on fuel imported under Removal in Transit Facility, by imposing payment of duty at the Port of Entry which can then be recovered on acquittal at the Port of Exit by bona fide, genuine in – transit importers with effect from 1st August, 2024.
g) – Reserved Sectors for Indigenous People
The public notes with happiness the protection of haulage and logistics, customs clearing, shipping & forwarding, borehole drilling, brick manufacturing and pharmaceutical retailing to Zimbabweans only. However, it is interesting how the government will deal with the high number of Chinese owned brick manufacturing firms already operating in the market.
The public is also interested to know what the government is doing about an increased number of foreigners operating in the Harare down-town grocery market (tuckshops). We hope, the government will also reserve and protect this retail market for indigenous Zimbabweans. There are genuine worries that these foreigners are attracted by US dollars readily available in Zimbabwe’s domestic market and generally they don’t bank their USD sales. This raises serious concerns about USD leakages and externalizations. It is imperative to protect our economy in these times of heightened protectionism globally where each country is advancing national interests.
Over and above all, it is a good Mid Term National Budget Review, we, thus implore and encourage robust implementation of these proposed fiscal measures towards enhanced consolidation of economic transformation.
“By Any Means Necessary, Together We Can”.
©TLN Economics International Analysis, July 2024.
Lazarus Nyagumbo is a UK based International Economist with vast experience and exposure working both in Zimbabwe and United Kingdom.
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