On Wednesday 21 November 2018, Professor Mthuli Ncube, Zimbabwe’s minister of Finance, presented his maiden national budget. There are many things one can say about the budget, I will just say five things:
1) ”The spike in prices of goods and services appears to have receded, confirming that the main price hikes were a spontaneous response to uncertainty and confidence issues,” he said.
What he should have gone on to say he had created most if not all the uncertainty with his ill-advised and downright foolish statements. He said Zimbabwe was going to phase out the Bond Notes only to contradict that a few days later.
He then said “market forces” will determine the value of the Bond Notes relative to the US$ and other foreign currencies only to say the opposite a day or so afterwards. This caused serious panic in the economic and financial markets with the Bond Notes : US$ exchange jumping from the official 1:1 to as much as 10:1!
If Zimbabwe had been a healthy and functional democracy Minister Ncube would have been forced to resign; Zimbabwe is Banana Republic and so he stayed. If anyone thought the above admission showed the Minister had learned his lesson the next statement shows he had not!
2) "The 2 917 Youth Officers who still remain on the payroll, are being retired and the posts removed from the establishment, by end of December 2018,” he said.
"At its 38th Meeting of 5 December 2017, Cabinet re-affirmed its decision to terminate employment contracts of 3 188 Youth Officers as previously resolved.”
President Mnangagwa had made a big song and dance about ending corruption, mismanagement, etc. that had become endemic under Mugabe’s reign. Now the nation learns that it was all hot-air the few Zanu PF youths laid off were those belonging to the rivalry G40 faction.
Even if the regime finally act and laid off these Zanu PF youths, commonly known as the green bomber in reference to their traditional green uniforms and are nothing more than green flies laying life nuggets on the wounds of the sick nation; nothing much will change.
The nation is painfully aware that President Mnangagwa has “redeployed” most of his former cabinet members, permanent secretaries, etc. on their last salary, perks everything. Only those considered to be G40 members have been laid off. In other words the nation is shedding off one set of blood sucking ticks only to inherit another! This is just a revolving door!
On the other big corruption issues such as the wholesale looting of diamond in Marange and Chiadzwa costing a staggering $15 billion, according to Robert Mugabe’s own admission; the regime has done nothing and the Minister said nothing.
Talk of restoring certainty and confidence this Zanu PF regime has done precious little to win back the trust and confidence of investors and lenders, they saw the Minister’s blundering, the regime’s refusal to deal with the big issues of corruptions but worst of all the country’s failure to hold free, fair and credible elections.
Every report that has come out on Zimbabwe’s 30 July 2018 elections have all condemned them as flawed and illegal. President Mnangagwa and his junta rigged the election and thus confirmed Zimbabwe is a pariah state; no one wants to do business in a pariah state.
3) ”In order to redirect scarce foreign currency to the productive sectors of the economy, the budget proposes that customs duty and all other taxes on imported motor vehicles be levied in foreign currency acceptable as legal tender, with effect from 23 November 2018," said Professor Ncube.
Is government going to pay all its workers in foreign currency then?
Does this mean the Chemist, Shop owner, etc. have the green light to insist in being paid in foreign currency? After all, what is good for the goose is good for the gander!
What is happening here is that those with the political and economic clout will be paid in US$ whilst the downtrodden are forced to accept Bond Notes. The economic burden of Zimbabwe’s economic meltdown is not being shared by all, the poorest of the poor are carrying it all and they are paying dearly for it - with their very lives!
4) “Initially, the economy had been projected to grow by 6,3 percent in 2018 spurred by anticipated good performance in key sectors helping drive the country to an upper middle income economy by 2030,” said the Minister.
“There was, however, a slowdown in economic growth in the last half of the year on foreign currency supply and allocation challenges, exchange rate misalignments and inflationary pressures that affected mining, manufacturing and services.
“As a result, Government reviewed downwards the growth projections to 4 percent for 2018. Notwithstanding, the economy currently remains resilient, with performance exceeding expectations.”
Zimbabwe’s spectacular fall from the middle income nation in 1980 to the poorest nation in Africa was accomplished in 25 years. In 1980 the country had a very robust strong industrial infrastructure, second to only to SA in subSahara Africa; they have all long shut down and Zimbabwe now imports 70% of nation’s needs.
Our agricultural sector made the country the breadbasket of the region; that is all a very distant memory. For the last decade the nation has relied on imported food aid. We are starving in what is, for all intent and purposes, the Garden of Eden. A damning testimonial to the sheer incompetence of the men and women who have governed the country since 1980!
"Government policy initiatives will see solid growth of 4 percent in 2018, that way sustaining revenue and exports performance above targets," said Minister Ncube.
How is that possible when you have done nothing to stop the criminal waste of human and material resources through gross mismanagement, rampant corruptions and whilst the country remains a lawless pariah state?
5) There is no doubt that Minister Ncube’s budget is a catalog of one economic hardship after another, especially for the 75% of the country’s population now living on US$1.00 or less a day. Many Zimbabweans will suffer and many will die of poverty related hunger, diseases, etc.
What makes the situation totally intolerable is that none of the economic recovery the regime is promising will ever materialise because none of the basic requirement for such recovery are there. There will never be any meaningful economic recovery whilst corruption, vote rigging and all the other hallmarks of a pariah state remain firmly in place.
This is a austerity budget guaranteed to bring wailing, gnashing of teeth and death especially to the country’s poorest of the poor, the 75% already living on US$1.00 or less a day. The suffering and deaths will all be in vain, there will be no meaningful economic recovery because nothing has been done to address the root cause of the economic meltdown - misrule.
It is shocking that for one who profess to be knowledgable in economics you should be presiding over the country’s continued decline. This budget is not founded on basic economics but rather the same voodoo-economics of the last 38 years.
This is a budget to tax the poor to death. It is not just the “spike in the prices of goods and services” you will be getting with your budget, Minister Ncube, but a “spike” in the numbers of avoidable suffering and deaths due to hunger, disease, lack of medicine, etc. - many will die with worthless Bond Notes in their pockets and accounts! Have you no shame!
In a healthy and functional democracy is normal for those in power to look to those in society who can afford to carry the burden of any austerities whilst throwing a safety net for those who can least afford the hardships. At the very worst, one would expect everyone to share the hardships. Not so in the Banana Republic of Zimbabwe!
ReplyDeleteEver since the country accepted the need for economic reforms in 1990 with the first Economic Structural Adjustment Programme (ESAP) in 1990 Zanu PF has asked the poor to tighten their belts whilst the rich have loosened their belts as they piled up the pounds! The poor have got progressively poorer whilst the rich have got progressively richer! Nothing has change!
Professor Ncube's budget in certainly going after the poorest of the poor to raise money to pay for the filthy rich's extravagant lifestyles. The regime is lay-off the green bombers and yet keeping the Zanu PF geezers who not only dragged us into the mess we are in but are the owners of the multiple farms and other looted assets.
The taxpayer is to pay US$53 million to compensate the white farmers and yet those who benefited from the seizure keep the seized assets for which they never paid one dollar!
Zimbabwe has no chance os any meaningful economic recovery whilst the nation remains a pariah state. I agree that this budget in going to tax the poor to death all in the name of economic recovery which is nothing more than a mirage!
Zanu PF must be removed from power if the country is ever to get out of the hell-on-earth the regime landed us. If the regime remains in power till 2023 then we can be certain of one thing - yet another rigged election!
Mnangagwa said he had told Industry and Commerce Minister Mangaliso Ndlovu to regularly engage business over-pricing.
ReplyDelete“Prices were going up left right and centre, but I called business leaders to State House, and immediately some of them reduced the prices. Fertiliser was increased from $35 to more than $100, but when I engaged with them, they said they would reduce it to $45. Most of the manufacturers and wholesalers are charging acceptable prices, but it is the retailers who have the biggest problem. I asked my young minister, Ndlovu, to meet with them and I am waiting for further details. But if they refuse to reduce prices then they will also lose their licences,” he said.
Zanu PF is a tyrannical regime used to imposing its tyrannical will on everyone as demonstrated by the blatant rigging of the recent elections. Command agriculture, command economy, command everything is in their blood. So price controls are a give although the regime will be loathed to come out in the open and say so!
The root cause of Zimbabwe's foreign currency shortage is the country skewed balance of payment; we are importing far more than we earn from exports. With the collapse of our agricultural sector following the chaotic seizure of the white owned farms the country lost billions of dollars from the sale of cash crops such as tobacco, cut flowers, etc and food stuff. Zimbabwe was the bread basket of the region. Worse still, Zimbabwe has gone from a net exporter of food to a net importer and so we are spending valuable foreign currency importing even the basic food items such as milk, maize and wheat.
ReplyDeleteThe collapse of our industry means we now import many products we used to manufacture and/or our industries have become unproductive they could not compete on quality and price.
Instead of coming up with solutions designed to address the root cause of the skewed balance of payment government is robbing Peter to pay John. Demanding that import duty on motor vehicles must be paid in foreign currency will only mean the car dealers will demand payment in forex somewhere along the line!
It is sickening to hear that people are going without their medicine because they do not have foreign currency to pay for the drugs. It is rich that President Mnangagwa claims that Pharmasts are being allocated the forex to buy the drugs when he knows that what they have been getting was not enough.
One of the most burning questions was currency reforms, especially exchange rate liberalisation. Although Ncube wanted the currency reforms, including freeing the exchange rate, IMF and RBZ officials expressed discomfort on the timing and sequencing of the measures, cautioning that if this was done without prerequisite fiscal and monetary interventions it could intensify market turmoil and economic destabilisation.
ReplyDeleteNcube yesterday abandoned his currency reform plans as he maintained the unsustainable myth that local quasi-currencies — the Real Time Gross Settlement, bond note and mobile money transfers — were trading at par with the United States dollar.
He also kept the multi-currency system amid attendant contradictions writ large which will almost certainly fuel the parallel market and arbitrage. Flaws and inconsistencies were apparent in his budget speech on currency matters as government took the lead in re-dollarising by demanding duty on some imports in foreign currency, while restricting other players in the economy from charging in foreign currency. In their early October monetary and fiscal policy interventions, Ncube and RBZ governor John Mangudya separated foreign currency (US dollar) and local quasi-currency accounts, virtually acknowledging the currencies were not at par; a move interpreted by the market as de-dollarisation. Ncube’s move to charge duty on some products in forex effectively indicated re-dollarisation, although grey areas remain. Sources said Ncube had been privately communicating with IMF and RBZ officials on the currency issues, mainly the exchange rate reform bid, but was told that his timing may be catastrophic. That and the current turmoil, sources said, forced him to abandon his currency agenda.
Although Ncube and some business executives in Zimbabwe think removing foreign exchange controls and freeing the exchange rate would deal with market distortions and forex allocation bottlenecks, IMF and RBZ officials said this move without the required fundamental support measures — structural reforms, external funding, and reducing foreign deficit and monetary expansion —will not yield the desired results.
Sources while the IMF – advocates of the Washington Consensus which emphasises free market reforms and removal of economic controls – and RBZ know that fixing the exchange rate in the face of external shocks without the prerequisite supporting fiscal and monetary measures will result in an overvalued exchange rate and exert pressure on the balance-of-payments, they want Ncube to sequence the reforms to avoid a calamitous big bang approach.
Zimbabwe is facing a very serious economic meltdown, one that has been going one now for over 15 years, and is causing heartbreaking human misery and deaths.
We need to address the corruption, mismanagement and lawlessness; the root causes of our economic problems as exemplified by the wholesale looting of diamonds going on in Marange, the waste of millions of dollars sending chefs outside the country for their health needs whilst local hospitals are starved of funds and the rigging of recent elections. There will never be any meaningful economic recovery whilst the criminal waste of human and material resources through corrupt, etc. continues untouched.
The celebration of the removal of Mugabe last year was premature as the Mnangagwa regime has turned out to be just as corrupt, incompetent and tyrannical. All the promises of democratic renewal were just hot-air!