Proposed raft economic reforms key to economic turnaround

18 Nov, 2018 - 00:11 0 Views
Proposed raft economic reforms key to economic turnaround

The Sunday News

cafta-economy-nicaragua

Dr Bongani Ngwenya
GOING through economic reforms has never been pleasant at all. Naturally, economic reforms subject all stakeholders in an economy to excruciating pain of one form or the other and in differing proportions.

However, from an economics perspective the end consumer tends to suffer the most. The beauty of it all is that, when managed well and prudently economic reforms do achieve the desired outcomes. There are many success stories out there.

Many countries have undergone economic reforms in order to reverse negative economic fundamental trends and turn around their economies for the betterment and sustained socio-economic development.

It is unfortunate that as a nation we find ourselves in this predicament with no choice but to endure the pain for the future benefit for all. In my opinion, as long as there is shared burden of pain and collective efforts towards turning around our economy it shall be well in the near future.

The decisions taken by the Government to embark on a raft of economic reforms are a welcome development, notwithstanding the inevitable pain that might need to be endured by all of us. I was particularly excited by the new regulations that were gazetted by the President last week, empowering the police to be able to randomly search or arrest those they suspect to be dealing in foreign currency from public places such as streets, roads, passages, parks or recreation grounds.

Citing from the regulations, “If any authorised officer or police officer, acting to enforce Section 4, finds any person frequenting, loitering in or lingering about any public place in circumstances that give rise to a reasonable suspicion that he or she is dealing in currency in contravention of Section 4(1)(a), such a person may be required by the officer to give an explanation of his or her presence in or about the public place, and of his or her conduct thereafter, and to produce to the law enforcement agent any identity document, and to show to the agent any currency or property in his or her immediate possession or under his or immediate control and to account to the agent of his or her possession or control of the same,” the regulations read in part.

The regulations stipulate that cash barons who have been fuelling the parallel market currency rates and a raft of other economic ills will now face up to two years in prison if they fail to explain the source of their wealth, while street dealers also face arrest if they fail to explain their business at street corners to police officers.

The new legislation stipulates that the High Court may grant an order in respect of any property with a value of over $10 000 that might be deemed ill-gotten. In other words according to the Extraordinary Gazette, the wealth must be explained only in terms of known sources of income. The unexplained wealth can be frozen until a court determines otherwise.

“At the same time and before the same court that an application for an unexplained wealth order is made under Section 37B, the applicant enforcement authority may apply for an interim freezing order in respect of all or part of the property that is the subject of the unexplained wealth order applied for,” the Gazette reads.

The new law seeks to punish those who may give false information on the unexplained wealth by imposing a fine of $65 000 or imprisonment not exceeding two years. It is not the first time the Government has gazetted similar legislations. Like I said in last Sunday’s instalment, it is everyone’s hope that this time around there will be significant prosecutions of the perpetrators.

In my opinion, fighting corruption in this manner would pave the terrain for  economic reforms that are being instituted by the Government. The culture of corruption in the country is so entrenched in the fabric and minds of those that are engaged in it. People have lost humanity and its values.

The leadership intervention is highly appreciated. “The wealth of our nation lies not in the wealth of its leaders but in the values of its leaders”. These are the words of the wise man — Vasu Gounden. It is quite pleasing to note that there is leadership and political will to deal with the perennial problem of Government expenditure as part of the economic reforms to be instituted.

Finance and Economic Development Minister, Professor Mthuli Ncube has given indications that the 2019 National Budget would reduce the budget deficit to four percent of the Gross Domestic Product (GDP) in 2019, and subsequently to 2,4 percent the following year. Certainly to achieve such a target would take a lot of sacrifice and painful decisions to be made.

Reduction of ministries and other Government bureaucratic structures, locally and externally would go a long way towards streamlining Government expenditure to sustainable levels and reduce the fiscal deficit.

“The 2019 National Budget first and foremost, targets strengthening fiscal responsibility and management of Government expenditures in order to create an appropriate environment for increased budget financing of development programmes that enable and enhance the economy’s overall productive activities,” Prof Ncube said while giving his presentation during the 2019 pre-budget seminar that was held in Bulawayo recently.

“Government will aim to ensure optimal resource mobilisation, consolidate the gains realised by the local industry through support measures provided by Government such as the following: sector specific tax concessions which seek to attract investment; increase exports; reduce the cost of inputs into production, thereby expanding the tax base,” he said.

Cutting on Government expenditure to reduce the fiscal deficit to the set target levels would free substantial financial resources that would be channelled to social development and the productive sector. The recently introduced two percent on the electronic transactions is envisaged to significantly improve the fiscal revenue collection and contribute to fiscal deficit reduction.

As the measure cuts into consumers’ disposable incomes, it is a necessary evil and pain to endure in order to turnaround the economy of the country. As part of the Transitional Stabilisation Programme (TSP), there are good plans to support the productive sector through taxation rebate in order to encourage and reward employment creation.

What this means is that beneficiary companies would retain profit and plough it back, in the process creating additional employment. Quite a number of loss making State enterprises have been identified for privatisation as part of State enterprises reforms.

In conclusion, the country needs to move on and forge ahead with the economic reforms, no matter how much pain they may cause for a season. The nation is better off enduring pain for a season than experiencing another economic meltdown of the 2008 proportions or even worse.

Dr Bongani Ngwenya is currently based at UKZN as a Postdoctoral Research Fellow and can be contacted at [email protected]

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