The Sunday News
Gabriel Masvora
On Thursday, Finance Minister Patrick Chinamasa presented the 2016 National Budget which outlined a number of programmes aimed at guiding the economy next year.
Below are some of the major highlights and a brief explanation of what some of them mean to the people and the country.
Arrears Clearance
Finance Minister Patrick Chinamasa reiterated efforts he has been making over the past few months that Zimbabwe is committed to clear its debt to international financiers. However, it was made clear that Zimbabwe does not fall into the category of Highly Indebted Poor Countries meaning it has to mobilise resources to pay the money.
As such Minister Chinamasa said he will mobile $1,8 billion to pay to multilateral creditors, the International Monetary Fund, World Bank and African Development Bank. In a nutshell by second half of next year Zimbabwe would have cleared its debt to these institutions. However, Zimbabwe’s debt both domestic and international stands at $8,368 billion and the payment, even if it is met will cover just a fraction of the total debt.
Economic overview
Minister Chinamasa thinks that next year the economy will experience rapid growth due to the accelerated implementation of Zim Asset. Next year Zim Asset will be two years to its deadline hence he sees everyone putting their heads together to ensure most of the set targets are met. In a nutshell Minister Chinamasa thinks the economy will grow by 2,7 percent next year, an improvement from 1,5 percent this year. The growth, he said, is also going to be underpinned by the envisaged debt clearance which will open more avenues for international institutions to resume channeling credit to Zimbabwe.
Inflation and Trade
He sees the country experiencing sub-zero inflation figures like what happened during the greater part of the year due to what he termed price correction, weak aggregate demand, tight liquidity and depreciation of the South African rand against the United States dollar. Zimbabwe imports most of its goods from South Africa and the more the dollar appreciates against the rand, the cheaper the imported goods will become.
This, however, has resulted in pushed up the trade deficit to $2,9 billion from $2,7 billion last year.
This means we are importing far too much than we are exporting. He projects that the deficit will slightly decrease to $2,6 billion next year.
Budget estimates
Minister Chinamasa thinks that total revenues will amount to $3,85 billion. This is the total money the country is expected to collect from various sources such as taxes. This is below the budget framework of $4 billion meaning the Government will borrow to finance the gap.
Agriculture
Because agriculture is still seen as the fulcrum of the economy, Minister Chinamasa reiterated commitment by Government to support the sector.
To improve rainfall which experts have already predicated will not be enough, Minister Chinamasa said he is allocating a further $300 000 on top of $200 000 availed earlier for cloud seeding. The banking sector has also set aside $1 billion to support agriculture. Seed houses and fertiliser companies have enough stock to meet national demand. The Government has cleared all its arrears to farmers.
The Government is also providing inputs to vulnerable households. The Government has taken over the resuscitation of cotton farming in the country. A number of incentives to also boost production of other crops have been availed and also increased usage of water bodies such as dams to promote irrigation.
Further, a number of developmental organisations have also put in money to support agriculture. In the livestock sector, a number of measures have also been put in place to boost the national herd.
In a nutshell agriculture is one of the areas in which the budget has put in more focus. In the event of a successful rainy season agriculture is likely to record a substantial growth next year.
Beneficiation and Value Addition
Being one of the major focus under Zim Asset, Minister Chinamasa said the platform has been laid for the beneficiation and control of most minerals that are mined in Zimbabwe. More importantly Minister Chinamasa said platinum mines have promised to be running a base metal refinery by 31 December 2016. This means that by the end of next year Zimbabwe will no longer be exporting raw platinum concentrate. On diamonds Minister Chinamasa said the Government has licenced 10 diamond cutting and polishing centres to value add all locally produced diamonds.
Mining
Mining has been leading the export drive hence Minister Chinamasa announced a number of incentives to boost production.
Some of the major highlights for the sector included the approval by Cabinet of the Minerals Exploration and Marketing Cooperation Bill and the Mines and Minerals Amendment Bill which will clearly spell how the sector is to function going forward. Minister Chinamasa also announced plans to rationalise mining fees, which have been a major contention among miners. This means some of the license fees which miners were paying will be consolidated into one and probably be reduced.
Manufacturing
It is one of the sectors that has suffered much over the years. Minister Chinamasa said funding was still a constraint but said has a lot of opportunities. Apart from alluding to funding that has already been availed, Minister Chinamasa also said the issue of setting up Special Economic Zones was still underway. However, on surface the issue of SEZs has taken too long to implement.
Tourism
Marketing seems to have paid off and the Government will unveil more incentives to allow more visitors to come into the country. The biggest development is the setting of a uni-visa system which will ultimately allow visitors to come into the country when visiting the region.
Ease of Doing Business Reforms
Zimbabwe’s attractiveness in terms of doing business is not good and Minister Chinamasa said there have been measures put in place to improve ease of doing business. Zimbabwe is expected next year to get into the top 100 on the ease of doing business index. Part of the move to improve ease doing business is to accelerate the setting up of a One Stop Centre. This will improve the way investors access investment opportunities in the country.
Indigenisation and Empowerment Framework
One of the most contentious issues has been the issue of indigenisation. Minister Chinamasa said consultations towards strengthening and clarifying the processes of implementing the indigenisation policies in the other sectors of the economy outside the resources sector have been completed. However, the issue of 51 percent on resource based sectors such as mining stands.
Border Posts
The issue of borders has also been debated for long with accusations of corruption and delays. Minister Chinamasa said there will be improvements at major borders especially Beitbridge. Hours of operation will also be extended at Chirundu and Livingstone to 24 hours. In short next year Government foresees improvement of border operation to allow transparency and quick movement of goods and people.
SMES and Women and Youth Empowerment
The Small and Medium sector has anchored the economy over the past years, and Minister Chinamasa wants to see improved support on the players as well as improving women participation in the economy. Funding mechanisms will be laid out next year to improve access to capital. For youths a fund of $10 million is already underway and its benefits will obviously spill into next year.
Transport and Communication
The major highlight is the anticipated road works on the country’s busiest highway linking Beitbrigde and Chirundu. Other projects also include the completion of upgrades of the Victoria Falls Airport and Harare International Airport. Other major roads are also earmarked for rehabilitation. In short these projects are likely to see improved transport and communication systems in the country.
Financial Sector
According to Minister Chinamasa, Zimbabwe’s financial sector is now safe and sound. This translates to confidence in banking. It means the country is unlikely to see any bank being closed any time soon. Minister Chinamasa said to further strengthen the sector, the Government was amending the Banking Act, Insurance Act, Insurance and Pensions Commission Act and the Pension and Provident Fund.
The amendments will further strengthen the sector of which most of the details will be announced in the central bank’s monetary policy statement. Of note is the slight decrease in interest rates being charged by banks.
Zim Asset
Minister Chinamasa said only $189,8 million was directed towards implementation of the various Zim Asset programmes and projects during the year mainly due to weak revenue inflows.
This is far short of the average $5 billion which is required per year for implementation of projects in the economic blueprint.
This translate that most of the projects prescribed in Zim Asset are lagging behind and might not be finished by 2018.
In conclusion however for many years, the 2016 budget never alluded to the issue reviewing tax brackets nor the issue of bonus.
