Finance Minister Patrick Chinamasa
HARARE,– Finance Minister Patrick Chinamasa on Thursday presented the first budget under the presidency of Emmerson Mnangagwa, seen as key to Zimbabwe’s economic recovery by restricting thresholds of the controversial Indigenisation Act to platinum and diamonds while re-engaging foreign debtors on the 2015 Lima debt clearance plan
Here are five takeaways:
The Indigenisation albatross
Chinamasa took a hammer to the Indigenisation and Economic Empowerment Act, passed in 2008 by Robert Mugabe and has been key to his reelection in the 2008 and 2013 elections. But it had also become the albatross on the economy as the country fell behind regional peers in the battle to attract foreign investment. The Act compelled foreign companies, including mines and banks, to transfer at least 51 percent shares to black Zimbabweans.
Chinamasa said that the 51/49 ratio will apply to only two minerals; diamonds and platinum while the other sectors of the economy will be open to investors regardless of nationality.
The civil service conundrum unknotted slightly
Zimbabwe’s bloated 298,000 strong civil service has been the subject of Chinamasa’s humiliation by his former master, Mugabe, who reasoned that job cuts equalled electoral defeat. But the shackles have been released and Chinamasa went to it, even though, reservedly. After all, elections are about nine months away.
Anyone above the retirement age will be retired, those that do not have skills for their jobs, will be kicked out while thousands more will be urged to take voluntary retirement to bring government spend on wages to 70 percent of budget expenditure in 2018, from the current 86 percent.
Clearly, Chinamasa’s “new economic order” has less room for political sentiment, with government wielding the axe on 3,530 so called Youth Officers and Ward Development Coordinators. Business class travel has been with immediate effect restricted to Ministers;Heads of Ministries and equivalent grades; Parastatals’ Chief Executive Officers; Local Authorities’ Mayors, Town Clerks, Chief Executive Officers; and Constitutional Commissioners. Government will also not hire 6000 early childhood development teachers. However, government will pay the promised 2017 bonuses to civil servants but at the current rate, the 13th cheque will become alien in future budgets
Corruption fight gets bite
Government has also taken few steps to deal with corruption in its arms such as Zimbabwe Republic of Police (ZRP), Zimbabwe Revenue Authority (ZIMRA), Environmental Management Agency (EMA), Vehicle Inspectorate Department (VID) to avoid “kuswera vakamira pama roadblocks in large numbers” extorting money from the public.
These government agencies have been associated with money extortion, abuse of funds by management officials and other criminal acts that have see them lose public trust.
ZRP and other agencies will be required to issue quarterly updates on value of money or property recovered, as a result of their interventions. Public office holders will be audited to justify their wealth. Lets see if government has the stomach for the fight against what has become a national pandemic.
Some action on parastatal leeches at last
“We are going to shut down any parastatal that is technically insolvent and is of no strategic value to Zimbabwe’s economic development,” Chinamasa thundered in Parliament. He didn’t say if the list included the struggling national carrier, Air Zimbabwe, which despite the gold dust of the former first family’s son-in-law, Simba Chikore, remains a relic of former times. But it appears Chinamasa has had it with the perennial lossmakers. Last year’s financial audits indicate that 38 out of 93 public enterprises incurred a combined $270 million loss due to weak corporate governance practices and ineffective control mechanisms. Down the chute goes the gravy train then for many political appointees whose payoff included drawing as much as possible from moribund SOEs.
Paying off debts makes economic sense
No one country can get away with wishing away its obligations or thumbing the nose at those it had borrowed from, as was Robert Mugabe’s wont. And Chinamasa knows too well the price of reasoning with a man who, despite numerous degrees, did not grasp simple economic management principles.
He has a fresh start, and paying off the $1,8 billion arrears to the World Bank, African Development Bank will be key unlocking the new funding Zimbabwe’s economy desperately needs.