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Fiscal policy review: A procurement perspective

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Finance minister Biti presented an updated Mid-Year Fiscal review that highlighted the objectives of the $4 billion 2012 Budget. Facilities and measures contained in the Budget were targeted at leveraging the productive sector.

Policy consistence and investor confidence, slow pace of reforms and corruption were issues within the remits of policy makers that affected projected growth by a negative 4% to 5,6%.

A point to note was the mismatch between external factors of imports and exports that reflect the state of our economy. The 2012 projections for exports had to be revised from $5 167 billion to $5 090 billion. The import requirements increased from the projected $6,8 billion to $8,215 billion.

Negative balance of payment was inevitable under the circumstances. Initially a negative 31,5% was expected, but had to be revised upwards to 38,8% following the decline in exports and increase in imports projections.

Also highlighted was the initiative to pursue a number of legislative and administrative reforms in the areas of procurement, public enterprises and public finances. Administrative reforms if objectively crafted could go a long way in improving performance of the economy.

Productivity rates were reported to be very low in the areas of agriculture. Maize productivity was 85% less than world averaging 0,6 tonnes per hectare (ha) against 4,2 tonnes per ha internationally. Regionally, countries were averaging between 1,5-2 tonnes per ha. Wheat productivity was also reported negative.

Productivity drivers are adequacy of inputs of the right quality and the application of appropriate production methods. Investigation of factors contributing to declining productivity is critical as a way forward. Farmers could be using inappropriate technology against the background that Reserve Bank of Zimbabwe provided massive support in form of implements and inputs.

On the other hand, poverty may be driving farmers to economise on the application of inputs at the detriment of productivity. Another possibility might be that quality of inputs is not appropriate.

Lack of capacity to produce fertilisers by the local manufacturers was reported. The requirement of 350 000 tonnes was expected to comprise 29 000 tonnes already in stock, a 250 050 tonnes production capacity and imports of 70 950 tonnes.

Given erratic electricity supply and funding challenges highlighted, the probability of fertiliser manufacturers failing to produce half the projected output from their capacity, was very high. The projected deficit of 20 000 tonnes could be anything around 150 000 tonnes or even worse.

Price of tobacco prices were reported to better than the previous years. Demand and supply conditions in the market favoured Zimbabwe. The major competitors, Brazil and the United States were affected by adverse weather conditions and contributed to reduced global output of tobacco.

Manufacturing sector capacity utilisation was projected at an average of 60% with the clothing and footware industry anchoring at the bottom with a 9,9% rate of utilisation. The industry with the highest rate of utilisation was wood and furniture that had a capacity utilisation rate of 96,2%.

The low rate of capacity utilisation reflects the deficit earlier highlighted on the imports and exports projections. The cheap and highly subsidised imports particularly from the Far East could be worsening resuscitation of our manufacturing sector. The clothing, footwear, motor industry and pharmaceutical industries were the ones most hit.

Obsolete technologies were highlighted as contributory factors to inefficiencies in the manufacturing sector.

Companies were operating with old technologies thereby promoting incompetence on both the domestic and exports markets.

High wages, high rentals, unreliable supply of utilities shortage and poor quality of inputs were major contributors to lack of competitiveness.
A disconnect between contract management and project management was prevalent in the infrastructure report. Some projects were reported to be surrounded by contentious issues around project implementation.

Contract management issues were exposed on the construction of Manyame Bridge and maintenance of elevators at a number of government buildings were it was reported that suppliers were paid but failing to perform.

The report also pointed out the need to create a conducive environment that facilitates the participation of private capital through private public partnerships.

Healthcare delivery had a disbursement of $21,6m. The funds were targeting the acquisition of health infrastructure, medical equipment and procurement of drugs and surgical equipment to various institutions.

The government would have benefited from economies of scale if they had adopted centralised decision making and decentralised implementation on the procurement of the required resources by the various institutions.

The issues highlighted bring to the fore that procurement and contract management issues are critical for performance of the Budget and the government. They need to be taken seriously if service delivery is to be improved.

Nyasha Chizu is a fellow of CIPS and branch chairman for CIPS Zimbabwe writing in his personal capacity. Email: chizunyasha@yahoo.com

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