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2013 National Budget:Need for paradigm shift

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As preparations for the 2013 National Budget  gather momentum and a greater participation by various stakeholders becomes evident, Newsday today publishes a report by a special correspondent.

In this article, economic and finance commentator Tapiwa Nyandoro looks at what Finance minister Tendai Biti and the inclusive government should consider in the forthcoming Budget

Resorces to be spread thin among an inordinately large number of ministries, many of which should be abolished, amount to a paltry $3 billion.

At some point Finance minister Tendai Biti will take a weathered briefcase complete with a national court of arms to Parliament, for what may pass as a comedy, were it not for tragic economic circumstances obtaining in the country.

It sobers the mind and brings home the extent of the tragedy, when one considers that Samsung, a South Korean electronic goods maker, has just reported a record quarterly profit of $7,3 billion. This company, with 206 000 employees, is projecting a profit per annum of $25 billion.

By comparison, Zimbabwe with a population of 13 million impoverished souls will have to do with a Budget of $3 billion. Virtually all the resources available, hardly enough for the Health and Child Welfare ministry alone, will go towards salaries of civil servants.

At the same time foregn direct investment (FDI) and off-balance sheet financing ought to be harnessed to augment the paltry inflows into the receiver of revenue.

Diamonds will not bring to the taxman the billions that are needed. The platinum group of metals — even if refined platinum production reaches the million ounces per annum, sufficient for our own refinery — will bring just under $2 billion in export earnings and much less to the collector of revenue.

Countries are supposed to learn from financial crises. Turkey and China have done so wooing billions of United States dollars in FDI, offering their cheap labour and huge growing markets as an incentive. Latin America — and in particular Brazil — has done the same thing, with an agrarian revolution based largely on genetic technology and mechanisation powering growth.

If we have learnt our lessons — one of which is we do not live alone in this global world — then the Budget, devoid as it is of fiscal space, must at least demonstrate a paradigm shift from the usual as follows:

Cabinet and Legislature size


The number of ministries, ministers and deputy ministers is simply too high. Twelve ministries and 12 ministers are enough for our country. If China is run successfully by a nine-member standing committee of its political bureau, then Zimbabwe does not need over 30 ministries and 10 governorships for such a small population and even smaller economy.  A restructuring of the Executive is, therefore, called for.

Ideally the new constitution should prescribe Cabinet size and the roles of line ministries, so that they are not changed unnecessarily from time to time. The second vice-president is another luxury we cannot afford.

Both local and FDI dislike policy uncertainties and Zimbabwe’s economy is best served by a strong single seven-and-half-year-term presidency, with the incumbent replaced by his or her running mate in case of incapacitation. The electorate ought to vote directly for their President and the stand-in should the need arise, rather than a political party’s elite being entrusted with the responsibility.
The head of state should be a national figure and not a party candidate. His or her policies must be the ones that carry him or her to the State House.

To this end, the 2013 Budget needs to fund the Zimbabwe Electoral Commission and the police adequately, so that elections are conducted peacefully and flawlessly.

Savings from trimming the bloated Executive and Legislature should make this possible.

Foreign Affairs ministry


True, we are down to the bone, but some expenses can be cut. Embassies need to be reduced in number. Not more than 20 embassies are needed and use of information technology could serve the country well.

It will take us years to afford the current number of embassies and the use of destitute staff to represent the country is indicative of indecision and poor governance.

In addition, the ministry should take over roles played by the Regional Integration ministry, while the later is rationalised. Regional integration ought to be the Foreign Affairs ministry’s core business in its five-year plan.

The two education ministries should be collapsed into one, and at least $600 million budgeted for the mega ministry. The quality of education which has been Zimbabwe’s major competitive advantage has suffered over the past 10 years. Tertiary education, however, should as much as possible be moved off the recurrent Budget to self-funding. This is a hard and emotive choice, but there is no point in poor quality tertiary education not recognised regionally, let alone globally.

Health


The Budget needs to be raised to $400 million at least. On a per capita basis this is not even enough for pharmaceuticals alone in a middle income country. And the government should retreat from some of tertiary healthcare institutions such as the Parirenyatwa Group of hospitals and United Bulawayo Hospital in favour of Public Private Partnerships, ther government’s equity being the substantial infrastructure and land already in place.

Police and defence


Here too, it is time to bite the bullet. A fully-fledged defence review conducted by the Defence ministry to Parliament and the Executive’s satisfaction is long overdue. The combined total of police and defence forces head count should be reduced to 30 000 men and women, a 15 000 man army and air force and a 15 000 police force, a reduction of some 20 000 or more from current numbers. The availability of well-educated recruits should enable the two organisations to have a single more comprehensive training programme in the first year or two, thus enabling sharing of human resources as the need may arise.  The police needs the bulk of the Budget, perhaps at $350 million, while the army can do with $250 million.

The defence forces Budget may be targeted at 2% of gross domestic product as is the case with Nato countries. The bloated leadership structures of both organisations will also need trimming to their original structures; a major general in charge of the army, any air vice-marshal for the Air Force, a three star general as commander of combined operations, and a single commissioner for the Police.

Local authorities and municipalities


Local authority grants should be restored with urbanisation taking centre stage as an economic growth strategy. Twenty to 30% of the National Budgets should go towards these grants, which ought in the first few years, to target water delivery and sewage handling infrastructure rehabilitation and capacity enhancing. These grants will go a long way in augmenting the local authorities’ other sources of revenue. Together with the State Enterprises ministry Budget, the grants if competently managed would see the creation of jobs and help attract foreign direct investment.

Social welfare


Orphanages and child headed homes are running without food. Mortuaries are full of unburied bodies. Poor relatives are unable to afford the burials of their loved ones. Ten percent of the Budget should go to Social Welfare, and half of it targeted for distribution in conditional cash transfer that should target the poorest 300 000 households, who may receive an average of $30 per household per month. This should replace the grain loan schemes, Beam and other handouts.

Land question and agriculture

This is a key ministry as it relates to food security while the major primary resource, land, is God-given. Besides that, the job creation and economic potential of the agro-industrial sector is enormous provided the two major risks of drought and ownership structure are properly mitigated. Yearly, donations of inputs to the sector, without any tax receipts from it, as at present, are not sustainable strategies. Robbing the poor through value added tax to subsidise A2 farmers is inimical to the values of the liberation struggle and to the ethos of the people’s revolution. A land tax at 2% to 3% the value of the land held in the former commercial farming regions should be imposed. The 11 million hectares if valued at $11 billion dollars should yield between $220 million and $330 million in land taxes, money desperately needed by the ministry itself.

As said above, uncertainty needs to be mitigated with a massive drive to put at least three million hectares under drip irrigation to ensure a two-crop-year. We have the land and the water as well. The irrigation infrastructure can be funded by long-term debt from sovereign wealth funds, the World Bank and others, besides some of the receipts from the land tax. But first the land ownership structure must change and be stabilised. Titling of land should be brought back and extended gradually to the communal lands.

Conclusion

Time has come to move from the comfort zone and take action. A measure of austerity is necessary. No one country is spared. Dependence on donors, like Unicef, for water and education has become addictive, and the Finance ministry must learn to say “thank you” and move on. The bloated Executive and Legislature are an embarrassment whose time has passed. And our land should earn us money and not be a burden to the fiscus. The politicians should rise above their selfish indulgencies and party politics to put State interest above all else.

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