ZIMBABWE requires “real money, not small money” to grow the economy in the short to medium term as business activity slows down, Finance minister Patrick Chinamasa has said.
Speaking at the AMH Conversations held in Harare, Chinamasa said when he was appointed Finance minister, his appointment was received with mixed feelings from his friends and enemies with the latter hoping that he would fail.
AMH conversations are dialogue sessions held by Alpha Media Holdings — publishers of NewsDay,Zimbabwe Independent, The Standard, The Southern Eye and Southern Eye on Sunday — on various topical issues. The dialogue was held under the theme Unlocking value-Getting Zimbabwe to work.
Former Finance minister Tendai Biti once said the country required a stimulus package of $4 billion.
“To get out of this situation we need real money not pennies. People are coming with $20 million, $25 million, that is not enough. We need real money that should not come at commercial rates, but concessional rates. I need a period of grace to do the sort of things that I have to do,” Chinamasa said.
“My enemies were jubilant at my appointment as the Finance minister, they anticipated a waterloo, a failure. That reflects the challenges our economy is facing.”
Already, industry capacity utilisation has declined to 39% from 44% last year due to a host of problems besetting the economy. The mining sector, now the mainstay, also requires at $5 billion.
According to a report seen by this paper, the Chamber of Mines of Zimbabwe said more investment was needed in the platinum mining sector to outpace Russia as the world’s second-biggest producer of the white metal.
Zimbabwe currently has the second known largest platinum reserves after South Africa. Experts say underfunding and limited exploration have over the years stifled growth of the mining sector, now the mainstay of the economy. Mining contribution to GDP has grown from an average of 10,2% in the 1990s to an average of 16,9% from 2009–2011.
Reeling with a huge import bill and unsustainable trade deficit, analysts say government should review the indigenisation and empowerment regulations which compel foreign-owned companies to sell controlling stakes to locals.
His remarks came a few weeks after the ruling Zanu PF party endorsed an economic blueprint to guide government in the short-to-medium term.
The Finance minister said the country was facing a huge power deficit with a total of between 1 100 megawatts and 1 200 megawatts being produced compared to 2 500 megawatts due to depressed demand because of various challenges in the economy.
Chinamasa said the country could not move forward until the issue of power was addressed. He said for the past 20 years, infrastructure has not been attended to and the agricultural sector has not been fully funded. Official figures showed that Zimbabwe required at least $6 billion for power projects.
“Human capital in this country is not being replaced because of the social infrastructure, education and health no investments has been done in the past 20 years,” he said.
Chinamasa said the country was still facing realities of sanctions and debt from multilateral institutions and the country was in the process of verifying the debt figures. Zimbabwe, which agreed to the International Monetary Fund Staff-Monitored Programme was saddled with a $10,7 billion external debt.
“We think we will be able to get to the figures, and we will announce that this is our formal debt,” he said.
Chinamasa said the debts were in four parts that included African Development Bank, World Bank, International Monetary Fund, bilateral individual countries, European and Western countries under the Paris Club, Chinese and other small debts scattered all over the show.
Chinamasa said there was need for the creation of a conducive environment in word and speech so that the country could move forward.
The Finance minister said there was need to deal with the issue of perceived country risk as it was the major reason why the country was failing to attract cheap money. He said for instance, when one borrowed directly from European banks the libel rate was 0,2%, but when Zimbabwe borrow that cheap money they would add 7% country risk to Zimbabwe and banks would also add their own margin that would result with the figure coming to 12-15%.
“It’s 12% or 15% on United States Dollars, one cannot make viable business unless you are a trader. You cannot make money with 12%, 15% or 17% interest. Country risk has to be addressed and is determined by what we say about ourselves to other people,” he said.
Commenting on the recently adopted economic blueprint Chinamasa said the Zimbabwe Agenda for Sustainable Socio- Economic Transformation (Zim Asset) will focus on water and energy as they were the most important things in the economy.
“The power deficit is huge, we need to close that gap and on water we need to have running water. It’s something that we are talking about,” he said.
According to national statistics, the country recorded Gross Domestic Product growth between 2009 to 2013 of 10,6%. The country managed to achieve the growth through various measures such as the introduction of multi-currencies as well as the taming of inflation under 5% from the highs of 231 million in 2008.
New border control Bill on cards
GOVERNMENT is crafting a Border Post Authority Bill to ease congestion at the country’s ports of entry amid concerns that Treasury could be losing millions to corruption at the border posts.
Speaking at a dialogue session organised by Alpha Media Holdings, AMH Conversations, Transport and Infrastructural Development minister Obert Mpofu said the ministry has received numerous complaints regarding congestion at the ports of entry and exit.
The meeting was attended by Media, Information and Broadcasting Services Minister Jonathan Moyo and his deputy Supa Mandiwanzira, Finance minister Patrick Chinamasa, Minister of Agriculture, Mechanisation and irrigation Joseph Made, ambassadors and several stakeholders in the country. Zimbabwe is one of the lowly ranked countries on the World of Doing Business Report.
Players say travellers and haulage trucks spend more than three hours to get clearances at the port of entry prejudicing Treasury of revenue as some resorted to corrupt activities to facilitate processing of documents. “We are currently working around the clock to bring normalcy and reduce the waiting time at the borders. The Border Posts Authority Bill, currently in its formative stage, is envisaged to deal with this challenge permanently,” Mpofu said.
Observers said it took more than three hours to get cleared at the Beitbridge Border Post while it took eight hours or days for truck drivers to be cleared at Chirundu Border Post.
He said the ministry required significant funding, but was unable to raise more funding as the Central Vehicle Registry was still using a manual system that has made it difficult to fully value vehicles as more vehicles were unregistered and not paying licence fees.
Mpofu said the rehabilitation of the Plumtree-to-Mutare trunk road network was ongoing, adding that expressions of interest for public works along the Beitbridge-Chirundu road, Harare-Nyamapanda and Karoi-Binga roads were being looked at.
“More than 15 road construction and rehabilitation projects will, in the next few weeks, be presented for bidding, “he said
Mpofu castigated the contracts that have been made on the dualisation of roads infrastructure in the country saying they were skewed in favour of the contractors.
“When you look at the contracts they leave a lot to be desired, it’s a contract that has someone who knows that you are in a desperate situation. We have a problem with local business as they are the ones with some of these shortcomings, look at the Harare-Norton road,” he said.
Opening the Eighth Parliament in September, President Robert Mugabe said the new Bill would facilitate the efficient movement of all forms of traffic at the country’s border posts.
Turning to the country’s rail infrastructure, Mpofu said a railways recapitalisation programme was being implemented to restore the National Railways of Zimbabwe’s capacity as a cost effective and efficient bulk carrier.
“It is estimated that NRZ requires about $260 million in the short-to-medium term and we are currently in negotiation with possible financiers to agree on the funding model to be adopted,” he said.