The 2020 national budget statement announced by Finance and Economic Development minister Mthuli Ncube a fortnight ago was telling in more ways than one. The professor had no qualms to nail his government’s colours to the mast that Zimbabwe was taking a new neo-liberal route.
The former African Development Bank chief, who is a disciple of neoliberalism, is of the belief that capital and markets would haul Zimbabwe out of the rut. The budget was anchored on the theme of spurring production.
Ncube announced a $63,6 billion budget, which is more or less austerity-themed, thanks to his continued war against subsidies. His decision to end subsidies on maize and wheat has sent shivers down the spines of consumers, especially the majority of Zimbabweans who are generally regarded as poor.
“The current subsidy policy, whereby government funds the procurement of grain at market price and sell this to registered grain millers at subsidised price, has been open to abuse and placed a huge burden on the fiscus. At times, the intended beneficiaries do not enjoy the benefits of the subsidy from government,” Ncube said in his budget statement.
“To address these distortions, government, will, with effect from January 2020 remove the existing grain marketing subsidies for maize and wheat that were being provided to grain millers through the Grain Marketing Board (GMB). The intervention will see GMB selling wheat and maize at market prices, with grain millers having an option to either import or purchase grain from GMB.”
Since time immemorial, these grain subsidies have managed to keep a tight lid on the prices of commodities such as mealie-meal, flour and bread, but Ncube opines that this policy was not sustainable. Maize price has a domino effect on all prices as it is a bigger commodity to the national economic matrix. The removal of subsidy will, in turn, have unintended consequences.
Without serious consideration, the removal of subsidies on grain will leave millions of already hard-pressed Zimbabweans queueing for food hand-outs from donor agencies, as their incomes will not be enough to buy basic commodities. Even though there is need to tame inflation, the removal of subsidies will push Zimbabwe to the brink.
With weather foresters painting a gloomy picture, coupled with poor preparation for the 2019/20 farming season, the situation is predictably going to be tough for the majority of Zimbabweans.
Before the ink on the budget statement had dried, the Grain Millers Association of Zimbabwe announced a jump in mealie-meal price from $55 to $101,66 for a 10kg roller meal at a time the lowest paid employee is earning virtually peanuts. Such a jump in price will trigger inflation and poverty for the majority. Attention should be brought to fiscal authorities that since food contributes 30% to the national inflation basket, hyperinflation will rear its ugly head and will soon catch up with us.
Government should have all its hands on the deck, making sure it delivers on its constitutional mandate to provide food for citizens. Food is a right, especially staple food. Section 15 of the Constitution mandates the government to ensure food security for everyone despite their social status. The European Union, through the Common Agricultural Policy (CAP), provides subsidies which cover sectors such as farming, environmental measures and rural development and this can be attributed to low commodity prices in the bloc.
That the European Union allocates 40% of its annual budget to subsidies speaks volume of how our colleagues in Western countries value those safety nets. But Ncube, with his wisdom and lack of it, decided to throw the poor person in the countryside under the bus. Our northern neighbours, Zambia have managed to register success in agriculture thanks to subsidies. For a couple of years, Zambia has consistently cultivated more maize — their national staple — than what is consumed domestically.
Much of this achievement can be attributed to a government-led subsidy programme.
The removal of subsidies, particularly in fuel and electricity might give short-term relief to the government as it will help in containing its budget overrun, but will have a negative effect in the long run. It is a fact that the biggest cost driver in production is power. The removal of subsidies has resulted in the prices of fuel being adjusted every Monday and this means that costs of production also increase. Local products have literally lost competitiveness on the international market thanks to Ncube’s cut and paste economic policies.
Subsidies are prone to abuse, Ncube argued as he motivated for the discontinuation of subsidies. The big question is: Abuse by who? The politically-connected; obviously. Since its inception, farmers have been abusing farming inputs they get from the presidential input scheme, but was the programme discontinued? No! Last year, the government blew US$3 billion on the command agriculture programme only for the country to reap food insecurity. Despite evidence that the command agriculture programme had failed the nation, the government this year applied lipstick to a frog, remodelling it to smart agriculture. Ncube should have discontinued the command agriculture programme because it has become a burden to the fiscus and the intended beneficiaries are not enjoying the benefits of such government interventions.
The removal of subsidies is a disservice to consumers, especially the poor. For years, subsidies had managed to reduce the levels of poverty among the majority of citizens. While it must be admitted that there are a few bad apples who have been abusing subsidies, this should serve as a wake-up call to authorities to plug loopholes and provide safety nets to vulnerable members of society.
Now the poor are at the mercy of the rich in a skewed system, where survival of the fittest mantra is being entrenched. The Finance minister is literally burning his house to smoke out a rat. The dream of becoming an upper-middle class economy by 2030 will remain a mirage if the government continues to engage in anti-poor policies.
Musician Hosiah Chipanga captured the Zimbabwean situation better when he sang that vatadza kupedza hurombo, vakuda kupedza varombo vacho (they have failed to eradicate poverty; they now want to wipe away the poor).
The poor will surely sink deeper into poverty, while the rich will grow big bellies at the instigation of Ncube. Removing subsidies on maize and wheat is tantamount to throwing away the baby with bath water. Food for thought!
Cliff Chiduku is a journalist. He writes here in his personal capacity