With the local economy expected to grow at a slower pace in 2012, Finance minister Tendai Biti has a herculean task in balancing the expectations of individuals, business and politicians.
Economic commentators believe the success of the Budget largely hinges on setting realistic targets supported by macroeconomic fundamentals and an effective anti-corruption fight.
The Budget comes at a time when capacity utilisation in the manufacturing sector has increased to 57,2% from as low as 10% in 2009 according to a recent Confederation of Zimbabwe Industries (CZI) survey Monica Mhlanga said there is need for the creation of a statutory instrument empowering the Finance ministry to deal with errant ministries who spend above their allocations.
“Previous budgets have been ruined largely by corrupt practices with government. Biti has to strengthen the operations of the Anti-corruption Commission” said Mhlanga.
Biti recently said little funds have been channelled towards the commission, critical in curbing vice. Mhlanga said apart from allocating funds to the commission, Biti should announce a raft of stringent policy measures that would result in prosecution of offenders.
“The fundamental problem is saying that government spending on travel has to be reduced year in year out without action taken on offenders. Biti has to craft a law that should result in people being prosecuted,” said Mhlanga.
Presenting the Budget Strategy Paper in parliament last month, Biti said the economy will grow at a slower pace next year as a result of politics and election talk.
The economy is this year expected to register a 9,3% growth compared to the projected growth of between 7,8 to 9% in 2012.
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The Finance minister said agriculture and mining would remain the major drivers of economic growth supported by tourism, manufacturing, transport and communication sectors.
“We are making the assumption that there will be election talk in 2012, which will affect the economy,” Biti told Parliament.
Another analyst, Alexander Rusero, said Biti should commit resources towards the mining sector as it has shown a lot of potential in stimulating the economy. “He needs to be realistic in his allocation of resources taking into account the performance of the economy. We need to move away from addiction to high budgetary requirements,” said Rusero.
He said it was critical that funds be made available to such sectors as health and education as they played a critical part in ensuring the attainment of set goals. “Our education system needs reconfiguration. It will be key in my view that there are incentives put in the education sector,” he said.
Rusero said there was no doubt that the manufacturing sector was in need of assistance given the numerous challenges faced by companies.
The minister has already hinted that the 2012 Budget could be around $3,5 billion, up from $2,7 billion this year and donors are expected to chip in with $500 million. This is, however, expected to be reviewed upwards as a result of revenues likely to accrue to the country from the sale of diamonds.
Mines and Mining Development minister Obert Mpofu early this month said the country is set to earn in excess of $2 billion in gross revenue annually following the lifting of the ban on exports of its diamonds by the Kimberley Process.
According to the Budget Strategy Paper export receipts will increase to $4,6 billion in 2012 up from $4,1 billion. Imports are projected to top $5,7 billion. Government is expected to spend up to $2 billion on civil servants’ salaries alone.
CZI in its 2011 manufacturing survey urged the government to introduce a raft of measures to quicken economic recovery and manufacturing currently facing a myriad of challenges.
Among measures being advocated for is the introduction of import duty on all goods and services coming into the country over a certain incubation period to allow local industries to recapitalise. The manufacturing sector continues to face challenges of low demand, machinery breakdown, shortage of working capital and lack of raw materials.
According to CZI there should be greater access by all economic sectors to lines of credit and introduction of export incentives. This was likely to result in increased liquidity and cash in circulation. The industry body said the indigenisation and economic empowerment law should be amended in a manner that brings about transparency, as it has remained the key stumbling block to foreign direct investment (FDI) flows into the country.
It said restoration of property rights in a modern free-market economy was critical to encourage FDI, growth and equal opportunities for all citizens.
