Feature: Ncube’s policy missteps costing the economy

He even boldly suggested doing away with bond notes, Zimbabwe’s surrogate currency.

IN the days running up to his appointment as Finance minister in 2018, Mthuli Ncube proffered public advice on how to tackle issues such as the country’s debt and currency crises.

He even boldly suggested doing away with bond notes, Zimbabwe’s surrogate currency.

“The market is setting the pace,” he said in his presentation at the United Kingdom think tank Chatham House at the time.

“What is left for us is choreography and management of the economic fundamentals. The economy has dollarised. RTGS [real time gross settlement] balances are over $6 billion. The market is doing everything; we are going through a transition.

“The market has said these currencies (US dollar and bond notes) are not at par. I don’t want to argue with the market. The bond notes will, at some point, have to be demonetised and I cannot tell you (when that will be).”

He seemed like a serious individual, prepared to discuss economic issues with the people.

But Ncube changed course as soon as he took office. He didn't take the bond notes out of circulation. He began formulating policies without first seeking input from important parties, including businesses and ordinary citizens.

The economics professor has to date, made innumerable policy errors that have harmed the economy and put people's livelihoods in danger, eroding public confidence in his abilities.

He even circumvents debate and public consultation by amending Acts of Parliament through the use of statutory instruments (SIs).

For instance, the High Court in 2022 said Ncube usurped Parliament’s powers through SI 123A of 2020 that created a new taxation regime in respect of a carbon tax and the NocZim redemption levy.

As such, the court scrapped it.

In 2020, the government issued a record 300 statutory instruments, breaching established protocols on the majority of subsidiary legislation in the process.

The government gazetted a few SIs the next year, the most contentious of which was SI 127 of 2021, which resulted in significant price increases for the majority of goods and services in the nation.

Ncube ignored numerous suggestions from the public and business community when he formulated his "anti-poor and anti-industry" 2024 national budget in November 2023.

For example, Ncube disregarded industry requests to eliminate the 2% intermediated money transfer tax.  Rather, he proposed additional taxes and levies, which led to a backlash from the public and the business sector.

Due to this, the former vice president and top economist of the African Development Bank was compelled to evaluate his budget twice in a month, indicating that he had not conducted extensive consultations or taken other people's opinions into consideration.

This week, a number of economists told the Zimbabwe Independent that Ncube's continuous trial-and-error strategy was counter-productive.

“I've seen a number of times he delves into his bank policy issues. There's a reversal, he bans Ecocash, there's a reversal, suspends lending, there's a reversal,” professor of economics Gift Mugano said.

“He put 2% (IMMT) tax without consultations. Now we have this recent budget statement, which is quite a challenging one in terms of how it is going to be affecting the economy and the people in general.

“So even before these recent changes which were made yesterday (Monday), we also made changes before the budget was passed in Parliament and Senate. So a budget is done through a normal process called the budget cycle.”

He said the Finance minister could have exhausted these ideas with the stakeholders and also looked at the possible cost benefit analysis of the proposed measures.

“But it is very clear to me that the minister of Finance did cosmetic consultations. They just move around with the Parliamentary Committee on Budget to just rub a stamp. It's very bad because it creates a challenge of drought of confidence,” Mugano said.

“It’s embarrassing. How do you have two serious changes within less than a month? You have the first set of changes when you are taking the budget through Parliament debate.

“Now, during the first week of implementation, you have already changed a number of policy measures.”

He added: “If you don't consult, you have no shared vision. You have no consensus. For every policy there should be consensus. Yes, there will be divergence in terms of common interest, but we should come to a mid-ground and be able to have consensus.

“So if you don't have consensus, you cannot use a gun to push economics. The market is the best constitutional court for economics. So whatever you want to do, the market will reject it.”

Another professor of economics Tony Hawkins said increased business uncertainty since the November 30 budget is a "sorry commentary" on the efficiency and competence of the Finance minister and Treasury officials.

“This sorry catalogue of administrative changes to budget proposals already approved by Parliament makes a mockery of government claims that Parliament is sovereign,” he said.

“If budget amendments are necessary, they should be carried out constitutionally in Parliament, not by ad hoc statements and statutory instruments.

“This bungling of the budget and the Finance Bill is a reflection of a deeper malaise across the administration. Officialdom is not held to account where there is no transparency and no accountability. The victims are businesses, households, and consumers.”

Economist Vince Musewe said every economic policy has a social impact and policy makers need to consider the social impact before they actually announce a policy.

“If you are inconsistent then it actually gives a perception of risk, country risk, because things change too often and you don't want that. You want stability. You want people to be able to plan long term,” he said.

“So, they need some assurance that whatever policies the government is going to come up with do not actually disrupt business activities and their strategies. That's the issue that we are facing when the minister comes up with one thing this week and the next week after consultation he then amends it.”

Musewe said the Treasury should consult widely before coming up with a policy.

“The recent amendments to the budget indicate the need for adequate and good faith consultations before passing the budget. Had the minister paid sufficient attention to what Zimbabweans were saying before passing the budget, he would not have been forced by the markets to embarrassingly climb down,” he said.

National Consumer Rights Association spokesperson Effie Ncube said the policy inconsistencies lead to speculation, which drives prices higher.

He said some of the prices that went up on announcement of the budget will not come down now that the minister is reversing tax increases.

“This will hurt consumers and erode the little disposable incomes. In many ways it is too little too late. The government is out of its depth when it comes to the economic crisis, hence the policy inconsistencies. It is just trial and error,” he said.

In future, economist Stevenson Dhlamini hoped that the policy making would be more “inclusive and more participatory” to avoid the “inconsistencies” of using SIs to correct Acts of Parliament.

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