All eyes on Biti

HARARE - Finance minister Tendai Biti comes under spotlight today when he presents the 2013 National Budget, amid high expectations from a depressed industry and cash strapped populace, which has borne the brunt of current liquidity challenges.

His budget comes on the back of rising public sector wage pressures and calls for elections, which have traditionally slowed down economic activity.

It’s also on the backdrop of the failure by government’s five-year economic plan, the Medium Term Plan (MTP), to achieve projected targets in the first year of implementation.

Biti – facing competing needs against dwindling revenue – is widely expected to play a balancing act to jumpstart the weakening economy by injecting more capital into the agriculture and manufacturing sectors, while the equally critical energy and transport sectors are also clamouring for financial support.

Although Biti is expected to deliver an even bigger budget compared to last year’s, Zimbabwe actually needs $16 billion for rehabilitation and development of its national infrastructure in order to achieve its economic recovery and growth targets, according to a special report by the African Development Bank (AfDB). Below are expectations from various key sectors of the country’s economy.

ENERGY

Of the over $6 billion needed by the energy sector, $4,6 billion is required for new power generation expansion projects and the balance for rehabilitation of existing power stations and the distribution and transmission networks.

The country is targeting six projects in the expansion drive. AfDB has reported that $400 million is required for the Kariba South Expansion project which would be implemented over a five-year period.
Zimbabwe Energy Council (Zec) has urged the Biti to seriously consider investing in energy development for the economic growth to be achieved and sustained.

“We urge treasury to unveil a comprehensive and robust support for Zesa Holdings to help the struggling parastatal to provide uninterrupted electricity supply to the country. Zesa has requested $72,5 million and we believe this is a sustainable and fair figure that needs Government support,” said Zec.
“These funds need to be availed quickly. They need to be fully supported by both direct fiscus provisions and favourable fiscal policies.”

Zec has also advised treasury to consider a five year extension of waver of duty on imported electricity spares and materials.

AGRICULTURE

Once touted as the mainstay of the economy, the agriculture sector underperformed last season resulting in its growth forecast being revised downwards from 11 percent to a negative 5,3 percent.

Most stakeholders contend that without a revival of the sector, the country will not register meaningful GDP growth.

The sector requires more than $2 billion per year to revive the agricultural sector and improve food and livestock production. This week agro-focused financial institution Agribank unveiled a $15 million support facility for farmers, which stakeholders said was ill-timed and way too little.

“As government we envisage that Zimbabwe requires about $2,5 billion per annum if adequate financial support for grain and livestock production is to be rendered to our farmers” Vice President John Nkomo has said.

TRANSPORT

Zimbabwe’s transport and communication infrastructure – which has gone for decades without meaningful maintenance –requires $4, 3 billion. Of great priority is rehabilitation of the road networks, rail system and aviation sector.

Of the total road network, nearly 90,000 kilometres - the proportion in fair to good condition has deteriorated from a scale of 73 percent in 1995 to only 60 percent.  

An additional 12, 800 kilometres has been reclassified to ‘poor condition’. AfDB has said the country requires $1 billion just for the rehabilitation of primary, secondary and tertiary roads while nearly $1,8 billion is needed for the dualisation of trunk roads.
    
REVENUE COLLECTION

The Confederation of Zimbabwe Industries (CZI), an industry representative body, has recommended that the Finance ministry restructures tax collector, the Zimbabwe Revenue Authority (Zimra), and its operations to eliminate corruption and help improve revenue inflows.

Over the years, industrialist and market experts have blamed Zimra, which is mandated to collect revenue from all sectors of the economy, for failing to recoup enough money into the fiscus due to rampant corruption.

In its 2013 budget input to treasury, CZI said operational inefficiencies by the revenue collector were costly to business.

“The current protection system is not working. Companies cannot afford the time and manpower needed to go through the whole process. As such the paradigm of the post audit division of Zimra should be re-oriented to ensure that their major clients, that is, industry, are protected,” said CZI.

Cross border traders have urged Biti to engage South African authorities in order to work out a more trader friendly mechanism which facilitates.

Zimbabwe is said to be losing around $100 000 daily translating to over $36 million annually through its citizens to reclaim VAT refunds.

MANUFACTURING

The manufacturing industry, which showed signs of improvement between 2009 and 2011, is now slowly burning out and is in dire need of fresh capital.

Capacity utilisation in the manufacturing sector plunged from 57,2 percent last year to 44,2 percent this year, due to the liquidity crunch blighting the national economy.

Apart from the desperate need for cash, players in sector also expect protectionism from Biti.

While operating from a high cost base, the manufacturing sector players face still competition from cheaper imports. - John Kachembere

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