Harder times ahead

HARARE - Crisis-weary Zimbabweans should brace themselves for excessive price hikes and food shortages in the coming months following government’s increase of duty on a number of basic food commodities.

Economic analysts say a raft of taxes introduced by Finance minister Patrick Chinamasa in the absence of donor support and foreign investment, in an economy that has been in free-fall for the past few months will help impoverish further the majority of citizens.

Faced with dwindling revenue streams, Chinamasa on Thursday announced a five percent increase in mobile phone airtime and a 25 percent import duty on mobile phone handsets.

The Zimbabwean government, which is facing a revenue crisis so severe it has been forced to stagger civil servants’ pay days as businesses have closed and a slump in foreign investment, also raised excise duty on petrol from 25 cents to 30 cents a litre.

In his mid-term fiscal policy, Chinamasa increased duty on a wide range of imports of finished products, including cooking oil, poultry, soap, maize meal, flour, beverages, dairy produce, furniture, sugar, fresh and canned fruits and vegetables, among others, saying they were accelerating collapse of the local industry and unnecessarily ballooning the country’s import bill which stood at $3 billion in the first six months of 2014.

Economists, however, questioned the Zanu PF-led government’s wisdom in raising import duty on basic commodities at a time when the country’s manufacturing industry is operating below 40 percent.

“The increase in import duty is supposed to direct Zimbabweans to buy local products, but these are not available in shops,” said economist John Robertson.

“As such there would be food shortages and subsequent price increases because at the moment manufacturers are waiting for farmers to produce, while farmers are waiting to get title deeds from government for them to borrow,” he said.

Zimbabwe — led by veteran nationalist leader President Robert Mugabe since 1980 — is going through an economic squeeze which is making life unbearable for citizens, with debilitating effects on industry and commerce.

Despite adopting a multiple currency system in 2009 that helped halt a decade long economic meltdown, the country is also battling to balance between reviving the manufacturing industry — brought to its knees by an influx of imported goods, ageing equipment and clogged external lines of credit — and protecting citizens from high prices.

Tax expert Tendai Mavima this week noted that while the increase of duty on finished products would raise government revenues, it would not be adequate to protect local industry.

“If the purpose is to raise revenue for government then it will be successful but if they want to promote local production, they have to introduce incentives for local industry,” he said.

Mavima said Chinamasa should have put in place measures such as tax incentives and suspension of duty on the importation of vital machinery used by industry in producing local goods.

He added that increasing duty on finished goods would have the adverse effect of increasing the price of goods, further eroding the disposable income of consumers.

Mavima said government should have looked at other variables that make the local industry uncompetitive such as the high cost of labour and electricity.

“The high utility costs will make it impossible for local industry to sell their products at competitive prices. If government subsidises utility costs for local industry, it will benefit them,” he said.

Christopher Mugaga, head of research at Econometer Global Capital said the latest move by government were acts of desperation which will not achieve intended results.

“These are just spruce-up measures because the situation is so bad. It’s too late for such interventions work,” he said.

 

Comments (20)

Wedu ndi Morgen Tswangirai. All zimboz who want to live normally and happily will rally behind Tswangirai. Kana musingade, suffer continue

changu - 14 September 2014

For most the time since independence, the majority of African countries have been ruled with men with authoritarian ideas. Kwame Nkrumah led the way by imposing a one-party state on Ghana, the first country to win independence after the Second World War. Other African leaders followed suit, declaring that their own irremovable governments would henceforth control everything of importance. They nationalised everything from mines and factories to bicycle-repair shops, staffed them with ruling party cronies and then ran them into the ground. For a while they were able to disguise the fact that they were not producing much by borrowing huge sums of money from the foolish Western banks and governments. This created a temporary illusion of prosperity. Some of the borrowed money was spent on free healthcare, education and loans to farmers, but much of it was wasted on prestige projects: dams, conference halls, steel mills erected far from the nearest port and over budget, and so on. Little of the money was invested in such a way that it actually produced a return, so African governments eventually found themselves unable to service their loans, let lone repay them. The problem in Zimbabwe is that Mugabe can see that he has failed but he still wants to remain in power hoping for some miracles. The latest trick to remain in power was to draft an unworkable economic blueprint, Zim Asset, then go to China on a “business trip” to beg - jam tomorrow. The country is undergoing Industrial Revolution in reverse.

Musona - 14 September 2014

we want money to buy cars for chiefs. we died for this country so all must die as well

ko hamuoni here? - 14 September 2014

Whoever voted ZANU (PF) knew this was coming. There is no way ZANU (PF) can improve the economy of this country. These guys have tried every trick in the book and there results are there for every one to see- dismal show. Even if they hire an economist from the moon they will not improve the fortunes of our economy without sound funding of projects.

PAPA ACTION - 14 September 2014

Whoever voted ZANU (PF) knew this was coming. There is no way ZANU (PF) can improve the economy of this country. These guys have tried every trick in the book and there results are there for every one to see- dismal show. Even if they hire an economist from the moon they will not improve the fortunes of our economy without sound funding of projects.

PAPA ACTION - 14 September 2014

Whoever voted ZANU (PF) knew this was coming. There is no way ZANU (PF) can improve the economy of this country. These guys have tried every trick in the book and there results are there for every one to see- dismal show. Even if they hire an economist from the moon they will not improve the fortunes of our economy without sound funding of projects.

PAPA ACTION - 14 September 2014

Anybody who still believes that the salvation of the long suffering Zimbabweans lies in the hands of ZANUpf is having a very bad dream. Until, as Zimbabweans, we all rally together to remove this selfish evil party from governing this country we will be in for a very long time of suffering. When you look at these men and women, who among them do you think will come up with an idea to better things for us? NONE AT ALL. This is a group of looters and their hangers-on who feel entitled, because of history, to do with this country and its people, as they so wish. Morgan might not be the best option but the thing is he lacks that sense of entitlement and if he messes up, he is easy to remove. Look at all the other African countries that gained independence. After removing the founding parties it became very easy to remove whoever came latter. Malawians removed Joice Banda just when she was getting comfortable. This is what we need to do. ZANUpf na d Zimbabwe are no longer compatible. Both cannot survive and are we willing to allow Zimbabwe to die for the sack of ZANUpf?

Kufakwejeyi - 15 September 2014

Without taking time to really look at the ripple effects due to the increase of taxes, Chinamasa and and advisors just went ahead and did what they always do, they just rushed to implement before looking at the bigger picture in terms of how this will affect the economy. Yes, the government will be able to milk more money from the already impoverished citizens and the few employers that are still hanging in there. Prices of just about everything have gone up, consumers' disposable income will decrease leading to lesser sales for retailers and wholesalers who will in turn shed off some of their labor force . The few manufacturers who are still operating will fail to open shop after the year end shut down next year not only putting more people onto the street, but depriving the government of that much needed tax. We have leaders who only look at the here and now in the foolish belief that somehow things will work themselves out in the future.

Dr Know - 15 September 2014

THings are going in the right direction, Zanu is digging its own grave very soon the people will revolt. Watch the space

Garwe - 15 September 2014

Shame, how can people survive these taxes? What about the monies earned from diamond mines? Or from gonyetis ferrying in huge containers of goods from SA for resale?

drkisskiss - 15 September 2014

I AGREE GARWE. HOWEVER WHAT CAN WE DO WHEN RURAL PEOPLE ARE THE ONES RULING OUR COUNTRY.

see - 15 September 2014

Log on to URL - http://www.newzimbabwe.com/opinion-17819-Mugabe+rants+After+whites,+who+-+Ndebeles/opinion.aspx By a Tirivanhu Mujaji there is a very interesting article which he tells the truth on some matters about Ndebeles coming to the south west now south west of Zimbabwe around 1830 as I have always stated in my countless times. And that Mugabe's father's origin is dubious, and definitely not Zezuru. Copy and paste this URL on your browser - VERY INTERESTING ARTICLE.

Musona - 15 September 2014

Log on to URL - http://www.newzimbabwe.com/opinion-17819-Mugabe+rants+After+whites,+who+-+Ndebeles/opinion.aspx By a Tirivanhu Mujaji there is a very interesting article which he tells the truth on some matters about Ndebeles coming to the south west now south west of Zimbabwe around 1830 as I have always stated in my comments countless times. And that Mugabe's father's origin is dubious, and definitely not Zezuru. Copy and paste this URL on your browser - VERY INTERESTING ARTICLE.

Musona - 15 September 2014

Log on to URL - http://www.newzimbabwe.com/opinion-17819-Mugabe+rants+After+whites,+who+-+Ndebeles/opinion.aspx

Musona - 15 September 2014

Zanu PF, are you sure Chinamasa is the best you can offer?

Johno - 15 September 2014

cHINAMASA HAANA MHOSVA HAASIRIYE BOSS , ARIKUTONGA NDI.....

Harare - 15 September 2014

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