Chinamasa tables $4,1bn hopeless budget

HARARE - Finance minister Patrick Chinamasa yesterday presented a static $4,1 billion 2015 national budget which offered little relief to Zimbabwe’s deteriorating economy.

Chinamasa conceded the economy was in bad shape and called for various reforms aimed at stimulating production in various economic sectors.

He forecast the economy to grow by 3,2 percent next year up from 3,1 percent this year.

“The major challenge is that the revenue base remains limited, and hence, the need to expand it,” he said to a joint sitting of Parliament.

“The economy needs substantial investment, both domestic and foreign direct investment, as well as other support, also targeting infrastructure and production for the export markets.

“The economy continues to be dragged down by liquidity shortages, antiquated plant and machinery, cheap imports and high cost of production — a situation that has led to company closures.”

According to treasury figures, at least 4 160 companies have closed shop since 2011, sending over 55 443 employees into the streets.

Chinamasa said out of the $4,1 billion budget, $3,32 billion or 81 percent would go towards recurrent expenditure, particularly employment costs thus crowding out pressing needs — particularly to do with economic revival and infrastructure development.

He noted that only $798 million would go towards capital projects and debt servicing in order to open avenues for more financial support.

“What this means basically Mr Speaker sir, we are paying people to sit in their offices and not to undertake their operations and this is a major issue and challenge that we have to address,” he said.

In an effort to halt economic decline and boost revenue collection, Chinamasa introduced a raft of measures to encourage exporters by slashing corporate tax in relation to their export thresholds.

Companies which export between 30 to 50 percent of their products will attract between 17,5 percent and 20 percent in corporate tax while those above the 51 percent threshold will be levied with 15 percent corporate tax.

“I propose to exempt foreign agents’ fees from withholding tax. The agents’ fees should, however, not exceed five percent of the value of exports based on the Free on Board prices,” said Chinamasa.

Chinamasa further proposed to defer export tax on un-beneficiated platinum until 2017 following the commissioning of a $200-million base metal refinery in the next 24 months by Zimplats.

In order to promote beneficiation and value addition, Chinamasa scrapped royalties on licenced local diamond cutters and polishers but warned that government would come up with a new mining tax regime by March 2015.

Tax-free threshold increased to $300 from the current $250.

Economic experts said  it would be a long shot for government to achieve the revenue targets it has set.

“It’s a typical operational budget but my major worry is that $4,1 billion in this type of economy is a bit on the upside,” said economist Christopher Mugaga.

MDC legislator Nelson Chamisa said the spending plan lacked depth.

“This is a declaration that the country is now insolvent and bankrupt,” he said.

“It’s a complete admission that the government has failed to address the issues of the people.

“By listening to the figures — over 4 000 companies have closed, affecting 55 000 employees. This is a clear indication that the country is going through a difficult time.”

Bikita West Zanu PF MP Munyaradzi Kereke said this was “a progressive budget under difficult economic circumstances.” There was no fiscal space that the minister had as the government expenditure continues to grow,” the maverick economist said. “I am happy there is a huge tax incentive encouraging companies to export and  paying less corporate tax.”

Deputy Foreign Affairs minister Christopher Mutsvangwa said: “I am happy with the creation of special economic zones, this is similar to what the Chinese have done and we are going to be seeing positive growth in the economy  in the future,”


Comments (3)

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lovemore - 28 November 2014

It appears there's something critically important to economic development missing on the budget. Isn't the Finance AND Economic Planning Minister supposed to tell us his plan (budget) for the political stability ENVIRONMENT, which is the liquid into which other ingredients are fused. Economic, not Political environment? I thought the difference between the two is the same.

Chenjerai Makudo - 28 November 2014

Personally I would feel very ashamed to be a leader of a resource rich and yet so poor a country such as ours. That national budget of 4.1 billion is way smaller than that of some middle earning companies in neighboring South Africa.

Dr Know - 29 November 2014

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