Policy, not goodies, needed in Budget

08 Nov, 2019 - 00:11 0 Views
Policy, not goodies, needed in Budget

eBusiness Weekly

The 2020 National Budget is scheduled for next week, and presumably the business sector will be more interested in the spending plans of Minister of Finance and Economic Development Professor Mthuli Ncube than his revenue proposals, largely because he cannot do much, if anything, on the income side.

Those who expect a bag of “goodies” from the Minister need to remember that his bags are pretty slim, and his main problem will be finding money to keep the Government functioning, rather than looking for ways to make life easier for companies and individuals. In other words he has no “goodies” to give out.

But he does lead the Government’s fiscal policy, and here business has legitimate demands and interests. Since he assumed office last year he has imposed and maintained a very tight fiscal discipline. That has led to austerity and, as he removes the layers of make-believe and allows the real world to penetrate Zimbabwe’s finances, we have seen the gunge he inherited rise to the surface of the pool.

But for Prof Ncube to renounce fiscal discipline, or even to ease it, will produce nothing except a very short-term gain, like for one month, before we plunge into an even deeper abyss. Most business people will understand this as they, also, have to as a matter of routine balance their expenditure to their income and have to manage their cash flows with what amounts to a degree of fanaticism.

So Prof Ncube will continue to win support if he can maintain his primary budget surplus, that is if he pays his salary bill and other routine monthly expenses on time and without using overdrafts, borrowings or any other creative financing. This is just what every company has to do and what makes your average chief financial officer these days really earn their salary and what makes them lose sleep when they go home at night.

We have wasted so many decades through short-term fiscal indiscipline that we are now in far deeper trouble than the problems this indiscipline was supposed to correct.

We, in effect, have a last chance. The Government started with a reasonable level of discipline at independence, then blew it. ESAP, while badly planned and very poorly implemented, did give us a new chance, and that chance was wasted with the only lasting result being some appalling foreign debt to international financial institutions along with some rusting consumer goods we squandered the money on.

The collapse of the old Zimbabwe dollar and the switch to multi-currency in some ways helped, but did not do much to resurrect our productive sectors since consumers rushed for imports and, more seriously and more regrettably, a lot of our productive sectors reckoned they should use imported raw materials and services. So we wiped out our primary industry, made vast swathes of our secondary industry dependent on imports and the vagaries of real exchange rates, and stocked our shops with imports of lower quality and price.

However, in the welter of consumer junk there was some new capital equipment which did help resurrect industry as import restrictions and a real exchange rate came into play.

But not everyone was responsible. We are now fixing things, but it is taking time and the curiosities of perceptions and memories of the first decade of the 21st century are still taking their toll.

So this is where Prof Ncube has to both hold his nerve and nudge the economy into the sort of path it should have entered and stayed with from independence.

The magic word is “production”, not consumption, and even then production has to be based on getting the ground state right, rather than on finishing and packaging imported raw materials and semi-finished goods.

So it is the spending plans for agriculture and mining, right there at the basic level, that will test the Minister. Agricultural production has a lot going for it if it can be fixed. It not only can substitute for imports and create exports, so slashing our current account deficits, but can also spread that wealth since so many Zimbabwean families are farmers or work on the land.

Land reform is supposed to be a way of improving production and spreading the result of that improvement.

Government programmes have pushed up production, but as the Minister has noted, there has been indiscipline and corruption. Throwing money at the problem is only part of the solution. The money has to be precisely targeted and has to be used properly. In other words, the Government has to follow the same sort of procedures a successful private business follows. This does not win friends but it does make programmes successful.

There have been advances in mining, with commitments to new investment. But none of these are going to boost exports this month or very much next year. It takes time for mining geologists to precisely map ore beds and for their mining engineer colleagues to design the most efficient extraction works. And then someone has to dig the holes. But we must keep pressing on with our programmes to make investment easy and pleasant for those with the capital.

Secondary industry is largely outside Government’s orbits now. But Prof Ncube needs to work out ways that makes it easier and cheaper for this sector to process Zimbabwean raw materials rather than assume the Government and the Reserve Bank of Zimbabwe are responsible for supplying these.

Many have noted that Zimbabwe’s secondary industry needs to start taking control of its supply chains, that is establishing very strong ties to farmers and miners so the right stuff is grown and dug up. Carefully crafted policies that make this desirable extension of private business necessary will do a lot to develop Zimbabwe.

Business has other hopes, starting with a stable exchange rate. But the Minister cannot decree that. He can do his part by keeping a tight lid on Government spending, so he is not the source of any increase in money supply. Many of his predecessors either did not care if they overspent, or were overruled if they knew what was right. He is in the position where he does know what is right and has the required political backing.

But business has to realise that he cannot perform fancy miracles. Just as a large company needs to follow standard accountancy rules and sensible policies, so too does the Minister, and business can help him by backing his successful efforts at fiscal discipline and then working with him to figure out ways how we can get improvements in real production, starting with primary production, to build our economy from that base.

Hanging around Samora Machel Avenue with an upturned hat waiting for goodies is not going to do that. Only hard work in a proper environment can create wealth and employment. The Minister understands that and business understands that, at least in its own concerns.

They now need to be in more frequent contact and be pulling in the same direction. Fiscal policy can help weave the required joint harnesses.

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