Problems is presentation rather than policy

18 Jan, 2019 - 00:01 0 Views

eBusiness Weekly

Clive Mphambela
In November 2017, President Mnangagwa strode into power with a powerful intention to reform the Zimbabwean economy.

Nine months later in August 2018, the President and his party Zanu-PF were re-elected into office, following a hard fought campaign that was conducted in an environment where democratic space had been opened up significantly and the opposition was strong.

The election was marred somewhat by the politically motivated violence of August 1, 2018 following which ZANU- PF romped to victory with a 75 percent Parliamentary majority, whilst the presidential vote was the subject of a constitutional court challenge.

President Mnangagwa was later to be confirmed the elected President and following his inauguration, he reaffirmed his intention to continue to put Zimbabwe on a firm path of economic recovery.

This week, however, Zimbabwe looked fragile, unreformable. For two whole days starting this Monday, the streets of Harare and other towns across the country were littered with burned-out cars and tyres, and glass from smashed shop windows.

Significant parts of the country have been paralysed by protests as hooligans obstructed roads and blockaded fuel service station and looted shops. All this followed a policy pronouncement made by the President late last week that the Government had resolved to deal decisively with the fuel crisis by pushing up the price of fuel.

The announcement was met with public panic in the market and hence the massive backlash but does this mean that the policy in itself was bad? The answer to me is No. In fact, the Government has been since the election, making perhaps some of the soundest policies of recent times.

The new Minister of Finance and Economic Development Hon Professor Mthuli Ncube in October announced an important new tax, the 2 percent Intermediated Money Transfer tax, which became very unpopular. He also announced the separation of Nostro dollars from RTGS accounts, directing banks to separate real dollars from commingling with bond notes and RTGS dollars in the same accounts.

Both policies were met by public displeasure and somewhat negative market reaction. But does the public reaction make the moves inherently bad? The Minister of Finance and Economic Development went further to present a budget premised on creating an austere environment that will kick-start the economy’s rebound, again the Budget was met by public anger.

Policy announcements are making President Mnangagwa and his Government look insensitive to the plight of the people, but is this a fair assessment? Are people being objective or it is simply the massive economic hardship that is cloaking the eyes of the masses and hence the negative response to various policy announcements that are coming through.

Austerity by its nature is not a walk in the park, it requires tough economic choices and my advice to the President and the Government is to remain firm and resolute in implementing the tough economic policies that they are coming up with.

Any policy U-Turns will position the President as weak as his recent predecessors who failed to change the course of this most stubborn of nations.

A strong-willed Finance Minister

The appointment of Hon Professor Mthuli Ncube in October last year seems to have heralded new optimism about the Zimbabwean economy both domestically and across the world.

Young, intelligent and bubbling with ideas to make Zimbabwe a more open, dynamic and fiscally sober economy, Mthuli has given an eloquent rebuttal to the economics of wastefulness.

He has reigned in Government profligacy, pushed for austerity and is fighting to restore monetary order.

All this effort requires support of the political establishment around him and suffice to say that all hope for a broad renewal of the radical centre comes to rest squarely the shoulders of his main principal, the President of the land.

Zanu-PF must use its parliamentary majority to drive economic reforms

When the ruling party won a thumping parliamentary majority, the President Mnangagwa revolution seemed to get a lease of life that essentially makes it unstoppable. Parliament should swiftly pass long-needed legislation that will drive economic reforms in the country.

For example, there has been cries from industry to make the labour market more flexible, and Government must work quickly with unions to see this process through.

Labour market reforms do not necessarily mean workers’ rights will be diminished, but we need to have a labour framework that allows for the promotion of investment and creation of decent and stable jobs.

Parliament should also exercise its oversight on the executive to ensure that the national budget is knocked into shape, and expenditures led deficits stay within sustainable limit of 3 percent of GDP.

Closer engagement with the masses

However, as alluded to above, President Mnangagwa’s policies need to be repackaged in a manner that the ordinary citizen, who is facing untold hardships on a day to day basis, can understand.

Along the way, the President must not forget that Zimbabwe is not a monarchy but a democracy and that communication of new painful policies requires the constant forging of consensual alliance with the citizens.

The President must also keep in mind that during last year’s election, 42 percent of voters were happy to vote for his opponent and that those voters have not gone anywhere. So it would be unwise of President to needlessly leave behind such an important constituency.

Ramping up wealth taxes and ring-fencing revenues for provision of social services

One of the main this first moves was to increase taxes on wealth. Income inequality makes wealth taxes and efficient redistribution tool. Traditionally wealth taxes are inefficient, incentive-sapping and should be often avoided.

But in our case the introductions of these progressive taxes should go side-by-side with Government providing more help for those who are hard-up. It is for this reason that taxes such as the 2 percent IMMT and the recent hike in fuel excise duties should be communication as taxes that are actually more pro poor.

However, more attention needs to be paid to the people that the fuel taxes for example hurt most — struggling urban folks who need to drive or commute to work when public transport is non-existent.

It is clear to me that the Government new thrust on revenue collection should be met with a stronger commitment to provision of social services so that the hardships being felt by the populace are ameliorated. That should by the President and his cabinet sufficient headroom to put policies in place that will see the recovery of the economy, in a politically stable environment.

The writer is an economist. The views expressed in this article are his personal opinions and should in no way be interpreted to represent the views of any organisations that the he is associated or connected with.

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