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SDRs should target health, informal sector: CZI

30 Jul, 2021 - 00:07 0 Views
SDRs should target health, informal sector: CZI

eBusiness Weekly

Business Writer

The Special Drawing Rights allocation that the country is likely to receive from the International Monetary Fund should be deployed in a way that delivers sustainable long term benefits for citizens of this country, Business Weekly can report.

Following deliberations on how the SDR allocation can be utilised, the Confederation of Zimbabwe Industries (CZI) concluded that, if used wisely, the funds have the potential to transform the face of the economy and significantly accelerate progress towards vision 2030.

CZI’s deliberations and recommendations come at a time, Zimbabwe and other International Monetary Fund (IMF) member countries, are likely to get Special Drawing Rights (SDRs) allocations from the global lender.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves.

Reports say, the global lender will next week Tuesday decides on the SDR allocations of which Zimbabwe is expected to get an estimated US$965 million.

The SDR allocation would be a welcome development as it will aid Zimbabwe, which has been fiscally constrained even before the Covid-19.

However, according to CZI, the way the funds are utilised is critical.

The industry representative body said the country must take full advantage of this opportunity to accelerate its economy toward vision 2030.

The number one priority, CZI said, has to be the health care system, which it said has a “massive rate of return on investment in healthcare provision.”

“A healthy population is a productive population.”

“The health of employees is a key enabler for business growth. In that regards business is fully supportive of initiatives designed to improve the healthcare system,” reads part of CZI’s recommendations.

The business membership organisation made two proposals on how funds can be used in the health care system.

The first one is setting up a properly funded health insurance system for the general population.

“The SDR allocation will be seed capital that sets the stage for a sustainable fund that could create affordable and effective healthcare for generations to come.’

The second recommended option is for the SDR funds to be used to upgrade healthcare infrastructures such as hospitals and clinics.

“Healthcare we believe should be the top priority for the use of SDR funds and careful analysis of the available option should be done by appropriate experts to ensure maximum benefit is obtained through the use of these funds,” CZI said.

Apart from the health care system, CZI believes that government should channel at least 15 percent of the SDR funds towards employment creation.

“Some of the SDR funds may be used to create a revolving fund for industry to borrow to increase the productive capacity, targeting export projects.

“These loans can be disbursed as five year loans at a reasonable interest rate of say 5 percent per annum,” CZI recommends.

SDR funds can also be channelled toward the informal sector, which has been decimated by the Covid 19 pandemic and plunged the majority of the population into poverty.

The informal sector is seen as a major source of employment for the majority of Zimbabweans and CZI believes formalising the informal sector is a significant opportunity that will contribute to economic growth and vision 2030.

CZI suggested that capacitation of the informal sector can be done through the creation of an enabling environment that allows the informal sector to formalise.

The industry representative body also called for the provision of suitable infrastructure for informal sector operations, ideally in form of “infrastructure that is not just for trading but allows for small-scale manufacturing and other small scale informal sector activities”.

According to CZI, the difficulties in formalising an informal business in Zimbabwe are a major obstacle to formalisation.

“The multiplicity of licenses and difficulty with tax compliance still represent significant issues.

“In that regards, we recommend that priority be given to the reform of the tax code and the introduction of a simplified taxation system for small businesses.”

CZI added that the availability of funding via SDR’s provides an excellent opportunity to create suitable infrastructure for small businesses which can be leased out at affordable rentals.

“The key question becomes, how do we ensure that the infrastructure is attractive for small businesses and avoid the risk of white elephant projects that will end up standing empty.

“We feel that part of the answer to this question is the active involvement of small businesses in the creation of the suitable infrastructure so that infrastructure is built fit for purpose.”

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