eBusiness Weekly
Misheck Ugaro
The challenge the country faces now is how to make positive developments being achieved into tangible social benefits that are impactful on the man in the interest.
The current gains need to be all inclusive in order to have positive results on people sentiment.
Zimbabwe’s performance in the just passed third quarter of the year and with all indications pointing to a sound last quarter has been positive against all odds.
Chief of the achievements so far has been the stability of the local currency unit that has virtually settled at $81,3:US$1.
That has been the result of an effective currency auction trading system introduced in June supported by a tight monetary policy position.
As a result, annual inflation has come down to 659 percent in September, having peaked at 837 percent in July and now showing a consistent decline and forecast to close the year below 300 percent.
The forecast GDP contraction of 4,5 percent, however, still represents a shrinking national cake and is therefore, still experienced by the general population in real terms.
This is manifest in current labour disputes predominantly being experienced in the civil service and a general negative national sentiment widely spread in the population.
It is therefore in this regard that authorities need to come up with tangible ways of distributing these new gains in order to re-assure the nation of the gains that have now been achieved as a result of the Transformation Stabilisation Programme, but more importantly, to gain national convergence on the need for maintaining the current trajectory.
The last budget theme in 2020 was “Gearing for Higher Productivity, Growth and Job Creation”, and emphasised on growth stimulation and employment generation through promotion of productive oriented investment and productivity, without losing focus on fiscal responsibility.
This direction should be maintained in the forthcoming budget for 2021. While inflation is coming down and the local unit exchange rate has stabilised, a contracting economy means each person generally has less at their disposal than they had the previous year.
Declining inflation rate does not translate to declining prices. It only translates to a reduced rate of price increases and so the populace still faces rising prices against a declining national cake.
Both the treasury and monetary authorities must be commended for a diligent fiscal and monetary management this year. The forthcoming year calls for a careful review of further promotion of growth while holding the current fiscal and monetary discipline.
A growth stimulus position is required but with utmost discipline. This, more importantly, means that it is time for all other sectors of the economy to pull their weight and lead from the front.
The auction system has now made foreign currency for importation of productive raw materials as well as capital goods more readily available. This should promote increased capacity utilisation leading to increased production and job creation.
It is through increased job creation that the general public can start experiencing the positive impacts of the current gains.
On the other hand, in order for the Government to maintain fiscal discipline, it is also incumbent upon the private sector to play their part. This is through a responsible disposal of all tax liabilities in order to enhance Government revenues.
There is more that the private sector, in particular the financial sector, can be expected to do in order to assist in the nation driving forward.
Partnerships should be possible for the provision of non-monetary benefits/incentives to the civil service like housing and other important provisions (including vehicles) on the back of Government guarantees in order to alleviate the financial pressure on the fiscus.
An example is on how the Micro Finance (MFIs) sector has flourished on the back of the so called “deduction code” which basically is some form of a guarantee from the Government whereby all borrowers who work in Government would have their loan instalments deducted at source.
This concept can be extended to bigger considerations like the provision of housing requirements and this would be a major boost in calming the current labour disputes.
It is important to highlight that both sides of this dispute are in fact correct in the sense that on one side, the employees are earning well below living expenses requirements while on the other side, the employer, being the Government, has no money and the current fiscal management needs to be maintained if we are to avoid running back to the printing machine.
For a balance to be achieved, a middle of the road approach, incorporating both the public and private sectors, would suffice because it is in the interest of all concerned for the current positive momentum to be maintained.
In conclusion, we do expect an expansionary budget proposal from the Ministry of Finance but still buttressed on fiscal discipline.
The projected 7,4 percent growth in 2021 followed by an anticipated steady 5 percent annual growth thereafter will eventually filter through to the populace over time and it is important for generation of goodwill and buy in of the current momentum through some innovative solutions such as, while not being exhaustive, the suggestion above.
Misheck Ugaro is a former expatriate banker once based in several SADC countries and currently works as a Corporate Advisory Services Consultant. He is the founder of Rucabel Investments Private Limited, an investment company based in Zimbabwe. He is a member and past Vice President of the Zimbabwe Economics Society
