The Parliamentary Committee of Finance and Economic Development has recommended that any fines exceeding $20 should be referred to the courts to curb corruption.
The committee’s recommendation, made in its contribution to the 2016 budget, comes in the wake of the hiking of spot fines to $100.
“On the proposed road traffic fines, it is the view of your Committee that a fine of US$100.00 is too much for an already traumatized populace and this can promote corruption on our highways,” Committee chairman David Chapfika said.
Other recommendations from the committee were:
- The Government accelerates its debt clearance strategy so that fresh funds can be injected into the economy and attract Foreign Direct Investment for the growth of the economy.
- A clear path of Civil Service and Pensioners rationalization be provided and a detailed audit of all staff in all Ministries and government departments should be conducted.
- Revenue retention by line ministries and Government departments be stopped forthwith and that all revenues be accounted for through the Consolidated Revenue Fund for effective allocation to critical priority areas determined by the Ministry of Finance and Economic Development
- The government should seriously consider issues raised by key stakeholders and amicably engage them to ensure policy buy in.
- Parliament should be fully funded so that it performs its duties as an independent legislative body without compromising the separation of powers.
- Treasury disburses allocated funds to line ministries timeously so that they provide adequate service to the people.
- A moratorium be extended to SMEs for the repayment of their outstanding loans considering that government is also getting the same from financial institutions.
- Local productive industries be protected through a prohibitive tariff regime.
Full contribution:
HON. CHAPFIKA: Thank you Mr. Speaker Sir. I rise to submit the report of the Portfolio Committee on Finance and Economic Development on the 2016 National Budget. Mr. Speaker Sir, the National Budget is a serious national plan for Zimbabwe. Your Committee took time to interrogate the budget report and the estimates as submitted by the Hon. Minister.
Mr. Speaker Sir, the crafting and implementation of the 2016 National Budget based on the sub-title: “Building a Conducive Environment that attracts Foreign Direct Investment.” Focus of the 2016 Parliament Pre-Budget Seminar held during the period 30 October-3 November 2015, in Victoria Falls, was on “Growing the National Cake for Socio-Economic Development and Transformation.” The focus of the 2016 Budget is therefore on Growing the Economy through attracting foreign direct investment. The 2016 National Budget is estimated to be US$4 billion with the projected financing gap of US$150 million funded largely through borrowing on the domestic market. The budget comprises recurrent expenditure of US$3.85 billion, which is 92.1% of the budget. Capital expenditure, which is critical to the revival of the economy, has been allocated US$315 million (7, 9% of the budget). Such an allocation is out of sync with the ZIM ASSET thrust and so will not stimulate economic growth.
The Zimbabwean economy is endowed with diverse mineral and other natural resources, high quality human capital endowment, peace and tranquility, among other positive attributes. However, the 2016 budget comes at a time when the economy is beset with a host of challenges, chief among them being tight liquidity conditions and low domestic and foreign investment and a deflationary environment that has seen our economic growth declining from an average of 9.5% between 2009 and 2011 to a projected 3.1% by end of 2014; 3.2% in 2015, revised downwards to 1.5% in the 2015 Mid-Term Fiscal Policy Review due to the drought induced underperformance of the agricultural sector. The Gross Domestic Product is projected to rebound to 2.7% in 2016, driven by mining, tourism, construction and the financial service sector. Agriculture is expected to recover by 1.8% but there is need to plan and mitigate against the impact of the El-Nino effects. Your Committee however feels that this growth target may not be achieved unless the Minister unlocks value from the abundant mineral resources that we have.
Madam Speaker, the 2016 national Budget is based on the assumption of the successful resolution of Zimbabwe’s external payment arrears, significant reduction in the perceived risk premium that make credit lines to Zimbabwe expensive and the country being able to access credit lines at competitive rates. External and domestic debt levels remain unsustainable. Although your Committee recognizes the effort being undertaken by Government to clear the arrears through the re-engagement of the International Financial Institutions (IFIs). The initiative to clear external arrears clearance in discussions that took place in Lima, Peru, is a basis to unlock fresh lines of credit.
Both the balance of trade and the balance of payments are negative due to the high imports volumes. Business and investor confidence has also plummeted, leading to widespread closure of companies and the informalisation of the economy, coupled with high unemployment levels, low disposable income leading to low aggregate demand of goods and services. The stability of the financial sector ensures economic growth. Your Committee acknowledges the efforts that are being undertaken by the OPC under the Rapid Results Approach and the Thematic Technical Working Groups on the ease of doing business. To that extent, there is need to address challenges like the provision of energy, infrastructure development and information communication technology architecture for the attraction of FDI.
The operationalisation of the Zimbabwe Investment Authority (One Stop Shop) is slow. However, your Committee is pleased to note that a Ministerial Working Committee has been tasked to develop an appropriate model for an effective and vibrant one stop shop investment centre that aims to accelerate investment deals destined for the country. Your Committee, however, feels that this should be expedited so that foreign direct investment flows into the country are accelerated. Successful implementation of special economic zones will also attract foreign direct investment flows. This should be completed by March 2016.
Madam Speaker, the potential of the Small to Medium Enterprises (SMEs), the New Economy, to drive economic growth cannot be overemphasized as 70% of the labour force in Zimbabwe is in this sector. Your committee is worried that the Minister allocated a paltry US$6, 363 million to such an important ministry. The players in this sector need retooling since they are using obsolete machinery. It is your Committee’s submission that the Ministry should have been allocated more to unlock value. The sector also needs to be granted a moratorium on the repayments of loans as some had their properties attached for their inability to pay back loans. Government created a special vehicle for debt assumption ZAMCO to take over debts from parastatals like ZISCO, Sable Chemicals, COTTCO among others. This should be extended to Small and Medium Enterprises.
Your Committee acknowledges ZIM ASSET and the ten point plan; however, it is the Committee’s views that without adequate funding the objectives of the economic blueprint will not be achieved. In this regard, government has to unlock value through the effective utilization of the natural resources and the human capital that we have.
MINING AND INDUSTRY
Madam Speaker, the Parliament held a post budget analysis meeting on Tuesday 8 December 2015 where the budget was unpacked to Hon Members of Parliament by experts in the field. Your Committee immediately followed this up through consultations with a number of stakeholders such as the Bankers Association of Zimbabwe (BAZ), the Zimbabwe National Chamber of Commerce (ZNCC) and the Chamber of Mines of Zimbabwe (COMZ), whose input your Committee acknowledges.
Your Committee noted positive measures in the budget relating to the mining sector that include: deferment of export tax on un-beneficiated platinum to 1 January 2017, reduction of royalties on gold for large scale producers, downward review of mining fees and charges in the first quarter of 2016, capitalization of the Geological Survey with necessary equipment and technology to carry out exploration activities among others.
The 2016 National Budget provides for the reduction in royalty for large scale producers to 3% from 5% on incremental output based the previous year’s production. This measure can, unfortunately, be enjoyed by a few mines that have the capacity to increase production. The majority of small to medium scale producers who are currently facing viability challenges will not benefit from the reduction in royalty as it is most likely that their output may come down in 2016 due to viability challenges. Your Committee appeals to Government to ensure that this royalty reduction can be used as a reprieve to high cost as well as incentive to increase production.
The Mines and Minerals Amendment Bill and the Minerals Exploration and Marketing Corporation Bill have been approved by Cabinet and await Parliamentary consideration. Your Committee appeals to Parliament to expedite the finalization of the two laws as they present an opportunity for the mining sector to positively contribute to the growth and development of the economy.
Madam Speaker, in his 2015 Mid-Term Fiscal Policy review statement, the Finance Minister revealed plans to reduce the wage bill by 40% from the current 80% as Government continues to struggle to reduce its expenditure. It is however quite unfortunate that there are no visible steps that have been put in place to reduce this wage bill. Treasury needs to give clear signals on how the wage bill will be rationalized in order to reach sustainable levels as the 2016 budget will still consume a huge chunk of the recurrent expenditures on wages.
MANUFACTURING SECTOR DEVELOPMENTS
Madam Speaker, manufacturing sector activity continues to decline due mainly to the high cost of borrowing, obsolete equipment, among other challenges. This is evidenced by capacity utilization which declined from 39.6% in 2013 to 36.3% in 2015. The manufacturing sector is strategically positioned to promote value addition from commodity production to processing, in line with our economic blueprint, ZIM ASSET. Therefore, supportive policy interventions in promoting competiveness of the domestic industry such as clothing, leather and horticulture among others are commendable, as these measures have seen improvement in the capacity utilization levels in the sub-sectors concerned. There is need for government to impose high duty levies on the importation of finished goods and charge low duty on raw materials to promote local investment. The US$1 million rebate extension on capital equipment should be revised downwards and should not be discriminatory against small scale producers.
Your Committee also noted that the Green Fuel project in Chisumbanje is value addition outcome where economic development, environmental sustainability and social inclusion are all at play as a result of beneficiation. The project is generating employment for the local communities. This Committee agrees that fiscal interventions instituted from 2014 in support of various industries achieved positive results with a number of distressed firms being resuscitated while others managed to increase their capacity utilization where notable examples are in the textile, leather and milling among others. The Committee also appreciates the effort the Treasury is doing in monitoring the performance of the supported industries with the view of ensuring that such entities improve their competitiveness.
Another notable positive development in the 2016 National Budget, is that about 51 companies benefited from the Distressed and Marginalized Areas Fund (DIMAF) where loans amounting to US$28.7 million were disbursed to manufacturing, services and distribution, agriculture, mining and transport sectors in various regions and this has increased their capacity utilization, revenues, employment as well as exports. However, your Committee notes with concern that there is an increase in non-performing loans under DIMAF due to cyclical problems faced by some companies, low aggregate demand, subsidized imports and delayed disbursements.
Madam Speaker, your Committee that the rapid and continued depreciation of the Rand against the US dollar should reduce the cost of capital goods sourced in South Africa which local businesses should take advantage of. Therefore, measures can be taken to incentivize investors to import capital equipment.
In order to improve the production activities, fresh and significant capital injection is needed into the economy for re-capitalization, among other needs. Your Committee appreciates indications of the imminent announcement and gazetting of the Indigenization and Economic Empowerment frameworks’ templates and procedures for implementing the indigenization policies in a manner that both promotes investment and eliminates discretionary application of the law. This is commendable and your Committee and the international business community anxiously awaits this announcement and clarification this important piece of legislation.
As presented in the 2016 proposed Budget, licensing processes, the multiplicity of levies and other charges, delays in utility connections, all frustrate potential investors as they end up increasing the cost of doing business.
2016 EXPENDITURE AND REVENUE ESTIMATES
The proposed budget clearly illustrates the economic and fiscal challenges which confronts Government and highlights the difficulty the Hon Minister had in trying to reconcile competing demands with limited fiscal space. There is therefore a serious need for innovation and strategic management to try and address the many problems and challenges before us as a country. Your Committee calls for a paradigm shift in the approach to the manner in which we craft our budget. Any effective budget must recognize the objectives of government economic blueprint, the ZIM ASSET and the ten point plan, which places special emphasis on the exploitation of the human, land and mineral resources at our disposal amongst many and the impact of same to the budget. The allocation of resources must therefore be on a priority bases and not ad hoc. The successful turnaround of the economy should be through a low wage bill and flexible labour laws and the general cost of doing business.
It is also the view of your Committee that on the revenue side of the budget estimates of income from all sources in 2016 may not be achievable if it fails to recognize the impact of the effective exploitation of the abundant resources your Committee referred to above. Contrary to the growth expectations expressed, the indications are that the economy may in fact be contracting.
FUNDING FOR PARLIAMENT
Your Committee has observed with serious concern that Parliament has been allocated a paltry US$20 255 million against a bid of US$48 million for 2016 financial year. This allocation is not consistent with Section 325 of the Constitution of Zimbabwe which provides for adequate funding of Parliament, given its size. The Hon. Minister is also aware that Parliament could not effectively execute its mandate in the past due to resource constraints.
REVENUES FROM STATE-CONTROLLED BODIES
Madam Speaker, your Committee noted that the combined revenues collected by government institutions or Departments outside of the budget could well reach over $1 billion in 2016 if properly and accurately accounted for. This includes revenues from fines collected by the Zimbabwe Republic Police, ZINARA, Environmental Management Authority and the Registrar’s Office amongst many other government agencies.
It is therefore, your Committee’s view that all these funds be paid to the Consolidated Revenue Fund for effective allocation to critical priority areas by the Ministry of Finance under the control of the national budget system and the supervision of Parliament. It should also be noted that these agencies are also covered in the National Budget. In addition, your Committee has also observed that the international community provides significant funds towards education, health, water and sanitation and that it is time that these activities were fully disclosed and the values incorporated into the national budget so that government has a better understanding of just how much we are spending on different government departments and Ministries. For example, if the donor funding health and the Aids Levy are incorporated into the budget under the Ministry of Health, then Zimbabwe could easily meet its obligations under the Abuja Agreements of allocating at least 15 per cent of national revenues towards Health services.
On the proposed road traffic fines, it is the view of your Committee that a fine of US$100.00 is too much for an already traumatized populace and this can promote corruption on our highways.
PUBLIC ADMINISTRATION AND GOVERNANCE
Madam Speaker, your Committee commends the adopting public administration and governance concepts such as Private-Public-Partnerships (PPPs), e-government, monitoring and evaluation and research-based management. Admittedly these practices should address issues such as efficiency and competiveness in administration. Your Committee however suggests that the Government implements the new public management system in its entirety as opposed to implementing some aspects of it.
CORRUPTION
The growth of China as the second largest global economy was based on a growth model that had zero tolerance on any form of corruption, for our economy to grow, we need to take a leaf from this and deal decisively with corruption.
DEMONETIZATION
The RBZ carried out the demonetization process but unfortunately the amounts that were given did not adequately address the traumatic experiences that were suffered by the depositors and pensioners. It would appear that those who befitted are the borrowers. To restore confidence with our financial services sector, the Minister has to revisit this.
SUMMARY OF RECOMMENDATIONS
In summary Madam Speaker, the Finance and Economic Development Committee of the House of Assembly recommends that:
- The Government accelerates its debt clearance strategy so that fresh funds can be injected into the economy and attract Foreign Direct Investment for the growth of the economy.
- A clear path of Civil Service and Pensioners rationalization be provided and a detailed audit of all staff in all Ministries and government departments should be conducted.
- Revenue retention by line ministries and Government departments be stopped forthwith and that all revenues be accounted for through the Consolidated Revenue Fund for effective allocation to critical priority areas determined by the Ministry of Finance and Economic Development
- The government should seriously consider issues raised by key stakeholders and amicably engage them to ensure policy buy in.
- Parliament should be fully funded so that it performs its duties as an independent legislative body without compromising the separation of powers.
- Treasury disburses allocated funds to line ministries timeously so that they provide adequate service to the people.
- A moratorium be extended to SMEs for the repayment of their outstanding loans considering that government is also getting the same from financial institutions.
- Local productive industries be protected through a prohibitive tariff regime.
- Fines exceeding US$20 should be referred to the courts
CONCLUSION
Madam Speaker, it is clear from the budget that the Minister of Finance is faced with an extremely difficult task this year. He has been open and frank with the nation and from the evidence led by the different stakeholders has not only held meetings with them but taken most of their ideas and suggestions on board. This is a welcome development. However, your Committee feels that the concerns raised by stakeholders are valid and deserve attention and we hope that, even at this late hour that these will be addressed. I thank you.
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