By Alois Vinga
BUSINESS experts Friday grilled Finance Minister Mthuli Ncube for failing to address economic fundamentals in his recent 2020 national budget, indicating tough times lie ahead.
Speaking at the 2020 post budget breakfast meeting, audit expert at Ernest and Young, Fungai Kuipa raised concerns over the effectiveness of the tax free thresholds saying they are inconsistent with hyper-inflationary pressures.
“The threshold now stands at $2 000 after being raised from $700 in August does not relate to current inflation figures representing a 186% increase. Notably, combined with the issue of civil servants bonuses these measures will be wiped out by inflationary pressures because currently a family of six requires $ 4 600 per month,” Kuipa said.
He added that the retrenchment packages tax free thresholds which were also increased from $50 000 to $80 000 is too little to start up a meaningful business due to inflationary pressures.
Zimbabwe Congress of Trade Unions president, Peter Mutasa warned Ncube of the imminent repetition of the 2007 to 2008 economic crisis arguing there is nothing for the working class in the budget.
“On behalf of labour, there is nothing much for workers and poor citizens as we perceive the mantra associated with this document as mere rhetoric which we have heard it before. It can only be pro-poor when we taste it on our tables.
“We can’t buy bread, clothes and pay rentals despite the fact these were the major issues that we thought will be addressed. We have seen a lot of complicated statistics in the budget but we were expecting to see figures on the numbers of children who have dropped out of school because of austerity measure, mothers and patients dying in hospitals for failing afford medication,” Mutasa said.
The ZCTU president said while the budget comes at a time when the country is going through a second major economic crisis the first one having been in 2008, workers were expecting to see a paradigm shift biased towards realistic currency reforms.
“Sadly, the budget is premised on illusionary stability and purported successes of the Transitional Stabilisation Program similar to “kuzvifonera” (calling yourself on the cellphone). There is no stability Minister. I know you are a professor and if I write an exam and say this economy is stable, you will definitely fail me,” Mutasa said.
He said workers who were earning US$400 before the reforms are now getting an equivalent of US$40 while pensioners are getting US$5.
“Without national cohesion and ownership, this budget is only going to be guaranteed through the use of baton sticks, teargas and canisters,” he added.
Economics expert, Tapiwa Mashakada who is also MDC legislator for Hatfield constituency quizzed Ncube on what will guide the recent budget in the absence of the Transitional Stabilisation Program which has just been discontinued.
“The net credit to government is increasing when compared to private sector what could be the implications of this? Our Gross Domestic Product is worth $340 billion but we can only manage to collect $58.6 billion, what can be done to grow the cake because the differential is big?” he asked.
Mashakada pointed out that recurrent expenditure will gobble $38 billion while $17 billion goes to meet employment costs. He questioned how Ncube will play around with the budget to fund proposed incentives.
The MDC policy chief said the reduction in corporate tax from 25 % to 24 % is marginal while expressing similar sentiments on Value Added Tax which was reduced from 15 % to 14.5 %.
Mashakada said concerns were that the mining sector is not contributing enough to the fiscus but albeit the observations, Ncube instead lowered the royalty tax.
Another panelist , Clemence Mumbengegwi of the Economic Society of Zimbabwe described Ncube’s budget as opening a number of risks because the balancing of twin deficits came through discretionary measures.
“I would celebrate it if future budgets’ economic growth matches up with revenue growth because that way their elimination becomes self -sustaining.
“It is a fact that we still have a dual currency US$ and Zim $, the former saving as a mechanism for storing value while the latter is used for salary payments hence the disconnect will serve as a continuous problem,” he said.
However, in response Ncube defended the budget saying it addresses multi stakeholder input, people issues through broad based subsidies, a generous portion to health and education and is the right step towards prosperity.