The ManicaPost
Kudzanai Gerede Business Correspondent —
One of the major positives derived from the 2017 national budget tabled by the Minister of Finance and Economic Planning, Patrick Chinamasa last week was setting the tone for the enhancement of revenue collection figures into the fiscus, a move seen as restraining the widening fiscal deficit that is plunging Government into accumulation of unsustainable debt to meet its huge expenditure.
Analysts have outlined that in order to restrict fiscal deficits, Government has to address the economic matrices on both fronts, thus increasing its revenue basket through facilitating increased production and emergence of new vibrant business establishments for a wider tax base on one side while tightening its tax systems to ensure accountability and curb leakages on the other end.
This is to be complemented by streamlining of Government expenditure by ensuring rationalization of the wage bill that account for the huge chunk of Treasury expenses.
Market watchers have however applauded minister Chinamasa for taking seriously the issue of reducing the budgetary funding gap by narrowing next year’s budget deficit by above 50 percent.
This was spearheaded by the reduction of the US$ 3.14 billion in wages recorded in 2016 that has been trimmed down to US$ 3 billion next year.
In 2016, the funding gap owing to drought relief, bonus payments and employment costs stretched to US$ 1.1 billion whilst projections for 2017 have been streamlined to US$ 400 million.
Despite the US$ 400 million being a sizable amount in terms of its proportion to overall budget, this has been largely viewed as a first positive step towards establishing balance to the national budget without accruing further debts that tend to discourage lines of credit into the country.
Despite headwinds such as poor revenue flow to Treasury, slow economic activity stalling business and cash and liquidity challenges, the 2017 national budget envisions a rebound to 1.7 percent expected to be buoyed by the agriculture and mining sectors which are expected to grow 12 percent and 0.9 percent respectively.
Presenting the 2017 national budget statement last week in Harare, the minister put in place a raft of measures meant to ensure that Treasury curbs financial leakages such as tax avoidance and misrepresentation of transaction records by companies.
“This therefore reflects a path towards reducing the budget imbalance through rationalisation and fiscal consolidation measures,” said Chinamasa while accentuating the need to plug leakages to boost revenues through licensing more suppliers of fiscalised devices that will bring efficiency into local taxing system.
“Currently, 10 companies are licenced to supply fiscalised devises of which four of them are no longer operational. This has constrained the supply of fiscalised devices thereby undermining progress of the programme,’’ he added.
However the fundamental challenge remains weak production levels across all sectors of the economy which has resulted in a downward revision of the initial 2.4 percent growth rate for 2016 to 0.6 percent in the last quarter.
This was mainly due to poor performance in the agriculture sector which was expected to underpin growth projections owing to low yields resulted from the El Niño effect that hit the country last season.
This has resultantly undermined the performance of the manufacturing sector which directly depends on agriculture for raw materials.
Despite a projected growth of 0.3 percent in 2017 for the manufacturing sector, inherent constraints such as antiquated machinery, low product uptake, capital shortages, high cost of utilities and unfair competition from external products are likely to threaten production.
The coming in of Statutory Instrument 64 improved capacity utilisation mainly for industries that directly fall into the category of listed items scrapped from the Open General Import License but industrialists have been calling for further incubation of other selected items that still fall victim to unfair competition from exports products.
The budget has hence been welcomed for taking a pro-productive stance following an upward review of duty on textiles in order to level the playing field for the local clothing players.
Clothing manufacturers will on the other hand continue accessing fabrics duty free as per the clothing manufacturers rebate as government envisions an improvement in the growth of the textiles sub-sector currently operating at around 30-35 percent.
The textiles industry has been massively hit by continuing influx of clothing bales despite their ban in last year’s fiscal statement. There are high levels of smuggling of clothing bales into the country mainly through the eastern border with Mozambique.
The removal from Open General Import License of luggage ware, school uniforms and wheat flour has also received credit from the various economic players in these sectors.
