EDITORIAL COMMENT: Interventions to stimulate economic growth Minister Patrick Chinamasa

PATRICK CHINAMASAAON Thursday, Finance Minister Patrick Chinamasa presented a bold mid-year fiscal policy review statement in which he highlighted a number of cost containment measures and strategies towards consolidating domestic economic growth.

He demonstrated the government’s appreciation of the barriers to sound progress and affirmed its commitment to bringing a new dispensation towards successful implementation of the Zimbabwe Agenda for Sustainable Economic Transformation, (Zim-Asset).

Slashing the bloated civil service wage bill and protecting and capacitating local industries were the major highlights of the minister’s statement.

With 80 percent of the country’s revenue gobbled by salaries, Chinamasa boldly stated the scenario was not sustainable given the limited resources shown by Zimra’s failure to meet its revenue target for the first half of 2015.

The minister was pragmatic and realistic as he assured the country that a turnaround of the economy was certain.

He said reducing the government wage bill to below 40 percent was in line with the International Monetary Policy’s Staff Monitored Programme, that Zimbabwe agreed with the IMF to ease the country’s excessive debt burden.

Chinamasa said his ministry and that of Public Service, Labour and Social Welfare had made headway in this regard.

“The government is concerned with the level of resources from the national budget that employment costs continue to absorb at the expense of developmental expenditures and expenditures in support of government operations in public service delivery,” Chinamasa told Parliament.

“Cabinet recognises that this is unsustainable, hence it has given a directive to the minister responsible for public service and the minister responsible for finance to urgently propose remedial actions to gradually bring down the share of the wage bill in the budget from over 80 percent to below 40 percent.”

He said the two ministries have already undertaken an extensive exercise engaging the line ministries benefiting from the technical support and co-ordination of the Civil Service Commission, the Judicial Services Commission and the Health Services Board.

Chinamasa said the Civil Service Commission has also completed a physical head count of all civil servants as part of the exercise.

Considering the fact that no up-to-date official figures of the number of public sector workers exist, we applaud the government for being realistic and tackling the problem head on.

Estimates indicate 83 percent of the government’s $2 billion costs were going to the salaries of about 554,000 employees. The scenario leaves little fiscal space for capital expenditure hence the slow economic development.

While the exercise will result in shedding unnecessary staff, we concur with the minister that in the long run it will see an improvement in pay.

Chinamasa also stressed the need to expedite labour law reforms in the context of rampant job losses in the private sector following the recent Supreme Court ruling.

He said labour laws would be reviewed with a view to protecting the rights of both the employee and the employer while at the same time ensuring continued survival and viability of businesses.

The minister said the loopholes in the current legislation had created imbalances that have had negative implications on the economy.

He noted how the labour cost burden had led to the demise of giant parastatals such as Ziscosteel (NewZimSteel) which has accrued payroll liabilities of over $131,5 million in the five years it has not been operational.

Air Zimbabwe has salary arrears amounting to $136,4 million while the National Railways of Zimbabwe is at $140,1 million and GMB $20 million.

We agree with the minister that such a scenario makes our companies unattractive to any potential investor or strategic partner.

To show urgency, the minister said recommendations on the issue from the Tripartite Negotiating Forum, a body representing employers, employees and the government would be placed on next week’s Cabinet agenda.

Chinamasa increased surtax on imported second hand vehicles of five years and older to 35 percent from 25 percent in a bid to protect local car assemblers and contain the growing import bill at $3 billion since January.

He announced a cocktail of measures to protect local industry, which include a power tariff relief for businesses, a ban on second hand clothes starting September 1 and the scrapping of rebate on imported basic goods that can be produced locally from August 1.

The minister also removed from the travellers rebate such grocery items as maize-meal, meat, sugar and flour.

Among the growth enhancing measures is the $3 million facility for SMEs and $5 million seed money towards the setting up of a Women’s Bank.

We feel these interventions will go a long way towards rejuvenating domestic production and an expanded market for local firms.

Local companies should, therefore, grab this opportunity and complement government efforts to bring a desired turn around.

You Might Also Like

Comments