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Economic reform in the new dispensation

The Herald

Nick Mangwana Special Correspondent
In the post-independence era in Zimbabwe, several well-designed economic designs were drafted, some with floral acronyms and written in intellectual language, but none except the Transition Stabilization Program (TSP ) has passed the implementation test. Did not we have some regrets that Zimbabwe is good at producing blueprints that are dusting somewhere!

The last part of a three-part series, written in as many weeks in this publication, deals with the Mnangagwa economic reforms undertaken by the President ̵

1; the other parts are political and legislative reforms that we have discussed in previous weeks.

The TSP is President Emmerson Mnangagwa's short-term economic reform plan, which is guided by the Vision 2030 Guideline and aims to turn Zimbabwe into a middle-income economy by 2030.

The implementation of TSP will be – like no other Time in the history of Zimbabwe – persecuted in word and spirit – within a scientific matrix.

The TSP outlines policies, strategies and projects that guide Zimbabwe's interventions on social and economic development for the period from October 2018 to December 2020. President Mnangagwa's economic reform thrust is aptly reflected in the two mantras "Zimbabwe is open to business" and "Prosperity austerity" reflects the government's clear commitment to end Zimbabwe's international isolation and abandon the negative policies of populism.

True to the mantra of opening the land to business, the new regulation in 2018 changed the 2007 Restrictive Indigenization and Empowerment Act, which reduced foreign shareholdings in local companies to 49 percent. The indigenization law stipulated that the indigenous people own at least 51 percent of all companies worth more than $ 500,000. The law was restrictive and unappetizing for foreign investors who felt disadvantaged and deprived of their hard-earned capital injections. An amendment to the Exclusive Indigenization Act of March 2018 lifted restrictions on all sectors except the diamond and platinum sectors. Foreign investors can now fully invest in the non-commodity sector as the new regime facilitates technology transfer, value creation and job creation. For potential investors, it is safer that the government has already announced its readiness to lift the remaining restrictions in the diamond and platinum sectors. Russian diamond giant Alrosa has already acquired a 70 percent majority stake in a joint venture with the Zimbabwe Consolidated Diamond Company (ZCDC).

Correction of ambiguity
Under the TSP program, the government corrects the economic imprudence of the previous ruling, which includes fiscal and monetary discipline, liquidity constraints and distortions in the foreign exchange market. These led to a growing budget deficit and its funding through overdrafts at the Zimbabwe Reserve Bank and over-issuance of Treasury bills, which were the main causes of macroeconomic instability and vulnerability of the financial sector. In order to tame all disciplines, the new regulation drew up and implemented measures derived from the TSP to curb its budget expenditure.

In order to curb the public spending law, the TSP is introducing the following measures: public service reform, strengthening the public finance management system, improving the use of public resources and improving accountability. The main objective of public service reform is to reduce consolidated public sector wages and salaries for central government plus salary remittances. At the same time, the bill on employment costs including pension benefits and employer contribution to health insurance and the NSSA will decrease from 90.6 percent of total revenues to 62.5 percent of total revenue by 2020 occupation of non-critical posts, enforcement of retirement schemes, introduction of a voluntary retirement plan, introduction of a new regulation of personalized vehicles, rationalization of missions abroad, reduction of bonus payments and functional reviews, where the identification of areas is dominated by duplication, duplication and non-essential services. The measures also include the reform of state-owned enterprises (SOEs), the introduction of a CMED vehicle tracking system, the abolition of the post of youth workers and the reduction of salaries of high-ranking government officials.

The government has already begun implementing these reforms. State-owned enterprises (SOEs), which have been out of control for decades, are being reformed. A reform framework has been approved for 43 state-owned enterprises and municipalities, which aims to make them fully accountable and economically viable. Some state-owned companies are partially privatized by involving strategic partners and / or listing them on the Zimbabwe Stock Exchange, while others are merged, fully privatized and / or liquidated. So far, the GMB has been merged into GMB Strategic Grain Reserve and Silo Foods, a commercial unit. The 15 state-owned companies are National Handling Services, Petrotrade, Zimpost, POSB, Grain Marketing Board (GMB), Zimbabwe Mining Development Corporation, Zimbabwe Infrastructure Development Bank, TelOne, NetOne, Telecel, ZUPCO, Willowvale Mazda Motor Industry, Chemplex Corporation , Deven Engineering and G & W Minerals. The government has concluded the assignment of transitional advisers to state-owned enterprises, as required by the Public Procurement and Waste Management Act. Soon, the government would invite investors to buy shares in the companies. The parastatal reform program is funded by a $ 42 million grant from the African Development Bank.

Early Signs
TSP interventions are already bearing fruit as the government managed to lower its employment costs through the retirement of 3,365 youth officers. It also lowered the salaries of high-ranking government officials by five percent. The pay cut concerned officials from the rank of principal director to the bureau. The government also reduced premiums paid to civil servants in 2018. Instead of the previous formula, where the premiums were calculated on the basis of officials' basic salaries plus transport and housing allowances, the Government paid only the premiums calculated on the basic salary. Freezing when occupying noncritical locations has been retained. The government is also withdrawing from all government officials who are 65 years or older. The number of foreign missions in the country will also be reduced. The country has 46 diplomatic representations with approximately 581 employees. To further reduce costs, the government banned the use of their vehicles in unauthorized companies by installing a tracking system to monitor the movement of all state-owned vehicles. Officials who find they are abusing state vehicles for personal use will be punished. All these austerity measures will save millions of dollars used to fund basic development projects, such as road rehabilitation.

On a monetary level, the new dispensation succeeded in stopping inflation, which galloped at a hemorrhagic pace for the economy. The Ministry of Finance and Economic Development, Professor Mthuli Ncube, timely introduced the legal instrument 142, which ended the multi-currency system and introduced a single currency system. The intervention sparked the death of a parasitic black market system that has sabotaged the economy for decades. The SI142 has revived the interbank foreign exchange system and revived the operation of the currency exchange. At present, the formal foreign exchange system is flourishing, enjoying favorable exchange rates, which have markedly reduced parallel market activity and significantly improved the inflow of foreign currency to the benefit of industry and other companies in the formal market.

of doing business
In order to simplify business operations, the government has implemented plans to set up a lean entity called the Zimbabwe Investment Development Authority (ZIDA) to shorten the start-up time for investors running a business on the Country. The ZIDA law was passed on 5 April 2019 and is now before the Parliament. ZIDA will merge three investment agencies, the Zimbabwe Investment Authority, the Joint Ventures Unit and the Special Economic Zones Authority into one single point of contact. In addition, the government introduced special economic zones. On August 17, 2018, the government adopted the legislative instrument 154 of 2018, which effectively puts all SEZs into operation. According to the Government Gazette, nine companies, including Surewin Pvt (Ltd.) (Sunway City Technology Park, SEZ), Zimbabwe's iron and steel company (SEZ Zisco), Afrochine Pvt Ltd (Selous Afrochine Special Economic Zone), Southpole Consulting Pvt Ltd (Victoria If Special Economic Zone), Lentsloane Pvt. Ltd. (Norton Business Park), Trade Kings Zimbabwe Pvt. Ltd. (Workington), Ecosoft Pvt. Ltd. and Bernard Pvt. Ltd. Investors working in Special Economic Zones will not pay any taxes in the first five years. Afterwards they pay taxes, which are below the normal tax rate of 35 percent. So far, the government has simplified business processes by implementing the following administrative measures: improving the system for registering real estate by reducing the number of procedures from five to four, setting up a credit register to facilitate lending, improving the enforcement of contracts by increasing the number of Small claims courts from two to ten and establishment of four commercial courts. Other incentives to attract investors include tax relief and the deduction of taxes on investment in new equipment, machinery and factory improvements.

Fighting corruption
In order to further simplify business operations, the government has also revived efforts to combat corruption by restoring and reviving the Zimbabwe Commission on Zimbabwean Anti-Corruption Commision (ZACC) by issuing powers of imprisonment. A new ZACC chairman, Justice Loice Matanda-Moyo, and a new team of commissioners have been appointed.

The team did not take time to catch its first blood by arresting high-ranking Minister of Tourism and Hospitality, Prisca Mupfumira, charged with corruption, in connection with operations at the National Social Security Authority (NSSA) , Eliminating corruption will lower the cost of starting up businesses in Zimbabwe and removing other barriers to transplantation.

The reforms under the new ruling have been thumbs-up from several sides by the representative of the International Monetary Fund (IMF) in Zimbabwe, Patrick Imam. and told Business Weekly, "We welcome the reforms announced in the 20 February Statement on monetary policy and the June 24 news release to address economic distortions that have hampered macroeconomic stability."

The Resident Coordinator of the United Nations, Bishow Parajuli also welcomed the reforms by saying, "This economic reform that is taking place is essential, and the steps that have been taken for economic reform have been essential."

Recognizing the government's efforts to get the economy back on track, the World Bank improved Zimbabwe's rank from low income economy to a lower middle-income economy for the period 2019-2020. This shows that the economy is growing and omy Land is well on track for its 2030 vision of turning economics into middle-income by 2030.

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