Bite the bullet ─ industry tells Government

FINANCE minister Mthuli Ncube should introduce more tax reforms and perk up the country’s ease of doing business climate in his pending mid-term fiscal policy statement to boost the economy.

So recommend economic experts, who told The Financial Gazette — Zimbabwe’s number one business publication — this week that Ncube also needed to take further policy interventions to fortify the country’s new currency, the ZiG.
The president of the Zimbabwe National Chamber of Commerce (ZNCC), Tapiwa Karoro, said while business understood that the tasks at hand were challenging, it was nevertheless looking for additional measures by authorities that would help to lift the economy.
“The upcoming statement should thus aid in fostering a more conducive business environment that stimulates and sustains growth and macro-economic stability.
“The economy also needs new measures to encourage the formalisation of informal businesses, as well as greater acceptance of the local currency for taxes, levies and duties.

“Similarly, business is seeking policy measures that will bring confidence and greater certainty in the performance of the ZiG and the overall multi-currency regime,” Karoro said.
“We also urge authorities to continue with their efforts to reduce the country’s debt arrears and to improve relations with multi-lateral funders.
“Any further debt accumulation, if necessary, should also align with the Public Debt Management Act,” he added.
Investment analyst, Enock Rukarwa, called for the reining in of “the ballooning government expenditure” as seen through heightened road construction, agriculture subsidies and food relief programmes.
“The only way to accommodate the prevailing monetary policy measures is through a contractionary fiscal policy, wherein taxes are maintained at current levels or increased to reduce the deficit position, albeit at the expense of economic growth.
“It’s unfortunate that we have ballooning government expenditure through road construction, agriculture subsidies, SADC summit-related expenditures and food relief programmes. “The government, through the RBZ’s monetary policy committee, has already revised GDP growth projections for 2024 downwards to two percent. So, emphasis should be on anchoring inflationary pressures and exchange rate volatility,” Rukarwa said.
Economist Vince Musewe stressed the need for a focus on investment growth and job creation.
“It’s critical that we stimulate investment growth and job creation. This economy must grow and create incomes and a better quality of life for all citizens. That is what is lacking,” he said.
Economic analyst, Prosper Chitambara, highlighted the negative impact of the current tax regime on businesses.
“Business is concerned about the general tax regime and structure within the economy, which poses a big burden on commerce and industry,” he said.
Chitambara also hammered on the importance of “fiscal and monetary policy complementarity” in achieving low inflation, as well as a stable exchange rate.
Another economic analyst, Dawie Roodt, stressed the importance of protecting private property rights, promoting free trade, and maintaining low inflation for business growth. He also criticised the government’s restrictions on ZiG trading.

Economist Victor Bhoroma zeroed in on the challenges businesses faced due to increased taxation, which made it difficult for them to operate profitably.
“There are too many tax heads and levies that fall under different government departments or ministries.
“Some have been complicated by the latest statutory instruments. All these make tax compliance difficult,” he said.
Bhoroma also stressed the importance of aligning government expenditure with taxable revenue to curb money creation, which induced inflation.
“Authorities must set their expenditure below taxable revenue to curb money creation or parallel funding through the central bank.
“The government must also implement customs and import systems that make it expensive to import finished goods that are manufactured and available locally.
“To stabilise the economy, there is a need to align government expenditure to collectable tax revenues and end all central bank quasi-fiscal operations, while also implementing a market-driven foreign exchange system. All these will ensure sustainable economic stability,” Bhoroma added.

This comes as business and other economic experts are more optimistic about the country’s growth prospects in the second half of 2024 than they were in the first half of the year.
This is despite the many challenges that continue to affect the economy negatively, including the El Niño-induced drought and the country’s relentless power cuts.
Business leaders and economists who spoke to The Financial Gazette last week said the introduction of the ZiG in April this year had brought a welcome measure of stability to the economy, with inflation now trending downwards and the new currency continuing to hold its value.
“Of course, there also remain a lot of opportunities in Zimbabwe. Chief among these is the looming rainy season in the fourth quarter of the year that is expected to benefit the agriculture sector,” ZNCC chief executive, Chris Mugaga, said.
He further highlighted the recent approval of Starlink — the satellite internet constellation operated by a wholly-owned subsidiary of giant American aerospace company SpaceX — as a positive development for the ICT industry and the rest of the economy.
“The approval of Starlink to operate in Zimbabwe will also mean that we will see growth in the ICT industry in the could,” he added.
However, Mugaga also cautioned that the government’s heightened infrastructure spending could put pressure on the ZiG.
“Government has been over-relying on domestic sources of funding for its projects, and this could put a bit of pressure, or strain on the value of the ZiG,” he said.
The president of the Confederation of Zimbabwe Retailers (CZR), Denford Mutashu, echoed the same cautious optimism.
“The first few months of the year were marked by significant inflationary pressures, but the introduction of the ZiG has been instrumental in creating much-needed currency stability — which has, in turn, contributed to a more predictable economic environment,” he said.
Mutashu also called for comprehensive tax reforms, including a reduction in the Intermediated Money Transfer Tax (IMTT), to alleviate the financial burden on formal businesses and consumers.

Mutashu also stressed the importance of continued efforts to further improve the ease of doing business environment in the country, as well as the need for more monetary policy adjustments to control inflation.
Economist Mishek Ugaro was optimistic about the country’s economic outlook, noting the falling inflation.
“Inflation is now on a downward trend since the launch of the new currency in April. I expect this trend to continue.
“My outlook projection is continued currency stability and inflation to end the year within the range of one to two percent month-on-month, since we cannot have an annual figure until April next year,” he said.
However, Ugaro urged authorities to improve the circulation of small denomination notes and coins of the ZiG to facilitate ease of transactions.
“We have seen the deliberate shortage of notes and coins in circulation as the authorities drip-feed the system to support the demand for the new currency.
“We urge the authorities to increase the circulation of small denomination coins and notes for change purposes,” he added.
Another economist, Nyasha Kaseke, also forecast a positive outlook — “contingent on the continued acceptance and use of the ZiG”.
He added that although there had been “initial hesitancy” among the public regarding the new currency, the stability that it has brought to the market was starting to build confidence.
“This stability is expected to continue in the second half of the year if we continue to have the current tight monetary and fiscal policies,” Kaseke said.
He further urged the Reserve Bank of Zimbabwe (RBZ) to promote more use of the local currency outside major towns, saying if it continued to be accepted and used then there would be “a much more positive outlook in terms of the economy”.
Persistence Gwanyanya, a member of the RBZ’s monetary policy committee, emphasised the importance of continued fiscal discipline and sound monetary policy.
“Our economy has shown a lot of resilience not only in the face of many headwinds, including the current drought which is a major issue in the region,” he said.
newsdesk@fingaz.co.zw