Economy has undergone robust transformation — Prof Ncube . . . as he presents 2024 National Budget today
ZIMBABWE’s economy has undergone a robust transformation over the past five years and the 2024 National Budget will focus on consolidating these gains by laying the foundation for sustainable and inclusive growth, Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube has said.
This comes as Minister Ncube will this afternoon present the 2024 fiscal plan themed “Consolidating economic transformation”’. He is expected to address the nation’s aspirations for continued growth, stability and prosperity. Businesses and the general public eagerly await the revenue and expenditure framework to gain insights into the Government’s plans.
Minister Ncube said the economy had undergone a fundamental transformation, driven by growth in critical sectors such as infrastructure, mining, agriculture and tourism.
Despite the challenges posed by the Covid-19 pandemic, he said Zimbabwe had demonstrated resilience and adaptability, paving the way for sustained and robust economic growth.
“The economy has undergone (what) I would say is tremendous transformation for us to have come out of Covid the way we did,” said Minister Ncube in a pre-budget interview with ZTN PRIME.
He said the economy had exhibited resilience and growth in recent years, achieving successive growth rates above the regional average, having expanded by 18,5 percent and 6,5 percent in 2021 and 2022 respectively. It is expected to register a 5,3 percent growth this year although this may see a slowdown due to a drought.
Infrastructure development has been a key focus with significant investments made in upgrading roads, improving energy generation and enhancing water infrastructure.
Substantial investments have also been made in social infrastructure including learning facilities for primary and tertiary sectors as well as healthcare facilities in urban and rural areas.
In addition, Zimbabwe’s mining sector has experienced a remarkable surge in recent years, fuelled by significant growth in lithium, gold, iron ore and platinum projects, creating employment, quality jobs and propelling economic growth.
Further, various initiatives to support farmers, including providing access to inputs were implemented, leading to enhanced productivity and improved food security.
Minister Ncube said “the speed and scale of the projects” was encouraging and would undoubtedly keep the country on course to become an upper middle-income economy.
“There is a complete transformation of the economy everywhere and we want to consolidate that transformation by making sure that we add where we need to add, we fine-tune where we need to fine-tune, crowd in the private sector where it is needed, fine-tune our social protection programmes. We want to consolidate this transformation so that it takes us to the next level as we move towards Vision 2030.”
While ministries and State departments have submitted budget proposals amounting to $110 trillion, Minister Ncube underscored the fact that Government spending must align with its capacity. He said that exceeding the 18 percent GDP threshold would lead to unsustainable debt levels and jeopardise the nation’s economic stability.
The minister, however, said priority would be given to sectors that ensure the transformation is consolidated.
“It’s never easy; ministries fight for their budgets as they should. Even my ministry does the same thing with me. So it’s always a tough job (of) balancing priorities,” he said.
“(We will) prioritise those sectors that ensure the transformation is consolidated. We have a finite envelope, but we also use a track record on how each ministry has done. We also make use of that record, we can see which ministry overspends and if it is because we gave them less budget last year, (then we see if) we should do better.”
On taxes, Minister Ncube promised an early Christmas present for workers as the tax-free threshold would widen to take into account the current inflation trends. He said the budget was a product of wide consultations with various stakeholders including President Mnangagwa, Parliament committees and the public.
Inevitably, the national budget will also have to carry measures on how the Government plans to deal with the effects of El Niño, inflationary pressures as well as exchange rate instability.
Analysts and economists told The Herald’s sister publication Business Weekly recently that the 2024 National Budget played a critical role in shaping the economic landscape and the overall welfare of the population.
Economist Enoch Rukarwa believes a desirable overall tone of the 2024 National Budget should be premised on consolidating and sustaining the relative stability that we have experienced in the last 12 to 24 months.
Mr Rukarwa, however, said an effective contractionary spending approach to curtail inflation and stabilise the domestic currency stance should not stifle aggregate investment and stronger economic growth.
Economic commentator Glady Mutsopotsi-Shumbambiri believes the budget should address issues of better service delivery in health and education. Supply of adequate drugs in public hospitals and revamping of key infrastructure and better remuneration of civil servants are expected to receive priority.
Given that tax policies play a pivotal role in the economic landscape, Zimbabweans can expect a careful review of the national tax system to ensure business growth and encourage investments.
“The Government may introduce measures to broaden the tax base while providing relief for certain income groups. Striking a balance between generating revenue and alleviating the burden on citizens will be a key consideration,” said economist Mr Tinevimbo Shava.
“The Zimbabwean tax framework remains growth limiting in terms of its overall haircut to business operations profitability. Any form of tax easing on the current tax structure should be welcoming to the greater business community,” Mr Rukarwa concurred.
Ms Mutsopotsi-Shumbambiri said Treasury should seek ways to broaden its tax base, simplify and improve the tax system and administration system.
“The Government should consider expanding the tax base by introducing new taxes or increasing existing taxes on non-traditional taxable goods and services. This could include taxes on digital services, luxury goods, or environmental taxes.
“The current tax system in Zimbabwe is complex and burdensome for businesses. The Government should simplify the tax code, reduce the number of tax rates and eliminate unnecessary exemptions and deductions.
“The Government should strengthen tax administration by investing in technology, training tax officials and fighting corruption. This will improve tax compliance and increase revenue collection,” she said.
Economist Dr Prosper Chitambara says tax is one of the major challenges in terms of the competitiveness gap as an economy and we need fewer taxes and simplified taxes across the board.
“There is a need for some tax relief given the tax burden imposed by the plethora of taxes and levies, even duties and my expectation is that maybe we need to simplify and consolidate our taxes so as to enhance competitiveness,” he said.
Analyst Tafara Mtutu said taxes were a delicate issue because if raised, they could make the few formal businesses run away from the public glare into a shady informal market.
“What is ideal is to create an enabling environment of incentives in order to lure businesses in the dark to begin paying taxes after they formalise, but unfortunately, I do not feel they will look in that direction,” Mr Mtutu said.
“In order to push the use of the local currency they might increase the taxes in US dollar transactions, it becomes a hindrance to formal business operations and it might cause a bank run as people will prefer transacting in cash.”