Govt oblivious to economic realities
http://www.theindependent.co.zw/
Thursday, 03 February 2011 18:29
A MAJOR contributor to the economic ills which continue to confront Zimbabwe
is the magnitude of governmental policies pursued solely for their perceived
objectives, with total disregard for the negative consequences.
Recurrently, in pursuit of policies which are generally — but not always —
of good and sound national intent, government demonstrates total oblivion to
many adverse repercussions of its policies. The prejudices of such adverse
repercussions are of such magnitude as to negate objectives.
Examples government’s one-track thinking are so innumerable that they could
fill not only this column, but a very comprehensive book. Thus only a few
examples can be cited here, but indisputably most of commerce and industry,
other economic sectors and the populace at large could cite many more. To
emphasise the immense harm inflicted by government on Zimbabwe and its
people by its myopic failure to consider associated consequences of policies
are the following examples:
Justly determined to enforce tax compliance and contain pronounced tax
evasion, government legislated that all enterprises as are Vat registered,
and having sales revenues of US$240 000 or more per annum, must operate
fiscalised electronic registers or memory devices which would have direct
data feed to the Zimbabwe Revenue Authority (Zimra). A similar statutory
requirement exists in many developed economies, and recently in several of
Africa’s developing economies.
From the points of view of private enterprise probity, and enhancement of
greatly needed governmental revenues, the requirement of modern electronic
technology cannot be faulted. However, to impose such obligation upon
business enterprises when the economy is yet to recover meaningfully from
its prolonged moribund state is incomprehensible and economically
counter-productive.
The harsh fact is that most of Zimbabwe’s financially and operationally
distressed enterprises do not have the resources to fund installation of the
statutorily required electronic devices. They are devoid of the funding
required to purchase, install and operate the fiscalised registers, and are
therefore forced into discontinuance of operations. Concomitant consequences
are greater unemployment, reduced downstream economic activity, and lesser
inflows to the impoverished Fiscus.
Admittedly, the legislation does empower Zimra to grant extensions of time
for compliance, but the period of such extensions — 30 days — is a miniscule
and meaningless. Moreover, only two suppliers of the fiscalised registers
and devices have to date been approved by Zimra, resulting in the absence of
price competitiveness, and an insufficiency of supplies to service the needs
of the whole economy even if enterprises did have the requisite financial
resources to purchase the equipment.
If government, in general, and the Minister of Finance Tendai Biti, have any
real concern for the country’s economic recovery and growth, they would
suspend the legislation to a more propitious and realistic date (probably in
2012).
There is thoughtlessness applied to the legislative requirements for
re-registration of all motor vehicles, including issuance of new number
plates. On the one hand, a charge of US$160 for the re-registration and
number plates is incomprehensibly excessive and, on the other hand, many did
not (and do not) have the funds necessary to comply, notwithstanding their
ownership of vehicles.
Such ownership does not necessarily evidence wealth and cash liquidity,
particularly so in the case of enterprises with large operational fleets,
and of pensioners and others with aged vehicles. They are dependant upon
those aged vehicles, but do not have the wherewithal to fund the exorbitant
charge. The probable real cost of the plates cannot exceed a maximum of
US$40, unless suppliers or government is guilty of gross profiteering.
Allowing for a governmental administration cost of, say, US$10 per vehicle,
the maximum justifiable charge for the reregistration of vehicles and issue
of new plates should have been US$50.
Yet another example of destructive thoughtlessness was the reduction, in the
2011 Budget, of the rates of customs duties on clothing and footwear. A
significant element of Zimbabwe’s economy has, for many decades, been the
manufacture of such products. The textile, clothing and footwear
manufacturing sector has been one of the biggest employers of Zimbabweans,
has contributed substantially to the country’s economy, has been a major
source of direct and indirect tax revenues for government and been a key
economic foundation.
However, in recent years, the sector has been critically affected by
Zimbabwe’s very negative economic circumstances, and the hardships faced by
it were intensely compounded by the magnitude of competition from imported
products which have been smuggled into Zimbabwe without payment of duty, and
by many such products having gained from excessive export subsidisation by
exporter countries, and by disguised origin in order to attain preferential
duty-free importation.
Instead of addressing the survival needs of this key manufacturing sector,
government has seen fit to worsen its lot, and jeopardise its survival, by
lowering the rates of customs duty. How thoughtless and foolhardy can a
government be? Yet another example of governmental policies anathema to
economic wellbeing is the continued alienation of foreign investment.
Government has repeatedly, and voiciferously, acknowledged the need for such
investment as a prerequisite to economic development and growth.
But, concurrently with doing so, it not only legislates for 50% Zimbabwean
control over all enterprises, but also threatens expropriation of 90% of
equity in all foreign-owned businesses that do not publicly condemn the
allegedly “illegal” international economic sanctions (which do not exist,
being only certain restrictions upon specified governmental individuals,
government itself, and its underlying entities). At the same time, it fails
to comply with the Bilateral Investment Promotion and Protection Agreements
into which it has entered, whilst concurrently concluding new such
agreements. Steadfastly, despite its protestations to the contrary,
government alienates investment, instead of motivating and attracting it.
It is long overdue that government gives substantive and constructive
fore-thought to its policies. government needs to learn that it must “look
before it leaps”!