ZIMBABWE’s economic crisis over the last two decades has been characterised by a debilitating liquidity crunch, forex and cash shortage, galloping inflation that has eroded incomes and frequent power outages that have crippled the operations of the business sector. Our senior business reporter Melody Chikono (MC) recently spoke to professor of economics and executive director at Africa Economic Development Studies, Gift Mugano (GM) on the side-lines of the Insurance Institute of Zimbabwe Annual Conference in Victoria Falls to discuss at length the government’s economic blueprint amid the headwinds.Below are the excerpts of the interview:
MC: Can you unpack the National Development Strategy 1 (NDS1) for us. Its strengths and weaknesses?
GM: The NDS1 is a blueprint, which aims to achieve Vision 2030 where we expect income per capita of US$4 500 to US$12 000, becoming an upper middle income economy. Right now, we are lower middle income at US$1 000. So, we need to move to US$3 000 per capita. For us to do that, we need to change the structure of our economy. We need to transform our agricultural sector to profitability and also move up value chains.
When you look at NDS1, in terms of clarity of what we need to address, it is very clear but in terms of execution and that is where the challenge is. The narrative is that it is implemented through the national budget. We are saying we are going to use budget resources to the NDS1 like funding. When you do that, it means you are not quite prescriptive and direct that you are going to include more private players in the game. The fiscal policy and monetary policy are not structural policies but kind of complementary policies, which support structural policies through an incentive scheme.
MC: Can you shed more light on structural policies?
GM: You need structural policies, which is your industrial policy. So, when you develop an industrial policy to support NDS1, you are simply coming up with specific strategies on how each sector of the economy is going to be functioning. You will be pronouncing measures that in best practice are through value chain development encouraging economic activity and investments in those sectors.
Policy measures like Special Economic Zones can be the interesting vehicles to push value addition, investments production and exports. The budget can only come in as a complimentary and cannot be a standalone policy. If you set up SEZs through industrial policy, you want fiscal policy. So, it comes in support but it cannot be a standalone policy and the same applies to agricultural policies.
They must be championing and pioneering the push for agricultural transformation moving the sector up the value chain. Instead of exporting raw materials you make sure that the supporting industries are part of the ecosystem. You need to make sure you have a public sector investment programme, which should see investment into roads.
The budget plays a complimentary policy supporting agriculture by availing funds. On our current NDS1, the emphasis is that the budget will be the implementing policy. It is kind of putting other instruments on a hold. There is silence and no forums that have robust discussions on industrial policies, what we have achieved and so on.
MC: So, what is the impact of all this?
GM: There is a mismatch in terms of how policies should be working together and that is the gap that I think will derail our desire to achieve Vision 2030. We are now having a command economy, command agriculture, but if we had an agriculture-oriented policy framework, which is focusing on economic transformation, we would go far.
In short, we have a missing link on pronouncement and consistency in structural policies and we have not seen much movement on some ministries. If you hear any policy forum, it is the Reserve Bank of Zimbabwe and the Ministry of Finance and Economic Development but they cannot drive the economy alone.
MC: Are you saying the NDS1 in its current form is not sustainable?
GM: In terms of execution, yes. But in terms of structure, the blueprint is very clear as it explains the areas that we need to focus on. However, for example how do you expect the ministry of Industry and Commerce to help in meeting fertilizer requirements that we want? The answer is not there. How are we able to move up the value chain in the cotton sector? The answer is not there because we do not have sector specific strategies, which have been developed to implement NDS1. We do not have the implementing framework. So, we will not achieve 760 000 jobs.
MC: You touched on budget spending by ministries, can you elaborate on that?
GM: In terms of budget performance, by mid-year, the ministry of Finance and Economic Development should have distributed 50% of budget votes across all ministries, departments and agencies (MDAs). However, I indicated that government departments and line ministries have been starved of resources as they utilised below 50%. Of great concern are the ministry of Health and Child Care and ministry of Foreign Affairs and International Trade, which, respectively, are failing to deliver basic health and meeting foreign obligations including staff salaries at our missions abroad.
Ironically, in a manner that reinforce my argument on the drought of political will on government procurement system, the following departments and ministries exceeded their 50% budget threshold as follows: Office of the President and Cabinet (111%), ministry of Finance and Economic Development (75%), ministry of Lands, Agriculture, Water, Fisheries and Rural Development (80%) and Defence and War Veterans (75%).
In addition, the same departments and ministries were awarded massive supplementary budgets. With this new budget, about ZW$1,22 trillion budget (auction rate US$1:ZW$646,24), which will be distributed to government service providers, one can only expect the exchange rate to run away until the Zimbabwean dollar goes into extinction.
If you starve a ministry of resources, you don’t get activities going. There is misallocation of resources and those that get them they overspent. There is overspending by those that even get more. The problem we then have is that we then have a destabilising budget, the procurement system is being abused and the budget is being abused.
MC: How then does this destabilise the economy?
GM: We remain entrenched in drought of production. The second aspect is that we have monies that are going be tied in wastefulness for the procurement system and that money goes onto the black market then destabilises the economy. The message for the government is very simple. We need to prioritise resources to key ministries which are production oriented for NDS1. After doing that we need to stick to the budget in terms of utilisation.
MC: Why do you think there are other ministries that overspent when they are not supposed to?
GM: I think it’s just rent-seeking behaviour. If you check the ministry of Finance and Economic Development, they do not have any justification to use the money. If you talk to them, they tell you, we use this money for emergencies but as it is, they have spent over 75% but there are no emergencies.
Because of the rent-seeking behaviour and corruption, they refuse to release money for Industry and Commerce, ministry of Foreign Affairs and International Trade, who are being embarrassed, internationally, because of failure to pay money on time. But they can afford to pay for motor vehicles. That is corruption.
MC: Do you foresee any changes in the future in terms of budget systems?
GM: No. Not if they have been doing this for the last four years and it is well documented, the ministry of Finance and Economic Development has been a big disappointment and with the campaigning season it can only get worse. There will be more distortions.
MC: What are your expectations for the upcoming budget that can steer the economy forward?
GM: The budget should understand what we are trying to address. Our challenge is production. There is also corruption. Corruption is when the ministry of Finance and Economic
Development allocates itself a lot of money, they must make sure the money goes to the key line ministries and they must play their supervisory role. Most critically, we need to reduce our tax burden.
Four percent tax on transactions is just a menace, because its intention was to promote the use of the Zimbabwean dollar but we have lost the plot.
So, the policy has become irrelevant. It is inflationary due to cumulative costs. If we want to fight inflation the 4% tax must go but we still need our local currency.
Government still has an opportunity to bring back the Zimbabwean dollar from the dead. I know that the discussion between US dollar and Zimbabwean dollar is a difficult one and it can only be settled when we go for Zimbabwean dollar but how do we bring it back.
In the budget, government must make a decision to say all the taxes in this country are in the Zimbabwean dollar and repeal the Finance Act which compels everyone to pay taxes in the currency of trade. All government payments should be in the Zimbabwean dollar.
What this will do is that it will create demand for the Zimbabwean dollar. It will force economic agents in the economy to keep the Zimbabwean dollar because they will know it is an important currency to meet government obligations.
If they do not do that, they must forget the Zimbabwean dollar next year. This is because, clearly as soon as you want to get Zimbabwean dollar, you are going to change it and throw it away but if you are to pay tax or do government business you will need it and have to keep it so you reduce its pressure on the black market.
Biden: Willing to Talk to Putin About Ending War in Ukraine – VOA Zimbabwe
WHITE HOUSE AND WASHINGTON —
U.S. President Joe Biden raised the possibility Thursday of talks with Russian President Vladimir Putin to negotiate an end to Moscow’s war against Ukraine but said he had yet to see any willingness on Putin’s part to halt his 10-month invasion.
“I’m prepared to talk to Putin but only in consultation with NATO allies,” Biden said at a White House news conference after holding several hours of private talks with French President Emmanuel Macron about Ukraine and other issues. “I have no immediate plans to contact Mr. Putin. I’m not going to do it on my own.”
“There’s one way for this war to end, Putin to pull out of Ukraine,” Biden said. “It’s sick what he’s doing. If he’s looking for a way to end the war, he hasn’t done that.”
Macron said he was confident the U.S. would continue to support Ukraine with more military and humanitarian assistance.
“It’s about our values,” the French leader said. “Having the U.S. support Ukraine … is very important.”
Biden said the U.S. “will never ask Ukraine to compromise” to end the war without the consent of the Kyiv government.
Earlier, before their private discussions, Biden said as he welcomed Macron for the first state visit of a foreign leader during his presidency, “France and the United States are facing down Vladimir Putin’s ambition.”
“The alliance between our two nations remains essential for our defense,” Biden said. “The U.S. could not ask for a better partner than France.” He described France as “our oldest ally and unwavering partner in freedom’s cause.”
Macron, speaking on a sunny but chilly morning in Washington, said, “As war returns to European soil with Russian aggression against Ukraine, and in light of the multiple crises facing our nations and societies, we need to become brothers-in-arms once more.”
He said Washington and Paris “share the same faith in freedom and democratic values.”
While agreeing on their determination to support Ukraine, Macron expressed sharp concerns to Biden about the U.S. leader’s Inflation Reduction Act, or IRA, approved by Congress earlier this year that provides billions of dollars to support the U.S. clean energy industry, and a separate measure that bolsters U.S. semiconductor manufacturers.
Macron told congressional leaders Wednesday that the measure was “super aggressive” toward European companies.
“The consequence of the IRA is that you will perhaps fix your issue, but you will increase my problem,” he said, noting that France makes “exactly the same products as you.”
At the news conference, Biden said the legislation was “never intended to exclude” European trading partners. “We’re back in business,” he said of U.S. economic advances. “Europe is back in business.”
Macron said, “France wants the same new manufacturing jobs.”
Biden acknowledged that some aspects of the legislation might need to be tweaked, as he put it, and said he was confident that U.S. and European negotiators could work out differences so both the U.S. and European economies can prosper.
The pomp and circumstance of a White House state visit for a foreign leader was on full display, with Biden and first lady Jill Biden greeting Macron and his wife, Brigitte Macron, and then watching as a band in colonial uniforms played the national anthems of both countries. A 21-gun salute for Macron’s visit rang out.
The two leaders and their wives waved from the White House balcony before Biden and Macron went inside for substantive talks. A state dinner was planned for the evening.
The Bidens took the Macrons to Fiola Mare, an upscale Italian seafood restaurant overlooking the Potomac River, on Wednesday evening.
Some information for this report came from The Associated Press, Agence France-Presse and Reuters.
Bid for more MICE events: ZTA – Zimbabwe Independent
ZIMBABWE Tourism Authority Chief Executive, Ms Winnie Muchanyuka has urged players in the tourism and hospitality players to collaborate with government in bidding for Meetings Incentives Conferences Exhibitions Tourism (MICE) events.
Muchanyuka was speaking at the 2022 edition of the Hospitality Association of Zimbabwe Congress which kicked off in Victoria Falls yesterday.
“I would like to encourage the hospitality industry to continue working closely with the ZTA and other government arms to jointly formulate strategies to bid for more MICE business. We must find strategic ways to collaborate in our quest to promote Zimbabwe as a first choice MICE destination,” said Muchanyuka.
“There is a lot of potential for us to create more MICE businesses locally. We just need to have a more collaborative approach as a sector. If you look at our statistics for this year, you will find out that MICE contributed quite significantly to the general recovery of the sector.
Muchanyuka said hoteliers have indicated that most of the MICE business was generated from the domestic market which was mostly constituted of government agencies, the corporate sector and nongovernmental organisations.
“MICE business continues to be the dominating force in generating room occupancies for hotels,” she said.
Zim traverses globe to reclaim tourism markets – NewsDay
THE battle to reclaim tourism markets have accelerated since governments eased Covid-19 pandemic restrictions this year. In an interview with our business reporter Freeman Makopa (FM) this week, Environment, Climate, Tourism and Hospitality Industry minister Mangaliso Ndlovu (MN) tells us the strides the country has made. Below are excerpts of the interview:
FM: What is the outlook for the tourism industry?
MN: Since the beginning of the year, global tourism has continued to exhibit signs of consistent recuperation from the adverse consequences of the Covid-19 pandemic. Current trends for Zimbabwe have shown recovery, which has been supported by the bouncing back of worldwide inbound travel and growth in domestic tourism.
FM: How has the industry performed this year?
MN: The first nine months of 2022 saw a 165% rise in tourist arrivals. Arrivals increased to 693 498 during the period, from 261 415 during the same period in 2021. This is more than double the number of international arrivals received during the first nine months of 2021.
FM: This means hotel room occupancies have also improved
MN: Yes, on average, occupancies for the first nine months of 2022 grew by 21 percentage points. Occupancies rose from 21% in 2021 to 42% in 2022. Overall, this performance has been reinforced by domestic tourism, which is dominant, contributing 95% of tourism business in 2022.
FM: How has Zimbabwe managed to drum up domestic tourism during this difficult period, economically?
MN: Like any other country, Zimbabwe is traversing through the recovery from the Covid-19 pandemic and the on-going war in Ukraine. These have affected global economies, travel and trade. Given this economic situation, the tourism sector is implementing the National Tourism Recovery and Growth Strategy (TRGS), which is driving the growth of tourism. This is mainly through campaigns to accelerate meetings, conferences and exhibitions (MICE) and domestic tourism. The ZimBho, MeetInZim and InvestInZim campaigns have stimulated domestic and business tourism.
FM: Please share the investment levels into the sector attributable to these campaigns
MN: These campaigns have contributed to tourism growth doubling for January to September 2022 as alluded to earlier. There have been investments totalling US$306,7 million during the period, from US$90,4 million. This was mostly invested into accommodation facilities and vehicle hire.
FM: How do you plan to sustain this growth trajectory?
MN: The tourism sector is guided by the National Development Strategy (NDS) 1, 2021 to 2025 and the TRGS. NDS1 agitates for the growth of the tourism sector through increased investment into diversified products, while TRGS seeks to grow the tourism economy to US$5 billion by 2025. The ministry has the following programmes in place, in its endeavour to achieve the NDS1 goals: product development and diversification, instituting ease of doing business reforms, climate proofing of the tourism sector and establishing a tourism satellite account.
FM: Tell us about the role of the private sector in these initiatives
MN: Zimbabwe’s tourism sector is government-led and private sector driven. The ministry and the private sector already have synergies to promote the country through bilateral agreements signed with other countries in the region and abroad. The ministry is currently implementing memoranda of understanding on cooperation in the field of tourism with South Africa, Zambia, Malawi, Rwanda and the Democratic Republic of Congo. These provide the public and private sectors the opportunity to jointly market and promote destinations, exchange of programmes for professional in the sector and joint collaboration of private sector associations. Government also supports private sector participation at international travel fairs through subsidising participation fees of operators. The ministry through the Zimbabwe Tourism Authority (ZTA), jointly with the private sector, participates annually at fairs such as World Travel Market in London, International Travel Bourse in Berlin, Germany and Indaba Travel Fair in Durban, South Africa.
FM: What else is the government doing?
MN: Over and above the synergies, the ministry is establishing market presence in the country’s key tourism source markets. Two tourism attachés were deployed in August and September 2022 to China and the United Arab Emirates. An additional nine tourism attachés were recently appointed and are expected to be deployed in the first quarter of 2023 to Germany, France, the United Kingdom, the United States of America, India, South Africa, China and Japan. Physical presence in key source markets and the joint synergies with the private sector will aid government in promoting the destination internationally, attracting more tourists to the country.
FM: Tell us about financial support to the industry.
MN: The government of Zimbabwe has put in place several incentives to help the tourism sector. These include duty rebates on capital equipment for use in tourism development zones. We also have SI 10 of 2022, which spells out rebate on duty for safari vehicles and tour buses and SI 279 of 2019, which spells out rebates in respect of new capital equipment for expansion, modernisation and renovation of hotels and restaurants within hotels.
The funding also supports boat equipment imports, among others. There are also tax breaks in tourism development zones and tax exemptions for investments into the Victoria Falls tourism special economic zone.
FM: What are the developments on the electricity front, with regards to tourism?
MN: Electricity and water are already subsidised by the government. As a result, Zimbabwe has one of the cheapest utilities in the Sadc region in this respect. The government of Zimbabwe in 2018 launched the National Tourism Masterplan, which is an overarching guide to the development of tourism in Zimbabwe. The master plan identified potential tourism nuggets to grow new tourist attractions in Zimbabwe. The plan has identified 11 tourism development zones in Harare, Eastern Highlands, Chimanimani, Gonarezhou, Limpopo, Great Zimbabwe, Midlands, Bulawayo, Victoria Falls, Kariba and Mavhuradonha. Government has put in place incentives to support investments into special economic zones and tourism development zones that investors can take advantage of.
The national tourism policy agitates for an enabling environment to attract investment into the sector. It also uses tourism to attract foreign direct investment into the country. At the same time, the government will ensure the industry is protected from disinvestment through primary and secondary legislation.
FM: Are you happy with accessibility?
MN: Accessibility is the backbone of the growth of tourism destinations. And air accessibility contributes significantly to the growth of regional and international tourist arrivals to any destination. Air Zimbabwe, therefore, plays a critical role in providing direct access to Zimbabwe from key source markets and an instrumental role in national identity. The airline connects Harare with local destinations such as Victoria Falls. To strengthen the role of Air Zimbabwe in connecting travellers, the government has allowed private sector players such as Fasjet and Kuva Air to fly from Harare to Bulawayo, Victoria Falls and Kariba. We are fully behind the capacitation of the airline and the massive investment in the expansion of the ports of entry.
FM: We have seen more airlines returning to this market. Please share with us what has been happening
MN: The cross-cutting role of infrastructure development, such as the expansion of airports has a huge impact on all sectors of the economy. Airport expansion will boost the country’s growth and transformation in trade and tourism as part of strides. Airport expansion, as seen with at Victoria Falls International Airport, will attract new aircrafts and airlines.
The expansion of Victoria Falls International Airport saw African airlines like Ethiopian Airlines, Air Botswana, Fastjet, Airlink and Kenya Airways increasing flight frequencies to the resort town.
It also attracted new airlines like Eurowings from Germany and Mack Air from Botswana.
This also increased the airport’s passenger handling capacity from 500 000 a year to about 1,5 million.
Expansion will, therefore increase regional and international tourist arrivals into the country, tourism receipts and the sector’s contribution to gross domestic product as well as attainment of the US$ 5billion tourism sector by 2025.
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