Going back to the basics

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THE 2021 Budget presented by Finance and Economic Development Minister Professor Mthuli Ncube last week reverted to the basics of economics.

It imposed strict discipline on spending to allow far higher sums to be spent on capital expenditure.

The main thrust of the spending is to accelerate building infrastructure and support the productive sectors to push economic growth, as required by the National Development Strategy 1 which sets his targets.

The 2021 Budget pays attention to priority areas such as inclusive growth, developing and supporting productive value chains, optimising value from natural resources, social protection, engagement and re-engagement, effective institution building and governance as well as strengthening devolution by bringing decision making, infrastructure and knowledge to communities to address development gaps.

And he reckons next year, the drive for production and growth will be hinged on generating more revenue and tighter enforcement of tax rules. Thus, Minister Ncube adjusted and widened the range of presumptive taxes from the equivalent of US$30 a month (US$1 a day) to be collected from each market stallholder by their landlords to $500 000 a month for doctors, lawyers and engineers, who have not filed accurate business accounts with Zimbabwe Revenue Authority and collected a tax clearance certificate.

The message is clear; formalise and submit taxes or pay the presumptive tax. 

Could the stick that the minister has chosen be the push needed?

But he feels that others, besides PAYE taxpayers, major companies and consumers through VAT and customs duties, need to chip in.

Also in the national budget, the need for discipline in all spheres cannot be overemphasised as we had become a nation of consumers of other people’s goods.

No wonder Minister Ncube banned the importing of second-hand vehicles more than 10 years old.

Imagine an import bill of US$1,3 billion on cars alone from 2015 to September 2020. 

Hopefully, the ban will augment the trade balance position which keeps improving as imports continue to decline.

Statistics from the Zimbabwe National Statistics Office (Zimstats) show that the value of imported goods and services in the period from January to August 2020 declined by 3,6 percent to US$2,96 billion compared to the same period in 2019.

Over the same period, Zimbabwe exported goods and services worth about US$2,54 billion, which represents an increase of about 3,8 percent compared to the same period the prior year, bettering the trade balance.

From these figures one can see there is still over-reliance on the foreign markets for goods and services, since the trade deficit is still significant, demonstrating the need for more efforts towards import substitution.

This is the time for Zimbabwe to grow its exports.

It is time local industries produce quality goods which meet the conformity standards of international markets so that the country can tap into the 1,2 billion people market which is being created through intra-African trade through the African Continental Free Trade Area (AfCFTA).

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