HARARE, May 16 (The Source) – In his Independence Day speech in April, President Robert Mugabe said there were “signs of recovery”. Last week, his Industry Minister, Mike Bimha, said “we are recovering”, and that there were “pockets of recovery”.
But the government’s own numbers tell a different tale.
Poring over the Ministry of Finance’s bulletin for the first three months of this year, a picture of decline emerges. Deficits are widening, the portion of taxes paid by companies is in free fall as companies shut down, manufacturing is falling as more and more factories fall silent, and the country has virtually no other way of raising revenue apart from taxing its people.
Of the little that government is getting in taxes, just one percent is being spent on infrastructure. The rest is being spent on recurrent spending, most of it on government salaries.
The trade deficit – the gap between what Zimbabwe imports and what it exports – is widening, an increasing worry for Reserve Bank of Zimbabwe governor John Mangudya who is desperately groping for a solution to the liquidity crisis this has caused.
In the first three months of the year, Zimbabwe imported goods worth $1,328 billion, a small decline from the $1,493 billion in the first quarter of last year, according to the report. Exports in the first three months of 2016 stood at just $626 million, falling from the $716 million worth of goods exported in the same period in 2015. In other words, some $700 million left the country in three months.
It is hard to see Bimha’s “pockets of recovery”anywhere in the government data, where the falling contribution of corporate tax to the revenue pot in fact paints a picture of a rapidly shrinking industry.
Over the past three years, taxes paid by companies have fallen from $86 million in the first quarter of 2013, or 10.3 percent of total tax income, down to $70 million in the same period in 2014, further down to $52 million (6.5 percent) in 2015, and now just $43,5 million (6 percent) in the first quarter of 2016.
Contrary to Bimha’s claims of recovery, government’s forecasts for first quarter industry growth, according to the Ministry of Finance, were off the mark.
“During the first quarter, the 2016 manufacturing growth rate was revised downwards from the Budget projection of 2.1 percent to 0.5 percent. The…revision was necessitated by subdued economic activity prevailing in most of the subsectors.”
Decline was seen across the key industries in “food stuffs, drinks and beverages, clothing and footwear subsectors”, says the bulleting. These sectors “have reported decline in volume of sales due to depressed demand and influx of cheap foreign products.”
Such is the lack of good news on the manufacturing front, that the bulletin makes a big deal of the opening of a mango processing plant.
Says Treasury: “On a positive note, a tropical fruit and processing plant was commissioned in Norton, advancing the Zim-Asset thrust of promoting value addition.”
With virtually no budgetary aid and international capital, Zimbabwe now relies almost entirely on taxes. According to the figures, 89 percent of government revenue comes from taxes.
“The bulletin comes at a time when the 2016 Budget is faced with declining revenue on most tax heads as well as expenditure pressures emanating from payments of the outstanding 2015 salaries and wages as well as the associated bonuses.
While Zimbabwe often boasts of its “mineral wealth”, the outlook for commodities remains weak and minerals are unlikely to do much for the country in the short term. China, a major buyer of Zimbabwean commodities, is buying less as it manages a slowdown in its economy. This means Zimbabwe, which relies heavily on commodities, faces even more troubled times ahead.
“The global economy remains weak and gloomy, casting doubt on the domestic economy’s turnaround efforts. International commodity prices for the country’s major exports remain depressed, while our rate of absorbing imports remains high,” the bulletin says.
Zimbabwe’s use of the US dollar, which the RBZ is trying to ease with a series of frantic measures, continues to weigh on the economy. As the dollar gains on currencies such as the rand, it becomes cheaper to import goods than to manufacture them in Zimbabwe, while exports from Zimbabwe become uncompetitive.
“The rand and other regional currencies, despite stabilising, remain weak against the US dollar. This has rendered the economy uncompetitive. Consequently, Zimbabwe has now emerged as the regional market for US dollars.”
While government officials are continue with the feel good rhetoric on the economy, their own numbers tell a different story.