Finance minister Patrick Chinamasa on Thursday announced several austerity measures, effective from Friday, meant to resuscitate the economy that include new levies and taxes on churches, imported groceries, fertiliser, and a ban on importation of secondhand clothes.
By Xolisani Ncube
Presenting his mid-term policy statement reviewing the 2015 National Budget in Parliament, Chinamasa also proposed plans to reduce government’s wage bill by 40% as Treasury struggles to pay civil servants owing to a reduced revenue base and uncontrolled expenditure.
The minister reviewed downwards the projected economic growth rate from 3,2% to 1,5%, a move he attributed to poor rainfall and poor performance of the manufacturing sector.
“The move would free fiscal space to cover projects under the government’s blueprint Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset),” he said.
From January to June this year, Chinamasa said government had spent over $1,5 billion on civil servants’ salaries,which was 80% of the total revenue collected.
“Cabinet has given a directive to the minister responsible for the Public Service and the salaries,which was 80% of the total revenue collected.
“Cabinet has given a directive to the minister responsible for the Public Service and the minister responsible for Finance to urgently propose remedial measures to gradually bring down the share of the wage bill in the budget from over 80% to under 40%,” Chinamasa said.
“Cabinet will be considering the full package of necessary proposals in the next couple of weeks. The above interventions to manage the wage bill are meant to create the fiscal space necessary to enter medium to long-term growth for sustainable platforms for improved remuneration.”
He said revenue projections for 2015 were $3,6 billion, down from a targeted $3,99 billion while expenditure was set to come down to $4 billion from $4,11 billion.
This would create a budget deficit of $400 million, which would be financed from domestic and external sources.
As a way of protecting the struggling local industry, Chinamasa removed certain groceries from travellers’ rebate, mostly for commodities that can be obtained locally.
Among the groceries removed from the rebate list are sugar, maize meal and flour, among others.
Due to the collapse of industry and closure of companies, many people have been pushed into the informal sector and are selling various wares among them second-hand clothes and shoes.
But Chinamasa announced that he was banning the importation of such goods due to health-related challenges.
“I move to remove second-hand clothing and shoes from the open general import licence and any future importation of second-hand clothing and shoes will be liable to forfeiture and seizure,” he said.
He said tourism was projected to grow by 5%, and mining by 3,5% on higher mineral output despite poor commodity prices.
However, he said the 2014/2015 agriculture season performance was below expectations owing to poor rains, and the sector would decline by 8,2%.
To stimulate growth in the mining sector which he said was now the country’s major economic driver, Chinamasa proposed to reduce royalty charges for small-scale gold miners from 3% to 1%.
“Mining developments during the first half of 2015 indicate stronger performance to the end of the year, with mining growth projected above 3,5% against the initial projection of 3,1%,” he said.
The minister said the country’s imports stood at $3,1 billion from $3 billion recorded in the corresponding period last year, adding that the figure was likely to grow by 6% by year end.
As a way of reducing the import bill, the minister increased surtax on imported second-hand vehicles of five years and older to 35% from 25%.
He also announced plans to tax churches on their income-generating projects, but said tithes and offerings were exempted.
He said tax amnesty on defaulters would be further extended by four months to October.
Reacting to the budget review statement, Bikita West MP Munyaradzi Kereke (Zanu PF) said the introduction of tax on imported fertiliser would affect the cost of farming and the agricultural sector.
“This is regrettable and I appeal to government to relook into the issue so that we could stimulate growth of the sector,” Kereke said.
He said government should not expect external funding to finance the budget deficit warning that stringent measures should be implemented to attract investment.
Kuwadzana East MP Nelson Chamisa (MDC-T) said Chinamasa’s budget statement was “an insult on the poor and a declaration of war on vendors who sell second-hand clothes to make a living”.
“He is declaring war with God, how can he tax the churches? This shows that he is desperate and has no clue of how to navigate this country from the current crisis,” Chamisa said.
Hatfield MP Tapiwa Mashakada (MDC-T) said the budget statement lacked strategies to stimulate economic growth.
“The statement is the same old story . . . this government has failed to find a strategy to grow the economy.
“How can you tax churches and fertiliser when your economy is agro-based?” Mashakada questioned.
Thousands of unemployed Zimbabweans have resorted to vending and most of them sell second-hand clothes imported from all over the world.
Last week, Matabeleland South MP Priscila Misihairabwi-Mushonga (MDC) caused a stir in the National Assembly when she waved second-hand women’s underwear as she implored Chinamasa to protect Zimbabweans against degrading imports.