If you somehow missed the memo then you should know that the Zimbabwean economy is sick and the pessimist amongst us have gone further to call it “dead.” With the role of the Reserve Bank’s intervention mechanism through the Monetary Policy significantly reduced because of the multi-currency system currently in Zimbabwe the Fiscal budget has never been more important. It is therefore left to Hon. Patrick Chinamasa to play doctor and try to revive the economy and bring it back from the brink of collapse. Unfortunately the proposed budget in its current form is unlikely to cure our ailing economy principally because in the minister’s own words it is “short on money and long on policy.” In other words it just all talk.
The problems.
No matter which business you are in, from ICT to construction whether you are self-employed (a hustler) or an employee, there are certain problems that have been commonly affecting every business in the country that are in dire need of attention at a national level. One of these is liquidity. Most businesses have a lot of non liquid assets on their balance sheets resulting in them struggling to meet their short term obligations as they fall due. Businesses are failing to buy stock, pay wages, suppliers, rent and other creditors on time. This has resulted in businesses going under as they are compelled into liquidation. Profitability means very little if your business is facing cash flow problems it will not survive unless there is some form intervention.
Another pressing problem that has been affecting our economy is that of depressed demand. Due to reduced disposable income people have been spending less and less. In 2012 aggregate demand was 13% compared to only 5% this year. Some businesses in a bid to encourage sales have been forced to resort to offering credit terms which has in turn compounded the businesses’ liquidity problems.
In addition to liquidity and depressed demand there are such problems as unemployment, excessive government debt, an economy that is basically made up mostly of consumers as opposed to producers resulting in a massive deficit in the Balance of Trade and a government that is nearly obsessed with primary industries at the expense of everything else. Other problems include deteriorating national infrastructure such as roads and dams, obsolete equipment and shortage of skilled labour especially engineers.
Key points
- The economic growth is slowing down at a worrying rate (stagflation.) GDP (the economy) grew by 3.4% as opposed to 10.6% in 2012.
- Business confidence is very low as investors view Zimbabwe as a risky destination.
- We are importing a lot more than we are exporting.
- We must remain calm in spite of all this and trust ZIM ASSET will be the panacea to our problems.
- China’s economy is doing well indeed and the U.S. and the UK are on a recovery path. Yeah good for them.
- The prices of commodities like gold, platinum, wheat and maize are falling but we are going to obstinately invest in agriculture and mining despite all this.
- ZIM ASSET will make the economy by 6.1% next year based on images seen in a crystal ball. This is a throw back to Hon Murerwa’s budgets that kept forecasting a fall in the Zim dollar/USD exchange rate without a shred of evidence similarly the honourable minister incumbent does not offer concrete evidence to support this projection at all.
- ZIM ASSET will increase savings in 2014.
- ZIM ASSET will lead to increases in livestock, wheat, maize, gold, chrome, diamonds and other good stuff.
- ZIM ASSET will lead to an increase in manufacturing produce except the textile and ginning industry that has contracted since David Whitehead, Modzone and Karina closed because of an influx in cheap Chinese products.
- BATA is going to make lots of shoes in 2014.
- Despite all the load shedding electricity generating capacity improved to 1073MW from 1012 MW in 2012.
- ZIM ASSET is going to guide the economy and solve all the problems you can think of and guide us towards “an Empowered Society and Growing Economy.”
- All hail ZIM ASSET!
Too much talk.
This whole “in ZIM ASSET we trust” attitude is a bit disturbing. Even more worrying is the fact that the minister’s budgets do not adequately address such issues as liquidity or skills shortage especially in the public sector. Also it seems this is a “stick oriented budget” with a punitive measure conceived for everything including bans on exporting most unprocessed ores including gold and platinum. The manufacturing sectors including ICT all take a back seat as agriculture is given preference once again. This is unlikely to help the balance of trade. I am trying to fight back words like clueless but it seems our dear appointed Finance Doctor is unlikely to cure our ailing economy.
From a macro-economic view 2014 is going to be a very bleak year no matter what business you are in. Hopefully the use of plastic money will become more mainstream and at least mitigate the liquidity crunch. No matter who you are, employer and employee, there is no reason to be cheerful at the turn of the new year. The budget is not just underwhelming it as disappointing as it is inadequate.
You can read the full text of the budget here.
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13 comments
We come to this blog for technology news. Kindly create a sister publication better suited to pontificating on economic issues.
The budget is the basis by which every industry including ICT charts it way forward and as a matter of opinion, every ICT entrepreneur needs to know this for their 2014 game plan. I believe discussing the budget is critical for any industry to avoid shooting in the dark.
The technology sector is part of the macroeconomic environment. The budget includes such things as the duty (if any) to be levied on the import of ICT products which ultimately affects the price that you pay for the product here. As @ma1 has pointed out they give you a roadmap of what is ahead and help you plan.
My 2 cents, how can you ICT and technology plan forward when more taxes are being laid in the path of telephone banking, equipments and spares procurements, hikes in fuels at the pumps, more taxes on phone recharge cards, insurances rises, rates when bad debts and loans sour. 110% of equipment for Zim use are all imported and we are producing very little locally.
plastic money will not solve liquidity problem my dear learned friend. money in the bank is counted as liquid. an asset that can be immediately converted to cash without much loss in value is deemed to be liquid. liquidity crisis can only be solved by finding other sources of money aside from those that already exist e.g. foreign direct investment, international borrowing, and most of all, printing the money.
While the term liquidity problem may be incorrect he is referring to the fact that banks have insufficient paper money, so even though I have 2000 in my account they will only let me draw 200 of it in cash. This is a genuine struggle for a lot of companies who may have the money but cannot get to it easily for salaries etc. Technology can ease this problem with the banks.
But otherwise you are correct to solve our liquidity crisis we need money from overseas in the form of sales, donations, loans or investment.
Or we could introduce a zim dollar, print it and solve our problems for about 2 weeks then end up worse than ever.
While money in the bank is deemed as money one of the courses of the liquidity problem is that banks do not have enough paper to cover withdrawals. In other countries this is easily solved by using cheques for most transactions thus reducing the need for cash. People in Zimbabwe have not warmed up to cheques and the widespread use of cards will ease the demand for cash and hopefully solve the liquidity problem. Plastic money is deemed cash equivalent and therefore it is seen as liquid.
Zimbabwe imports more than Exports! reason being the counrty has never prioritised Physics and Scientific research. America is number one due to Scientific Research. Physicists and scientists research into materials to make our lives better then enginering and production firms commercialise and mass produce for exports bringing in revenue. Take Solid State Lights (LED lights), its all scientific understanding of semiconductor materials that allows us to improve the Tech, Now Philips has a 9.5 LED light retailing under $15 in the US that performs better than its 60W incandescent equivalent. Zim Govt talks about Beneficiation, But what is Beneficiation, its just using Physics and Science to develop ways of optimising value from our minerals yet there is no Research structure in Place. Zimbabwe has Lithium and Graphite, why are companies not working with Universities etc to develpop and manufacture Li ion Batteries in Zim? Yet they know Lithium ion Batteries are the future of electric cars planes, Cell phones laptops etc. Do we have to sell Lithium to China then Import the Battery? Lets get Serious! We need production 1st before we look into the business of accounting Because without production all those bankers ,finance and accountants will have nothing to account for!
You can only be disappointed because you expected something from these guys. Those who knew were disappointed back when this “new” government came into power. Thanks for catching up with the majority of Zimbos. As for the taxing of transactions, does the minister know that he is taxing the use of technology. Because if you say you want a tax when I transfer my money from the bank to my phone..eish. So from Steward bank to my Ecocash, the government wants a share. I did not produce anything, I did not buy anything, yet you want a share. The sad faces I saw in Mbare soon after elections were correct. It was the genesis of doomsday!
Important fact left out – corruption. And nepotism.
Well Its true… Zimbabwe is suffering. I get the idea the guys in power had for an all black Zimbabwe. Its achievable but allot of backtracking has to be done in terms of our political scene.
Sad , really sad. All Hail “ZIM ASSET!!!!!!!!!!!” – I’m leaving the country .
What really is ZIM ASSET. Can Techzim draw an infographic of what it entails including the benefits. This will help us see what the future holds for Zimbabwe. The article at most guides me to take my life considering all the deep graphic adjectives used. smh
This is a great summary especially the key points section which highlights a very consistent point among Africa’s leadership a lot is said in our case Zimasset is said to be able to deliver 1,2 and 3 without much expiation of the detailed steps to b taken to achieve 1,2 and 3.