Walter Muchinguri and Bright Madera
3 December 2009

Harare — The 2010 National Budget presented yesterday by Finance Minister Tendai Biti has drawn mixed reactions from industrialists and analysts.

Confederation of Zimbabwe Industries past president and industrialist, Mr Anthony Mandiwanza, said the budget was developmental and would have a positive impact in the revival of the industry. He said the reduction of corporate tax from 25 to 20 percent would be a big boost to cost structures for most companies.

"The taxes have been aligned to regional standards and this will enable us to compete on the same footing with other companies in the region.

"The concessions on tax on inputs for local production is consistent with best practices within the region, you will come across this in South Africa, Namibia and any other country within the region," Mr Mandiwanza said.

The increase in marginal tax, he said, would help attract human capital back into the country as taxes were now being aligned to those within the region.

He said one of the reasons for skills flight had been Zimbabwe's punitive tax regime.

However, he said the minister had been a bit shy on the tax-free thresholds and Pay As You Earn since the increase from US$150 to US$160 was minimal.

"He could have done well with a figure of US$200 because the increase will have very little impact on salaries and wages.

"That is why he probably compensated on the bonus tax-free threshold of US$400, which should stimulate aggregate consumption," he said.

Aggregate consumption, he added, should also be aided by the decompression of civil servants' salaries.

Mr Mandiwanza lauded the minister for allocating US$52,6 million to Zesa for energy and power development and extending the exemption of duty on basic commodities, which would ensure shelves, remain well stocked.

"Overally, the minister did well to align his budget in the context of Sadc, especially as we are heading towards regional integration and it would be folly for the country's macro-economic fundamentals to be out of sync with emerging regional initiatives," he said.

Kingdom Financial Holdings Limited economist, Mr Witness Chinyama welcomed the minister's presentation saying it should however be complemented by a strong and robust monetary policy.

He said budget expectations were high and the minister's presentation had managed to meet some of the expectations.

Mr Chinyama said the fiscal policy had to deal with macro-economic policies, which included high growth rates and high employment levels among other drivers.

"The minister's tool kit to stimulate production was small, he had to decisively deal with production, inflation and job creation, he has to come up with other complimentary initiatives to stimulate growth.

"The Reserve Bank of Zimbabwe was given a paltry US$10 million, surely that money is for day to day operations and not for transformation.

"At present, there is no monetary policy to talk about and we need this complementality.

"We need the central bank to deal with money supply growth and rates as a way of encouraging growth in the economy," Mr Chinyama said.

He said a sustainable fiscal policy should create an enabling environment that created more companies, further increasing Government's tax base.

"Companies need money to re-capitalise, and there is no money we expected the minister to tackle this issue head on.

"Until and unless we address these issues, it would be very difficult to achieve the projected growth rates," Mr Chinyama said.

Another economic analyst, Mr Nyasha Chasakara, said although the economy had not yet turned around, the minister showed more aggression by raising revenues.

He said the tax reforms announced by Minister Biti would be very beneficial and was a welcome development as it was a departure from previous statements that skirted around the issue.

He commended the minister for his pronouncements on the issue of revenue from the mines, saying that other regional economies were reaping the rewards of such investment and Zimbabwe should not be an exception.

On his economic growth prediction, he said that the figures were very conservative although achievable given the stability that had been achieved in the economy so far.

"What is important is for Government to walk its talk," he said, adding that to its credit there had been no policy reversals on the part of Government with the only concern being the rumours on the impending return of the Zim dollar, which was dampening investor spirit.

Another economist was upbeat about Government's chances of raising the money it required.

"My initial assessment is that the economy is in dire need of external cash injection given the under performance of revenue collection.

"There does not appear to be a broad plan to acquire the resources needed to finance the budget," he said.

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