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*FULL TEXT: Biti Submissions For The 2023 National Budget Debate*

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*Submissions for the 2023 National Budget Debate by Tendai Biti, the MP for Harare East (CCC) and a former Finance Minister in the Unity Government of 2009-13.*

> Thank you for allowing me to join the debate on the 2023 budget. Before I go into the merits, I want to express my disappointment with the Minister of Finance, my colleague, for being absent for two weeks.

> The budget is a national document and it is the only statement by a Minister that is actually defined mandatorily in the Constitution of Zimbabwe in Sections 302, 303, 304 and 305.

> In other words, it is a constitutional obligation that the people of Zimbabwe have placed on the Minister and I think the Minister should not undermine his own budget by doing what he did.

> At the same time, there was Article 4, IMF Mission in the country which has been here since the 1st of December, 2022.

> They have just issued their interim financial statement which I am going to refer to that he also abandoned that Article 4 because that Article 4 is so important because you are giving input and you know Mr. Speaker that we are suffering under debt unsustainability and therefore it is important to narrow the gap between us in the IFIs and that Article 4 Mission was very important.

> Mr. Speaker Sir, when you read this budget, you get a sense that the Minister was in a hurry. Maybe it was because his mid-term statement was in September and then the budget was in November.

> I have compared this budget and his previous budgets, some of the passages are just cut and paste. The only thing that is done is to modernise the figures.

> I think he needs to take time when preparing the budget because it is a national statement.

> I do not think he afforded it the same concentration and quality of attention that is required in what is clearly a cerebral process.

> So there is a lot of cutting and pasting and he bears final responsibility because he is the Treasury. He is the Minister as defined by Section 7 of the Public Finance Management Act.

> Our economy is facing serious structural problems. If you read the World Bank country report of October 2022, it speaks of 65% of our population being in the informal sector.

> That is a frightening figure and that report says that for this economy to attain the vision 2030 being espoused by the authorities, our economy needs to grow from 2023 by a figure of 15% per annum and we are limping at around 1%/2%.

> Eighty-nine per cent of our people are living in extreme poverty. People are wallowing in poverty. These are serious things.

> One of the things that are most worrying in that World Bank country note is the fact that out of 17 countries that they examined, we are second from last in terms of productivity. This economy is not productive.

> These are some of the things that we thought the Minister would address. I want to come to the actual budget. The first thing that I want to deal with is the credibility and legitimacy of this budget.

> In an economy that is now so dollarized to the extent that 72% of the transactions that are being done in Zimbabwe right now are being done in USD; the USD is on a cash economy. A credible and legitimate budget could and should have been expressed in USD.

> If you look at the 2022 budget, we made the same point that the budget should be expressed in USD. The Minister did not listen to us and the net result was that by mid of 2022 in July this year, he had come with a supplementary budget that was 200% bigger than the original budget.

> His original budget was ZW$700 billion. We increased a supplementary budget of 1.9 billion, almost 2 billion dollars. So for the sake of legitimacy and credibility, the budget ought to have been expressed in USD.

> The second thing on credibility is the growth projection of 3.8% and I want to echo what we have said in the Budget Committee that your assumptions do not support the 3.8% growth rate.

> Moreso, in light of the fact that the regional economic outlook produced by the IMF of September 2022, predicts that…

> THE HON. SPEAKER: Order, Order. There are two people who are taking audio of what you are speaking – please stop it. If you want to follow what is being said, you can always check in the Hansard.

> HON. BITI: So that regional economic outlook says that the economies that will do well in sub-Saharan Africa, the growth will be around 1.5%.

> It is hard to imagine where the 3.8% is going to come from particularly in light of reduced agricultural output acknowledged by the Minister in his budget, the absence of power which was one of the anchors of his macro-economic assumptions.

> The third thing around credibility is that the budget is ZW$4.5 trillion yet the growth rate is 3.8%. Theoretically, the budget must grow and the revenues must grow by 3.8% of the 2022 budget which was ZW$1.7 trillion.

> So the growth of the budget from ZW$1.7 trillion to ZW$4.5 trillion is not supported by the 3.8% growth rate which he is targeting.

> This means that this is a budget that implicitly accepts that the inflation rate of this country will remain at above 200%.

> The growth of the gross figure of the budget from ZW$1.7 trillion to ZW$4.5 trillion can only be supported by the inflation figure of over 200% and that is most unfortunate when a Minister has to budget for such growth levels of inflation.

> The fourth thing on credibility is on disbursements. If you read the supplementary budget, by September of 2022, the average disbursement was a mere 36%.

> We acknowledge as we do in our statement from the Budget Committee that there are four ministries that have overspent.

> There are four ministries that have gotten the lion’s share but the rest of the ministries, the budget outturn has been 36%, meaning that what we are doing is just a waste of time because money is not going to be disbursed except to those four privileged ministries.

> Number 5 on credibility is that we come here, we approve this budget but there is a parallel budget that operates somewhere.

> There is a parallel expenditure that operates somewhere and as I am talking to you right now, there are taps that are open somewhere that we will see two/three years later.

> As I am making these submissions, we have before this august House two Financial Adjustment Bills.

> The first Financial Adjustment Bill is for USD10.6 billion. We have not approved that Financial Adjustment Bill.

> In other words, over and above what we agreed on, Government went on to spend USD10.6 billion. As I am talking to you, there is a second Financial Adjustment Bill of 100 billion dollars and six billion to make 106 billion dollars in respect of the financial years 2019/2020, meaning that what we are doing again is exercising self-delusion because there is a parallel budget that is being run oblivious to this august House and that undermines our work and credibility.

> Mr. Speaker Sir, I have referred to the Article 4 Mission that was in the country. They have just issued their preliminary statement and they make four fundamental points that we have been making to the Minister which this budget ought to have addressed.

> The first point that they make is that the exchange rate should be liberalised.

> We have been arguing with the Minister for the last four years that you cannot de-dollarise as he tried to do in February of 2019 when conditions for de-dollarisation did not exist and we know that dedollarisation has failed and the Government itself is the first character to acknowledge the failure of de-dollarisation.

> All Government charges, without exception, are now expressed in USD terms, whether it is passports, fuel, birth certificate, death certificate, licencing, number plates for vehicles, et cetera.

> So, the biggest undermining of the de-dollarisation process has been the Government itself but we said you can use the Zimbabwean dollar, there is no problem but float the Zimbabwean dollar.

> Let the Zimbabwean dollar be floated, let it find a natural mark in the market; that did not take place and as a result, what we saw is massive arbitrage.

> The same budget will tell you that from June 2020 to now, the auction system has disbursed USD 3, 6 billion but the economy has nothing to show for that. It is a lot of money.

> The elites have been accessing cheap USD for two years at an average exchange rate of 1:83 but the parallel exchange rate in the streets has had a premium of 200 to 300%.

> People have made money out of speculation on the Zimbabwe Dutch Auction System, which is why as a Committee, we have recommended that there should be the introduction of a Wealth Tax so that we can net these speculators who have taken advantage of this loot and booty of the Dutch Auction System.

> Another recommendation that is made by the same Article 4 Missions, today, namhla, khathesi, you must abolish the gold coins.

> We have made the same point that for a country with a weak currency like ours, for a country with a weak current account like ours, do not take the figures he gives in the figures; the reality of the matter is that we have got a negative current account, capital account; he will tell you otherwise that the import pressures of this country are too much we need to import fuel, food, electricity, so there is no way we can have a current account surplus. However, that is an issue for another day.

> My point is; in a country with a weak currency, we need to keep our gold, to preserve our gold but instead we are now minting that gold and selling it at a price which is 200% less than the true value of that gold. The going price of an ounce of gold right now is USD1800.

> We are selling that gold in its currency form at USD1200. We have spent over 18 billion USD printing gold coins but what we have gotten in return is around nine billion dollars. Who does that – no sane, objective person does that.

> The third thing that the IMF recommends which we have also made to the Minister is that you must live within your means, you must eat what you kill, and you must maintain a fiscal consolidation. That has not been happening.

> The Government has been printing money, the Reserve Bank has been printing money, and quasi-fiscal activities are now at least 20-30% of GDP.

> If you look at the budget itself, I think it is paragraph 93, it will tell you that between January and September of 2022, broad money which economists like Hon. Prof. Mashakada there will tell you, grew by 400%. In other words, we generated hot air of 400% into the economy.

> Mr. Speaker, when too much money chases too few goods, you have a crisis of over-accumulation. Like in 2008, we all became trillionaires but trillionaires who could not buy a bottle of soda water.

> Your Members of Parliament, we earn ZWL 200 000 per month but we cannot pay rent Mr. Speaker. The salary we earn cannot fill even a fuel tank to go to Dotito to plant maize.

> That is the crisis of over-accumulation. We have made arguments in the past that there is a need to rationalise the activities of the Central Bank, the Article 4 Mission also makes the same recommendations.

> However, I want to come to the real economy, Mr. Speaker Sir. Our economy needs to deal with certain fundamental structural issues to move forward.

> The first one is the issue of debt; the debt levels produced by the Minister show that we are around 18 billion dollars.

> That is not the real issue; the real issue is that our debt as a percentage of GDP is now around 102%. The acceptable threshold, the SADC convergence threshold is 60%, so we are way above.

> Debt puts a premium, a tax on future generations and our debt and the obligation to deal with our debt is a developmental issue.

> We defaulted way back in 1999. However, because we have got huge arears around two billion to the World Bank, around 600 million dollars to the African Development Bank, and five billion dollars to the Paris Club of Lenders, we need to deal with these arrears so that we can access the huge amounts of developmental funds that are sitting at the African Development Bank.

> Resolving our debt crises de-risks Zimbabwe, lowers the risk profile of Zimbabwe.

> So, I am disappointed personally, that when you read the Budget Statement, there is no plan for debt. As a Committee, the IMF Mission yesterday, one of the things we raised was, when are we going to get the next Staff Monitored Programme (SMP) because it is both quantitative and qualitative?

> It at least tries to show some track record of performance. We do not have that since the collapse of the last SMP in April of 2020.

> So we are doing nothing, we have spent five years doing nothing; at least Minister Chinamasa tried his Lima process in October of 2016.

> It may have failed but at least there was an effort, so you give him two out of 10 for the effort but my brother, you cannot give him anything – so, that is sad.

> The second structural issue I want to deal with is agriculture. We have mismanaged agriculture and one of the reasons why we have mismanaged agriculture is the unsustainable interest rate of 200%.

> If you want the economy to raise an interest rate of 200% which interest only benefits bankers, there is no savings rate of 200%; in other words, if you put your money in your bank, you are not going to get 200% but if you lend, you are going to be charged 200% plus charges.

> It means the effective lending rate in Zimbabwe is 280% and that is not sustainable.

> So, we are going to shrink this economy, output is going to decrease; in my own calculation, if you get 1, 2% growth rate, you will be very lucky.

> Thanks to that punitive interest rates but it is killing agriculture, and as I am speaking to you right now, a bag of 25 kg of maize, whether Mbizi or Mbada is 90 USD. A bag of compound D is USD45 or USD50, a bag of ammonium nitrate is USD70; if you find it.

> Where I come from in Chiendambuya, they add USD80. How can you plant anything? A hectare you need USD600 yet we are USD 600 if you look at us kudhara kudhara, we have no money. So agriculture is being killed.

> What we suggest Mr. Speaker, is that if you look at the budget, the Minister proposes to give special certificates to Model A1 and A2 farmers which are bankable, why play around with these fancy instruments that have no legal basis?

> Why not simply introduce title deeds to farmers on Model A1 and A2 farmers? That is what the Constitution says anyway in Chapter 16, so that farmers can go and borrow cheap money. If a farmer is going to borrow at anything more than 5%, he might as well shut down.

> That is why Mr. Speaker right now, if you go to places like Gokwe, throughout the country, you will find Command Agriculture inputs being sold on the streets because it is cheaper and more profitable to sell the inputs than to put a badza or a gejo in the field and to plant.

> The second structural issue Mr. Speaker Sir is the energy. We had the Minister of Energy yesterday, the esteemed Hon. Zhemu Soda. We have a crisis Mr. Speaker.

> If you listen to him carefully, his only answer is ‘I hope to import more’. He is hoping to import 500 megawatts from EDM in Mozambique and from the SADC power pool but there is a deficit in the entire region.

> Eskom, South Africa has a black-out –welcome to Zimbabwe, Zambia – same thing. There is a regional deficit.

> If the strategy of the Minister is to import when everyone is in a net deficit position, it is a disaster but this economy cannot move Mr. Speaker without addressing the issue of power.

> The third issue is the issue of mining. Mining can transform this country. This country can be a $200 billion economy purely on the basis of mining but we have to do certain things right. Firstly Mr. Speaker, we cannot give away our mining rights as if they are cakes at a wedding.

> Anyone who wants, we give him a lithium mine. Anyone who wants, we given him iron ore. Anyone who wants, we give him diamonds. Anyone who wants, we give him platinum.

> Manhize is sitting on 43 billion metric tonnes of iron ore – the biggest in the world. We gave them for free. I was very hurt Mr. Speaker by a company called Karo Investments or Tharisa. They got a special mining lease.

> To get a special mining lease, in terms of Section 139 of the Mines and Minerals Act, you must show the authorities, Minister of Mines, Hon. Chitando that you have got USD100 million.

> So they came here with nothing then they list on the Victoria Falls Stock Exchange some bonds to raise money to mine our minerals. They raised $34 million. Are we that foolish Mr. Speaker with great respect?

> We give away our mining concession for nothing, then we allow that same person kuti korokoza tumari twedu twatinatwo muhomwe and we say we are governing the country.

> Mr. Speaker, it cannot be right. Let us get our mining right. The issue of licences and leases, let us auction them. They should go to the highest bidder. We get our qualified economist, lawyers, accountants and they do the cadastral surveys, evaluate and get best price.

> We call sharp people from South Africa, Botswana with experience and we auction our mining rights. How much money do you have? What are you going to do in the next five years?

> Mr. Speaker, we are giving platinum licences but there is no single refinery in Zimbabwe. One of the things that my esteemed friend has done in the budget is to introduce, through S. I. 89 of 2022, the payment of royalties in alternative minerals.

> How does it work Mr. Speaker? Take platinum, it has got six to ten PMGs derivatives and you do not know what is in a tonne.

> The soil you extract, it has to go to a refinery and we do not have a refinery here. So it will go to South Africa where they tell us whatever they have found because we are not there. Then we are now expecting them to drive lorries to bring the 50% of the royalties – to drive them where Mr. Speaker?

> It does not work Mr. Speaker. I can understand gold because it is fungible. It is like oil. I can understand a law that says 50% of our gold royalties should be paid as gold because it is fungible and it is a reserve but what about coal, what about platinum, chrome?

> It does not make sense. The point I am making is that if we get our mining right, we can transform this country.

> The fourth issue is our model of accumulation…

> [Time limit]

> HON. P. D. SIBANDA: On a point of order Mr. Speaker. With your indulgence, Hon. Biti is not only a former Minister of Finance, he is the shadow Cabinet Secretary for Finance in this country.

> Therefore, I plead with you Mr. Speaker that he may be given an extra 10 minutes to exhaust his points.

> THE HON. SPEAKER: Order. Why do you not make your request without embellishment? In terms of our Standing Order –

> [HON.MEMBERS: Inaudible interjections.] – Order. When you speak you do not have to clap your hands please. Use your voice. In terms of our Standing Orders, you are allowed extra five minutes Hon. Biti, if you may please wrap up your contribution?

> HON. BITI: I will wrap up. So Mr. Speaker, we need to start afresh. Mining can change our country. Mining can transform our country. I had started talking about our accumulation model. If you look at the structure of our economy, our economy is designed to extract and export.

> The two major activities in our economy are mining and agriculture. If you take agriculture, it is designed for export. Ninety per cent of the tobacco that we produce in this country goes out of Zimbabwe.

> Tobacco like cocoa, the farmer gets 2% from the value chain – he gets nothing. I live along Enterprise Road, everyday there are literary hundreds of small little trucks full of women and men from Mutoko selling tomatoes.

> They have been doing that for the last hundred years. The more they sell, the poorer they become and the reason is because of our accumulation model.

> I have said before, if you wake Cecil John Rhodes today he will not get lost because Zimbabwe, 44 years after independence is still structured like Southern Rhodesia, like Rhodesia. It has not changed because we are still exporting raw materials.

> I urge the authorities, the Minister, to ensure that there is value addition in this economy, to ensure that there is manufacturing in this economy, to ensure that there is beneficiation in this economy.

> Countless trade policies have been written which speak to the same thing but nothing has been done.

> One small point on agriculture Mr. Speaker Sir, the marketing of agricultural goods is killing the farmer, earning the farmer RTGS76 thousand for maize and USD90 when you have spent USD300 does not work. I urge the Minister to have the courage of introducing a commodity exchange so that the person who sells maize is in the same position as the person who sells tobacco. He goes to the market, gets his money and goes back home. The marketing model needs to be changed.

> I want to come to the taxation review. One of the problems I have with my friend, the esteemed Minister of Finance, an approach to taxation from the point of view of government coffers, just getting money. Tax used wisely is a tool for progressive social intervention.

> This business of increasing VAT is not only cruel but it is uneven and unequal because the person who stays in Borrowdale will pay the same 15% as the person who stays in Buhera, Chiendambuya, Dotito, Tsholotsho or Nkayi.

> The same applies to the Intermediated Money Transfer Tax, we do not need that. We are one of the few countries in the Sub-Saharan African region who has that.

> The IMTT punishes the small person because it is the small person who goes into a bank and at the ATM but rich people do not do that Mr. Speaker Sir. So why are you punishing the poor? IMTT must be scrapped Mr. Speaker Sir.

> Now I want to make the following recommendations to the Minister through you Mr. Speaker Sir:

> 1. Express this budget in US dollars. It is clear that your budget was US$4.5 billion. So just say it as it is.

> 2. Make timeous actual disbursements to ministries.

> 3. Pay special attention to education and health as these are drivers of the nation.

> Mr. Speaker, when I went to University in 1986, the esteemed Minister was my senior. He was doing his Masters when I was doing my first degree.

> I know for sure that if he had not gotten the education that President Mugabe gave him, he would be herding cattle somewhere in Tsholotsho.

> 4. Scrap the auction. I read something on the Reserve Bank talking of opening the auction on the 9th January 2023.

> Please scrap the auction, scrap the US dollar and pursue fiscal consolidation, the issue of debt and issue of title deeds to people. Reduce and scrap VAT and the IMTT.

> 5. Lastly, please respect the budget.

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