Perspectives: Losers and winners in the 2024 budget statement

Given the Zimbabwean context it’s important to understand who stands to benefit or lose out in 2024 as determined by the budget statement.

 According to the voters' roll 54% of voters are women and 70% are young  people aged below 35.

In the last FIVE years unemployment  has meant that 90% of working adult population are accessing income through the informal market.

The economic instability-with-inflation rate according to the Hanke index being over 800% .

This has  resulted in Zimbabwe having nearly 49% of its citizens living in extreme hunger.

Zimbabwe is currently going through the effects of the El Nino phenomenon, a lived deja vu experience from 2008 and 2016, both of which a state of emergency disaster was declared. 

• Mavhunga puts DeMbare into Chibuku quarterfinals
• Bulls to charge into Zimbabwe gold stocks
• Ndiraya concerned as goals dry up
• Letters: How solar power is transforming African farms

Given this context Zimbabwe has been put by World Food Programme on the extreme hunger watchlist from February 2024.

 With regards to the business environment the United Conference on Trade and Development (UNCTAD) suggests that FDI suggests inflows have fallen significantly by nearly 40% from 2019, this being an indication of the regressing investment environment.

 Within the statement there is a commitment to empower women and SMEs,  but there is little demonstrable evidence of  how this is enforced.

A statement to encourage women to take up government jobs is negated by lack of mention of substantive increment on civil sector wages.

In Zimbabwe, women as the backbone of society assume parental/guardianship positions within households therefore, income is a key incentive for employment opportunities. 

 This statement should have been supported through employer incentivisation through tax or indeed wage increments .

 Instead, formal employment is further disincentivised by  reducing the personal income tax threshold which adversely affects household income. 

The gender budget statements notes that currently only 25% of public sector employees in decision making positions are women and this is unlikely to change.

Women are further disenfranchised by other punitive tax measures such as the disbandonment of duty free exemption on basic good and VAT exemption on the same.

Women who are key players in the informal market will be forced to be VAT- registered in order to purchase their trading items from local suppliers.

Everyone would assumes from the statement that  this VAT registration will likely attract VAT penalties on already struggling informal traders.

Women will be forced to import through informal channels which carry social risks to them and their families.

The statement avails $10 billion through the Women’s Microfinance Bank of which using the official exchange rate is equal to US$4 million. Also if the loans are disbursed from government using the local currency then these will need to be revised due to inflation. 

Whilst women may still qualify for other available programmes which other stakeholders also qualify for, the total of US$7.1 million is restrictive.

The microfinance will likely carry a high rate of interest which will make it less palatable for women who are trying to maximise their income under a very unstable economic market.

Young people who are the majority of the population and also the majority of the unemployed have been awarded a ministry budget of $210 billion.

Given that the young people population is about 8.84 million, the amount of dedicated resources for each youth is laughable to say the least.

Converted to US$  this is US$38 million which equates to less than US$5 per each young person  below the age of 35.

 It’s also not clear how much of that will be dedicated to the youth service programme which is an inappropriate scheme as young people need gainful employment rather than forced ‘patriotism discipline’ training under the   national youth service.

Other taxes such as the  personal income tax threshold further disenfranchise young people as entry level jobs will attract tax which creates a significant burden on income. Young people will be forced into unemployment as the overheads of working will likely result in a negative income balance.

The statement recognises the scourge of drugs and substance misuse amongst the youths and the subsequent ramification on socio-economic development.

However inspite of this recognition only $30 billion has been set aside  for rehabilitation centres, healthcare professionals and awareness campaigns.

After taking into account real rate of exchange this equates to US$3 million and is hardly sufficient given that the capital outlay of residential rehab centres can cost north of US$750,000 to set up .

It will be difficult for much more to be achieved from the various aspirations outlined.

It’s unlikely that investment inflow will increase following this budget statement as some critical macro-economic fundamentals are not addressed .

It is clear that the presentation of the budget denoted in Zimbabwean dollars that the de-dollarisation roadmap is now well underway without the consultation of stakeholders that is implied.

 This is inspite of not only domestic instability but also  the presence of exogenous global conditions that demand a stable currency in order to build resilience. 

The statement has not heeded any caution, given that El Nino may affect liquidity as input prices increase as supply  becomes impacted. This puts a huge requirement on currency stability.

While the roadmap to de-dollarisation still remains vague — public services will now receive payments in local currency.

However, this will be unsustainable as government is going to require foreign currency to pay for  energy inputs, grains, healthcare inputs and other costs. 

It will also mean that the public service contracts will be serviced in local currency which contractors will in turn look to offload this local currency as they rely on  imported raw materials as well as fuel which is paid for in US dollars. Other fiscus measures such as the high retention on foreign deposits mean that these transactions will likely happen on the parallel market.

This will continue to increase the exchange rate. In the long run exchange rates and inflation will respond with sharp increases. 

The business environment continues to have property rights infringed indicated by items such as ‘temporary closure’ of businesses to recover tax.

 Closure makes it less likely for the business to afford tax thus becoming self-defeating. Access to cash vaults will be subject to abuse by the state and is a clear infringement on property rights.

The commercialisation of Hwange 7 and 8 may come with increased energy prices which will increase business overheads.

Other taxes such as tollgate charges and motor vehicle registration tax will increase overheads without any realisable benefits to businesses.

Pensioners continue to be isolated by the budget which regrettably states compensation to pensions from 2009 are still outstanding.

There is still no outline of a roadmap to disburse the agreed compensation; sadly some pensioners may never live to receive their hard earned pensions. 

Other punitive tax measures such as the wealth tax on properties will further disenfranchise pensioners.

Pensioners who may have been able to purchase their homes when properties were affordable will now be subject to tax on those properties.

 Potentially this is  double taxation as owners will likely have already paid income tax.

 This is an infringement on property rights at best and daylight robbery at worst.

Pensioners should be receiving substantial rebates on rates and other such expenses given the low pensions received from both state and  some private pension schemes.

They will no doubt also be negatively impacted by removal of VAT and duty free exemption on basic goods.

In terms of winners those engaging in illicit trade especially within the mining sector continue to be given a free pass.

The statement is muted in terms of demonstrably steps to curb illicit trade and indeed work with artisanal miners who are key stakeholders in mining.

 Instead there is a heavy focus on a wild goose chase of mining rights which actually speaks more to legislative reform than operational activity.

Those who are displaying lavish styles not backed by any known income generating activity also get a free pass as government takes the approach of cutting one’s nose to spite the face through the blanket wealth tax which will punish the ordinary person. 

Calls for lifestyle audits have been ignored.

Other winners are fuel trading businesses who retain the benefit of charging in USD while also having tax exemptions.

Fuel consumers will not realise any benefit as fuel pump prices remain amongst the highest in Sadc.

In conclusion one can substantively say the 2024 budget is definitely not  for everyone!

• Mutambasere is a development economist and technology architect based in the United Kingdom.
• These weekly articles published are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Private) Limited, past president of Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe. Email - kadenge.zes@gmail.com or Mobile No. +263 772 382 852