Zim rising steadily out of debt
Fiscal discipline now a reality
THE INTERVIEW WITH TAFADZWA CHIHAMBAKWE
This week, Finance and Economic Development Minister Professor Mthuli Ncube (MN) presented a State of the Economy report in Parliament amid heckling by opposition MPs. Despite the interruptions, he pressed on, outlining some of the corrective measures Government was making under the Transitional Stabilisation Programme (TSP) to promote a stable economic growth. In this report, Zimpapers Television Network presenter Takudzwa Chihambakwe (TC) speaks to Prof Ncube, unpacking issues contained in his report.
TC: You spoke a lot about opportunities that are arising from the CSC partnership, we just want to understand the employment opportunities there. You have highlighted that the private partner has taken over the payment of salaries since February. But is there room for getting people employed?
MN: Yes, the joint venture at CSC with a UK-based firm Boustead Beef (Pvt) Limited will go a long way in bolstering employment through that entity countrywide. There have got ranches, abattoirs and facilities across the board. But also the backward and forward linkages with the agro-processing industry, for example, and there are forward linkages in terms of buying from others, the cattle herd and replenishing it. They will be working with rural farmers everywhere. All of that will create jobs over the next 25 years and we have no doubt about that and that’s a positive thing.
TC: You highlighted that to boost the local herd, they actually have to be importing from South Africa and Botswana. Is there an opportunity for them to use local breeds in the country to make the locals benefit from this initiative?
MN: Absolutely. There is an opportunity for them to use local raw materials to bolster the cattle herd. For example, at Chinhoyi University of Technology, there is a whole programme that is producing semen straws from bulls that can be used to replenish our herd. So we expect this company to partner with Chinhoyi University to use indigenous intellectual property to boost the cattle herd. Absolutely, there will do everything to make sure the herd is bolstered. We know that in March 2017, the national herd — which was controlled by CSC in its ranches — was down to about 341, so it was very low and now with the drought this year, is impacting on the quality of the herd, so there is need to replenish through importation. But at the same time we want to use intellectual property such as the development at Chinhoyi University to bolster the cattle herd.
TC: Now to Zupco. There were 39 buses that were commissioned by President Mnangagwa four weeks ago. The question is where are these buses? People are not seeing them. Are they already on the road and, if not, when are they going to be on the road?
MN: Basically, we have received 100 buses from China and 200 buses from South Africa. So the first fleet of 39 buses has been delivered which President Mnangagwa commissioned. These buses are beginning to ply our routes. Of course, 39 buses are not a lot, so the impact has not yet been felt. But we will increase the fleet going forward through these negotiated agreements with China, Belarus and South Africa. So we have actually negotiated 800 buses so far and our intention going forward is to get to 1 000 buses. And, when a strategic partner comes to ZUPCO we want to go up to 3 000. We believe that dealing with this mass transit bus system is key to an efficient development of transport infrastructure to support our fast urbanising economy. So we will get there, the buses are coming on stream and we will see them beginning to ply urban routes. That will then liberate the ZUPCO fleet to start plying the rural routes.
TC: Fuel is still in short supply and how do you intend to enhance the efficiency of the public transportation system?
MN: In terms of fuel, it impacts everyone, but the idea is to prioritise public transportation when it comes to allocation of diesel fuel, and we will allocate more foreign currency. Because in doing that we know we are dealing with the transportation issue making it easier for anyone to access it and also keeping the prices low since we will have injected competition in the sector. We are quite aware of this and we are going to make sure that the fuel issue is dealt with.
TC: Coming back to issues to do with Parliament. Last week you were expected to come before the Parliamentary Portfolio Committee on Budget and Finance chaired by Tendai Biti. We understand you travelled and you couldn’t make it. On Tuesday, you were expected again to appear before the same committee but you did not appear and there were indications that you will present a ministerial statement in Parliament. What is the issue there? Can you tell us the reasons why you have not been able to attend Parliament?
MN: They (MPs) do understand as I was in Parliament today (Wednesday) and I was happy to see all my colleagues and I think they were equally happy to see me. When I said I am keeping a low profile it is that I was not in the media, that is what I meant where most people are likely to see me. So, last week I was in Paris at the invitation of the Minister of Finance for France. Basically, we had a meeting called the Paris Forum, which is nothing other than a group of creditors and debtors who get together in Paris because France chairs the Paris Club. So, we were there to discuss the global debt issues. So I was there to contribute from a Zimbabwean point of view and from an African point of view, our debt situation both external and domestic debt.
Through those discussions we were able to say that most of the African countries are beginning to feel the heat when it comes to their external debt because it is rising. I won’t mention their names because I am a minister now but I have all the data. So, it is important therefore to start instituting serious fiscal discipline to be able to contain the debt accumulation pace. That’s why here in Zimbabwe we had the fiscal consolidation, and we have been able to maintain discipline which has allowed us to manage our debt levels.
We have been paying our domestic debt and now we are negotiating the payment of our foreign debt arrears through the Staff Monitored Programme. We discussed all of that and I was able to make a contribution. The other issue that we discussed is that we should have a better handle on the data on all Government debt and from parastatals because very often a Minister of Finance is required from time to time assume debt from the parastatals in order to clean up the balance sheet of a company and prepare it for privatisation. So, it is important for the Ministry of Finance to be aware of what those debt levels are and be up-to-date but also have a proper debt management offices.
But, also it was called upon the creditors to be transparent about letting the world to know what they are lending for because often pressure is on us borrowers to tell everyone through parliamentary inquiries and sharp journalists like yourself are asking us tough questions. But, creditors don’t reveal, so we need transparent information from both sides and that was emphasised. So that was the nature of the broader global discussion.
So, basically we had the Paris Club creditors and us the typical borrowers from Southern Africa. There was us and South Africa and those French-speaking African countries. I was also able to engage with the French government as one of the key creditors there. I engaged them on our reform agenda and on our debt clearance agenda in preparation for the eventual restructuring of our debt. I was also able to engage with the World Bank president, who is also the managing director of the International Monetary Fund and other key persons.
TC: Just to cut you short there, you mentioned an interesting point there, that the Government is paying its domestic debt. Do you have a figure of how much has been paid so far?
MN: This year alone, we have paid $195 million using the surplus that we were able to accumulate. So we are paying and we continue to do that to reduce the domestic debt. Even the foreign debt we have also begun to make token payments on our arrears on foreign debt, with the World Bank, African Development Bank, European Investment Bank and also the Global Fund on HIV. Because we are aware that by settling what we owe them and in terms of commitment we will unlock much more to support our HIV programmes. So this quarter we have decided on servicing our debt with those kind of institutions and we had stopped doing that in 2017. So here we are, two years later we have begun that process which is very important for our credit standing. We began doing that from the surplus that we accumulated so far. But coming to Parliament in terms of making a statement I agreed with the committee that I will make a full and formal statement on the State of Economy, which I did on Wednesday.
TC: You said after six months people can judge you and Zimbabweans have been asking that things were projected to stabilise by April. It’s May now almost June and inflation is skyrocketing and prices of goods are going up. Last week we had a meeting with the Confederation of Zimbabwe Retailers where retailers signed a Memorandum of Understanding that they will start self-regulating and make sure if someone in the market is over-pricing they will make sure the supplier won’t give them goods. But after six months your projections and where we are, what’s your take on that?
MN: Frankly, in terms of the economic reform agenda we have done very well in the last six months. Look at the record. If
you look at our record on fiscal consolidation we have eliminated the deficit. So tick that box, we have achieved that. If you look at the progress that we have made on the State enterprises agenda and earlier we were talking about the progress regarding CSC, regarding ZUPCO and we have moved on to ZESA and GMB de-bundling, dealing with governance issues and Allied Timbers.
So that’s a lot of progress. As I speak now, if you look at the institutional agenda basically, the POSA Bill is before Parliament now and we have also reported on the Freedom of Information Bill, which will repeal AIPPA once it is approved by Parliament. Again we have made a lot of progress on that, so what I mean judging us in six months is that we will walk the talk on our economic reform agenda.
On the issue you raised on inflation, I have always maintained that inflation will remain high until October this year and it is a technical phenomenon because we have changed the base of inflation and then by year end it will then come down. So, for example, this time next year it should be much lower than what it is. By the way I welcome what the retailers have done which is self-regulating in terms of increasing prices and that’s what it should be.
There is no justification for prices to go up the way they are doing and the retailers using the parallel rate to determine the prices. That is bad economics, that’s bad finance and that is not how it is done. If you produce a good locally what will work out is the import component within that and it is never a 100 percent. So it can’t be that whenever the exchange rate rises you raise your prices. So the move by retailers shows that we are beginning to engage again in a constructive dialogue and that is most welcome.