Following the recent presentation of the 2020 national budget statement some economic commentators, including Members of Parliament, argued the budget allocation for industry and commerce was inadequate when compared to the funding gap in the manufacturing sector.
Treasury only allocated $368 million to the Ministry of Industry and Commerce in year 2020, plus $240 million towards capacitating the Industrial Development Corporation (IDC).
The issue sparked fierce debate among business people before spilling into Parliament where some legislators suggested the industry budget allocation be increased to at least $1 billion. Kambuzuma MP, Willias Madzimure, said the 2020 national budget theme: “Gearing for higher productivity, growth and job creation” was perfect but needs to be supported by a higher budget vote for the country to substitute imports.
“The amount allocated for industry is too little. Industry needs to be capacitated to grow. We need to substitute those things that we are importing,” he said. “We need our industry to be retooled. We need equipment that is efficient, equipment that can produce high quality goods at the lowest cost.”
Dzivarasekwa legislator, Edwin Mushoriwa, said the nation “expected more money” to be thrown into the industry portfolio. He added that the Zimbabwe National Industrial Development Policy and the Local Content Strategy, which were adopted this year, needed to be buttressed by a solid budget for successful implementation.
Magunje MP, Cecil Kashiri, said Zimbabwe must not be left out of the Fourth Industrial Revolution, which is anchored on innovation, artificial and creative intelligence. Such a drive requires adequate budget allocation, he said.
“How do we go forward into the Fourth Industrial Revolution with such a small budget? We are talking of technology and technology is expensive. Let us not lag behind in the SADC region, Africa and European countries because we are going into robotics as soon as possible.”
Prof Ncube, however, differed with legislators saying what industry needs more at the moment is policy reform than financial bailouts. He said recent company tours at big industries such as Pepsi Cola factory, Varun Industries, Surface Wilmar, Nestle and Tregers Group in Bulawayo, have shown that most companies were eager to produce more with some already at Fourth Industrial Revolution stage – using robotics. “What is clear from my tours so far is that the issue for these industries, for them to retool to export and employ more people, they don’t need an increased budget from the Government. That’s not the issue,” he said. “They are looking for better policies, consistent policies and better inter-bank market so that they can access foreign currency.”
Prof Ncube said the much-hyped talk about an increased budget allocation was based on a mistaken assumption that it’s Government’s role to invest, which is not correct.
“There are investors out there, they are doing their things and they know what to do. They require our support and that support is not financial?
Industry is not looking for capital from the Government to retool,” he said. Zimbabwe Pharmaceuticals managing director, Tavengwa Mukuhlani, who is also Mhondoro-Ngezi MP agreed with Prof Ncube saying “industrialisation by nature is policy driven”.
While budget figures were important for the ministry to superintend and develop supporting policy, he said it was not the ministry’s role to go out and start industries.
“The industry in Zimbabwe is not affected by budget allocations. The industry in Zimbabwe is affected by policy and regulatory framework,” said Mukuhlani.
“Our regulatory frameworks are so stringent that it creates high entry barriers into industry. We need to relook at our regulatory framework and incentivise local businesses that are reviving businesses that had collapsed.
“So, it does not matter how much the minister allocates to this ministry. Even if he were to allocate a billion dollars – industrialisation will not take place because the regulatory framework does not allow that to take place.” Rushinga MP, Tendai Nyabani, called for supportive policy to unlock small to medium enterprises’ potential.
“We are looking at small businesses like soap making, garments manufacturing, oil expressing etc. We should promote small companies and Government should allocate funds for that,” he said.
Chegutu West legislator, Dexter Nduna, concurred saying Government must create “the right conducive environment” for private business to thrive. He also called for increased funding support to indigenous businesses and urged Treasury to expedite budget disbursements as opposed to staggering it during the year.
While Zimbabwe has narrowed its trade deficit to 63 percent between February and August this year to $644 million compared to $1,73 billion last year, according to Zimstat, a weak industrial base has sustained reliance on imports. Incessant power cuts and shortage of foreign currency to procure key raw materials, have escalated the situation. As a result, the Confederation of Zimbabwe Industries (CZI) says capacity utilisation this year dropped to about 30 percent from 48 percent in 2018. Mount Pleasant MP, Samuel Banda, said such a decline was worrying.
“So, if we continue to give this very important ministry only $300 and something million, then it does not make any sense,” he said.
“The budget should be at least a billion dollars because that way, we are going to really capacitate industry.” Prof Ncube, however, said Treasury will continue to avail resources to support start-ups of small industries in particular.
Already a National Venture Fund of $500 million has been set up and cuts across to the youths that need funding.
This is over and above a guarantee scheme for companies that seek capital from banks but have run out of collateral to pledge for those loans.