via 2014 Zimbabwe Budget: A procurement perspective January 6, 2014 Nyasha Chizu NewsDay
The affirmation that the multiple currency regime was here to stay provided the much-needed confidence on the market.
A stable environment is a prerequisite for economic development and facilitates effective procurement planning and control.
In addition to clarity on the government policy on currency, the indigenisation policy was also clarified bringing the much needed investor confidence.
Finance minister Patrick Chinamasa highlighted that the economic environment was characterised by a subdued inflation around 6,4% in the Sadc region in 2013.
It was, therefore, expected that approved projects in 2014 would be completed within Budget limits given the stable inflationary environment.
The stable environment was further complemented by international commodity prices that were also projected to be subdued.
Oil, a major cost driver, was expected to decline by 3%.
This was optimistic given the previous downstream price hikes associated with marginal oil price increases.
Given the decrease in maize output from 968 041 tonnes to 798 500 tonnes, the country will inevitably increase the quantity of imported maize to cover for the production deficit.
The Budget projected a decline in the international agriculture commodities prices that present a silver lining on the dark cloud of local production.
The development had potential benefit to the general citizenry from lower costs of agricultural related products.
The local agricultural industry pivotal for economic growth was allegedly not viable due to high input costs.
The high costs were attributed to the lack of competitive and comparative advantages of local production methods.
The projected subdued commodities prices also worked against local producers.
This undesirably affects the primary and secondary industry to the detriment of ordinary citizenry who look forward to employment and better public goods and services.
The government debt, on the other hand, was also reportedly affecting the fertiliser manufacturing industry.
Availability of long-term loans was apparently a sticking point in the revival of the economy.
The limited short-term facilities had unsustainable interest rates between 3% and 24% affecting the local producers.
This was purportedly over spilling to the incapability of recapitalisation, low project turnover due to high input costs and the high rate of input costs.
The national Budget of $3 628 billion was mainly employment costs with only $492 million allocated for capital projects.
This is not a healthy situation to commerce that looks forward to public sector projects tocreate employment and wealth for the general public.
Minister Chinamasa also stressed that tax revenues were declining.
The scenario above of a paltry 13% of the national Budget being allocated to the productive sector in form of capital projects further affects tax revenue inflows due to non-availability of economic stimulant from the government projects.
The external debt was also eroding the country’s creditworthiness.
Although the government introduced the Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy that made strides in reducing the national debt, the country had penalty charges amounting to 17% of the total external debt.
General public procurement expectations
Not much procurement activities were anticipated in the public sector in 2014.
This was against the background that the other source of public sector funding from the donors was limited to health and other service sector and was not channelled through national treasury, limiting localindustry participation in donor funded procurement due to the lack of competitive and comparative disadvantages.