Mnangagwa gamble backfires 

Source: Mnangagwa gamble backfires – DailyNews Live

Tendai Kamhungira and Mugove Tafirenyika      4 October 2018

HARARE – President Emmerson Mnangagwa has got it all to do after the
government’s new measures to stabilise the country’s sickly economy were
rejected by a wide cross-section of the Zimbabwean populace – who feel
that the steps taken by authorities this week will worsen their suffering,
the Daily News can report.

This comes as militant labour unions warned yesterday that they were
preparing to go on strike – to protest the two cents per dollar tax which
was introduced by Finance minister Mthuli Ncube on Monday – and which they
say must be reviewed by the government as a matter of urgency.

It also comes as Mnangagwa, 76 – who was elected as Zimbabwe’s substantive
leader in the hotly-disputed July 30 national elections – has been working
hard to revive the country’s battered economy.

But while most Zimbabweans warmly received his recent Cabinet picks – in
which he dumped the old guard which had been a permanent feature in former
leader Robert Mugabe’s previous government – his administration’s latest
policy initiatives, particularly the electronic transaction tax, have been
roundly criticised.

The new measures announced by Ncube in his maiden fiscal statement – and
which were buttressed by Reserve Bank of Zimbabwe (RBZ) governor John
Mangudya’s Monetary Policy Statement (MPS) – were among the first steps
taken towards the government’s determined attempts to reverse the
country’s economic troubles.

But of major concern to many people in the new measures are the shockingly
high government debt that was revealed by authorities, as well as the
taxes on electronic transactions, and the controversial move to create
Foreign Currency Accounts (FCAs) for exporters, while leaving the rest
clutching onto their RGTS accounts which are now effectively Zim dollar
accounts.

Denford Mutashu, the president of the Confederation of Zimbabwe Retailers,
told the Daily News that the two cents per dollar transaction tax that was
announced by Ncube had triggered a fresh round of price increases in
retail outlets.

“The two cents per dollar tax is simply what it is, an additional cost to
business which is already overtaxed.

“Prices have gone up by between 2 and 15 percent in a space of 48 hours
and the parallel market rate is rampaging.

“The fiscal challenges facing the economy remain a nightmare and business
is more interested to hear about how government will cut its expenditure
rather than its collection capacity,” Mutashu said.

On their part, labour unions said they were consulting their members about
holding strikes to try and force the government to review its measures
which they said had pushed “workers to the brink of destitution”.

“Workers are already overtaxed and to add more taxes on the struggling
workers that are struggling will cause disaster.

“Some companies are also going to fold and prices will continue to
increase, and workers cannot carry this burden,” Peter Mutasa, the
president of the Zimbabwe Congress of Trade Unions (ZCTU), told the Daily
News.

“Workers’ organisations are saying workers are being short-changed. This
is daylight robbery. Salaries have been eroded seriously and there is need
for the workers to be cushioned.

“There should be a social contract premised on a political settlement. We
need another political settlement that deals with the issues prevailing in
the country,” Mutasa added.

The militant Amalgamated Rural Teachers’ Union of Zimbabwe (Artuz) also
queried the creation of FCAs, as well as the two cents per dollar tax –
which it said was punitive.

“We feel robbed by the introduction of a two cent tax on all electronic
transfers. We reject the tax regime and stand ready to defend our wages by
any means necessary, because it is clear that the government is making us
pay for its recklessness,” Artuz said.

Apart from being seen as “disadvantaging” business and ordinary people,
the two cents per dollar tax was also viewed as an assault on the
government’s own policy of promoting financial inclusion and creating a
cash-lite society.

Mobile cellular companies and banks were also seen as victims of this new
tax, as both had millions of clients who stood to lose significant sums.

“The two cents per dollar tax is a retrogressive and unfair tax because
all along government has been encouraging people to use electronic
transfers and point-of-sale machines to move away from physical cash.

“They have been promoting financial inclusion which was the very purpose
of mobile platforms such as EcoCash, One Wallet and others which reached
places that were previously unbanked like the rural areas.

“But now, by charging these people two cents to the dollar transacted, it
means therefore that the government is penalising those that are poor,”
Economist Godfrey Kanyenze told the Daily News.

Political analyst Maxwell Saungweme concurred with Kanyenze, urging the
government to reverse the new tax forthwith.

“All along, and due to cash shortages, the government was encouraging
people to use plastic money and less cash. What this new, insensitive tax
does is to punish people who are already heavily taxed.

“This is typical of the Zanu PF government’s economic and monetary policy
inconsistencies that make investors shun the country, as it’s difficult to
predict profits and cash flows in a country with volatile policy
frameworks.

“This move is self-defeating as it makes Zimbabwe more and more
unpredictable and increases the cost of doing business for investors,
while squeezing the consumer who will be inclined to shun the banking
system, and therefore reducing savings and the financing accessible to the
productive sector,” Saungweme added.

Zimbabwe is in the middle of an economic crisis which has seen the prices
of basic consumer goods increasing on the back of a thriving black market
for scarce United States dollars, whose parallel rates have shot up to
more than 200 percent.

As a result, companies which need to import raw materials have been
struggling to meet market demand – leading to the price increases, and at
times to product withdrawals from supermarkets.

Mnangagwa and his government are under pressure to mend the country’s
broken economy in line with their promises made after Zanu PF won the July
30 polls.

Millions of Zimbabweans cast their vote in the historic elections to
choose both a new Parliament and president – following the dramatic fall
from power of Mugabe in November last year.

The elections were the first since 1980 to be held in the country without
Mugabe’s participation, whose 37-year iron-fisted rule was stunningly
ended by a military operation which triggered events that ended with his
resignation.