Tsvangirai risks all as he does deal with Mugabe on sharing power

http://www.timesonline.co.uk/

January 31, 2009

Martin Fletcher and Jan Raath in Harare
Zimbabwe's opposition took the momentous but hugely risky decision yesterday
to enter a unity government with President Mugabe's Zanu (PF) party, whose
brutal and misguided policies have brought the country to the brink of ruin.

Under pressure from South Africa - but to the consternation of some Western
governments - Morgan Tsvangirai won the approval of his Movement for
Democratic Change (MDC) to take a step that could conceivably mark the
beginning of the end of Mr Mugabe's 28-year-rule but could equally well hand
him a much needed lifeline.

"I'm doing what's best for the people of Zimbabwe," Mr Tsvangirai told
hundreds of jubilant supporters who had gathered outside the MDC
headquarters in central Harare.

"He has walked into a trap," a Western official countered. "Mugabe is not
serious about this ... He will honour as little as he can."

Mr Mugabe, 84, will remain President but Mr Tsvangirai will be sworn in as
Prime Minister on February 11. The ministries will be divided between the
parties. Zanu (PF) will keep the Defence Ministry, which controls the army,
while the Home Ministry, which controls the police, will be shared.
Mr Tsvangirai said he wanted the Southern African Development Community
(SADC), the regional body which first brokered the power-sharing agreement
last September, to address outstanding issues before February 11. These
include the release of all political abductees and the appointments of the
Attorney-General, Reserve Bank Governor and provincial governors. He did not
say what he would do if SADC failed to resolve those disputes and insisted:
"We are unequivocal. We will go into this Government."

Supporters say it will at least end Mr Mugabe's monopoly on power and give
the MDC a chance to win support by rebuilding Zimbabwe's social services.
They hope that Western donors will give aid to the MDC-run health and
education ministries.

They also say that they have no choice in a country where 94 per cent are
jobless, 80 per cent depend on food aid and wild inflation has rendered the
currency worthless.

"Now is the time to put aside our differences and prioritise the welfare of
the people," Mr Tsvangirai said. "We are not saying this is the solution to
Zimbabwe's crisis. Instead our participation signifies that we have chosen
to continue the struggle for a democratic Zimbabwe in a new arena."

Opponents, including senior members of Mr Tsvangirai's own party, argue that
the MDC's participation will give Mr Mugabe a veneer of legitimacy while
Zanu (PF) retains the levers of power. They fear his regime will co-opt MDC
ministers and MPs through bribery and ultimately swallow up the MDC just as
it destroyed Joshua Nkomo's rival Zapu party when it was forced to merge
with Zanu (PF) in 1987 after the massacre of 20,000 members of the Ndebele
people.

Britain and the US have made plain their opposition to a unity government.
One Western official said he saw no chance of the West giving development
aid to Zimbabwe or lifting sanctions against Mr Mugabe's inner circle
without a fundamental change of direction from the Government.

David Miliband, the Foreign Secretary, said last night: "The people of
Zimbabwe have too long been denied the government they deserve and have
suffered hardship, political violence and misrule ... The new government
will be judged on its actions... This will determine our formal engagement,
including the provision of donor support."

South Africa said the MDC's decision would help Zimbabwe to recover and
would lead to fair elections. The Zimbabwe Congress of Trade Unions (ZCTU)
said, though, that the MDC was being driven into a potential "political
 trap".

The MDC won Zimbabwe's parliamentary elections last March and Mr Tsvangirai
won the first round of the presidential election, but he withdrew days
before the second round after Mr Mugabe's regime unleashed a wave of
violence.

SADC brokered the power-sharing agreement to end the political deadlock that
ensued, but its implementation has been delayed for months by arguments over
how power should be divided. The MDC has now signed up to an arrangement
that is a far cry from the clear-cut victory it should have enjoyed.

Mr Tsvangirai received a rapturous welcome from a huge crowd of supporters
as he left yesterday's meeting of the MDC's national council. "There's light
at the end of the tunnel," proclaimed Yona Gilbert, 37 and also unemployed.

"This is a chance for the MDC to influence things from the inside," said
Wellington Ndawana, 37, a redundant salesman. "The MDC is full of lawyers
and intellectuals. They are cleverer than one old man."

Motlanthe to apprise AU on Zim unity government

http://www.zimonline.co.za

by Nokuthula Sibanda Saturday 31 January 2009

HARARE - South African President Kgalema Motlanthe is expected to table a
report at the African Union (AU) summit on the outcome of efforts to form a
power-sharing government in Zimbabwe and end political and economic crisis
in the country.

Motlanthe holds the rotating chair of the Southern African Development
Community (SADC) that has been pressuring President Robert Mugabe and his
opposition rival Morgan Tsvangirai to implement a power-sharing deal they
signed last September by form a unity government by next week.

Tsvangirai's MDC party said on Friday it would join the unity government
that will be headed by Mugabe as President with Tsvangirai his Prime
Minister. Tsvangirai's deputy in the MDC, Thokozani Khupe and Arthur
Mutambara, who heads a breakaway MDC faction will be appointed deputy prime
ministers.

The South African foreign ministry said Motlanthe was due to fly from Davos,
where he was attending the World Economic Forum meeting, to Ethiopia for the
AU summit that begins today.

"The summit of heads of state and government, organised under the theme
"Infrastructure Development in Africa, with emphasis on Transport and Energy
Investments is expected to discuss among others: peace, security and
stability on the African continent, including the DRC, Somalia, Zimbabwe,
Burundi, Sudan; the Middle East situation as well as the global financial
crisis," the statement said.

Regional leaders believe only a unity government could end Zimbabwe's crisis
marked by acute food shortages, hyperinflation, deepening poverty and a
cholera epidemic that has killed more than 3 000 people since last August.

Under SADC's plan for the formation of a government of national unity in
Zimbabwe, Parliament will amend the country's Constitution by February 5 to
create the positions of prime minister and deputy prime minister.

Tsvangirai will be sworn in as Prime Minister on February 11. His two
deputies will also be sworn in on the same day.

Cabinet ministers will be sworn in on February 13 to complete the process.

A joint monitoring committee of all Zimbabwe's three main political parties
involved in the power-sharing agreement is already working on the ground,
monitoring implantation of the deal. -ZimOnline

New power-sharing deal will not end the agony in Mugabe's Zimbabwe

http://www.timesonline.co.uk

January 31, 2009

Catherine Philp
Zimbabwe's feuding parties have agreed to rule together, but will it work
with Robert Mugabe still in charge? African leaders remained as divided as
ever on the issue - and on what another power-sharing deal means for African
democracy.

The Zimbabwe crisis dominated the debate on Africa at the World Economic
Forum in Davos, where

Kofi Annan, the former UN Secretary-General, joined leaders from South
Africa, Mozambique, Kenya, Senegal and Rwanda to discuss good governance on
the continent.

President Motlanthe of South Africa defended the decision to push for a
unity government as the only realistic way of halting the continuing
suffering in Zimbabwe. "This time we have the political basis for a
breakthrough in Zimbabwe," he said. "If we undo that and present no
practical alternative it means we are perpetuating the deterioration of that
country."

But the leaders of Senegal and Kenya expressed grave doubts about an
agreement that leaves Mr Mugabe in power and called for a deal granting him
immunity from prosecution to persuade him to relinquish power.
Abdoulaye Wade said Senegal was prepared to grant asylum to Mr Mugabe as
part of a deal for the leader vaunted as an African liberation hero. "We
should advise Mugabe that he should be withdrawing from power," Mr Wade
said. "We must tell him that if Mugabe does leave power, he will not be
pursued. We need to provide a smooth exit for him."

President Odinga of Kenya - Mr Mugabe's harshest critic on the continent -
said immunity was a price worth paying if it hastened the Zimbabwean
leader's departure.

"Is Mugabe the one who should be presiding over formation of a new
government?" Mr Odinga said. "Mr Mugabe must be told is that he is only
being tolerated because we want to give him a safe exit, not because he is
President - because he lost that election and the whole world saw. The way
Africa handles this process in Zimbabwe will define how democracy goes in
Africa."

Mr Odinga himself came to power as part of a power-sharing arrangement
brokered by Mr Annan to end the violence that followed Kenya's disputed
elections in which more than 1,000 people were killed. Mr Annan, however,
cautioned against using the agreement as a model for others and warned that
the settlement would fall apart if Mr Mugabe did not relinquish some
control. "The Kenyan situation was unique," he said. "I would hope that if
MDC agrees to join the Government, [other leaders] will not think the
situation has been resolved."

A political settlement would have to be matched by an economic one, he
added. "There can be no solution in Zimbabwe that does not include economic
recovery."

South Africa says it is ready to help Zimbabwe to rebuild its shattered
economy after the formation of the government. Western governments have
promised to release billions in aid and investment to a new government in
Harare - but it is unclear exactly how that will happen while Mr Mugabe
remains in charge.

Britain and the US have led calls for him to stand down and had been
preparing a new UN resolution calling for sanctions while the impasse
continued. South Africa and Russia scuppered previous attempts to get a
resolution on Zimbabwe, insisting it was a problem for Africa to solve.

Secretary-General Ban Ki-moon's statement

Secretary-General welcomes decision of Movement for Democratic Change to
join Zimbabwe's National Unity Government
Source: United Nations Secretary-General

Date: 30 Jan 2009

SG/SM/12079
AFR/1802

The following statement was issued today by the Spokesperson for UN
Secretary-General Ban Ki-moon:

The Secretary-General welcomes the agreement of the Movement for Democratic
Change (MDC) to join a Government of National Unity in Zimbabwe, in line
with the 15 September Global Peace Agreement and the communiqué of the
Extraordinary Summit of the Southern African Development Community Heads of
State and Government of 27 January 2009. The United Nations pledges its full
support to the implementation of the 15 September Agreement.

The Secretary-General calls on the new Government to take all necessary
measures to address the humanitarian and economic crises in the country and
respect democratic freedoms.

A Zimbabwe Unity Pact - For Real This Time?

http://www.time.com

By Alex Perry Friday, Jan. 30, 2009

In what it said was an attempt to force the regime to release its members
from jail, Zimbabwe's opposition Movement for Democratic Change (MDC) on
Friday announced that it will join Robert Mugabe's ruling Zanu-PF party in a
unity government. "Aware of the suffering people of Zimbabwe, the MDC
national council has resolved that we go into the government," party leader
Morgan Tsvangirai told reporters. Tsvangirai stressed, however, that despite
agreement on a unity government, his party's struggle with Mugabe was far
from over. "Political detainees must be released and some of the
appointments made by President Mugabe must be reversed," he said. "Make no
mistake, we are not saying that this is a solution to the Zimbabwe crisis.
Our participation signifies that we have chosen to continue the struggle for
a democratic Zimbabwe in a new arena... regardless of how long that struggle
takes us."
Under the power-sharing arrangement, Mugabe, who turns 85 next month and who
has ruled Zimbabwe for 28 of those years, will remain President. Tsvangirai,
who won more votes than Mugabe in a presidential election last March, will
take the new post of Prime Minister by Feb. 11, presiding over a government
comprising an equal number of ministers from the MDC and Zanu-PF. For six
months, control of the Home Affairs Ministry - which controls the police
force that has, until now, been deployed on behalf of the ruling party
against the opposition - will be shared between the two parties, after which
all ministerial appointments will be reviewed. (See images of political
tension in Zimbabwe)

A crowd of several hundred supporters cheered Tsvangirai as he addressed
them outside the MDC meeting in Harare, and passing motorists blew their
horns as the news was broadcast across the Zimbabwean capital. Forbes
Sithole, a 40-year-old office clerk, who was in the crowd listening to
Tsvangirai, said: "This is what we have been waiting for. This man is the
only answer to our woes." Thabani Moyo, a spokesman for the Media Institute
of Southern Africa, which champions press freedom in Zimbabwe, was more
cautious: "I support the MDC decision because it has been done with the
people in mind. Zimbabweans have suffered. But it is too early to celebrate.
It remains to be seen if Zanu-PF will respect their counterparts. That's
crucial."

Its equal standing in the cabinet and its majority in parliament and most
local authorities puts the MDC is in a strong position - on paper, at least.
But until now, such formalities have meant little in the face of the muscle
wielded by the ruling party. Mugabe's security forces massacred thousands of
supporters of a rival liberation party in the mid-1980s. After the MDC won
the general election in March, the security forces unleashed another wave of
violence against the opposition, in which nearly 200 people were killed.
That repression forced Tsvangirai's withdrawal and allowed Mugabe to "win" a
second round presidential run-off unopposed. For reasons he never explained,
at his inauguration Mugabe unexpectedly reversed course, announcing he was
prepared to share power with the MDC. Although South African mediation
efforts managed to secure agreement over forming a unity government, the
process quickly stalled when it came to allocating cabinet positions, with
the ruling party reluctant to cede significant control. Friday's
announcement by the MDC may have opened the way to ending the stalemate - if
Mugabe respects the deal.

Whether or not the arrangement secured by the MDC results in a genuine
sharing of power, the opposition knows that a national unity government is
key to rescuing Zimbabwe from a slow-moving catastrophe. As the politicians
have battled over power, Zimbabweans have been suffering under the burden of
poverty, hunger and disease, amid 80% unemployment. After years of
hyper-inflation, Zimbabwe on Thursday finally abandoned its own currency in
favour of the U.S. dollar and other neighboring currencies. Millions of
Zimbabweans have fled the country in search of a better life elsewhere. The
World Food Program warns that around 7 million Zimbabweans - more than half
the pre-crisis population - is in need of food aid. Even more urgent is a
cholera epidemic, spawned by the collapse of the water, sewage and public
health systems in the capital, which the U.N. says has infected 60,000
people, and has killed more than 3,000.

Genuine political power-sharing has become the vital first step to reversing
the country's catastrophic decline, because international donors and
investors are unwilling to help a Mugabe regime clinging to power against
the will of its electorate. Zimbabweans are hoping the pact will bring the
relief workers, aid and investment from abroad needed to revive a nation
that, until a decade ago, had been deemed a developing world success story
by measure of its economy and health and education services. "Tsvangirai is
going to attract rich nations like the United States of America and Britain
to help rebuild our country," said Sithole. That is the hope. Once again,
Zimbabweans must await the reality.

-With reporting by correspondents inside Zimbabwe

Tsvangirai gambles on 'forced marriage'

http://www.ft.com

By Tony Hawkins in Harare and Richard Lapper and Tom Burgis in Johannesburg

Published: January 30 2009 19:55 | Last updated: January 30 2009 19:55

The decision to join a government of national unity represents a huge
political gamble by the leader of the Zimbabwean opposition.

President Robert Mugabe has in his 28 years in power made an art form of
co-opting and suborning opponents, while consolidating his control of the
state.

The great concern for many supporters of Morgan Tsvangirai, the leader of
the opposition Movement for Democratic Change, and western critics of Mr
Mugabe, is that the ageing autocrat has been thrown yet another lifeline.
While Mr Tsvangirai has fought bravely in the nine years since he founded
the MDC, there have been persistent questions over his political acumen. The
question now is whether he can avoid being outmanoeuvred in a government
where he has limited power.

As prime minister with his own people in charge of finance, health and
education he now has formal responsibility for the very sectors that have
been most ravaged by Mr Mugabe's misrule. Without a rescue package from
western donors, which on Friday night looked set to be kept on hold, there
is little Mr Tsvangirai can do to reverse the crisis.

David Miliband - foreign secretary of the UK, the former colonial power -
did not rule out support for the new government but said it would have to be
earned step by step by measures including "an immediate end to political
violence ... the repeal of repressive legislation, the appointment of a
credible finance team".

By persuading his opponent to join a government of national unity, after six
months of wrangling, Mr Mugabe appeared to have won another round in the
long-running battle with his opposition rival which began in 2000. Of the
two leaders Mr Mugabe will be the happier party, said Bella Matambanadzo,
head of the Open Society's office in Harare.

Mr Mugabe remains a pariah in the west. But he has shown that he enjoys the
backing of regional leaders - including South Africa, Zimababwe's biggest
trading partner - in his efforts to cling to power .

Mr Tsvangirai and officials of the Movement for Democratic Change are
nevertheless putting a brave face on the deal.The MDC will control 13
ministries. Together with a small dissident MDC faction, it enjoys a small
parliamentary majority and has a significant influence in local government.
Officials say the deal gives them sufficient leeway to change Zimbabwe from
within. "We have a much broader and stronger platform from which to wage the
struggle than before," said one.

But the MDC failed to win concessions in one key area - control of the home
affairs and the police. The ministry, which is responsible for the country's
electoral machinery, will be shared,an option previously regarded by the MDC
and its international allies as unworkable.

Mr Mugabe and his Zanu PF party will also have overwhelming control over
financial resources through the central bank.

Many analysts argue that the mutual distrust between the parties will be
difficult to overcome.

"Neither side wanted to be seen to defy the 'African solution'," said Sydney
Masamvu, analyst at the International Crisis Group in Johannesburg. "It is a
forced marriage."

Copyright The Financial Times Limited 2009

Harare's false dawn

http://www.ft.com

Published: January 30 2009 20:00 | Last updated: January 30 2009 20:00

An end is not in sight to the nightmare of Zimbabwe. Friday's decision by
Morgan Tsvangirai and his opposition Movement for Democratic Change to form
a government of national unity with President Robert Mugabe is unlikely to
return the country to political sanity and economic stability in the
foresee­able future.

Mr Mugabe and his corrupt henchmen look set to retain far too much control
over national security and the economy for radical reforms to be agreed,
political violence to be stopped, and for the international community to be
persuaded to provide the aid and financial support essential to any economic
and social recovery. But there is just a glimmer of hope.

Many in the MDC have deep misgivings about throwing in their lot with
Zimbabwe's ageing and embittered leader, who has waged a murderous campaign
of intimidation against his opponents. They have been persuaded by huge
pressure from neighbouring states in southern Africa, led by South Africa,
whose willingness to tolerate Mr Mugabe's rotten regime has been a blot on
its own diplomacy.

The deal does not even provide for MDC activists who have been imprisoned
without trial to be released. The MDC, which had sought control of the
police to counterbalance Mr Mugabe's control of the army, will have to share
power in the interior ministry. With each side mistrusting and detesting the
other, it looks like a recipe for continuous deadlock.

It is also a slap in the face for the new US administration, which has made
clear its dislike of Mr Mugabe, but also its readiness to engage vigorously
in seeking a solution. The deal has been pushed through, providing a
lifeline for the Mugabe regime, without waiting for an alternative plan.

Yet the rest of the world cannot simply wash its collective hands and ignore
the humanitarian disaster that has overtaken Zimbabwe. Once a thriving
agricultural exporter, today two-thirds of the population depend on food
aid. Millions have fled to find work in neighbouring countries.
Hyperinflation has made the Zimbabwe dollar worthless, and this week's
budget opened the way for effective dollarisation of the economy. Thanks to
the central bank, Mr Mugabe and his friends have access to all the foreign
currency they want to go shopping at home and abroad.

However misguidedly, the main political forces in Zimbabwe have opted for
this unity government. It cannot be dismissed out of hand, but should be
judged according to its achievements. If aid donors are not to pour money
down a black hole, they must set precise targets, and provide assistance as
they are achieved. They would include reform of the security forces, the
judiciary, and the central bank. One cannot count on any of it, but one
cannot dismiss it, either.

Copyright The Financial Times Limited 2009

Date set for Tsvangirai to become Zimbabwe's PM

http://www.independent.co.uk/

Opposition leader will join government in two weeks as humanitarian crisis
grows

By Daniel Howden, Africa Correspondent
Saturday, 31 January 2009

After months of wrangling, Zimbabwe's opposition has agreed to join Robert
Mugabe in a power-sharing government in the crisis-hit country. Morgan
Tsvangirai, the leader of the Movement for Democratic Change (MDC), will be
sworn in as prime minister on 11 February, joining his bitter adversary in
an unlikely political experiment.

"We are unequivocal," he said yesterday after a party congress agreed to
back his decision to join the unity government with the ruling Zanu-PF. "We
will go into this government."

The unity government faces an immediate battery of crises as the UN
confirmed that cholera infections had hit 60,000 yesterday, just as the
World Food Programme (WFP) said that food shortages would see it halve
rations to millions of people in need of nutritional handouts.

Serious splits remain in the MDC despite Mr Tsvangirai's assurances. Some
senior party figures considered forming a breakaway group rather than join
Zanu-PF, said one MDC source. Attempts by Mr Mugabe to demote the opposition
to junior partner has left many in the MDC believing the new administration
will be "unworkable".

The political breakthrough is unlikely to release the huge flows of foreign
aid the country needs to check an economic implosion which saw it formally
abandon its currency this week. Western diplomats are unwilling to hand
significant funds to a government still overseen by Mr Mugabe. It would not
be possible to "work with a government containing Mugabe", said one
diplomat, speaking on condition of anonymity.

There appears to be a strong division between the Southern African
Development Community (SADC) bloc of regional leaders and much of the rest
of the international community in how to deal with the crisis. All past
attempts to use the UN to put pressure on Harare have been rebuffed by South
Africa. However, the new Obama administration is expected to try to use its
influence to persuade South Africa's President Kgalema Motlanthe to take a
harder line on Mr Mugabe.

One of the Zimbabwean leader's toughest critics, the Kenyan Prime Minister
Raila Odinga, also questioned the deal. "It is the time for Mr Mugabe to be
shown the door. If he is to be given a safe exit ... so be it," he told a
meeting at the World Economic Forum.

Earlier this week a SADC summit ended with "an agreement by all parties" to
enter a new government. While the MDC denied this claim at the time it
appears that Mr Tsvangirai had decided to go ahead but was unsure if his
party would come with him. It is not clear how much remains of the 15
September power-sharing agreement from last year, but the ruling party has
retained much of the security apparatus it has used so freely to crush
dissent.

Meanwhile the cholera epidemic is "mushrooming" according to the World
Health Organisation (WHO), with numbers of infections passing what had
previously been a "worst-case scenario" number of 60,000. The outbreak has
spilled into South Africa and Mozambique. A combination of strong seasonal
rains, crumbling infrastructure and the practice of rural burials has seen
the disease spread to all areas.

"The epidemic is really present in the provinces, it's jumping from one area
to another. It's mushrooming," Claire-Lise Chaignat, WHO global cholera
co-ordinator, said from Geneva.

Many of the 3,161 deaths from cholera since August last year have been
caused in part by malnutrition. The WFP said that seven million Zimbabweans
are now in need of food aid, up from 5.1 million in June. WFP's regional
spokesman Richard Lee told AFP: "The agency is being forced to halve the
cereal rations given to hungry Zimbabweans so that all the people in need
can receive aid."

Strikes loom over forex demands

http://www.fingaz.co.zw

Friday, 30 January 2009 15:52

ZIMBABWE is headed for a stormy collective bargaining period that might
cripple further operations across all sectors of the economy.
Workers throughout the country have been protesting against remuneration in
Zimbabwe dollars and asking for payment of salaries in foreign currency in
the wake of the partial dollarisation of the economy.
In a clear sign that the workers are distraught, employees at the Nati-onal
Railways of Zim-babwe have been on strike for the past month, protesting low
pay and poor working conditions.
On Wednesday last week, the country's postal service ground to a halt as
Zimpost workers downed their tools demanding that they be paid in hard
currency.
Not to be outdone, employees at the Zim-babwe National Water Authority
(ZINWA) followed suit a day later, resulting in some parts of Harare going
for days without water at a time when the country is battling an outbreak of
cholera.
Hard on the heels of the ZINWA strike has been that of council employees
from  Harare and Bulawayo municipalities, which effectively halted service
delivery in the country's two major cities.
And on Friday, the Apex Council - the bargaining unit of the entire public
service - announced it had reached a deadlock with its employer over the
payment of civil servants salaries in foreign currency.
Union leaders said they were mulling industrial action, joining thousands of
employees in the private sector who have not bothered to report for duty
after the traditional festive season break.
The latest job actions and disgruntlement come as the country's public
schools this week opened with skeletal staff after teachers reportedly
refu-sed to report for duty until their demands were met.
Teachers have set their demands at a minimum salary of US$2,200 per month.
The government had delayed the start of the new school year by two weeks due
to chaos in the education sector.
Results of last year's public examinations were by yesterday still to be
released, including Grade Seven results despite the fact that Form One
pupils were due to begin classes on Tuesday.
Economist John Robertson warned that the government and tottering companies
would battle to acquire enough foreign currency to maintain operations and
pay salary bills in foreign currency.
Robertson said the country should brace for more strikes unless a political
solution was found to address the country's economic woes.
The foreign currency craze became inevitable in September last year when the
government licensed about 1,000 shops to sell their goods and services in
foreign currency.
"Business and the generality of the population have lost interest in
accepting the Zimbabwe dollar as workers and anyone offering a service now
demand to be paid in foreign currency," said Robertson.
"These strikes point to the desperate need in government for actual answers
to the woes facing the country. I am certain we are going to see more of
these strikes moreso when the political leaders are refusing to bury the
hatchet.
"No one, including domestic workers, wants to be paid in Zimbabwe dollars.
But business can't borrow foreign currency to pay salaries. Every lender
chooses to lend those who are going to invest the money not borrow to
 spend," said Robertson.
Zimbabweans now pin their hopes on the successful implementation of the long
awaited inclusive government involving President Robert Mugabe, Morgan
Tsvangirai and Arthur Mutambara after the Southern African Development
Commu-nity directed that the protagonists form a unity government by
February 15.
"I am sure and certain that we are going to see more and more of these
strikes unless and until a final political solution is found," said
Robertson.
Lovemore Matombo, the president of the Zimbabwe Congress of Trade Unions
(ZCTU), the country's largest labour body, said workers were increasingly
getting impatient with the dilly-dallying by employers to pay them in
foreign currency.
The general council of the ZCTU resolved that all its affiliates should
negotiate wages in terms of the United States dollar failure of which they
should direct their members to withdraw their labour.
"It is not the fault of the workers but they are responding to the realities
on the ground," said Matombo.
"We are aware some employers want to resist, but they are doing this at
their own peril," he added.
Zimbabwe Union of Journalists president Matthew Takaona, on  Monday last
week wrote to all media houses informing them of the labour body's
resolution on wage bargaining.
"For the compelling reasons cited by the ZCTU General Council, it is
instructive that all works councils comply and all workers be paid in
foreign currency," reads part of Takaona's letter.
An official with the Employers Confede-ration of Zimbabwe, speaking on
condition of anonymity, said fears abounded that most companies would be
forced to close shop as they were already bleeding.
"We are waiting for direction from the financial authorities but it  does
not augur well for most companies especially those that are not exporting,"
said the official.

Q & A: Reporting in a 'culture of fear'

A generation of unschooled kids

http://www.fingaz.co.zw

Friday, 30 January 2009 15:49

In the past, it was heart-warming to watch young boys and girls excitedly
making their way to school for the first day of a new term. Not anymore.
When schools finally "re-opened" on Tuesday, more than two weeks late, one
felt sorry for   the children, knowing that they were going back to schools
whose main feature is the absence of teachers. Prior to the delayed start of
the new term, the press carried numerous reports about the continuing
exodus of teachers  to neighbouring countries because of poor remuneration
and conditions of service in Zimbabwe. Those teachers that were still in the
country did not find it worthwhile to return to work unless they were paid
in foreign currency. The question is, unless Patrick Chinamasa, who is due
to present the national budget today, has a magic wand to wave to produce
millions of United States dollars, where will the government get the hard
currency? Did the authorities make any contingency plans for this
eventuality?
About two years ago when the signs were unmistakable that the education
sector faced collapse due to neglect and lack of funding by government, one
of the main concerns was that the system was producing half-baked graduates
as standards continued to plummet. The reality now is that with no learning
whatsoever taking place, large numbers of youngsters face the real danger of
remaining illiterate. I recently overheard some  mothers discussing how they
had decided to tutor their children at home despite the fact that they are
not trained teachers. This is an inexcusable development for a country that
once boasted one of the best education systems and the highest literacy
rates in Africa.
Education, which was once sheltered in the tranquility of tradition as one
of the most valued symbols of development and upward mobility, is now caught
in the web of political turbulence. Where once ruling party politicians
promised universal and free education for all, they are now ready to see the
sector die as long as they can secure their own political futures. They can
only do this by continuing to bury their heads in the sand.
I recall a speech by David Chapfika, Deputy Minister of  Agriculture in the
government that held sway prior to last  year's harmonised elections in
which he said Zimbabwe's education and health delivery systems would never
collapse. In a bid to  deny that the political and economic crisis in the
country had sparked an exodus of teachers and health professionals, Chapfika
claimed that the brain drain would not affect these sectors. He asserted
that the flight  of skills was in fact a blessing in disguise because
Zimbabweans working in other countries  would repatriate wealth that would
revive education and health
"Zimbabwe's education sector is such that we will continue to churn out
highly qualified professionals who are marketable anywhere in the world.
That's why our education system and the policies we have in place ensure
that we have a high literacy rate and concentration of degrees in various
fields." Chapfika said this despite the fact that at that point,  both the
Zimbabwe Teachers' Association and the Progressive Teachers' Union of
Zimbabwe had announced that their members were embarking on industrial
action for the umpteenth time to press demands for better remuneration and
conditions of service. Lecturers at tertiary institutions and universities
throughout the country were also   either on go-slows or full-scale strikes
and yet a government minister could still gloat about Zimbabwe having the
best education system in Africa. I wonder what Chapfika and his colleagues
have to say now in the  face of the total collapse of the  system. A story
in the latest issue of the Zimbabwe Independent highlights an un-abating
exodus by Zimbabweans who no longer believe their country has anything to
offer them in terms of employment and a decent lifestyle. The paper reports
that more than 38 000 Zimbabweans  have fled  to South Africa in the last
four months alone. Human Rights Watch is quoted in the story attributing the
stampede to the untenable political and social realities in Zimbabwe. A
substantial proportion of those leaving  no doubt  consists of teachers and
other professionals whose skills are in demand in South Africa.
The tragedy in Zimbabwe is that while  these problems escalated steadily
over the years, government officials channeled all available resources and
their energies into a belligerent propaganda campaign devoted to denying
realities and denouncing anyone who pointed out these shortcomings and
called for remedial interventions.
I wonder what Chapfika's  colleague, Health and Child Welfare minister David
Parirenyatwa has to say about the total collapse of the health delivery
system under his watch. The Zimbabwe  Independent's sister paper, The
Standard, carried another depressing story in its last issue describing how
Zimbabweans living in the urban areas  now have to seek medical treatment at
mission hospitals in the countryside. This is a retrogressive development
that cannot be blamed on scapegoats such as sanctions but squarely on the
authorities for corruption and mismanagement. The authorities  need to be
honest if these institutions are to be rehabilitated. Without  sound
education and health delivery systems, Zimbabwe  will continue to be an
impostor among nations that care for the welfare of their people.
Feedback: mmakuni@fingaz.co.zw

Zimbabwe - reaction on previous coverage

From the Vice Chancellor of the University of Cape Town

The Physicians for Human Rights (PHR) last week recommended - among other
things - that a United Nations-led emergency health response should be
enforced in Zimbabwe and that Robert Mugabe should face the International
Criminal Court. They argue that he is committing a crime against humanity -
the results of which can be seen in the  thousands of deaths in that country
following the utter collapse of its health service.

The report by the PHR, drawn up by independent investigators that visited
ten provinces in Zimbabwe late last year, is simply devastating. It is a
story of death and suffering, brutality and misery and it spells out the
shocking depth of destruction of a country and its people.

Tolerance of the situation in Zimbabwe and inaction in the face of this
report makes SADC leaders, the international community and the United
Nations and its member states accomplices in the suffering of the Zimbabwean
people.

The report contains hard evidence of the horror stories heard for some years
now. It records the traumatic experiences of sick, injured and dying human
beings - many of whom will lose their lives from treatable medical
conditions.

Mothers, fathers and children are watching each other suffer and die because
the system has failed. Medical practitioners face dying patients without
access to water, electricity or basic facilities like toilets. Equipment is
desperately lacking and the most basic services are no longer available.

The very system that exists to protect the basic human rights of every
citizen has collapsed and its failure is undoubtedly the responsibility of
Mugabe and his government. It is untenable that they have allowed this. It
is even more disgraceful that evidence suggests that this collapse is
directly linked to their misguided, selfish actions to remain in power.

Aside from the immediate direct costs of suffering and loss of life, the
price of a failed government and particularly the failed health system is
huge in the long term. It will take many years and enormous amounts of money
and resources to restore. The emigration of the majority of Zimbabwe's
highly skilled health workers will impact on Zimbabwean society for years to
come.

We are all now witnessing a human rights disaster involving a far greater
number of deaths and suffering than we have seen in recent full-blown wars.
An immediate crisis intervention is now an absolute, critical obligation.

International statute allows the UN to intervene politically, through
sanctions and even militarily in a country whose government is
systematically killing large numbers of its own unarmed, defenceless
citizens. The evidence in the PHR report is of indiscriminate massacre by
another means. Not only has Mugabe not asked for assistance in stopping the
cholera epidemic, he has first denied that his subjects were dying from it
and then blamed it on western governments. Yet it is clearly his fault and
his effective denial of treatment to tens of thousands of patients dying
from cholera, malaria, TB, AIDS; to children dying of pneumonia and
diarrhoea, is shocking and a loud cry for immediate international
intervention.

All involved in the health care profession around the world should voice our
disgust at the situation and should redouble the pressure on politicians,
agents and bodies that are responsible for allowing the Mugabe regime to
continue one minute further.

Mugabe must also be pressured into allowing international health NGOs
immediate, full  and unfettered access, in effect to take over the running
of the health system, particularly in communities facing health crises.
These NGOs should be given funding by UN agencies and donor governments to
re-establish medicine and equipment supply chains and to employ local health
workers who want to work, but have no salaries, no food, no petrol in their
cars nor taxi money to get to work, no medicines or surgical equipment to
offer patients and no hope that their efforts will be appreciated.

The training of health workers in Zimbabwe has collapsed, and as a
university with a medical school, we will try to support the ongoing
training of some of those students until their medical schools are
re-established.

As institutions of higher learning - where we teach young adults about human
rights, social responsiveness and accountability - we condemn those
responsible for the human rights catastrophe that is playing itself out in
Zimbabwe.

The people of Zimbabwe - our close neighbours and kinsmen - have a right to
be protected from the brutality of this incompetent, murderous regime.

Dr Max Price

University of Cape Town

FULL TEXT: Zimbabwe 2009 budget statement

http://www.zimonline.co.za

Saturday 31 January 2009

MOTION

1. Mr Speaker Sir, I move that leave be granted to bring in a Bill to make
Provisions in connection with Revenues and Expenditures of the Republic of
Zimbabwe for the Financial Year January to December 2009 and to make
Provisions for matters ancillary and incidental to this purpose.

INTRODUCTION AND BACKGROUND

2. Mr Speaker Sir, the presentation of this Budget is consistent with
Chapter XI, Section 103(1) of the Constitution of Zimbabwe, which requires
that "the Minister for the time being responsible for Finance shall cause to
be prepared and laid before Parliament, on a day on which Parliament sits,
before or not later than 30 days after the start of each financial year
Estimates of the Revenue and Expenditure of Zimbabwe for that financial
year."

3. Mr Speaker Sir, while tradition in the previous years has seen the
National Budget delivered towards the end of November and early December of
each year, delays in completing political processes to allow for the
formation of an Inclusive Government have not made this possible.

4. Mr Speaker Sir, the year 2008 posed a number of challenges on our
country, resulting in the year being one of the most difficult for our
economy.

5. The sharp increase in inflation against a background of acute shortages
of goods and services, poor harvests and the attendant severe food shortages
and the deteriorating delivery of public services such as water,
electricity, sanitation and health imposed phenomenal hardships on the
population.

6. We are, therefore, grateful for the goodwill shown by our regional and
other international cooperating partners who have not only endeavoured to
bring us together politically but also offered our country immense
assistance in various forms such as food relief, agricultural inputs, drugs,
water treatment chemicals and power, just to mention but a few.

7. The Inter-Party Political Agreement of 15 September 2008 among the three
political parties represented in this August House, offers an opportunity
for cohesion and unity of purpose among ourselves for effective
implementation of holistic policies and measures necessary for us to take
advantage of the country's abundant resources for sustainable rapid economic
turnaround.

8. Unity of purpose allows and provides us immense opportunities to
positively deal with the negative impact of sanctions and other external
threats such as the current global financial crisis, through re-engaging the
international community for the necessary financial cooperation over
economic reconstruction and recovery, in particular, balance of payment
support.

9. Therefore, in order to decisively achieve economic turnaround, which
regrettably would in the short and medium term be painful, cohesion and
unity of purpose not only among political parties, but also among
institutions of Government, Business, Labour, Co-operating Partners and
other stakeholders will be necessary.

10. Hence the success of the 2009 Budget, which seeks to respond to the
various challenges facing our economy will much depend on us all working
together for the common good of the country.

11. The 2009 Budget will particularly focus on:

. inflation reduction;

. food security and productivity in agriculture;

. water management;

. guaranteed fuel and electricity supply;

. improved delivery of health and education services;

. infrastructure rehabilitation in transport (roads, railways and airports);

. improved telecommunication systems;

. efficiency of public enterprises;

. stimulating the productive sectors, notably agriculture, manufacturing,
mining, tourism and construction among others;

. provision of housing , including for those in the public sector; and

. social protection.

12. It must be noted, however, that implementation of the various projects
and programmes under this Budget will benefit from skills retention and
attraction in both the public and private sectors.

13. The performance of our productive sectors will also require a conducive
and stable macro-economic environment, which allows forward planning,
regular and sustainable inflows and access to foreign currency as well as
retention of skilled manpower.

14. Consequently, it will be critical for the country to support and
implement a holistic framework on transactions in stable currencies, in
conjunction with reforms aimed at restoring the value of our local currency
as a stable medium of exchange and store of value.

15. This, Mr Speaker Sir, establishes a level playing field for all economic
players by removing the current distortions arising from multiple exchange
rates and the licensing of businesses to transact in foreign currencies,
alongside the local currency.

16. Mr Speaker Sir, before turning to the 2009 specific Budget
interventions, allow me to briefly give an overview of the global economy as
well as domestic economic and fiscal developments over the past year. These
reviews provide insight and valuable information in the crafting of our
intended interventions.

17. In the work towards formulation of the 2009 National Budget, I have
consulted widely and benefited from inputs of the various stakeholders,
within and outside of Government.

RECENT GLOBAL ECONOMIC DEVELOPMENTS

18. Mr Speaker Sir, the difficult economic environment under which I am
presenting our 2009 Budget is exacerbated by challenges that are also
affecting the global economy.

19. Honourable Members will be aware of the recent turmoil afflicting world
financial markets, resulting in major financial rescue interventions by
Central Banks and Treasuries of the Organisation for Economic Cooperation
and Development (OECD) member countries, following American and European
housing markets' sub-prime crisis.

20. The impact of this has been a significant slowdown in most major
economies, including the rapidly growing economies of Asia.

21. In this regard, global economic activity, now revised downwards by 0.2
percentage points to 3.7% in 2008, is forecast to remain subdued in 2009
with only modest recovery anticipated towards year end as the world economy
feels the after-effects of the current financial crisis. Output growth in
2009 is, therefore, projected not to exceed 0.5%.

22. Developing countries are also feeling the adverse effects of global
financial crisis, with revenues from their raw material and semi-processed
exports threatened by depressed demand and, hence, falling prices.

23. Similarly, tourism as well as external financing sources, such as
portfolio and direct investment, lines of credit, grants and migrant
remittances are expected to suffer from this financial crisis and global
slowdown.

24. Reflecting this, economic growth in Sub-Saharan Africa is estimated to
fall below 5% in 2009, in part reflecting the positive spin offs from
sustained robust macro-economic policies which will maintain inflation at
low levels averaging 10% across most of Sub-Saharan Africa.

25. Macro-economic stability in these countries is anticipated to remain
anchored in continued implementation of tight and complementary fiscal and
monetary policies.

DOMESTIC ECONOMIC DEVELOPMENTS

26. Mr Speaker Sir, I have already alluded to the difficult economic
environment experienced by our people during the year 2008.

27. Central has been the widespread food deficit against the background of a
poor 2007/2008 agricultural season.

Agriculture

28. The poor performance of our agricultural sector had its core roots in
the 2007/2008 agricultural season that began with too much rain during
December 2007 and January 2008.

29. The incessant rains, unfortunately, came to an abrupt end in January
2008 and were followed by a long dry spell. The absence of adequate
irrigation facilities, together with intermittent and unreliable power
supply compounded the situation.

30. Decline in agricultural output was felt across all commodities, with
notable large falls in maize, tobacco, cotton, wheat, horticulture and soya
bean production. Tobacco output for the 2007/2008 season was 45 000 tons,
against an expected output of 73 000 tons. Less drought-prone small grain
crops, such as sorghum, rapoko and millet, also experienced significant
decline in output, largely from the initial incessant rains.

31. Livestock and dairy farming, though benefiting from the initial
improvement in grazing pastures due to the initial heavy rains, also
suffered from the drought conditions prevailing after January. The low rains
had the effect of lengthening the dry spell to December 2008, resulting in
loss of animals for many farmers.

32. The grain deficit, which had the impact of compromising supplementary
stock feed availability, made the situation even more desperate for
livestock farmers, particularly those in dairy.

33. This agricultural season, 2008/2009, notwithstanding the normal rains
that the country is receiving, our farmers are beset with a number of
challenges.

34. These include inadequate supply of such inputs as fuel, seed,
fertilizer, as well as chemicals. Where such inputs are available in the
open market, they are being sold in foreign currency.

35. Farm labour has also become a challenge, with workers now demanding
their wages in either foreign currency or basic goods.

36. Facilities meant to assist farmers, such as the Agricultural Sector
Productive Enhancement Facility (ASPEF), can no longer cope with farmers'
financing requirements under the current hyper-inflationary environment.
Farmers are, therefore, facing serious constraints in raising working
capital, moreso given that suppliers are now quoting their goods in foreign
currency.

37. It will, therefore, be critical that in this Budget we re-prioritise the
success of farming as a viable economic activity, and an anchor sector to
the whole economy.

38. This is central not only to our food security but also the production of
critical agro-inputs and exports.

39. Much will, however, depend on timeous availability and accessibility of
inputs such as seed, fertilizers, chemicals and fuel for tillage, as well as
producer prices which guarantee a positive rate of return.

40. This is the only way Government will be empowering farmers to take
advantage of Land Reform and substantial Government assistance in the form
of the extended concessional ASPEF, the Farm Mechanisation Programme, the
Cattle Herd Restocking Programme, as well as subsidised inputs.

41. The late review of producer prices can only serve to undermine the
financial position and confidence of farmers as they fail to recoup
production costs, thereby making it difficult to plan for the next season.

42. This has in the past often been compounded by inefficient Grain
Marketing Board (GMB) payment arrangements for farmers, resulting in a
number of farmers shifting from such "controlled" commodities as maize and
wheat to cash crops, such as soya beans, among others.

Mining

43. Mr Speaker Sir, mining is second to agriculture as a pillar to anchor
our economy both as an employer and foreign currency earner, with potential
to contribute around a third of total export earnings.

44. The sector, however, continues to experience decline in capacity
utilisation and production volumes despite last year's generally buoyant
mineral prices.

45. In the case of gold, decline in output is notwithstanding firm prices
recorded over the past three or four years, resulting in other countries'
gold producers expanding operations and production.

46. Major challenges behind this include the foreign exchange pricing
arrangements, coupled with frequent power outages, scarcity of foreign
currency to import critical spare parts, fuel, and skills flight.

47. Furthermore, the impact of the current global financial crisis is also
beginning to affect the sector through depressed demand and hence low prices
for minerals such as copper, aluminium, nickel, lead, zinc, ferrochrome and
platinum group metals.

48. Companies are therefore being forced to defer investment for expansion
as well as new exploration projects, with some scaling down operations, or
closing down altogether. Most of our major mines have, therefore, been put
on care and maintenance.

49. Closure and suspension of mining operations, Mr Speaker Sir, is a waste
of installed investment capital, which if not reversed can only seriously
undermine our turnaround efforts.

Manufacturing

50. Mr Speaker Sir, the challenges undermining agricultural and mining
production during 2008 made the situation facing our manufacturing companies
even more difficult, with capacity utilisation in the sector declining
further.

51. Consequently, manufacturing contribution to Gross Domestic Product
(GDP), total formal employment and the economy's export performance remain
significantly lower than the existing capacity and potential.

52. This is notwithstanding vast opportunities for value addition in the
agro-industry, particularly in canning, fruit and vegetable processing,
furniture manufacturing and textile, among others.

53. Key challenges to be overcome in restoring and realising the potential
of our industrial base and capacity include addressing, in a holistic
manner, such issues as inflation, as well as guaranteed supply of such
essential services as electricity and water.

Tourism

54. The escalation of the negative portrayals of our country continues to
undermine our efforts to promote Zimbabwe's tourism products.

55. This notwithstanding, developments in the first half of 2008 indicate
that 531 357 tourists visited the country, with Africa remaining the largest
source market contributing about 410 968 or 77.8% of total arrivals - mostly
from the Southern African Development Community (SADC) region. The remaining
arrivals were from the Americas (10%), Europe (7%), and Asia (3.7%). Oceania
and Middle East markets combined contributed 2%.

56. Average hotel room occupancy rose to 39% from 37%, over the period under
review. The majority of the clientele were Zimbabwean nationals comprising
85% in 2007 and 91% in 2008.

57. It will, therefore, be necessary that we invest in aggressive image
correction programmes and tourism promotion, complemented by expenditures to
improve our tourism infrastructure as well as other supporting
infrastructure in transport and telecommunications, among others.

58. This includes recapitalising the aviation industry, especially the
airports infrastructure and Air Zimbabwe, to improve accessibility into and
within the country, refurbishment, modernisation and capitalisation of the
transport system to include taxis, car hire services and tours among others.

59. Investment in internal cohesion and unity of purpose among our people
will also facilitate the rapid recovery of tourism, benefiting also from the
potential spin offs from the hosting of the 2010 Soccer World Cup in
neighbouring South Africa.

Energy

60. Energy supply continues to constrain operations of our productive
sectors, particularly agriculture, manufacturing and mining. While, the
supply of liquid fuels has been improved through licencing of private
importers, power generation and supply has lagged behind demand as a result
of deferring planned investments for expansion.

61. Notwithstanding a Government decision to allow a trigger mechanism for
tariffs adjustment, delays in reviews of tariffs which reflect production
costs have remained an impediment for the operations and future expansion
programmes of Zimbabwe Electricity Supply Authority (ZESA).

62. ZESA has, therefore, continued to rely on the fiscus for maintenance and
rehabilitation of its thermal power stations and transmission network,
procurement of coal and payment for water usage at Kariba.

63. The above challenges have been aggravated by the widespread vandalism of
such electricity transmission infrastructure as transformers and copper
cables, thereby worsening power supply and reliability.

64. The joint venture between ZESA and NamPower has, however, alleviated the
situation by improving power generation at Hwange Power Station.

65. As a result, current power generation has risen to 922 mega watts (MW)
from 569 MW against total internal potential production of 1 670 MW, and
demand of 2 279 MW.

66. A number of projects have been identified to improve power generation
and supply. These include the refurbishment of Hwange Power Station, Stages
1 and 2, with the potential of generating additional 480 MW and 380 MW,
respectively, as well as the restoration of small thermal power stations in
Harare, Bulawayo and Munyati to generate an additional 125 MW. This would be
augmented by imports of 400 MW from the region.

Urban Water Supply

67. Most urban areas continue to face water and sewerage challenges as a
result of Zimbabwe National Water Authority (ZINWA's) inability to discharge
its mandate. This has been compounded by the sub-economic tariffs the
parastatal levies on residents for services, resulting in their continued
reliance on the fiscus.

68. The water and sewer challenges faced by residents exacerbated the recent
cholera outbreak which necessitated further Government support to ZINWA to
enable the parastatal procure water treatment chemicals, maintenance and
rehabilitation of sewerage and water conveyance systems.

Public Transport

69. The commuting public is facing daily fare escalations which are taking
up workers' full incomes. Difficulties in accessing cash from banks are also
compounding this problem.

70. Furthermore, some public transport operators are now demanding fares in
hard currencies, leaving a large part of the commuting public with
challenges of obtaining the necessary foreign currency.

Telecommunications

71. The telecommunications sector has also not been spared from the current
difficulties the economy is going through. Foreign currency shortages in the
economy for the importation of the necessary equipment, has severely
militated against mobile phone companies' efforts to expand their networks
by installing more base stations and absorb more customers.

72. This has resulted in poor service delivery due to network congestion and
acute shortage of network lines. The continued imposition of sanctions on
the country stalled major investment projects particularly the fixed network
providers as they could not get foreign investors for their
re-capitalisation.

73. The dispensation extended to mobile phone operators to charge airtime in
foreign currency will, therefore, assist them raise foreign currency for the
importation of much needed equipment.

Health Delivery System

74. In the Health sector, most of our health delivery institutions have
scaled down operations, with some facilities closing down all together. Key
challenges include lack of equipment, essential consumables, drugs as well
as skills loss.

75. Medical aid insurance schemes have been rendered ineffective as members'
contributions are eroded by inflation. Accessing health care from private
health institutions requires payment in hard currencies.

Education

76. The education sector has also not been spared from the current
environment. While some teachers have left the country in search for better
working conditions, not all those who remain have been reporting for duty,
owing to deteriorating conditions of service and the challenges on public
transport mentioned above.

77. The above has also affected a number of education programmes, especially
examinations marking, with a huge backlog going back as far as June 2008.

Inflation

78. Mr Speaker Sir, rising inflation has seen our local currency fast losing
its role as a medium of exchange and store of value. Hence, as a result,
both licenced and unlicenced traders have resorted to using hard currencies
as a way of cushioning themselves from the impact of inflation.

79. In this regard, comprehensively dealing with inflation remains one of
the country's major challenges for stabilising this economy and realising
real savings and investment rates necessary for growth.

80. Excessive money supply growth rates, emanating from unbudgeted
expenditures made through the Reserve Bank, as well as low supply of goods
and services remain the major sources of inflation.

81. The current policy on import liberalisation and shift to transacting in
hard currencies have, however, seen some improvement in the supply of goods
and services, accompanied by stabilisation of those prices denominated in
foreign currency.

82. An opportunity, therefore, arises for stabilising prices in the local
currency as well as restoring the value of our local currency through
embracing firm measures entailing tightening both fiscal and monetary
policies and extension of support and incentives which boost the capacity of
our productive sectors and, hence, supply of goods and services.

83. Mr Speaker Sir, the 2009 Budget thrust should, therefore, shift from
policies that promote and fuel consumption to those which create wealth,
through supporting our productive sectors, particularly agriculture, mining,
tourism and manufacturing, whose capacity utilisation is now below 30%.

84. Consistent implementation of such policies will ultimately increase
output, thereby, reducing inflationary pressures.

External Sector

85. Mr Speaker Sir, our export performance has been deteriorating over the
years, and as a result, the country has been experiencing balance of
payments problems with a deficit of US$410 million being recorded in 2008,
from US$33 million in 2007.

86. The situation is reflective of constraints bedevilling our economy
resulting from sanctions, drought, and depressed prices on the international
commodity markets.

Exports

87. Mr Speaker Sir, in 2008 exports under performed, amounting to US$1.376
billion compared to US$1.606 billion in 2007. This represents a 14.32%
decline in exports of goods and services.

88. Mineral exports were the major contributor to total exports, with US$676
million, or 51% of total exports in 2008, compared to US$801.8 million in
2007. The decrease of 15.7% was largely a result of the global financial
crisis which led to depressed demand for minerals.

89. Tobacco exports amounted to US$203.7 million, representing a 24.3%
decrease over the 2007 exports of US$247.3 million. The volume of tobacco
sold in 2008 fell short of the targeted 75 million kgs as it is believed
some growers are still holding on to the crop in protest against low prices.

90. Agriculture and manufacturing contributed 15% each, reflecting declines
of 4.5% and 12%, respectively. In both sectors, lack of inputs and low
capacity utilisation, as well as high operational costs contributed to this
underperformance.

91. Tourism receipts amounted to US$29.1 million, representing a 55% decline
from the previous year. Negative publicity of the country continued to
undermine the performance of the sector.

Imports

92. Mr Speaker Sir, our Nation continues to be a net importer of goods, in
part due to the substantial amounts of foreign currency required to import
such critical inputs as raw materials, fuel, electricity and other
manufactured imports.

93. In this regard, imports increased by 7.6%, from US$1.9 billion in 2007
to US$2 billion in 2008

94. Growth in imports also reflected increased food imports during the year
2008 as Government instituted drought mitigation measures to ensure food
security for households affected by the poor rains received during the
2007/08 cropping season.

Capital Account

95. On the capital account, net inflows of US$98.5 million were recorded. Of
this, drought relief, medical drugs to combat cholera, Human
Immunodeficiency Virus/Acquired Immuno Deficiency Syndrome (HIV/AIDS) and
the purchase of water treatment chemicals accounted for some US$73 million.

FISCAL DEVELOPMENTS IN 2008

96. The high inflation environment during 2008 meant significantly higher
revenue inflows estimated at $14 960 quintillion.

Tax Revenue

Pay As You Earn (PAYE)

97. Cumulative collections from individuals' Pay As You Earn for 2008 were
$2 400 quintillion. This was mainly attributable to the frequent salary and
wage reviews in both public and private sectors, against the background of
the prevailing inflationary environment.

Corporate Tax

98. Corporate tax collections during 2008 amounted to $9 600 quintillion.
This performance was vastly due to higher nominal profit margins realised by
companies and intensified audits by the Zimbabwe Revenue Authority (ZIMRA)
to enforce compliance and recover revenues. The issuance of licences to
trade in foreign exchange also contributed towards boosting the performance
of some companies.

Value Added Tax (VAT)

99. Value Added Tax amounted to $792 quintillion during 2008, accounting for
only 5.3% of total revenue. The poor performance was spurred by price
controls, as well as declining availability of products on the official
market.

Customs Duty

100. Customs duty collections performed poorly, contributing only $2.8
quadrillion during 2008.

101. This negative performance reflected the sluggish movement of the
exchange rate valuation factor for duty purposes, which remained so low that
it suppressed collections under this revenue head.

102. The suspension of duty on basic commodities from May 2008 also
contributed towards poor customs duty performance.

Excise Duty

103. Excise duties during 2008 amounted to $96.7 quintillion, largely on
account of sales of second hand motor vehicles. Shortage of goods to be
levied for excise duty, due to foreign currency unavailability, has
contributed to the poor showing of the revenue head.

Other Indirect Taxes

104. Other indirect taxes raised $1 400 quintillion, mainly stamp duties on
transactions on the local stock exchange towards year end.

Non-Tax Revenue

105. Regular review of fees and charges for Government services has seen an
improvement in revenue inflows from this revenue head.

106. Resultantly non tax revenue collections amounted to $452.2 quintillion.

Expenditure Developments During 2008

107. Mr Speaker Sir, while underlying inflationary pressures raised nominal
revenue collections significantly to $14 960 quintillion, their impact on
the 2008 Budget was also to raise Ministries' expenditures to $51.7
quintillion, rendering the 2008 Budget appropriation provisions
insignificant.

108. Higher expenditures were incurred with respect to reviews on salaries
and wages which were driven by continued increases in cost of transport and
housing as well as rising prices of general goods and services.

109. In addition, operational and running expenses of Ministries, as well as
cost escalations for public sector programmes, and projects required
additional provisions.

110. Mr Speaker Sir, the 2008 Harmonised Elections, including the
Presidential Election run-off also incurred higher expenditures than
originally budgeted.

Financial Performance and Legal Compliance

111. Mr Speaker Sir, although total expenditures for 2008 of $51 quintillion
were within the realised total revenue collections of $14 960 quintillion,
this implied excess expenditures and revenues above the approved 2008
Budget. Such additional expenditures and revenues would have been ordinarily
addressed through a Supplementary Budget had Parliament been sitting.

112. In light of the dissolution of Parliament since March 2008, the
Additional Budget provisions of $51 quintillion to the end of December 2008,
were therefore, issued in terms of Part XI Section 103 (7) of the
Constitution of Zimbabwe and Section 27 (1) of the Audit and Exchequer Act
(Chapter 22:03), which provides that:

" . . . the President may authorise the issue of monies from the
Consolidated Revenue Fund for the purpose of meeting expenditure necessary
to carry on the services of Government during the period beginning on the
dissolution of Parliament and expiring three (3) months after the day on
which Parliament first meets after that dissolution."

113. In accordance with our Statutes, after expiry of the dissolution of
Parliament, an Appropriation by Parliament to cover the additional
provisions of $51 quintillion is supposed to be submitted in the first
Appropriation Act after the issues were authorised.

114. Mr Speaker Sir, I now accordingly propose to table the 2008 Additional
Estimates of Expenditure of $51 quintillion for the necessary Appropriation
by Parliament.

Programmes & Projects Performance

115. Mr Speaker Sir, inflation has had some negative effects on public
expenditure as evidenced by the deterioration in service delivery.

116. The deterioration in public infrastructure including the country's
water and sewer reticulation systems, and other municipal services, as well
as non-completion of critical projects is further evidence of the impact of
inflation, foreign exchange and other raw material shortages.

117. Furthermore, resource constraints also undermined Government's capacity
to retain staff as well as adequately finance programmes and projects,
especially in the health and education sectors, thereby rendering them to
operate below capacity, especially in the last half of 2008.

118. This Budget is, therefore, proposing measures to arrest and reverse the
decline in public service delivery.

119. Mr Speaker Sir, notwithstanding the challenging environment Government
faced during the course of the year, it is gratifying that other basic
public services remained functional.

120. I, therefore, commend respective Public Servants manning those areas
for remaining tenacious and dedicated to their work during 2008. This was
reflective of true and immeasurable sense of patriotism during a difficult
and unforgettable year.

121. Mr Speaker Sir, the experience we have had under this hyperinflationary
environment should rally us together in implementing measures for the
reduction of inflation. This way, we would begin to see some restoration of
public services to our people.

Cooperating Partners

122. Mr Speaker Sir, since August 2008, the Nation has been experiencing a
devastating cholera epidemic, which has since spread to all the country's
ten provinces.

123. Allow me to extend my appreciation to our cooperating partners for the
immense assistance they are rendering to us during these challenging times.

124. The country received cash donations amounting to over US$65 million,
whilst contributions in kind included vaccines, cholera medication, water
purification tablets & chemicals, medical equipment, among others.
Assistance was also channelled towards rehabilitation of water and
sanitation systems and public awareness programmes.

125. International cooperating partners included the European Union, as well
as Australia, Canada, China, Japan, the Republic of Korea, Switzerland, the
United States of America, among other countries.

126. Their contribution was complemented by support from our SADC regional
neighbours.

127. Support from the rest of Africa was led by the African Union, other
countries, together with the African Development Bank and included Libya,
which also provided medical specialists.

128. The Ministry of Health and Child Welfare, together with the World
Health Organisation, and other health sector partners who include the United
Nations International Children's Education Fund (UNICEF) have established a
comprehensive and coordinated cholera response operational plan to address
the needs of the population in affected areas.

Food Security

129. Mr. Speaker Sir, Government efforts to enhance summer cropping for the
2008/9 agricultural season benefited from support by various cooperating
partners who, amongst others, include the Food and Agriculture Organisation
(FAO), the World Bank, South Africa, Central Emergency Response Fund,
Venezuela, Ireland, Sweden, Spain and the United States of America.

130. These and other cooperating partners complemented Government support in
the agricultural sector by providing tillage services as well as provision
of agricultural inputs such as maize seed, small grains, chemicals,
fertilizers and fuel, valued at over US$50 million.

131. Therefore, allow me to acknowledge and appreciate on behalf of
Government the valuable assistance received from the various cooperating
partners.

BUDGET POLICY PROPOSALS

Macro-Economic Framework

132. In seeking to address our economic challenges, the Budget is premised
on a Macro-economic Framework targeted at reducing inflation to double digit
levels as well as a positive economic growth rate of about 2% in 2009.

133. Based on past trends, revenue collections are normally about 30% of
nominal GDP. Consistent with that, our projected nominal GDP of about US$5.5
billion translates to an equivalent of around US$1.7 billion as projected
revenue for 2009.

134. Given the need to contain inflation through tightening of our fiscal
and monetary policies, Government is proposing a balanced Budget linking our
expenditures to actual revenues.

135. In focusing on specific Budget policy measures, stakeholders have
consensus that the success of the 2009 Budget is much dependent upon
cohesion and unity of purpose in the implementation of all agreed policies.

136. I, therefore, put forward the following policy proposals as part of the
2009 National Budget.

Liberalisation of the Foreign Exchange Market

137. Honourable Members will be aware that in the hyper-inflationary
environment characterising the economy at present, our people are now using
multiple currencies for day to day business transactions, alongside the
Zimbabwe dollar.

138. These currencies include the South African rand, United States dollar,
Botswana pula, Euro, pound Sterling, among others.

139. In line with the prevailing practices by the general public, Government
is, therefore, allowing the use of multiple foreign currencies for business
transactions, alongside the Zimbabwe dollar.

140. Consequently, the 2009 Budget Estimates are presented in both local and
selected multiple foreign currencies.

Data Compilation

141. Consistent with the wide utilisation of multiple currencies in domestic
business transactions, the Central Statistical Office has, with effect from
this month, also begun to track developments in price indices in foreign
currency terms.

142. This also assists overcome situations where focus was more on tracking
movements in the parallel market exchange rate.

Currency Revaluation

143. As the Zimbabwe dollar trades concurrently with other currencies, it
will be critical that it be re-valued and thereafter maintain stability.

144. However, sustainable currency stability cannot be an outcome of decree
or legislation alone.

145. Essential for shoring up the value of the Zimbabwe dollar will be
implementation of a combination of strict and painful fiscal and monetary
measures that relate the Zimbabwe dollar monetary base to developments in
the real sector, and avoidance of recourse to money printing beyond the
economy's production of goods and services.

146. Realising this requires discipline and commitment to our expenditure
and revenue targets and, therefore, expenditures outside the Budget will not
be entertained.

147. This Budget, together with the Reserve Bank Governor's forthcoming
Monetary Policy Statement, will be making the necessary indications and
commitments in this direction.

148. The above measures will be complemented by interventions on enhancing
production and supply.

Quasi Fiscal Operations

149. Government has been constrained from funding some of the public
projects during the last nine years or so due to the sanctions imposed on
the Nation.

150. Honourable Members would be aware, as reported from time to time in the
Reserve Bank Governor's Monetary Policy Statements, that some public sector
programmes and projects have been funded through the Bank's quasi fiscal
operations.

151. These were in the areas of agriculture, dam construction, education and
health, among other activities.

152. I would want us to know that such expenditures which have been incurred
over the period 1 December 2003 through to 31 December 2008 have been
settled in full from the Reserve Bank's receipts from internal investments.

153. Hence, as at 31 December 2008, the Reserve Bank was able to remove all
these expenditures from the Bank's books through a Sinking Fund which had
been set up to cover these expenditures.

154. Mr Speaker Sir, it therefore follows that such expenditures which
amounted to $1 111 quintillion, and were going to be a first charge on the
fiscus and thus a burden on taxpayers, have been liquidated. I am sure that
Honourable Members will join me in extending our gratitude to the Reserve
Bank for this.

155. The Bank's balance sheet is now free of these quasi fiscal expenditures
and the Reserve Bank will now concentrate on its major mandate of assuring
the stability of prices and the financial sector.

Remuneration of Public Servants

156. Remunerating public servants solely in local currency in an environment
where the domestic goods and services market has been liberalised to allow
for multiple currency pricing, and where domestic confidence in the local
currency has temporarily collapsed, would dis-empower workers.

157. In this regard, Government proposes a Remuneration Framework for all
public servants which provides for:

. Payment of salaries in local currency, with periodic reviews in line with
cost of living developments;

. Payment of a monthly foreign currency allowance, to facilitate access to a
basket of goods and services now being charged in convertible foreign
currencies;

158. The foreign currency allowance will initially be through a Voucher
system pegged to a basket of basic goods for a family of six.

159. The Voucher system is an interim arrangement, and will be phased out
gradually in favour of payments through the banking system in line with
improvements in foreign exchange inflows.

160. Government is working on modalities for the introduction of this
facility which will be introduced in February 2009.

161. Mr Speaker Sir, review of the monthly foreign currency payment
allowance will be guided by foreign currency revenue inflows arising from
economic performance and the implementation of foreign currency based tax
revenue measures.

Licencing Requirements

162. Mr Speaker Sir, concerns have been raised with Government over
licencing requirements and processes.

163. Given that essentially all transactions can now legally be undertaken
in either local or foreign currency, Government is simplifying the licencing
requirements and arrangements to transact in foreign currency.

164. Allow me, therefore, to assure Honourable Members that the licencing
requirement to transact in foreign currency is neither intended to be a
revenue raising measure nor to serve as an entry barrier, by imposing
additional costs on local producers and retailers.

165. Its main purpose is to record and recognise traders for tax purposes,
as well as inculcate systems to deal with such malpractices as use of
counterfeit notes.

166. The Reserve Bank will be announcing the necessary details as part of
its Monetary Policy Statement.

167. ZIMRA will also be communicating tight measures to address potential
avoidance of payment of tax in the currency of trading, a case in point
would be payment of tax in local currency for trading income realised in
foreign currency.

Exchange Rate Framework

168. Section 47 of the Reserve Bank Act mandates the Minister of Finance to
set the country's Exchange Rate Policy for management and implementation by
the Reserve Bank of Zimbabwe.

169. Consistent with this, the Reserve Bank will implement an enhanced
exchange rate framework that promotes foreign exchange generation in the
economy, as well as encourage the inflow of both short-term and long-term
capital.

170. The Governor of the Reserve Bank will, in his forthcoming Monetary
Policy Statement, spell out the operational modalities of this new exchange
rate framework.

Insurance Companies and Pension Funds

171. The Insurance and Pension Funds Industries are a critical component of
the country's developmental institutions, through mobilisation of savings
for both public and private investment.

172. Hence, as part of the 2009 Budget policy measures, insurance companies
and pension funds, including the National Social Security Authority (NSSA),
have been given the flexibility of conducting business in either local or
foreign currency.

173. With effect from 1 February 2009, insurance companies shall be granted
licences to trade in foreign exchange and to collect premiums in foreign
exchange.

49

174. Similarly, pension funds shall be granted licences to trade in foreign
exchange and to receive contributions in foreign exchange.

175. Consistent with this, the following Prescribed Asset requirements shall
apply with effect from 1 February 2009:

. Long term insurance companies will hold 7.5% of their foreign currency
assets in Prescribed Assets denominated in foreign exchange, whilst short
term insurance companies will hold 5%.

. Pension funds, also collecting their contributions in foreign exchange,
will be obliged to hold 10% of their foreign exchange assets in Prescribed
Assets denominated in foreign exchange.

176. Government will be issuing, through the Reserve Bank, the requisite
foreign exchange instruments which will be open not only to Insurance
Companies and Pension Funds, but also to any other investor in the economy.

177. In cases where the local currency continues to apply, the current
prescribed assets ratios of 35%, 30% and 25% for pension funds, long, and
short term insurance companies shall apply, respectively.

Stock Exchange Trading

178. The Zimbabwe Stock Exchange remains a critical pivot for socioeconomic
development through its intermediary role between surplus economic agents
and those intending to raise capital.

179. Left to their whims, however, Stock Exchanges can spin out of control,
particularly in cases where there are no strict oversight rules of play.

180. In order to ensure that the Zimbabwe Stock Exchange fully plays its
developmental role, the Ministry of Finance, through the Securities
Commission, is putting in place a rigorous code of ethics, as well as
stringent licencing and risk management systems for stockbrokers.

181. Consultations are on-going over measures to ensure that the Zimbabwe
Stock Exchange also serves as an effective vehicle for foreign exchange
generation.

182. In this regard, Mr Speaker Sir, stock market trading in both local and
foreign currency will be allowed.

183. The necessary considerations underway to facilitate trade on the local
stock market in foreign currency include:

. Level of domestic foreign currency liquidity to allow for meaningful stock
market trading.

. Level of foreign investor participation, vis-à-vis promotion of local
ownership and participation in local companies. At present, a single foreign
investor can own up to 10% of a listed company and up to a maximum of 40%
for all foreigners combined.

184. The Ministry of Finance will, through the Securities Commission, be
announcing the detailed implementation modalities in due course.

Utility Authorities

185. Transacting in foreign currencies limits the scope of financing the
requirements of our public enterprises through domestic Central Bank money
printing.

186. Government is, therefore, empowering local authorities and public
enterprises such as ZESA, ZINWA, and National Oil Company of Zimbabwe
(NOCZIM) among others, to charge for their services in both local and
foreign currencies.

187. This will be complemented by periodic review of tariffs to economic
levels which allow institutions to cover operational costs, consistent with
the "User Pays" principle.

188. The respective line Ministries will, therefore, be submitting to
Treasury, their proposals on tariffs as well as other measures necessary to
enhance the efficiency of our public enterprises.

NOCZIM

189. To enable NOCZIM to raise sufficient funds to import fuel on a
sustainable basis without reverting either to Treasury or the Reserve Bank
for foreign currency, all customers, Government and farmers included, will
pay the full price in foreign exchange.

190. With regards to the review of fuel prices, the Minister of Energy and
Power Development will implement a trigger mechanism in the pricing of all
petroleum products that immediately captures shifts in international prices
and procurement costs.

ZESA

191. Mr Speaker Sir, with electricity tariffs in local currency continuing
to lag behind cost of supply, ZESA can no longer meet basic payment
obligations to suppliers of consumable materials, spares and equipment, let
alone electricity imports payable in foreign currency.

192. Based on the already Government approved cost-plus approach, the
electricity tariff is being adjusted with effect from 1 February 2009 by 47%
from the current US$0.067 to US$0.098 per Kilowatt per Hour (kWh) in order
for ZESA to recover costs of supply. This is payable in both local and
foreign currency.

193. Whilst adopting a cost reflective tariff approach, a tariff regime
providing for a lifeline tariff of up to 50 kWh hours for domestic consumers
will be used to provide for continued subsidisation of low income
households, while cost reflective tariffs are to be charged on other
consumer categories.

194. With regards to farmers, who remain the anchor of our agricultural
reforms, while Government recognises the need to cushion them, the current
subsidy of 55% of the tariff being paid by the farmers is not sustainable.

195. Farmers will, therefore, pay 80% of the obtaining tariff level with
effect from 1 February 2009.

ZINWA

196. The capacity of ZINWA to effectively manage water supply and sewer
reticulation throughout the country's urban centres is severely
overstretched.

197. The centralisation of water management in ZINWA has been characterised
by bureaucratic inefficiencies, leading to low staff morale.

198. Equally, the burden that ZINWA is placing on the fiscus is
unsustainable.

199. Various submissions for the restoration of its role in the management
of bulk water supply have, therefore, been put forward.

200. Government is, therefore, decentralising the management of water to
local authorities with effect from 1 February 2009. This entails that ZINWA
reverts back to its status prior to the directive of 9 May 2005.

201. Accordingly, ZINWA and local authorities should begin the processes for
smooth hand over and take over transfers.

202. Given that water reticulation infrastructure in some major urban
centres has become obsolete, Government will be working with the respective
local authorities in mobilising resources for the rehabilitation of such
infrastructure.

203. The charging of economic water tariffs will complement such resource
mobilisation measures.

Support for Productive Sectors

204. Government recognises that stabilising prices of goods and services
will benefit from improved domestic production supply and, hence, measures
directed at supporting our industries will be critical.

Agriculture

205. In agriculture, Government proposes measures for continued support to
farmers, including improved market-based access to inputs, farm
mechanisation as well as support for extension services.

206. Engagement of the fertilizer industry to enhance local production and
improve distribution is also underway.

207. Furthermore, the Ministry of Agriculture will be submitting proposals
that would enhance greater productivity on the land.

Grain Prices

208. The commencement of the 2008/09 summer season has benefited from the
good rains received to date and the support rendered to farmers through
agricultural inputs and farm mechanisation interventions.

209. Focusing on the 2009 winter wheat and the 2009/10 summer agricultural
programmes, Government has adopted a grain producer and selling pricing
framework that guarantees viability and market returns to farmers'
investments as is the case with other economic players.

210. In this regard, with effect from 1 February 2009 the marketing
arrangements for grain will be as follows:

. All maize and wheat grain exports are suspended, until further notice, to
allow for build up of the country's strategic physical grain reserve stocks.

. The GMB will now announce Free On Board (FOB) import parity related maize
and wheat grain floor prices in foreign currency or the local currency
equivalent. Hence, the GMB assumes the role of buyer of last resort.

. Millers and any other grain merchants will now compete in the purchase of
maize and wheat grain direct from farmers, alongside the GMB, at prices not
lower than the import parity related floor price.

211. Consistent with this Policy Framework, millers are now also able to
participate in marketing arrangements with the GMB to purchase in foreign
exchange some of the wheat already delivered to the GMB.

Seed Maize Prices

212. Mr Speaker Sir, consistent with the liberalisation of our grain
marketing, the price of seed maize payable to farmers upon harvest will be
in both local and foreign currencies, and pegged at F.O.B. import parity
levels for commercial maize plus 30%.

213. The selling price of seed maize to farmers by Seed houses will also be
in both local and foreign currencies, and pegged to levels which take
cognisance of seed maize growers' price as well as processing costs.

Financing of Agriculture

214. Mr Speaker Sir, Honourable Members will be aware of the large role
Government has been playing in the funding of agriculture, both directly
from the Budget as well as from Reserve Bank facilities such as ASPEF.

215. Financing of agriculture, however, should ordinarily be the
responsibility of our banking system, drawing from the deposits by the
general public.

216. Hence, the Reserve Bank will be coordinating measures to restore and
enhance the level of participation by our banks and other financial
institutions in lending to our farmers. This will be both in terms of
provision of short term as well as medium term agricultural finance.

217. Short term finance facilities will essentially avail 90 - 180 day
working capital for purchase of inputs and other requirements. Syndicated
financial facilities, guaranteed by Government, through issuance of such
financial instruments as Grain Bills offer great opportunity for tapping
into what would otherwise remain idle bank deposits.

218. Furthermore, the Reserve Bank will be taking the lead in coordinating
the banking system in the provision of medium term finance to capacitate
farmers through access to purchase of equipment. This, Mr Speaker Sir, could
be on the basis of such arrangements as lease and hire purchase finance
facilities.

219. The participation of banks in agricultural finance will be strengthened
by the liberalisation of agricultural pricing and marketing arrangements
alluded to above.

Crop Input Packs

220. Mr Speaker Sir, greater participation by the banking sector in
agricultural finance will allow for Government capacity to support research
and extension services, as well as targeted input support to the smaller
farmer in our communal and resettlement areas.

221. I will, therefore, be proposing a crop input pack support for the small
scale farmer, under which 10kg seed packs and two 50kg bags of fertilizer
will be provided.

Contract Farming

222. Furthermore, Government will for the coming summer crop season be
calling for increased contract farming.

223. In this regard, agro-processing companies are now invited to begin
making arrangements for provision of inputs, financing and extension support
to farmers on a Contract farming win-win basis.

Manufacturing

224. The main thrust of this Budget is to improve production through support
to our local industries. Increased supply will ultimately stabilise prices
of goods and services as well as avoid over-reliance on importation of
finished products.

225. This will entail measures that contribute to the competitiveness of
domestic production, and review of import duties that offer unfair
competitive advantage to foreign produced goods.

226. Unless local producers are competitive, Zimbabwe will become a market
for imported value added goods, hastening the demise of local manufacturing
and loss of industrial capacity as more jobs are exported to those countries
supplying our markets.

227. Mr Speaker Sir, I have already indicated policy frameworks on the
extended use of multiple currencies to producers and previously unlicenced
retailers, as well as simplifying licencing requirements and processes.

228. Over and above these, I will shortly be announcing review of price
controls, as well as measures for fair competition with imports, without
necessarily promoting and protecting domestic production inefficiencies,
incentives and tax measures to be extended to companies targeted on merit of
their contribution to the economy.

Pricing of Goods and Services

229. Following the import liberalisation policy, we have started to witness
some benefits in improved supply of goods and services.

230. Prices in foreign exchange which were initially far above import parity
levels, reflecting shortages and monopolistic behaviour, have now started to
stabilise and in some cases gravitating towards import parity levels. This
trend reflects improvement in stocks as well as competition.

231. Consistent with this, the domestic price regime is further liberalised
to remove the restrictive price controls.

232. The role of the National Incomes and Pricing Commission has, thus, been
reviewed to focus on monitoring price trends obtaining in the sub-region and
beyond, guiding producers and retailers as well as advising Government on
import parity based pricing.

Imports of Basic Goods

233. Mr Speaker Sir, while it is critical that we begin to restore domestic
production levels, taking advantage of the liberalised currency and pricing
environment, Honourable Members will acknowledge the need for us to support
importation of some basic goods as a transitional arrangement.

234. I, therefore, propose that we continue to facilitate, over the short
term, the uninterrupted importation and availability of basic goods in our
markets by individuals and corporates.

235. This will be reviewed taking account of developments and improvement in
domestic industrial capacity utilisation.

Export Bank

236. The establishment of an Export Bank to support all the productive
sectors venturing into export markets has become necessary given our drive
on increasing our export earnings and rendering the whole country an export
zone.

237. Initiatives will, therefore, be instituted by the Reserve Bank in
partnership with external parties expert in this area.

Mining

238. Government acknowledges the role of mining in support of the country's
efforts to attract improved inflows of foreign exchange through exporting as
well as foreign investor participation.

239. Central to the recovery of mining operations will be restoration of
their viability. This will enable mining houses to meet operational costs,
and allow for expenditures for production expansion.

240. Furthermore, improved exploration, value addition, supported by a
consistent policy framework that offers incentives to the mining sector as
well as plugging of leakages will all be critical.

241. Mr Speaker Sir, the depressed global metal prices are also posing a
challenge to the mining sector and hence, it is necessary that Government
institutes measures to assist mines minimise losses.

242. It is also critical that we support the resuscitation of mining
production, by facilitating producers' access to foreign currency to enable
them to recapitalise, buy inputs and invest in exploration of new resources.

243. I, therefore, propose the measures in support of the resumption and
increased capacity utilisation in mines, including gold.

Viability & Capitalisation

244. The Reserve Bank is reviewing support to the mining sector, allowing
for easier access to foreign exchange, and thereby supporting
recapitalisation, purchase of inputs and provision of working capital.

245. Furthermore, foreign currency sales to the Reserve Bank will be at a
market determined exchange rate.

246. Government, through the Reserve Bank, will also facilitate negotiations
for external financial facilities by mines, including gold, on the back of
future production.

247. Levels of Minerals Marketing Corporation of Zimbabwe (MMCZ) commission,
royalties and other levies will be reviewed in consultation with the
relevant stakeholders.

Gold Resuscitation

248. There are some initiatives that the Reserve Bank is working on to
assist the gold sector.

249. The Governor of the Reserve Bank will be unveiling the detailed
framework under this critical sector.

Exploration

250. Mr Speaker Sir, in the difficult economic environment, very limited
exploration activities have been undertaken, with few new Exclusive
Exploration Orders issued. This, needs to be addressed, to avoid
compromising future mineral production.

251. Government is also setting up a Zimbabwe Exploration Corporation
dedicated to mineral exploration and assessing the potential of the various
mineral deposits.

252. This, Mr Speaker Sir, will assist us in evaluating potential
investments to exploit our mineral deposits.

Value Addition

253. Furthermore, exportation of unprocessed mineral deposits is being
suspended in support of greater beneficiation.

254. This includes current exportation of chrome ore in its raw form, scrap
metal, among others.

255. Furthermore, the issuance of export permits for scrap metal, is now
rationalised and restricted to one Authority, namely, the Ministry of
Industry and International Trade. All such other authorities are, therefore,
invalidated.

Reserve Assets

256. Mr Speaker Sir, in light of major leakages being experienced in mining,
Government has reclassified diamonds, emeralds, and platinum as reserve
assets, alongside gold.

257. In this regard, the management of diamonds, emeralds and platinum will
be through the Reserve Bank.

Skills Training

258. Mr Speaker Sir, enhancing the potential of mining would also require
that we capacitate the University of Zimbabwe and the School of Mines.

259. Failure will have adverse effects on domestic skills availability,
forcing the industry to rely on external technical expertise.

Plugging Leakages

260. Government will also adopt stiffer penalties, as part of the measures
to support plugging of leakages through externalisation.

Public Enterprises & Companies with Government Shareholding

Capitalisation

261. While Government has full ownership and control of public enterprises,
the financial and economic benefits arising from this shareholding have
often been low, owing to under performance of these entities. Currently, one
of the major challenges compromising efficient service delivery emanates
from their under-capitalisation.

262. Given current Budgetary resource constraints, there is scope for
tapping the large potential resource base through selective listing on the
stock exchange as well as targeted friendly direct foreign investor
participation on a joint venture basis.

263. Significant equity anchored joint ventures with competent consortia of
foreign and local partners would raise financial and technical resources for
investment in expansion, improved efficiency and reliability, as well as
liquidating outstanding and current obligations.

264. The Framework for the re-capitalisation of such entities as the Cold
Storage Company, ZESA, Air Zimbabwe, National Railways of Zimbabwe (NRZ), as
well as telecommunication companies Tel-One and Net-One, is being developed.
This will also apply to companies in which Government has significant
shareholding, such as Hwange Colliery, and the Zimbabwe Iron and Steel
Company (ZISCO).

265. Given that these entities have Government shareholding, it will be
necessary that provision be made to facilitate the participation of other
investors, also allowing for possible debt restructuring.

266. Where Government has identified an enterprise and taken the decision
for joint venture investment with strategic partners, the implementation
modalities of such investment will reside beyond the Minister responsible
for administering its legislation.

Asset Disposal

267. In the disposal of identified assets, bids from potential joint venture
partners and other investors would be evaluated using international best
practices.

Governance

268. With regards to support for good corporate governance, I will be
proposing legislation providing for greater role clarity and accountability
of boards and management through a Public Finance Management Bill.

269. In the interim, all Public Enterprises boards are now required to
institute the necessary arrangements to ensure that key posts are manned by
substantive personnel with the requisite skills and competencies.

Companies with Government Shareholding

270. Mr Speaker Sir, Government has some significant investments and
shareholding in a number of companies other than public enterprises.

271. Regrettably, most of them have not been contributing to Government
revenue by way of dividends. Instead some of them have been operating with
expectation of further handouts from the tax-payer, extending Government
exposure beyond its shareholding.

272. I, therefore, propose to tighten the requirements for all companies in
which Government has shareholding to pay dividends. In this regard, the
Accountant General has been directed to work out the necessary arrangements
with the respective company Boards and Management.

Shareholding in Listed Companies

273. Government shareholding in listed non strategic companies also offers
scope to mobilise foreign currency resources for the country.

274. This also has the potential to promote economic empowerment, as well as
enhance private sector growth, whilst allowing Government to devote its
resources to strategic parastatals and provision of essential social goods
and services.

Infrastructure Development

275. Government efforts in infrastructure rehabilitation and development in
such sectors as power generation, road and dam construction as well as water
infrastructure offer scope for not only supporting productive sectors but
also stimulating economic activities and generate more employment.

276. Given Budget resource co nstraints, there are opportunities for
enlisting the participation of credible private investors, some of whom have
already expressed interest to complement Government efforts through joint
ventures under the Built Operate Transfer/Built Own Operate Transfer
(BOT/BOOT) arrangements.

277. Mr Speaker Sir, some potential infrastructure investment projects have
failed to take off on account of such issues as consensus over tariffs,
water rights and shareholding, among others. Government will, therefore, be
engaging investors as well as structuring appropriate incentives and other
measures that guarantee viability of identified projects.

278. Notable sectors and projects identified for implementation under
BOT/BOOT arrangements include the following:

Roads and Railways

. Harare - Beitbridge road dualisation;

. Harare - Chitungwiza railway line.

Electricity Generation

. Expansion of Kariba Power Station;

. Expansion of Hwange Power Station.

Water & Irrigation

. Construction of Kunzvi, Tokwe-Mukosi, Biri and Gwayi-Shangani dams;

. Expansion and construction of irrigation schemes such as Middle Sabi,
Nuanetsi, Wenimbi, Osbourne, Manyuchi and Dande.

Telecommunications

. Network expansion and upgrading.

Government Buildings & Housing

. Construction of houses;

. Maintenance of Government buildings.

Iron & Steel Making

. Refurbishment of ZISCO.

Toll Gates

279. Mr Speaker Sir, notwithstanding that Government has already taken the
decision to install toll gates as part of the efforts to provide for the
resources necessary to maintain and upgrade our national road
infrastructure, implementation has remained mired in bureaucratic inertia.

280. The Zimbabwe Revenue Authority is, therefore, now directed to set up
rudimentary Toll gate structures to facilitate the collection of toll fees
along our major highways as from 1 March 2009.

281. The payable Toll gate rates will be as follows:

. Motor cycles US$1.00

. Passenger vehicles & light trucks US$2.00

. Minibuses US$3.00

. Buses US$5.00

. Heavy Trucks US$7.00

. Haulage Trucks US$10.00

282. The Programme will initially target our inter-city national highways.
In this regard, ZIMRA will be communicating with the general public the
various designated sites where Toll gates will be installed.

Production of Vehicle Number Plates

283. Mr Speaker Sir, the vehicle number plates which used to be produced
locally are now wholly imported from outside the country with only the
inscription of numbers done locally. This, in an environment where the
country is experiencing foreign currency constraints is not sustainable.

284. I, therefore, propose that the production of number plates for vehicle
registration be done locally as was the situation before. This measure takes
effect from 1 March 2009.

Change of Vehicle Ownership

285. Mr Speaker Sir, the previous vehicle registration system tied the
number plate specifically to the vehicle, even in situations where a vehicle
changed ownership.

286. Under the current system, vehicle number plates are now specific to the
owner to the extent that if they lose the number plates for the same
vehicle, a new set has to be acquired. Similarly, in cases where vehicle
ownership changes, a new set of number plates is also required.

287. Hence, the current system entails that if one piece of the set of
number plates is lost, a new set of number plates with totally different
numbers is required, a situation resulting in a waste of scarce foreign
exchange resources.

288. With immediate effect, the Central Vehicle Registry will allow upon
change of ownership, the same number plates to be transferred to the new
owner. This only applies to the newly introduced alpha numeric number
plates.

Vehicle Registration

289. Mr Speaker Sir, while the Central Vehicle Registry is the sole vehicle
registration authority, it has appointed ZIMRA, City of Harare, City of
Bulawayo and Zimpost as vehicle registration agencies.

290. Hence, the registration of new vehicles is currently carried out by the
above agencies, a situation that has often compromised the security of the
vehicle registration system as well as payment of the relevant registration
and licensing fees.

291. Cases of registration of vehicles that would have been smuggled into
the country, as well as tampering with the registration books have been
experienced.

292. While the registration of vehicles and change of ownership remains the
responsibility of the Central Vehicle Registry (CVR), collection of fees and
other taxes associated with vehicle registration is paramount.

293. I have, therefore, directed ZIMRA to engage the CVR to work out
measures to plug loopholes associated with collection of fees and other
taxes on vehicle registration. Once modalities are in place, I will be
communicating the necessary review mechanism.

294. Furthermore, the CVR should take advantage of the existing provincial
Vehicle Inspectorate Department offices to widen their accessibility.

Health Services Delivery

295. The health sector is faced with a number of challenges which require
substantial amounts of Government funding.

296. Current estimates indicate that about US$250 million is required to
restore health services. The bulk of this contribution would come from
Government, with user fees anticipated to contribute initially only about
5%.

297. This, Mr Speaker Sir, would have to be complemented by further review
of fees and charges.

Health Personnel

298. The health personnel remain covered by the general Government
remuneration policy framework.

299. This is without prejudice to tailor-made top-up special allowances,
such as those applicable under the cholera control programmes.

Health Infrastructure

300. A number of health infrastructure projects have remained uncompleted
for a long time, owing to resource constraints.

301. Government, therefore, proposes prioritising completion of unfinished
projects before embarking on new ones. This ensures that the country gets
value for money from its programmes and projects.

Indiscipline & Corruption

302. There is a notable general rise in corruption and indiscipline in both
the public and private sectors, which are frustrating economic turnaround
efforts. The prevailing shortages of goods and services associated with low
production are also contributing to the rise in corruption cases.

303. Whilst this Budget is addressing challenges on supply constraints,
Government, has also considered stiffer penalties to decisively deal with
such malpractices.

304. I am, therefore, proposing the following standard scale of fines:

Standard Scale of fines

Level         Current fine (Z$)          Proposed fine (US$)

1                   5                            5

2          10                                     10

3          20                                    20

4          50                                    100

5          100                                    200

6          200                                     300

7          300                                     400

8          400                                     500

9          500                                     600

10          600                                     700

11          900                                     1 000

12          1 000                                     2 000

13          2 000                                     3 000

14          5 000                                     5 000

305. Furthermore, I propose that the Minister of Finance assumes the
responsibility of reviewing the standard scale of fines in consultation with
line Ministries.

306. This measure takes effect from 30 January 2009.

EXPENDITURE PROPOSALS

307. Mr Speaker Sir, I have already alluded to the negative impact of the
entrenched inflationary tendencies on the economy in general and the
Zimbabwe dollar in particular. This has necessitated the adoption of
multiple currencies to anchor our transactions.

308. In this regard, the 2009 Budget Estimates are being presented in
Zimbabwe dollars, the United States dollar and the South African rand. The
prevailing United Nations exchange rate has been used to compute the local
currency values.

Level Current fine (Z$) Proposed fine (US$)

309. Mr Speaker Sir, tabling the 2009 Budget Estimates in both the
Zimbabwean dollar and selected foreign currencies will facilitate
expenditure transactions during 2009, which will be on the basis of strict
budget allocations, in line with available foreign currency revenue
receipts.

310. The Secretary to the Treasury will be communicating with Ministries on
the necessary details, including guidance on treatment of transactions and
the accounting procedures thereof.

Expenditure Bids

311. Mr Speaker Sir, in light of the use of multiple currencies in
transactions, along side the Zimbabwe dollar, Ministries costed and
presented their expenditure bids in foreign currency.

312. Mr Speaker Sir, the level of the expenditure bids by Ministries were,
in most cases, at unsustainably high levels.

Estimates of Expenditure Proposals

313. Mr Speaker Sir, I have had to rationalise the requirements by line
Ministries in line with the anticipated foreign exchange revenues, which are
projected at $59.5 quintillion (US$1.7 billion) for the 2009 financial year
without any deficit provisions.

314. Mr Speaker Sir, I therefore propose a total 2009 Budget of $66.5
quintillion (US$1.9 billion), comprising $50.75 quintillion (US$1.45
billion) recurrent expenditure and $15.75 quintillion (US$0.45 billion)
capital expenditure.

315. The above Budget provision includes an amount of $7 quintillion (US$200
million), being resources already committed by cooperating partners which
are earmarked for specific programmes. Such resources will be accounted for
as the Vote of Credit.

316. Mr Speaker Sir, allow me, therefore, to now highlight to Honourable
Members components of the Budget Expenditure Proposals.

Employment Costs

317. The proposed 2009 Budget Provision for the overall employment costs
comprising the wage bill, pension as well as medical aid insurance,
therefore, amounts to $16.9 quintillion (US$482.8 million).

Government Wage Bill

318. Mr Speaker Sir, taking into account the remuneration framework I have
highlighted earlier, which takes into account the need to introduce payment
in foreign currency, I have made provision for an amount of $12.67
quintillion (US$361.9 million) for the wage bill.

Government Pensions

319. Mr Speaker, Sir, Government has an obligation to address the welfare of
its former employees who are now pensioners. This group would need, to the
extent possible, to be looked after through payment of their due pension
benefits.

320. However, the developments regarding loss of value of our local currency
have left our pensioners, just like the serving members, with no coping
mechanisms for sustenance.

321. Therefore, Mr Speaker Sir, as we were reviewing the remuneration
framework for public servants, Government has also paid attention to pension
benefits.

322. However, the challenge at present is that foreign currency revenues are
projected to start very low during the first quarter of the year. Therefore,
actual pension payment modalities will be worked out in due course.

Public Services Medical Aid

323. Mr Speaker Sir, Honourable Members will be aware that the
liberalisation of the foreign exchange market has imposed some challenges
across the board, with medical insurance affected as well. A situation now
prevails whereby, without foreign currency subscriptions, medical aid
societies are unable to meet claims by service providers, since the latter
are charging in foreign currency.

324. In light of the above, and as an interim measure to guarantee basic
cover for Government employees, I propose to allocate $87.5 quadrillion
(US$2.5 million) towards employer contribution to the Premier Service
Medical Aid Society.

325. This amount covers 100% of foreign currency contribution due from both
the employer and employee, given the low capacity for civil servants to meet
full foreign currency contribution.

Members will, however, be required to meet the full local currency
component.

Operations & Maintenance

326. Mr Speaker Sir, for operational requirements including office running
expenses, stationary supplies and other necessities, I propose to allocate
an amount of $17.96 quintillion (US$513 million).

327. This amount covers line Ministries and their Departments as well as
institutions funded through grants from the fiscus such as the Sports and
Recreation Commission, the Consumer Council of Zimbabwe and universities.

Social Protection

328. Mr Speaker Sir, our human development indicators have continued to
deteriorate on account of depressed economic performance.

329. This has increased the number of vulnerable groups requiring Government
assistance.

330. Mr Speaker Sir, Government, is reviewing the levels of support under
the various existing social protection programmes such as the Basic
Education Assistance Module (BEAM), Public Health Assistance, Public Works
and Children in difficult circumstances, among others.

331. I am, therefore, proposing to allocate $1.87 quintillion (US$53.5
million) under the social protection programmes.

Education and Health

332. Mr Speaker Sir, I have alluded earlier to the negative impact that
inflation has had on provision of education and health services.

333. Inflation has not only eroded incomes of our teachers, lecturers and
health personnel but also contributed to inadequate teaching materials,
medicines and drugs as well as deterioration in facilities and
infrastructure.

334. Therefore, it is imperative that measures aimed at fighting inflation
are put in place to complement the following allocations.

Education

335. Mr Speaker Sir, it is critical that we urgently address the challenges
afflicting the education sector as they threaten to reverse and undermine
the gains made thus far.

336. To this end, I propose to allocate an amount of $5.2 quintillion
(US$149.8 million) to the Ministry of Education, Sport and Culture.

337. I have set aside an amount of $378.9 quadrillion (US$10.8 million)
under this Ministry for the construction and rehabilitation of schools.

The aim is to phase out hot sitting and improve access, especially in the
newly resettled areas.

338. I also propose to set aside an amount of $1.6 quintillion (US$46.1
million) for the procurement of teaching, learning materials and equipment.
An amount of $103.7 quadrillion (US$2.96 million) is also being set aside to
facilitate supervision of schools by enhancing mobility of Education
Officers while setting aside an amount of $221.57 quadrillion (US$6.33
million) for in-service training for school heads.

339. The integrity of our public examinations has recently come under
spotlight following delays in their setting, conduct and marking.

340. Therefore, to improve and restore confidence, an amount of $592.39
quadrillion (US$16.9 million) is proposed under the Zimbabwe Schools
Examination Council (ZIMSEC) for this purpose. This amount will be
supplemented by additional income from examination fees, which will be
reviewed upwards with effect from this year.

Tertiary Institutions

341. Mr Speaker Sir, our institutions of higher learning have also faced
challenges relating to staff retention, shortage of teaching and learning
materials as well as general support services.

342. In an effort to turn around tertiary learning, I propose to allocate an
amount of $1.1 quintillion (US$29.9 million) for state universities,
comprising $437.5 quadrillion (US$12.5 million) for recurrent expenditure
requirements and $609 quadrillion (US$17.4 million) for capital projects,
including teaching and learning equipment.

343. I also propose to allocate $437.2 quadrillion (US$12.5 million) for the
thirteen Teachers' Training colleges and ten Polytechnics, mainly focusing
on operational requirements.

344. The provision under Higher and Tertiary Education also caters for $175
quadrillion (US$5 million) in support of students under the National
Education Training Fund, including targeted students under the Cadetship
programmes.

Health

345. Mr Speaker Sir, adequate provision of drugs and other medical supplies,
equipment, ambulances and service vehicles, including attraction and
retention of staff, are critical success factors in the delivery of health
services.

346. In this regard, I therefore propose to allocate $5.52 quintillion
(US$157.8 million) to the Ministry of Health and Child Welfare.

347. Of this amount, $2.1 quintillion (US$59.9 million) is targeted at
Government central, provincial and district hospitals as well as rural
health centres. In this allocation, 60% caters for the procurement of drugs
and medical supplies while the balance stands for general running expenses
for these institutions.

348. With this allocation, it is my expectation that our health institutions
will now be able to have improved levels of essential and necessary drugs
including other medical supplies.

Drugs

349. To improve and strengthen the referral system, I propose to set aside
$759.5 quadrillion (US$21.7 million) for the procurement of drugs and other
medical supplies for local authorities and mission hospitals and clinics.

350. In order to increase NatPharm's capacity to support the health sector
through the supply of drugs and medical resources, I have made a special
allocation of $568.75 quadrillion (US$16.25 million) for its capitalisation.

Equipment

351. In addition, I have set aside an amount of $141.2 quadrillion (US$4
million) for procurement of sixty-one ambulances and eighty service
vehicles.

Health Infrastructure

352. Mr. Speaker Sir, our health infrastructure such as boilers and steam
reticulation systems as well as laundry equipment continues to deteriorate
due to lack of adequate maintenance and age.

353. Mr Speaker Sir, mindful of our resource constraints and also taking
into account, challenges in technical and supervisory capacity, we have,
however, taken a deliberate stance to limit the number of health sector
projects this year's Budget takes on board.

354. I, therefore, propose to allocate an amount of $231 quadrillion (US$6.6
million) for urgent rehabilitation works at Harare, Mpilo, United Bulawayo
Hospital and Chitungwiza Central Hospitals.

355. Furthermore, an amount of $315.6 quadrillion (US$9 million) has been
set aside for ongoing construction works. Included in this allocation is
works on two provincial hospitals ($2.63 quadrillion), five district
hospitals ($31.57 quadrillion) and three rural health service centres ($42
quadrillion).

Agriculture

Support Towards Grain Production

356. Mr. Speaker Sir, as I have indicated earlier on, Government efforts
will now be directed towards rebuilding of the national strategic grain
reserves, extension services to all farmers as well as supporting communal
farmers.

357. To this effect resources amounting to $280 quadrillion (US$8 million)
have been set aside to support grain production for the Communal, A1 and the
newly Resettled farmers.

358. The support will be in the form of subsidised inputs targeting 300 000
ha with expected yield of 500 000 metric tonnes. Support will also be
extended to the vulnerable groups through provision of inputs comprising
10kg grain seed; 50kg compound D and 50kg ammonium nitrate.

359. To facilitate achievement of the set production levels, resources
amounting to $240.1 quadrillion (US$6.9 million) have been set aside to
strengthen extension services and monitoring of the programme through
Agritex.

360. I also propose to allocate $175 quadrillion (US$5 million) to cover
importation of grain up to the next harvest.

Tobacco Production

361. The land reform programme saw a shift to tobacco production by the
newly resettled farmers. It has therefore become necessary to unlock this
production potential through provision of working capital targeting about 25
000 hectares. Resources amounting to $105 quadrillion (US$3 million) have
thus been set-aside for this purpose.

Livestock Production

362. Mr Speaker Sir, I propose to allocate an amount of $56 quadrillion
(US$1.6 million) towards the Rebuilding of the National Herd Programme.

363. This programme, which involves the procurement of bulls, cows and
artificial insemination will be implemented through Agribank, agricultural
colleges, the Cold Storage Company and the Agriculture Rural Development
Authority (ARDA).

364. Alongside the livestock-rebuilding programme, Government is also making
resources available for enhancement of veterinary services including
procurement of vaccines and dipping chemicals for the prevention of animal
disease outbreaks under the Animal Disease and Risk Management Programme.

Other Capital Projects

365. Mr Speaker Sir, as I have indicated earlier on, our roads, water and
sewerage systems in particular have gone beyond their economic life span
and, therefore, require rehabilitation and maintenance.

366. Taking account of these constraints and working with implementing
agencies, I have had to scale down the number of projects to manageable
levels. Therefore, out of a total stock of 1 705 public sector projects that
Ministries proposed to implement, I have made provision amounting to $12.4
quintillion (US$354.6 million) to cater for only 594 projects.

Roads and Bridges

367. Mr. Speaker Sir, I am proposing to allocate an amount of $2.1
quintillion (US$59.3 million) covering construction and rehabilitation of
our road network.

368. An amount of $362.5 quadrillion (US$7.5 million) is being set aside for
dualisation of Harare-Masvingo, Harare-Bulawayo and Masvingo-Beitbridge
roads.

369. For construction of major roads, I have allocated $350 quadrillion
(US$10 million) for ongoing construction works. Of this amount, $63
quadrillion (US$1.8 million) is targeted at the completion of the
construction of Bindura - Shamva road while $287 quadrillion (US$8.2
million) covers further works on five high volume roads.

370. A specific amount of $1.3 quintillion (US$36.2 million) is proposed for
resealing of eight roads and re-gravelling of thirteen roads in the country's
ten provinces.

371. For the construction and rehabilitation of rural roads, I propose to
allocate $175 quadrillion (US$5 million) under the District Development Fund
(DDF).

Toll gates

372. Mr Speaker Sir, in order to kick start the establishment of toll gates
on all our major road networks, I have, therefore, allocated $70 quadrillion
(US$2 million) for the construction of appropriate structures.

Water and Sanitation

373. Mr Speaker Sir, water supply and sanitation management in both rural
and urban areas remain a challenge in terms of supporting business
activities as well as access to clean water by the general public.

374. To address the water and sewer challenges, I am proposing to set aside
an amount of $1.1 quintillion (US$31.2 million) for water and sewer
provision in both urban and rural areas.

Urban Water Supply & Sanitation

Harare

375. In line with the decision to transfer the function of water and sewer
management from ZINWA to local authorities, I propose to allocate an amount
of $451.5 quadrillion (US$12.9 million) to Harare City Council.

376. This amount will cover desludging of sewer tanks, installation of pumps
and rehabilitation of equipment at Firle, Crowborough and Zengeza sewer
treatment works as well as pipe replacement in some residential areas.

377. To improve water pumping and distribution capacity for Harare and its
environs, I propose to allocate an amount of $150.5 quadrillion (US$4.3
million) to cater for upgrading works at Morton Jaffray Water works as well
as $35 quadrillion (US$1 million) for pipe replacement.

Bulawayo

378. Mr Speaker Sir, I am aware that the City of Bulawayo has had perennial
water challenges. The construction of the Mtshabezi Pipeline, which would
have supplied to the city, is taking long to complete.

379. Therefore, to enhance water supply to the city, for the time being, I
am proposing to allocate an amount of $4.73 quadrillion (US$135 000) for the
rehabilitation of boreholes and upgrading of the treatment works.

Other Urban Local Authorities

380. For the other urban sewer and water supply schemes around the country I
propose to allocate an amount of $23.45 quadrillion (US$670 000) to cater
for the following cities and towns:-

Town Project Name 2009 Provision

Mutare Chikanga reservoir $2.45 quadrillion

Mutare outfall sewer $5.78 quadrillion

Gimboki Phase 3 extension $3.33 quadrillion

Gweru Gweru City Water Supply $3.5 quadrillion

Gweru City Sewage Rehabilitation $3.5 quadrillion

Marondera Marondera Water Supply $3.5 quadrillion

Chinhoyi Chinhoyi Clear Water $700 trillion

Chinhoyi Fernlea Sewage Station $700 trillion

381. To augment the above allocations, the responsible authorities will
raise additional revenues through charging of cost reflective tariffs to
allow them to re-invest in equipment and the conveyance system maintenance.

Waste Management

382. Mr Speaker Sir, the recent outbreak of cholera has brought to the fore,
challenges relating to waste management in most of our urban areas.

383. The shortage of financial resources, fuel and refuse removal equipment
has led to local authorities leaving refuse uncollected, thereby creating
unhygienic conditions which promote the spread of diseases.

384. Whilst the Budget will make provision of $175 quadrillion (US$5
million) to address some of these challenges, the local authorities will
come up with specific tariffs for targeted services.

Rural Water & Sanitation Programme

385. To cover for the provision of clean water in our rural areas, I propose
to allocate an amount of $598.5 quadrillion (US$10.57 million) under the
Rural Capital Development Fund. This amount will cater for the
rehabilitation of about 9 000 boreholes and sanitation facilities throughout
the country.

386. In addition, I propose to allocate an amount of $12.6 quadrillion
(US$360 000) to DDF for the drilling of an additional 10 boreholes in each
province.

Airports

387. Mr Speaker Sir, the rehabilitation of Harare, Victoria Falls and J.M.
Nkomo airports, as well as upgrading the Buffalo Range Airport are critical
to facilitate traffic as well as tourism targeting the 2010 World Cup in
South Africa.

388. I, therefore, propose to allocate an amount of $126 quadrillion (US$3.6
million) for on-going works under these airport projects. This will cover
rehabilitation of the runway and sewer upgrading works at Harare Airport and
procurement of baggage handling equipment, car park, access road and other
finishes at J.M. Nkomo Airport.

389. It is important for the Airports Authority to take full advantage of
the interest shown by some investors in the upgrading of our airport
infrastructure particularly the Victoria Falls Airport.

Dam Construction and Irrigation Development

390. Mr Speaker Sir, agricultural production stands to improve, if we are to
increase irrigation capacity, taking full advantage of existing water bodies
as well as complete the dams currently under construction.

391. I have already indicated above infrastructural projects including dams
which have potential for attracting joint venture capital with the private
sector.

392. In addition to the above, I have prioritised Bubi-Lupane and Mutange
dams and allocated $224 quadrillion (US$6.4 million) to facilitate their
completion.

393. Of the existing large dams, work to complete water conveyance and
infield works will be speeded up to enable full utilisation of the water
resources for agricultural production.

394. In this regard, Government has prioritised the expansion of irrigation
schemes on dams in various districts. (See Annex 3).

Energy

395. Mr Speaker Sir, the country requires urgent rehabilitation and
expansion of electricity generating projects in order to support our
productive sectors.

396. Government has already taken the stance to review electricity tariffs
to economic levels, thereby enhancing resources to finance power utility
operations.

397. In order to augment the above, I accordingly propose to allocate $227.5
quadrillion (US$6.5 million) for ZESA for the procurement of critical spares
and consumables, refurbishment of generation facilities including Hwange
Thermal Power Station, rehabilitation of transmission networks.

Rural Electrification

398. Mr Speaker Sir, our Rural Electrification Programme is an initiative
geared towards empowering rural communities to enhance their productive
capacity as well as their standards of living.

399. The Rural Electrification Programme continues to pursue the extension
of the grid as well as coordinate end use infrastructure development.

400. The proposed Budget of $147 quadrillion (US$4.2 million), therefore,
targets five (5) grid extension projects and some end use infrastructure
projects while provision has also been made for mini-grid solar systems.

401. The end use infrastructure projects include grinding mills, cottage
industries and irrigation schemes.

Institutional & Office Accommodation

402. A number of Government institutional and office buildings are under
construction. Resource constraints have delayed completion of these
projects, necessitating a targeted approach in allocating resources.

403. I am, therefore, proposing to allocate resources to the following
prioritised projects: -

Project Local Currency

(Quadrillions) US$ (millions)

Central Registry 105.0 3.00

Interpol Regional Office 17.5 0.50

Lupane Composite Office Block 33.8 0.96

5 District Registry Offices Central Investigation Department Headquarters
16.3 0.46

Zimbabwe Defence Forces' 38.5 1.10

Institutional accommodation 59.5 1.70

Chinhoyi & Gwanda Magistrates courts 122.5 3.50

Beitbridge Redevelopment Projects 115.5 3.30

Maintenance

404. Mr Speaker Sir, maintenance of Government infrastructure particularly
public buildings remains an area of great concern. Given the
hyper-inflationary environment, much of the planned maintenance work had
been inadequately funded.

405. In addition, concerns have been raised about the capacity of the Public
Works Department to undertake and supervise maintenance works given flight
of its workforce especially engineers and artisans.

406. Taking cognisance of the need to restore the value and improve the
operating environment of public buildings I propose an allocation of $173.9
quadrillion (US$4.97 million) towards the maintenance of public buildings.

407. This amount is shared between the Ministries of Local Government,
Public Works and Urban Development $103.6 quadrillion (US$2.96 million) for
urban infrastructure and that of Rural Housing and Social Amenities $70.3
quadrillion (US$2 million) for rural infrastructure.

Cooperating Partners

408. Mr Speaker Sir, I have also taken into account limited financial
support from cooperating partners in a number of ongoing projects in the
areas of food security, health, education, among others.

409. This is estimated to mobilise financial support to the tune of US$200
million.

REVENUE PROPOSALS

2009 Revenue Projections

410. Mr Speaker Sir, cognisant of the current poor level of economic
performance, the revenue generation challenge that we face can only be
overcome by taking advantage of our economy's huge potential, which the
policy measures that I am proposing are meant to realise during 2009.

411. The 2009 Budget revenue estimates I am tabling, therefore, require that
we successfully implement comprehensive and mutually reinforcing
macro-economic reforms, including the removal of all price distortions and
controls which though noble in their intentions have had the unintended
consequences of hampering production while not helping the intended
beneficiaries.

412. It is in light of this that I have also proposed fundamental macro and
micro economic reforms encompassing fiscal, monetary and exchange reforms,
structural, pricing as well as legal and institutional reforms, targeted at
stimulating positive supply response.

413. Taking account of the above, I am tabling the 2009 Budget Estimates
providing for Revenues amounting to US$1.7 billion, being the potential
realisable collections as we implement essential economic reforms backed up
by the necessary political will. Astute technocratic implementation and
time-bound monitoring framework will also be critical.

414. Mr Speaker, Sir, the above revenue estimates are also premised on
strengthening revenue collection, embracing into the Budget revenue net
those currently evading tax in the informal sector. This requires efficient
administration that enhances tax compliance.

415. Mr Speaker Sir, allow me to present the anticipated performance of the
respective revenue heads.

Foreign Exchange Tax Measures

416. Mr Speaker Sir, to meet the operational costs of Government including
the new Remuneration Framework, it will be necessary that we introduce a
number of tax measures targeted at mobilising resources in both local and
foreign currency.

417. In this regard, the 2009 Budget proposes measures to broaden the
collection of some of the tax revenue in foreign currency.

Remittances in Foreign Currency

Corporate Profit Tax

418. Mr Speaker Sir, corporate profit tax is currently payable in local
currency, except in instances where the holder of a special mining lease has
elected to maintain all books and records relating to the special mining
lease operation in foreign currency. However, most companies now conduct
business in foreign currency, hence realise profits in the same currency.

419. I, therefore, propose that corporate tax be remitted in the currency in
which business is conducted with effect from 1 January 2009.

Value Added Tax (VAT)

420. The VAT legislation provides that where payment for supplies of goods
and services is in foreign currency, VAT should also be payable in foreign
currency. However, upon importation VAT is payable in local currency. VAT
remittances to the fiscus are thus not commensurate with the volume of
business conducted in foreign currency.

421. I, therefore, propose that import VAT be payable in foreign currency on
the value of all imports with effect from 30 January 2009.

Customs Duty

422. Mr Speaker Sir, Customs duty is currently determined by applying the
duty rate on the foreign currency value of goods converted to the local
currency using the inter-bank rate. Taxpayers settle the bulk of their tax
obligations to Government by means of cheque or electronic transfers using
funds that are in some instances obtained through parallel market
activities. The value of tax paid to Government is thus undermined.

423. I, therefore, propose to charge customs duty in foreign currency on all
imports with effect from 30 January 2009.

Carbon Tax and NOCZIM Debt Redemption Levy on Fuel

424. Oil Companies currently sell fuel in foreign currency. However, carbon
tax and NOCZIM Debt redemption levy is paid in local currency.

425. I propose to levy carbon tax and NOCZIM Debt redemption levy on fuel in
foreign currency with effect from 30 January 2009. I further propose to
review the rates of customs duty on fuel, carbon tax and NOCZIM redemption
levy, with effect from 30 January 2009 as follows:

Tax Head                   Current Rate          Proposed Rate

Customs Duty          5% of CIF value or 30% of CIF value or Z$236 500 per
litre          US16 Cents per litre, which ever is greater

Carbon Tax          Zim 20 cents per litre          5% of CIF value or US 3
cents per litre, which ever is greater

NOCZIM Debt          Zim 20 cents per litre          5% of CIF value or US

Redemption          3 cents per litre, whichever is greater

Total Z$236 500.4 per litre 40% or US 22 Cents per litre

Excise duty

Clear Beer, Alcoholic Beverages, Cigarettes and Tobacco

426. Mr Speaker Sir, excise duty on imported and locally produced clear beer
and alcoholic beverages is payable in local currency. Clear beer and
alcoholic beverages are however currently traded in foreign currency.

427. I, therefore, propose to charge excise duty on imported and locally
produced beer and alcoholic beverages in foreign currency. I further propose
to levy excise duty on locally produced cigarettes and tobacco in foreign
currency.

428. The above measure takes effect from 30 January 2009.

Second Hand Motor Vehicles

429. Mr Speaker Sir, whereas trade in second-hand motor vehicles by
individuals and registered operators is currently being conducted in foreign
currency, excise duty is still payable in local currency, thereby depriving
the fiscus of the much-needed foreign currency.

430. I propose that excise tax on second hand motor vehicles be collected in
foreign currency with effect from 30 January 2009.

Presumptive Tax

431. Presumptive tax was introduced to capture the hard to tax informal
sector. The contribution of presumptive tax to total revenue is however
insignificant due to the impact of inflation, since presumptive taxes are
paid on a quarterly basis.

432. The informal sector businesses notably hair salons, driving schools and
taxicabs are trading in foreign currency.

433. In order to mitigate loss of revenue to the fiscus, I propose to levy
presumptive taxes in foreign currency on a quarterly basis with effect from
1 January 2009, as follows:

Driving Schools

. Vehicles used for Class 4 Training - US$500 per vehicle.

. Vehicles used for Classes 1 and 2 Training - US$600 per vehicle.

Haulage Trucks

. Of carrying capacity of less than 20 tonnes - US$1 000 per vehicle.

. Of carrying capacity of more than 20 tonnes - US$2 500 per vehicle.

. Combination of haulage truck trailers of a capacity of 15 - 20 tonnes -
US$2 500 per vehicle.

Commuter Transport Operators

. Of carrying capacity of 8 - 14 passengers - US$150 per vehicle.

. Of carrying capacity of 15 - 24 passengers - US$200 per vehicle.

. Of carrying capacity of 25 - 36 passengers - US$400 per vehicle.

. Of carrying capacity of 37 passengers and above- US$650 per vehicle.

Taxi-cab Operators

. US$100 per vehicle.

Hair Salons

. US$1 500 per salon.

434. Mr Speaker Sir, it must be noted that presumptive taxes are only levied
in cases where the businesses do not keep proper books of accounts and pay
their tax liabilities.

435. The rates are set higher to encourage businesses to register with ZIMRA
for tax purposes where they consider the presumptive tax liability is not
reflective of the actual performance of the business.

Capital Gains Tax and Stamp Duty on Immovable Properties

436. Property Developers and Real Estate agents sell immovable property in
foreign currency. However, the capital gains tax and stamp duty on immovable
properties is payable in local currency.

437. I propose to levy capital gains tax and stamp duty in foreign currency
where immovable property is disposed of in the same currency with effect
from 30 January 2009.

Pay As You Earn (PAYE)

438. The Income Tax legislation provides for payment of PAYE in foreign
currency, where an individual is remunerated in foreign currency. Tax
payable is determined by converting the salary into local currency using the
prevailing inter-bank exchange rate and applying the appropriate tax rates.

439. Use of the inter-bank exchange rate for purposes of determining the tax
payable has resulted in most employees earning foreign currency denominated
salaries either being left outside the tax net or being taxed heavily.

440. This was further exacerbated by inflexible movement in the inter-bank
exchange rate, which was not commensurate with the regular review of the
tax-free threshold and bands.

441. Mr Speaker Sir, in order to enhance the contribution of PAYE to tax
revenue and also uphold regional best practices in the taxation of incomes
earned in foreign currency, I propose to introduce separate foreign currency
tax tables for employees remunerated in foreign currency with effect from 1
February 2009.

Withholding Tax

Tenders, Consultancy and Other Services

442. Withholding tax on tenders, consultancy and other services between
unregistered and registered businesses is currently paid in local currency.

443. Where transactions are conducted in foreign currency, I propose that
withholding tax should be payable in the same currency. This measure will
apply on tenders, consultancy and other services above US$250 per
transaction with effect from 30 January 2009.

Commercial Imports by Unregistered Traders

444. Mr. Speaker Sir, withholding tax on commercial imports by unregistered
traders was introduced with a view to enforce payment of taxes by informal
traders.

445. In view of the fact that goods imported by unregistered traders are
sold in foreign currency, I propose that the withholding tax on commercial
imports by unregistered traders be paid in foreign currency with effect from
30 January 2009.

Accelerated Remittance Periods

VAT

446. VAT is payable within a period of 30-90 days depending on categories in
which registered traders fall.

447. Due to inflationary developments and the need to improve cash flow
inflows to Government, tax remitted after a lapse of 30-90 days loses value.
I, therefore, propose that VAT payment dates be brought forward to the third
day of the following month with effect from 1 January 2009. The proposed
payment date applies to all registered operators.

PAYE

448. PAYE is remitted within 15 days of the following month, after
collection. However, some employers have been remitting PAYE to the fiscus
within the month of collection.

449. I propose that the time period for remittance of PAYE be reviewed to
the third day of the following month with effect from 1 January 2009.

Capital Gains Withholding Tax

450. Capital Gains Withholding tax is levied on sale of immovable
properties. The tax is collected by conveyancers, legal practitioners and
estate agents and is remitted within a period of 30 days, from time
recieved.

451. In order to minimise the loss of value of revenue remitted to the
fiscus, I propose to review the remittance period to the third day of the
following month with effect from 1 January 2009.

Value Added Tax Registration Threshold

452. Due to inflation developments, the current VAT registration threshold
has declined in value to an extent that micro businesses are obliged to
register for VAT purposes. This increases the cost of compliance for small
and medium enterprises and also compromises ZIMRA's administrative
effectiveness.

453. With effect from 30 January 2009, I propose to review the VAT
registration threshold to US$60 000 per annum.

454. This measure does not apply to operators who are already registered for
VAT purposes.

Motoring Benefits

455. Motoring benefits that accrue to employees are deemed to be employment
income, which is grossed up to their salary for purposes of income tax.

456. I propose to review the deemed motoring benefits, with effect from 1
February 2009, as follows:

Engine capacity          Current Level          Proposed Level

                           ZW$                            US$ per month

Up to 1 500cc          45 000                   50

Over 1500cc not          50 000                   60

exceeding 2000cc Over 2000cc

not exceeding 3000cc 70 000 80

Over 3000cc 90 000 100

457. Where the fringe benefit accrues to a taxpayer earning a salary in
local currency, the deemed income will be converted to local currency using
the rate at which exporters are paid by the Reserve Bank upon surrender of
export proceeds.

Tax on Miscellaneous Income Deposits into Individual & Corporate Accounts

458. Due to illegal parallel market activities, huge amounts of deposits
have been reflected in both individual and corporate accounts. This
unproductive income has largely remained outside the tax net.

459. I propose to introduce a special tax on funds deposited into individual
and corporate accounts at the highest marginal tax rate of 40%, with the
tax-free threshold to be determined in tandem with market developments, with
effect from 1 February 2009.

460. This proposal will not apply to lawful sources of income as defined in
the Income Tax Act and in incidences where the same income has already been
subject to tax.

Tax Incentives

Corporates

Incentives for the Tourism Sector

461. Mr. Speaker Sir, the tourism sector is a potential foreign currency
earner, which over the years has continued to decline due to negative
publicity and perceptions.

462. The 2010 World Cup to be hosted by South Africa avails an opportunity
for domestic companies to take advantage of its spill-off effects, hence the
need to intensify programmes to promote tourism.

463. I, therefore, propose to exempt from duty capital goods used by
registered tourist service providers that include tour operators, safari
operators, boat operators and car hire companies.

464. I further propose to exempt from duty equipment for expansion,
modernization and renovation of hotels and restaurants.

465. The above measure takes effect from 1 March 2009.

Capital Allowances

466. Mr. Speaker Sir, capital allowances provide relief to companies that
invest in staff housing and also purchase motor vehicles for use by
employees. The value of these allowances has however diminished to an extent
that they no longer provide the necessary incentives.

467. I, therefore, propose to review the allowances, with effect from 1
January 2009, as follows:

. Passenger motor vehicle allowance - US$10 000.

. Staff housing allowance - US$25 000.

Donations to Schools, Hospitals, Clinics, Research and Development
Institutions

468. In order to encourage corporate social responsibility by the private
sector, donations to schools, hospitals, clinics, research and development
institutions, are deductible for tax purposes.

469. I propose to review the allowable deductions to US$100 000 per annum
with effect from 1 January 2009.

Attendance at Conventions

470. Mr. Speaker Sir, in order to incentivise companies to attend trade
conventions so as to market their business, I propose to review the
deductible allowance to US$2 500 per annum with effect from 1 January 2009.

Tax Relief Measures

Individuals

Tax-free Pension Contributions

471. The current inflationary environment has adversely affected the value
of pension contributions, which in the past years have been an important
tool for mobilising savings and investment income.

472. In order to maintain the value of pension contributions, I propose to
peg the maximum deductible monthly pension contribution in foreign currency
at US$300 with effect from 1 February 2009.

Tax Credits

473. Mr. Speaker Sir, tax credits provide relief to the elderly, blind and
physically challenged persons through reduction of tax liability.

474. In order to assist this category of disadvantaged taxpayers, I propose
to set the credits at US$75 per month with effect from 1 February 2009.

Retrenchment/Severance Packages

475. The value of retrenchment packages under the current inflationary
environment has dwindled to an extent whereby retrenchees are unable to
sustain the day-to-day living expenses.

476. In order to maintain the value of the nontaxable portion of
retrenchment packages, I propose to set the minimum taxfree threshold of the
retrenchment package to US$1 000 or one third of the retrenchment package,
up to a maximum of US$9 000 with effect from 1 February 2009.

Rental and Investment Income for Elderly Taxpayers

477. Mr. Speaker, Sir, in support of the welfare of elderly taxpayers who
rely on rental and investment income, I propose to review the exempt portion
of proceeds from such income to US$250 per month with effect from 1 February
2009.

VAT on Mobile Phone Airtime

478. The VAT rate on mobile phone airtime is currently 22.5%.

479. I propose to standardise the rate by reducing it to 15% with effect
from 1 February 2009, in line with the prevailing general level of VAT on
other products. This should translate into lower mobile phone airtime
tariffs.

Customs Duty

Customs Duty Suspension on Basic Commodities

480. Customs duty was suspended on some basic commodities from 10 August
2008 to 31 December 2008 to facilitate importation of basic commodities and
address shortages on the domestic market.

481. In order to enhance availability of basic commodities at affordable
prices, whilst allowing local manufacturers time to resuscitate production,
I propose to extend duty suspension on basic commodities to 30 June 2009.

Customs Duty in Foreign Currency

482. Mr. Speaker Sir, I have already proposed that customs duty be levied in
foreign currency on imported goods. This measure will increase cost of
importation thereby resulting in uncleared goods piling up in customs yards.

483. I, therefore, propose to reduce customs duty rates and remove surtax of
15% which is levied on all products that attract duty rates of 40% and
above, as follows:-

Product Current rates of customs Proposed rates of

duty customs duty

Raw materials 0% - 25% 0% - 15%

Intermediate goods 10% - 25% 10% - 15%

Finished Goods

Clothing and textiles 40% - 60% + US$10/kg 40% + US$5/kg

Clothing and textiles (school uniforms) 60% + US$10/kg 25%

Footwear 40% + US$5 per pair - 60% 40% + US$5 per pair

Electrical goods 60% 40%

Alcohol & alcoholic beverages 60% 40%

Cigarettes and tobacco 60% + US$5/1000 40% + US$5/ 1000

Motor Vehicles 40% - 80% 25% - 60%

Handbags and other articles of leather, 60% + US$5/kg 40% + US$5/kg

plastic or textile material

Fruits and vegetables 40% 25%

484. This measure takes effect from 1 February 2009.

Travellers' Rebate

485. Individuals are allowed to import under rebate of duty, goods valued up
to US$300 once in a calendar month. However, there are no restrictions with
regards to quantities that individuals may import. As a result, individuals
import commercial goods for resale under rebate of duty thereby prejudicing
revenue to the fiscus.

486. In order to minimise loss of revenue to the fiscus, I propose that the
travellers' rebate be restricted to goods imported for personal consumption.
The Zimbabwe Revenue Authority will provide guidelines on goods of a
commercial nature to be excluded from the rebate.

District Councils' Unit Tax

487. In the rural areas, district councils' capacity to generate substantial
resources through various charges and levies, including those on commercial
farming areas, has deteriorated.

488. In order to raise the revenue base and capacitate our rural district
councils, I propose empowering Rural District Councils to enforce the
collection of Unit tax on A1 and A2 farming communities.

489. This will enable District Councils to raise the necessary resources for
the restoration of such essential services as road grading, gully
reclamation, maintenance of schools and clinics, dipping services, among
others.

490. Mr. Speaker Sir, the poor state of the rural road network, which has
deteriorated over a number of years due to inadequate resources, is
currently a major challenge for farmers as they transport agricultural
inputs and produce.

491. I, therefore, propose to levy a Unit tax on A1 and A2 farmers in
foreign currency as follows:

Proposed rates of Unit tax

Natural Region Proposed unit tax per hectare per annum US$

1 3

2 3

2a 3

2b 3

3 2

4 2

5 1

492. This measure takes effect from 1 January 2009.

Fees and Charges

493. Fees and charges play an important role in augmenting Budget tax
revenues, which are meant to enhance service delivery and discipline.

494. Hence, it is necessary to continuously review these fees and charges
taking account of developments in the market, in particular increased cost
of service provision.

495. In the case of fees and charges currently under the jurisdiction of
certain line Ministries such as fines under Justice, I have already
indicated that the responsibility for their review will be transferred to
Treasury, though the administration remains with the respective line
Ministries.

Fees & Charges Unit

496. I am, therefore, constituting an adequately manned Unit within the
Ministry of Finance dedicated towards monitoring, evaluating and reviewing
the structure and level of fees, rentals and charges by Ministries and
Government Departments on a regular basis.

497. Mr Speaker Sir, the above measure will ensure timeous review of all
fees and charges, thereby overcoming delays that are currently being
experienced in line Ministries and departments.

Road Access Fees

498. The road access fee is levied on local and foreign registered motor
vehicles at ports of entry. The levy is payable in foreign currency and
local currency equivalent on foreign and locally registered vehicles,
respectively.

499. The local currency road access fee is however insignificant due to the
use of the valuation factor, which lags behind the market rate. As a result,
motorists have experienced delays due to challenges in accessing the local
currency.

500. I propose a road access fee of US$10 and US$20 payable by motorists
using locally registered light and heavy vehicles, respectively.

501. This measure takes effect from 30 January 2009.

Health Fees

502. Mr Speaker Sir, I have already given indications of the substantial
amounts of funding requirements in public health delivery, with user fees
anticipated to contribute initially only about 5%.

503. Government is, therefore, implementing a two tier hospital service fee
structure in both local and foreign currency, with hospitals required to
display both the Zimbabwe Dollar Tariff Fee Schedule as well as the Foreign
Exchange Tariff Fee Schedule.

504. The new hospital fee tariffs in foreign exchange are annexed to this
Budget Statement. (See annexure 1.)

505. The Government hospital local currency and foreign exchange fee tariffs
will be reviewed by Treasury in line with economic developments, thereby
gradually reducing Government contributions.

506. Additional cost recovery measures include introduction of full cost
recovery for use of private wards at Government hospitals.

Schools' Tuition & Examination Fees

507. The prevailing hyper-inflationary environment and the subsequent
introduction of pricing of goods in both local and foreign currency has
necessitated Government consideration for charging school fees and levies in
local and foreign currencies under both Government and non Governmental
schools.

508. With immediate effect, all schools other than primary schools in both
rural areas and high density suburbs are authorised to collect tuition and
examination fees as well as levies in both local and foreign currencies.

509. Rural day primary schools and primary schools in high density suburbs
will, however, be exempted from tuition and examination fees but will be
permitted to charge their levies in both local and foreign currencies.

510. For sustainability of our schools, it is further proposed that they
offer Technical Vocational subjects, including Agriculture, in their
Curriculum and also embark on farming activities. Those without land should,
therefore, apply for it through the relevant authorities.

Review of Fees

511. The responsibility to regulate and control school fees and levies,
taking account of economic developments, reverts back to the Ministry of
Education and away from the National Incomes and Pricing Commission who are
currently exercising that responsibility.

512. The National Incomes and Pricing Commission will focus on monitoring
compliance with Ministry of Education fee approved levels.

Tertiary Education Fees

513. Mr Speaker Sir, the expenditure requirements to restore quality
education in our tertiary institutions make it unavoidable that Government
shares some of the costs of tertiary education with the parents. This also
improves accountability among students in universities, polytechnics and
colleges as well as ownership of the institutions' facilities.

514. Honourable Members will have noted the many instances where,
surprisingly, even well endowed parents display inability to pay tertiary
education fees when they were able to get their children through ordinary
and advanced level education without State assistance.

Tuition Fees

515. Government has, therefore, approved the tuition fees and levies for
State Universities, Polytechnics and Teachers Colleges payable in both local
and foreign currency. (See Annexure 2)

516. The fees schedules were determined on the principles of cost sharing,
the need to ensure access and equity, the need to retain critical staff in
institutions of higher learning, the need to promote quality education and
finally the need to restore Zimbabwe's leading position in the area of
education and training.

517. To this end, institutions are required to embark on revenue generating
projects and activities such as applied research and full utilisation of
land as well as other resources allocated to them.

518. The intended impact would be improved quality of education, student
welfare and discipline and refurbishment of infrastructure and staff
motivation and retention.

Retention Allowances

519. The approved fees structures would yield additional funds that will be
used to pay Top-Up Retention Allowances to staff involved in tertiary
education who would continue to receive their basic pay from Government.

Cadetship Programme

520. To ensure access and equity, students at State tertiary institutions
unable to pay fees from their own means will be considered for support under
the Cadetship Programme, implemented through the respective Ministries and
Government departments.

521. Government has, therefore, put in place the necessary means testing
mechanisms, now drawing on input from both primary and secondary school
authorities, to improve on reliability of assessments of students to be
targeted.

Estate Duty

522. Deceased estates are entitled to a duty exemption on the principal
residential property and one family vehicle. The estate is also subject to a
tax-free threshold currently pegged at $25 billion, above which 5% duty is
levied on additional estate properties.

523. I propose to peg the estate duty tax-free threshold to US$50 000 with
effect from 1 February 2009.

DOMESTIC DEBT

524. In 2008 the Government raised domestic debt to finance operations
through one year Treasury Bills and Insurance Industry Bonds.

525. Mr Speaker Sir, I have alluded to the fact that our revenues during
2008 were significantly higher than our expenditures.

526. I, therefore, propose that the full amount of the domestic debt of $5
500 quintillion be redeemed with immediate effect to give some valuable
return to investors in this hyper-inflationary economic environment.

CONCLUSION

527. Mr Speaker Sir, the focus of this Budget has been on supporting
productive sectors, stabilise inflation and restore provision of basic
public services.

528. Realising this will require a paradigm shift in terms of acknowledging
the reality that we cannot spend what we do not have.

529. Sacrifices and deferment of some of the expenditures we would have
wanted to incur on a variety of programmes and projects during the course of
the year 2009 will, therefore, be unavoidable. In this regard, matching
expenditure to our projected revenue has been the cornerstone of my
expenditure proposals.

530. This Budget contains measures, which if consistently implemented, will
be able to stabilise prices, improve capacity utilisation and productivity.

531. The measures I have proposed would also enhance the efficiency of our
public enterprises and local authorities, improve the management of public
resources, thereby, creating scope for generating the required resources to
finance this Budget and other initiatives, which grow our economy.

532. Mr Speaker Sir, I am, therefore, calling on all Honourable Members in
this August House, and the whole Nation as well as our external cooperating
partners to rally behind the proposed measures in order to build a firm
foundation for the emergence of a new economy.

533. It is, therefore, incumbent upon us to consistently implement agreed
policies, notwithstanding the inescapable pain which we will encounter
during the course of the year, avoiding needless policy reversals,
inconsistencies and contradictions that will only yield further economic
contraction. We have to stay the course if we are to achieve our economic
objectives.

534. Mr Speaker Sir, I now commend the 2009 National Budget to the House and
I lay the Estimates of Expenditure on the Table.

535. I Thank You.

Hon. Senator P.A. Chinamasa

ACTING MINISTER OF FINANCE

29 January 2009

Annexure 1

GOVERNMENT HOSPITAL FOREIGN EXCHANGE FEE TARIFFS

DESCRIPTION OF PARIRENYATWA CENTRAL PROVINCIAL DISTRICT

SERVICES HOSPITALS HOSPITALS GENERAL HOSPITALS

HOSPITALS

General Ward US$ US$ US$ US$

Adult 12.00 10.00 6.00 4.00

Child 8.00 6.00 4.00 2.00

Private Ward

Private ward per day Adult 24.00 16.00 12.00 8.00

Private ward per day Child 12.00 8.00 6.00 4.00

Maternity Ward

Ante-natal, General Ward per day 15.00 10.00 6.00 3.00

Post-natal, General Ward per day 15.00 10.00 6.00 3.00

Maternity (all inclusive) care 6.00 5.00 4.00 3.00

Intensive/Coronary Care

Unit per day

Adult 15.00 10.00 8.00 N/A

Child (above 5 years) 8.00 5.00 4.00 N/A

Psychiatric Unit

General Ward per day 5.00 4.00 2.00 N/A

Committed patient per day free free N/A

Consultation Fees

Adult 10.00 8.00 6.00 4.00

Child (above 5 years) 5.00 4.00 3.00 2.00

Consultation - Chronic

Adult 10.00 8.00 6.00 4.00

Child (above 5 years) 5.00 4.00 3.00 2.00

Prescribed Medicines At Cost At Cost At Cost At Cost

Sundry items At Cost At Cost At Cost At Cost

Ambulance charges per km 2.00 2.00 2.00 2.00

Document Searching Fee 1.00 1.00 1.00 1.00

DESCRIPTION OF PARIRENYATWA CENTRAL PROVINCIAL DISTRICT

SERVICES HOSPITALS HOSPITALS GENERAL HOSPITALS

HOSPITALS

Annexure 2

Fees for Tertiary Education

Polytechnics

National Certificate (N.C) =US$200 per term

National Diploma (N.D) =US$500 per term

Higher National Diploma =US$600 per term

Bachelor of Technology =US$1 400 per semester

Teachers Colleges

Diploma in Education =US$500 per term

State Universities

Arts Humanities and Social Sciences =US$1 200 per semester

Science and Engineering =US$1 400 per semester

Medicine and Veterinary Science =US$1 800 per semester

Annex 3:

SUMMARY OF IRRIGATION PROJECTS DRAWING WATER FROM

UNDERUTILISED EXISTING WATER BODIES

Irrigation Potential No. of Source of water Allocated Amount

scheme Hectarage Beneficiaries (US$)

Zhove 1,170 1,000 Zhove dam 640,000

Osborne 300 Osborne dam 633,500

Biri 1,000 100 Biri dam 416,700

Ngezi B 316 350 Mamina dam 97,000

Lilstock 500 Lilstock dam 466,700

Mazvikadei 6,000 Mazvikadei dam 970,000

Magunje 50 64 Magunje dam 33,600

Mundi mataga 505 488 Mundi mataga dam 438,000

Mbindamombe 300 300 Mbindamombe dam 115,400

Manyuchi 228 400 Manyuchi dam 230,350

Matezva 140 280 Matezva dam 106,350

Muzhwi 150 Muzhwi dam 100,140

Mupudzi 700 Mupudzi dam 1,293,000

Mtshabezi 300 600 Mtshabezi dam 240,000

Wenimbi 300 300 Wenimbi dam 150,000

Nhema 150 150 Siya dam 562,000

Bengura 250 250 Siya dam 647,000

Kanhukamwe 324 Kanhukamwe dam 900,000

Mtange 100 200 Mtange dam 168,000

TOTAL 12,883 4,682 8,207,740 - ZimOnline