Jittery Zimbabweans say Finance minister Mthuli Ncube’s humiliating back pedalling on Friday — on his much-criticised two cents per transacted dollar tax — was “too little, too late” because the country is now facing “a full blown economic crisis”.
They told the Daily News on Sunday yesterday that the magnitude of the crisis was evidenced by the rampant panic buying by consumers across the country, as well as the disappearance of some goods from supermarket shelves.
This comes after Ncube — who had earlier vowed that he would not go back on his controversial tax — was forced to eat humble pie at the weekend when he announced that he was reviewing his measures.
In the process, the former banker confirmed the accuracy of Friday’s front page story of the Daily News on Sunday’s sister paper, the Daily News — which correctly reported that the minister had rushed to announce his measures without the approval of President Emmerson Mnangagwa.
The Daily News On Sunday can further reveal today that Ncube held a lengthy and emergency meeting with a concerned Vice President Constantino Chiwenga and Reserve Bank of Zimbabwe (RBZ) governor John Mangudya on Friday, to discuss the two cents per dollar transaction tax.
This came after Mnangagwa had apparently directed his deputy to look into the issue which has created panic among the suffering Zimbabweans, who are swamping supermarkets buying anything they can lay their hands on — amid a rampaging parallel market where foreign currency rates have hit the roof.
After Ncube’s meeting with Chiwenga and Mangudya, Mnangagwa later ordered the under pressure Finance minister to release a revised policy statement that reviewed his earlier measures.
“At the occasion of the presentation of the 2018 Mid-Term Monetary Policy, I announced a review of the Intermediated Money Transfer Tax from the current 5 cents per transaction to 2 cents per every dollar transacted. Further details pertaining to the tax are as follows:
“The 2 cents per dollar tax will apply on transactions of $10 and above only. Transactions below $10 will be exempt from this tax.
“There is a cap of $10 000 on the amount of tax to be paid. This implies that transfers above $500 000 will attract a flat tax of $10 000,” Ncube said as he released his revised measures.
He also said internal company transfers, as well as transfers of salaries, tax payments, foreign currency-related payments and transfer of funds by the government would also be exempt from the two cents per dollar tax.
Reacting to the developments, former Finance minister Tendai Biti said Ncube had caused mayhem in the economy as his measures had set off panic among the populace.
“The #newmess at the Min. of Finance has created total mayhem in the markets. Shops are upwardly adjusting prices & many have shut down until certainty. It’s 2008 de javu.
“There is panic buying & hoarding across the entire Zimbabwe. There are huge fuel queues with the parallel exchange rate now on 240. It is only 9 weeks after the election but we are at ground zero.
“We are in hyperinflation mode with month to month inflation now above 80 percent. High inflation is terrible economics & mismanagement. Hyperinflation is total loss of confidence & trust in a government,” Biti wrote on micro-blogging site Twitter.
Economic analyst Kipson Gundani also told the Daily News on Sunday that it was wrong for Ncube to resort to imposing new taxes without addressing the government’s “biggest problem” of living beyond its means.
“There is a misconception in that the government thinks that its problem is that of raising revenue. The problem is its expenditure.
“They need to contain expenditure not to tax people. I don’t think what the minister did is the solution to the current problems,” Gundani said.
Rights specialist and political analyst Dewa Mavhinga said while Ncube had raised hopes following his appointment to his portfolio, his recent measures were not indicative of “a man who has the solutions”.
“ED hired so-called technocrats like … Ncube to fix the economy, so why are things getting worse?
“If the government needs to turn around the economy they must agree to genuine governance reforms and institute a proper inclusive government to take the nation forward,” Mavhinga said, hinting on the need for Mnangagwa to engage opposition leader Nelson Chamisa.
In the meantime, several shops removed price tags from their goods yesterday as they prepared for a fresh round of price increases.
Visits by crews from the Daily News on Sunday to several supermarkets in Harare revealed that most basic consumer goods were either in short supply or had their prices hiked sharply.
Cooking oil and bread were not in stock at most supermarkets, with several shops rationing products such as bottled water, mahewu, lager beers and syrup drinks.
Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu said the worsening forex black market had severely affected business.
“We are in a critical situation because businesses are finding it hard to price goods based on the prevailing rates, as they do not know at what rate the US dollar will be bought for tomorrow.
“The demand for cash by retailers is in line with the fear of devaluation of RTGS rates and government should seriously look into it with urgency.
“Government should monitor the situation because the shortage of foreign currency is causing slow production and with the lackadaisical issuance of import licences, shops could soon be empty as some companies have completely stopped production,” Mutashu said.
Meanwhile, some companies have sent out notices to retailers notifying them of coming price increases — in response to the volatility in the economy.
Among these companies are leading dairy company Dairibord which is increasing its prices starting tomorrow.
“The business environment has remained challenging and for us to be able to fulfil your orders on demand and the good quality that you have come to appreciate from us, we have been left with no option other than to slightly adjust our prices by an average 14 percent.
“This is albeit the corresponding increases that we have picked across most of our key inputs (raw and packaging materials).
“On average over the last few days we have picked input increases of an average 41 percent coming from sugar, beverages bottles and closures, shrink wrap and other ingredients,” the firm said in a statement.
On it’s part, confectionary company Arenel has warned that it could retrench about 1 900 employees as its business was suffering badly owing to the current economic chaos and the shortages of flour.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said the government should step in and provide solutions.
“Unfortunately there is panic on the market, particularly on the exchange rate. People have not processed the implications of some of the measures that have been put in place.
“Government could help by investing currency if they have it. Certainly from discussions with economists, the rates should start coming down because there isn’t much money on the market to support the ballooning rates,” Jabangwe said.
There has also been further bad news for toiling masses, as Greater Harare Association of Commuter Operators (GHACO) said yesterday that they were hiking commuter omnibus fares.
“Fuel is scarce and we are being supplied by the black market which charges exorbitant prices. Prices of motor spares have also tripled in some instances.
“Tyres have also gone up from $70 to $180 in bond notes. We have not sat down to discuss and agree on a suitable fare price but I guess, faced by such hard times, operators have not had any choice but to hike the fares,” said the organisation’s secretary-general Ngoni Katsvairo.
Addressing a media briefing on Friday during the unveiling of his Transitional Stabilisation Programme (TSP), Ncube said things were going to be painful before they got better.
“We need to stop the bleeding and this is one way to do it. We can’t do this without pain. At the end, we will be glad, we need to fix our problem together. I need all hands on deck.
“I will be honest; there will be a little pain as we try to redress the economy. People don’t realise that already they have been paying indirectly for the sickly economy,” Ncube told journalists.