Finance minister Mthuli Ncube has urged the government to be receptive to the reform demands of the opposition and Western powers — as this will enable Zimbabwe to access help from overseas companies and multilateral institutions such as the International Monetary Fund and the World Bank.
Speaking in an exclusive interview with the Daily News yesterday, Ncube — who has come under heavy fire for his economic stabilisation programme — also said the new two percent tax that he recently imposed on every dollar transacted was reasonable compared to similar taxes in the region.
“There is also the issue about Zidera (the Zimbabwe Democracy and Economic Recovery Act) by the United States, which in my view … as Zimbabweans and government, we should embrace its principles in the sense that if it’s about opening up democratic space — which is what this is about — that should be a natural progression for Zimbabwe as we move to the club of upper-middle income countries by year 2030.
“So the issue now is also about the financial impact. Zidera has a financial impact which restricts US companies and banks from extending lines of credit to Zimbabwe.
“But the principles of it are not an issue as far as I am concerned. These are the things we should be doing for ourselves without anybody telling us — whether this relates to Posa (the Public Order and Security Act) and Aippa (the Access to Information and Protection of Privacy Act),” the well-regarded former banker said.
“Those are the things that will eventually be reviewed and then the electoral reforms will also be dealt with, and so forth. I am talking about the political issues which link to the current (economic) environment,” he added.
This comes as the United States government has been giving President Emmerson Mnangagwa’s administration some encouragement — indicating very strongly that it is willing to end more than 15 years of Zimbabwe’s international isolation if the country implements key political and electoral reforms.
Prominent US senators, Jeff Flake and Chris Coons — who are both members of Washington’s Senate Foreign Relations Committee — met Mnangagwa in Harare to convey this sentiment ahead of the July 30 elections.
The two men are behind a new sanctions bill that amended Zidera — which introduced punitive measures against former president Robert Mugabe personally, as well as many of his senior officials and State entities.
The successor law, the Zimbabwe Democracy and Economic Recovery Amendment Act of 2018, contains conditions which are specific to Mnangagwa’s new dispensation.
If Harare meets these conditions, President Donald Trump’s administration has promised to scrap the sanctions and normalise relations with Zimbabwe which have been frosty for more than 16 years.
In yesterday’s interview with the Daily News, Ncube said the negative reaction by many Zimbabweans to his new tax policy was “normal”, as was usually the case with any new such policies.
He said the new tax was a desperate attempt by the government to contain Zimbabwe’s large budget deficit, as the country had been spending far more than it was producing.
“So the solution to containing the budget deficit is two-fold. There is the revenue expansion side and then there is the cost containment of expenditure.
“It also happens that the Zimbabwe economy has become more informalised, while more people are also on electronic platforms.
“So, we felt that the best way to get everyone to pay their taxes, to have an inclusive tax regime, is to target electronic transactions,” Ncube said.
“And by the way, our rates are not even the highest on the continent. There are some countries — I don’t want to name these countries — which take 10 percent, 12 percent and so forth. So, two percent is not the highest,” he added.
Following Ncube’s pronouncement of the new tax regime, some Cabinet ministers also openly expressed their unhappiness over it.
However, the affable Finance minister said the new tax was not just the “perfect instrument” to mitigate the current situation, it had also been effected after thorough research.
Ncube further said as a way of containing its costs, the government would look at reducing waste — including re-looking the issue of motor vehicles for ministers and members of Parliament — which has currently been suspended as the government seeks an equitable solution.
“We are putting together a policy that we think is equitable, that will help us to manage expenditure, including on things such as vehicles and the wage bill.
“While those things are being negotiated, we are writing papers. Before any policy is pronounced, we actually do research on it,” he said.
Meanwhile, labour unions and civic society organisations have savaged the country’s new tax regime, which came into effect on October 13. They are also threatening to
take to the streets over the issue.
Civil society activist Mfundo Mlilo has also since approached the High Court — challenging the tax regime which he says is illegal.
Turning to the rampaging foreign currency parallel market — which has led to price hikes and commodity shortages — Ncube said he had no control over this, arguing further that this was not being caused by his new two percent tax.
He also said that there was no justification by retailers to increase the prices of commodities based on the new tax regime.