Zimbabwe's Finance Minister Tendai Biti.
Zimbabwean Finance Minister Tendai Biti, a member of the Movement for Democratic Change, has always cast himself as a no-nonsense bureaucrat who never gives in to pressure.
He now needs to summon all his grit as he tries to push through a series of “austerity measures” after a sharp dip in tax revenues, mineral earnings and a poor harvest.
The measures he wants to introduce face opposition from Zanu-PF, but they also set him on a collision course with his party’s union allies and the foreign investors present in Zimbabwe.
His proposals include a freeze on government salaries and new recruitment, a sell-off of state enterprises, a tax on underused land and renegotiating the terms of investment deals with existing foreign investors.
Over the past week the government has held a series of meetings, including an emergency Cabinet meeting, to find solutions to a cash crunch that threatens to grind government to a halt and push the economy, which has experienced some recovery since the coalition came to power, back into crisis.
Austerity
Tax revenues have fallen well behind projections over the past quarter, crop yields are lower than expected and foreign money in aid and investment remains elusive.
“There will be austerity. We have to live within our means. We will have to sell the silverware and reform our mining sector,” Biti told Parliament.
His appointment as finance minister in 2009 brought hopes of a flood of foreign aid and investment. But although Zimbabwe has managed to stem the decline of past years, recording the highest rate of growth in the region – 9.3% – last year, no foreign support has come.
Now Biti says the government is running out of money. Between January and May, Biti said, treasury had raised $1.274-billion in taxes, lower than the $1.469-billion target.
Biti plans deep cuts in state spending but faces opposition from all sides. He says 4600 new soldiers and another 5400 workers had been hired without his knowledge. As a result, the army faced ration shortages, he told Parliament last week.
The bulk of Zimbabwe’s $4-billion 2012 budget is spent on wages and Biti will have to review the budget within weeks. “The main reason we are going to revise it downwards is because of the underperformance of our diamond revenue. We have collected $30-million when we expected $240-million,” he said.
Land tax
The poor farming season has added to the pressure on Biti. Tobacco output, which had experienced strong growth over the past three years, will come in lower than the forecast 150-million kilogrammes. Maize output is also expected to be 900000 tonnes, down from 1.4-million tonnes.
Some of the cuts Biti wants to see include budgets for foreign travel. According to Education Minister David Coltart, the government has been spending more on foreign travel than on education over the past year.
Biti also wants to introduce a “land tax” on idle farmland, but it has been rejected by Zanu-PF, whose supporters form the majority of the beneficiaries of Mugabe’s land reforms.
He is also considering higher duty on “luxury items”, including vehicles, a measure that would be hugely unpopular.
Biti has also proposed a freeze on all new government appointments and a cap on salary increases, drawing criticism from traditionally pro-MDC labour unions.
The Progressive Teachers’ Union of Zimbabwe’s general secretary, Raymond Majongwe, said freezing salaries would lead to strikes.
Prodding nions to strike
“If it is his decision to freeze salaries then he will be in for it next month.”
Zanu-PF is already prodding the unions to strike, hoping to increase the pressure on Biti and his party ahead of elections expected to be held next year.
Zanu-PF is also opposing Biti’s plan to sell off state telecoms assets in which there is foreign interest. Mugabe’s party says telecoms is a “sensitive” sector and cannot be sold to foreigners.
Controversially the government now wants to renegotiate agreements with foreign investors, which it believes are benefiting more from the country than the economy.
This includes the biggest investment in Zimbabwe since the unity government was formed – Essar Africa’s takeover of Ziscosteel, the biggest steel company.