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NATIONAL ASSEMBLY HANSARD 11 JUNE 2013 VOL. 39 NO. 22

PARLIAMENT OF ZIMBABWE

Tuesday, 11th June, 2013

The House of Assembly met at a Quarter-past Two O’clock p.m.

PRAYERS

(MR. SPEAKER in the Chair)

ANNOUNCEMENT BY MR. SPEAKER

INVITATION BY WiPSU

  1. SPEAKER: I have to inform the House that Women in

Politics Support Unit (WiPSU) is inviting all members of the Women’s Parliamentary Caucus to a dialogue meeting on the creation of a safe place for women to participate effectively in governance and national processes from the 14th to 17th of June 2013 at Troutbeck Inn Hotel in Nyanga.

 

MOTION

BUSINESS OF THE HOUSE

THE MINISTER OF CONSTITUTIONAL AND

PARLIAMENTARY AFFAIRS: I move that Order of the Day, No. 1

be stood over until all the other Orders of the Day, have been dealt with.

Motion put and agreed to.

MOTION

REPORT OF THE PORTFOLIO COMMITTEE ON LOCAL

GOVERNMENT ON THE FOURTH QUARTER BUDGET

PERFORMANCE OF THE MINISTRY OF LOCAL GOVERNMENT,

RURAL AND URBAN DEVELOPMENT

  1. KARENYI: I move that this House takes note of the First

Report of the Portfolio Committee on Local Government on the Fourth

Quarter Budget Performance of the Ministry of Local Government, Rural and Urban Development. 

  1. CHINYADZA: I second. 
  2. KARENYI: Thank you Mr. Speaker. Mr. Speaker, the Portfolio Committee on Local Government resolved to undertake an inquiry on the last Quarter Budget Performance of the Ministry of Local Government, Rural and Urban Development for the year 2012. This was in line with the requirements of the Public Performance Management Act which compels every ministry to table before Parliament its quarterly budget performance reports. The Ministry of Local Government is one of the important ministries in ensuring service delivery to the citizens of Zimbabwe in providing the policy framework for the local governance and rural development.

The ministry administers physical planning to local councils and it is in charge of all the traditional leaders. It also facilitates and monitors development initiatives at the local authority level and rural community level. The objective Mr. Speaker, has been to have an appreciation on how the ministry spent its allocation for 2012.

The ministry is facing challenges in terms of the resources allocated to it for implementing its programme. The Committee received oral evidence from the Permanent Secretary of Local Government, Rural and Urban Development together with written reports.

Findings 

The findings from the Committee Mr. Speaker; the Ministry was originally allocated US$88 383 500 but it was revised down to US$28 910 000.00.  At the beginning of the fourth quarter, the Ministry had a revised budget balance of US$ 11 999 261.00 which translated into 41.38% of the total revised budget. US$6 800 000.00 was for local authorities PSIP, US$ 15 548 839.00 for employment costs and US$3 360 603.00 for the payment of traditional leaders’ allowances leaving US$ 3 360 603.00 for the ministry's general operations. This impacted negatively on the performance of the Ministry in view of the fact that there are twelve ministerial posts broken down as follows:

The substantive Minister for Local Government,

Rural and Urban Development,

The Deputy Minister,

Ten Provincial Governors and also nineteen heads of departments

and

Ten provincial administrators and seventy-two district administrators.

 

Whilst the total budget cut was 67.29%, the Ministry’s operational  budget, excluding the capital budget, current transfers and programmes was revised down to US$2 573 000.00 (budget cut of 40%) versus cumulative expenditure of US$ 1 774 039.00.  Thereby creating a state of affairs where the Ministry was literally brought to a standstill as only US$ 798 961.00 was left.  Virements totaling to US$ 333 167.00 were processed to clear negative budget balances on some expenditure items that arose from the budget cuts.

                   In the fourth quarter, the Ministry, with the authority of the Treasury, transferred funds amounting to US$1 200 000.00 from capital expenditure to meet recurrent expenditure requirements.

In terms of employment costs, the expenditure for the quarter was

US$1 465 000.00 leaving a budget balance of US$83 755.00 as a result of freeze on employment. At the end of 2012, the Ministry had 298 vacant posts which translate to 24% of the staff establishment. Vacant posts include provincial and district administrators, provincial planning officers, town planners, auditors and a deputy director in the department of physical planning.

                  The revised budget resulted in a negative budget balance in some line items especially state occasions and vehicle hire with a figure of minus US$457 300.  Funds were transferred from lending and equity participation to clear the negative budget balance. However, despite the virement, the Ministry was still left with some outstanding bills for

2012 which include Tel -One and CEED with US$ 1200 000.00 and US$1 100 000.00 respectively.

                  In terms of maintenance, the budget balance of US$86 964.00 was not enough and a virement of 380 000.00 was processed for the mainten!nce0of vehicles allocated to distriãt administrators' offices. THg bulk of funds was expended on mamntenance of vehicles and went towards the servicing of the vehicles almocated to the district administrators’ offices.  In total, a sum of US$ 120!000 was spent.

For the curr%~t trajsfers, the department of Civil Protection managed tn receive a donation of fiVe 4x4 vehicles from UNDP !nd these were allocated to flkod prone districts& The Detartment of Civil"protection"managed to r%nder assistance to the victims of`the various disasters which obcurred during phe quarter.

As a result of inadequate funding to the Local Government Board, meetings that were supposed to have taken place, at least twice a month, were not held. These meetings would have culminated in the production of an annual report which should have been presented to the Hon Minister. In this regard, the board failed to fulfill its statutory obligation as required by Parliament. The functions of the Board were not effectively carried out.

The Ministry launched a nationwide US$17 million Local Government capacity building and service delivery programme in partnership with the United Nations Development Programme (UNDP).

During the fourth quarter, only US$270 000.00 was released. Out of that amount, 60% was utilised leaving a balance of US$107 915.00 which was expected to be spent on the 2013 programmes. The 2012 Chief's Annual Conference was not on schedule for some reasons.  It was finally successful in the first quarter of 2013.

In terms of acquisition of fixed assets, no purchases were made since the entire budget of US$920 000.00 was reduced. The Ministry had intended to utilise the funds allocated to procure furniture and computer hardware for several districts.

The budget of US$ 1 200 000.00 which was allocated for the construction of district offices for the new districts of Mhondoro-Ngezi and Mbire districts was not provided for at all.  The staff at these stations had to contend with operating from borrowed facilities.  A situation that portrayed a poor image of Government and thereby increasing the risk of compromising the credibility and integrity of Government

Observations

Your Committee observed that provision of funding for the Ministry’s programmes and the delay in the release of allocations were the main challenges facing the Ministry.

 

        Recommendations

                  Accordingly, your Committee recommends that the Ministry embarks on inter-Ministerial borrowing for the construction of Mhondoro- Ngezi and Mbire Rural District Councils. Alternatively, funds can be viremented from allocations within their Ministry's budget.  Community Share Ownership Trust must be seen to be assisting in the development of these districts. Similarly this should also apply to other districts in the country e.g. where mining ventures are undertaken.

There is also need to engage stakeholders in the liquor industry, for example, companies such as Delta Corporation, Afdis, Ingwebu, Rufaro Marketing and Go-Beer, to name just a few, to assist in speeding up the decentralisation of information technology within the Local Government Board. This could be done by encouraging key stakeholders to plough back profits into the communities where resources are tapped.

There is need for Government Physical Planning Inspectors to charge economically viable fees as the business of physical planning draws substantial amounts of money from the fiscus.

There is urgent need to get funding so as to retain qualified personnel within the Local Government Board.

The institution of Traditional leadership should endavour at all times to be apolitical – [HON. MEMBERS:  Inaudible interjections]

  1. SPEAKER: Order, order.
  2. DZIRUTWE: Mr. Speaker Sir, I too would want to contribute to the debate. I am a member of the Committee and the item I want to dwell on is the image of the Government in these new local authorities, the Mhondoro-Ngezi and Mbire.  It is sad when Government officers operate from make-shift buildings yet these two areas are surrounded with platinum, in the case of Mhondoro-Ngezi.  In the case of Mbire, there is a lot of Safari and Game viewing going on there.  So, it will be important that the Government should think outside the box and get some money out of Community Share Ownership Schemes to make sure that Government offices are well built and well furnished so that it gives a good impression.  Also, areas like Mutare District, for example, could benefit from the Marange Diamonds because the Government offices are a sorry site. I thank you Mr. Speaker.

THE MINISTER OF CONSTITUTIONAL AND PARLIAMENTARY AFFAIRS:  I move that the debate do now

adjourn.

Motion put and agreed to.

Debate to resume:  Wednesday, 12th June, 2013.

MOTION

FIRST REPORT OF THE PORTFOLIO COMMITTEE ON

SMALL AND MEDIUM EMTERPRISES DEVELOPMENT ON THE

ACCESS TO FINANCIAL RESOURCES FOR SMEs IN ZIMBABWE

  1. R. MOYO: I move the motion standing in my name that this

House takes note of the First Report of the Portfolio Committee on

Small and Medium Enterprises Development on the Access to Financial Resources for Small and Medium Enterprises (SMEs) in Zimbabwe.

  1. MUSHONGA: I second.
  2. R. MOYO:

1.0 Introduction

The SME sector in Zimbabwe plays a critical role in economic growth and development, and eradication of poverty.  Its contribution to the GDP, demands that it is prioritised in terms of financial support from both the fiscus and the private sector.  The committee observed that the SMEs sector however, is grossly underfunded; most of it is owner capitalised with very limited access to very limited financial resources.

The committee set out to;

  • Inquire and appreciate the nature and terms of financial resources available to SMEs;
  • establish the extent of services rendered by key stakeholders;
  • ascertain the levels of expectations of SMEs in terms of the

nature of financial support; and

  • make recommendations for improvement of support and services to reduce the negative impact of underfunding of SMEs.

2.0 Methodology

  • In undertaking the inquiry, the committee received oral evidence from the following:
  • Ministry of Small and Medium Enterprises Cooperative

Development;

  • Ministry of Finance;
  • Bankers Association in Zimbabwe;
  • Micro Finance Institutions; and
  • Reserve Bank of Zimbabwe Governor.
    • Committee Findings
    • The Small and Medium Enterprises (SMEs) are playing a critical role in employment creation, poverty reduction, raising national incomes and the development of the informal sector. The world over, vibrant economies are SME driven with the sector as the hub of creativity and innovation.  The result of that is improved standards of living through employment creation.
    • The Ministry of Small and Medium Enterprises cooperative acknowledged the funding challenges and told the Committee that the financial constraints were hampering SMEs contribution to the economic growth.
    • The Ministry reported that SEDCO was grossly undercapitalised, yet was faced with the growing demands for machinery and equipment, infrastructure development and working

capital.

  • In 2012, the Government had budgeted US$5 million to SMEs through SEDCO. As of 9 February 2012, nothing of the US$5 million had been released to SMEs. That budgeted figure is inadequate against a growing sector with no other sources for adequate funding.
  • The Ministry of SMEs reported that outside the Ministry, difficulties for SMEs securing funding were compounded in the main by collateral requirements, and most financial institutions are reluctant to finance the operations. The position was supported by the Bankers Association, who said the cost of financing SMEs was high, and that the collateral requirements were to mitigate the high risk of non- payment.
  • The stringent requirements by the banks have forced SMEs to use micro finance institutions to borrow funds. That actually compounds their challenges as MIFs charge exorbitant interest rates currently ranging from 15% to 24% per month. The result is normally failure to service the loans and loss of property when MIFs attach property.
  • The Ministry of Small and Medium Enterprises Cooperative

Development is mobilizing resources from other sources such as Pension

Funds, Financial Institutions and other development partners. The Committee was informed that there was a group funding facility under IDBZ, facilitated by China of US$30 million, of which US$15 million is for SMEs.

  • The Ministry of Finance informed the Committee that Government has always recognized SMEs as critical to the development of the economy and creation of employment. They highlighted that whilst SMEs are contributing almost 50% of the GDP, Government’s support for the sector was between 5% and 10% of the national financial resources.
  • Financial resource mobilized for SMEs from various sources for 2012 amounted to US$165 million.
  • The Ministry of Finance informed the Committee that

SEDCO’s degree of accountability is not ideal and that is why most SMEs funding has to be through the banks. SEDCO will continue with its catalystic role of ensuring adequate training and impartation of skills to SMEs.

  • The RBZ Governor affirmed the bank’s commitment to SMEs and pointed out that the Government was not doing enough to support the sector. The level of support did not match the level of contribution by SMEs, RBZ has encouraged banks to establish SME banking division, and out of the 26 banking institutions, 16 banks have established SME bank divisions. As at 24 May 2012, the total loans extended to SMEs by these divisions was US$164,4 million.
  • There is a serious mismatch between the depositors’ interest and what the borrowers are charged in the banks, almost 0% for depositors, whilst the lending rates are as high as 30%. That also partly explains why approximately US$2 billion is circulating in the informal market.
  • The Governor pointed out that micro finance institutions were charging non-viable interest rates for SMEs, and some of their practices of attaching property were unethical practices accommodated by a more relaxed regulatory environment. He said MFIs were easy to set up because of low entry barriers.
  • Committee Observations and Conclusions
  • The Committee observed that although some funding has been availed to SMEs, the sector remains grossly underfunded.
  • SEDCO plays a very critical role in supporting SMEs, but is currently grossly undercapitalized.
  • The Committee noted that there are no special rates or borrowing arrangements for SMEs to facilitate easy access to funding.
  • The requirement for banks to set-up SME divisions is not enforceable, it is not law hence some banks have not complied.
  • Committee Recommendations
  • There is need for Government to revisit legislation governing

SMEs to ensure there is one comprehensive legislation governing SMEs.

  • There is need for Government to recapitalize SEDCO to enable it to play its set role, whilst ensuring the existence of accountability measures.
  • Government must legislate for banks to meet a specific threshold in terms of support for SMEs.
  1. MHLANGA: Thank you Mr. Speaker for affording me this opportunity to debate on this very important item. Like my Chairman has said, that this is very critical for economic development but you find that the behavior, conduct and the way even the government takes this is not serious. I say this because there is SEDCO which is supposed to have these small to medium enterprises but what happened with

SEDCO. Since SEDCO was formed, we did some investigation as a Committee where they had borrowed money since they had been formed. You will be shocked.

It is supposed to be done nationally but what happens, you find a company in the name of Bulawayo Circles is owned by a person who stays here in Msasa in Harare. You go to another one which is in

Hwange, you look at the address of the owner who is here in Msasa, in Harare. You will find that those people who have borrowed money from

SEDCO are a circle of four or five people.

If the Government is serious, surely those people after borrowing that money should have made a return. I tell you that those people have never paid a cent. What happens is that every budget, the same people benefit from the same fund. Therefore, I am saying I agree it is critical but the behaviour of the organisation including the Government does not show that it is critical.

Nobody has money in a bank but what happens with money is that the money is collected by the bank from the people by way of investments with the intention of getting a return or value for their money. If we continue to say we borrow, I actually understand the small business people, they must bring a return. Nobody has got the money. The money from the bank is from Mr. Ncube and Mr. Ncube must get a return from his money.  If the bank borrows money from Mr. Ndlovu  and Mr. Ndlovu does not pay, at the end of the day  there will be no money at the bank. There will be no money to borrow. I urge these small business people to have that idea – at least you must have something before you go to the bank. It must have been drafted to say small to medium, but they are saying small and medium. You must start small then go to medium. This organisation has remained small because there is no money circulating. The other people are not paying back the money.

  1. SANSOLE: I would like to add my voice to this debate on Small and Medium Enterprises.  I think it is essential when you look at the inability of SMEs to access funding given the general environment in which they operate.  Small to Medium Enterprises are a major employer.

They contribute about 60% of the country’s labour force.

If you look at what happened during the economic meltdown up to the time that the Inclusive Government was formed, a lot of factories had closed down, a lot of people lost employment.  A lot of people who lost employment went into the informal sector to set up small to medium enterprises. These enterprises contribute a lot to the economy. Their products are easily adaptable, versatile, prices are affordable and they can manufacture anything that you ask them to do. However, the environment in which they operate is very hostile. There are too many barriers to entry into that sector. There are many requirements, expensive and time consuming. There are a lot of official and unofficial levies; the tax structures are so complex to render any business unviable. Central and Local Government tender regulations make it unviable for SMEs to bid for contracts. You find local authorities have many zoning regulations that make operations almost impossible.

The major stumbling block is also limited access to capital. Capital on its own besides being difficult to access is very costly, expensive and only short term finance is available. They have limited access to markets and limited market knowledge which makes it difficult for them to generate money to repay loans. Most SMEs have inadequate infrastructure and limited technology which makes it difficult to generate money to pay back loans. They have inadequate managerial and entrepreneurial skills and that in itself is viewed by banks in a negative light.

There is need to simplify the administrative procedures which are required to enter into this market. There is need to reduce the cost and the time involved in processing their applications. There is need to reduce the number of forms that they need to fill and there is need to eliminate a lot of administrative procedures or red tape.  There is also need to avail more resources to SME focused financial institutions,  that is, those institutions that are set up specifically to assist small to medium enterprises.

There is need to establish an SME bank. I know there is SEDCO but if you look at the way SEDCO is funded, you find that there are a lot of inadequacies. The fact that SEDCO was allocated $5m which did not find its way to SMEs, tells us that there is something wrong in that sector. There is also need for CABS to scale up its lending to SMEs and also to regulate micro finance institutions because the way some micro financial institutions operate is actually a deterrent to SMEs in the way they demand collateral for they want the pledged asset to be delivered to the financial institution. That in itself discourages SMEs. I think there is need to assist SMEs in that manner.

MOTION

BUSINESS OF THE HOUSE

THE MINISTER OF CONSTITUTIONAL AND

PARLIAMENTARY AFFAIRS:  I move that Orders of the Day, Numbers 4 to 7 be stood down until all the other Orders of the Day, are dealt with.

Motion put and agreed to.

MOTION

REMITTANCE OF REVENUE TO TREASURY

Eighth order read: Adjourned debate on motion on the remittance of revenue to Treasury generated by Government Ministries and Departments.

Question again proposed.

THE MINISTER OF CONSTITUTIONAL AND PARLIAMENTARY AFFAIRS: I move that the debate do now

adjourn.

Motion put and agreed to.

Debate to resume: Wednesday, 12th June, 2013.

MOTION

ADJOURNMENT OF THE HOUSE

THE MINISTER OF CONSTITUTIONAL AND

PARLIAMENTARY AFFAIRS: Thank you Mr. Speaker. We do not

want to put hon. members through a difficult afternoon. I take it that hon. members are preparing to discuss a more thorough business on the Electoral Amendment Act which is coming sometime next week. I therefore move that the House do now adjourn.

Motion put and agreed to.

The House accordingly adjourned at Three Minutes to Three o’clock p.m.

 

 

 

 

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