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SENATE HANSARD - 24 MARCH 2009 VOL. 18 NO. 14

PARLIAMENT OF ZIMBABWE

Tuesday, 24th March, 2009

The Senate met at Half-past Two o'clock p.m.

 

PRAYERS

(MADAM PRESIDENT in the Chair)

NEW MEMBER SWORN

PROFESSOR WELSHMAN NCUBE took and subscribed to the oath of loyalty as required by law and took his seat - [HON SENATORS: Hear, hear].

ANNOUNCEMENTS BY MADAM PRESIDENT

BILLS RECEIVED FROM THE HOUSE OF ASSEMBLY

MADAM PRESIDENT: I have to inform the Senate that I have received the Finance Bill (H. B. 3, 2009) and the Appropriation (2009) Bill (H. B. 4, 2009) from the House of Assembly.

APPOINTMENT TO THE STANDING RULES AND ORDERS COMMITTEE

MADAM PRESIDENT: I also have to inform the Senate that I have received the nomination of Hon. Senator M. N. Mguni of the MDC-M Party to serve in the Standing Rules and Orders Committee that was announced last week.

SWITCHING OFF OF CELLPHONES

MADAM PRESIDENT: May I humbly remind hon. senators to switch off their cell phones.

MOTION

LEAVE TO SUSPEND STANDING ORDER NUMBER 18

THE MINISTER OF FINANCE: With the leave of the Senate, I seek leave to suspend Standing Order No. 98 regarding the procedures of bills relating to the procedures of the Finance Bill H. B. 3, 2009 and the Appropriation Bill (H.B. 4, 2009), the reason simply being that we have to allow debate of these Bills and therefore the need to seek leave of this august House.

Motion put and agreed to.

MOTION

SUSPENSION OF STANDING ORDER NUMBER 98

THE MINISTER OF FINANCE: I move that the provisions of Standing Order 98 be suspended in respect of the Appropriation Bill (2009) (H. B. 4, 2009) and the Finance Bill (H. B. 3, 2009).

Motion put and agreed to.

SECOND READING

FINANCE (NO. 2) BILL (H. B. 3, 2009)

First Order read: Second reading: Finance Bill (H. B. 3, 2009).

THE MINISTER OF FINANCE: I presented in Parliament last week on Thursday, 18th March 2009 the revised budget proposal for the 2009 budget. The reason why we had to revise that budget from the original estimate of US$1.9 billion to the current status quo of US$1 billion dollars, there are three reasons to that. We need to align expert measures to the Short Term Emergency Recovery Programme (STERP) that we launched on Thursday. In other words, we re-crafted the budget in order to recognize that there is new fiscal foundation of the budget by bringing in 2009 Short Term Emergency Recovery Programme. I will speak on key components of STERP in this presentation.

We also had to realign that budget downwards by aligning the actual developments of our economy and the performance of the economy from January to February 2009. In other words, we took a reality check that there was fiscal dislocation between the original presentation and the adjusted amount of US$1 billion dollars. Finally, we had to reconsider the US$1,9bn to US$1bn and re-align to the blue book that is consistent to the new Ministries created. All of us know the original Ministries and the original blue book that we read on the 29th of January in the year of our Lord 2009. We had 29 Ministries or 29 votes on the 29th of January 2009 when the Acting Minister of Finance presented the 2009 budget. We now have 36 votes that we had to take into account. In-fact, these votes will increase some of the votes that we have combined. We had to combine one Vote of the President and the Prime Minister's and Vice Prime Minister's.

We will have to split these and we will end up having 37. These are some of the reasons that have forced this budget downwards. I need to emphasize to the Senators the extent of our economy and I need to say Madam President, that it is a very tough picture of insight and it is much worse insight of picture than ours and I need to say something that I have been saying to many friends that; life in the opposition is very easy because it is easy to lift someone and then throw him down.

The realities are that when we are faced with challenges that we are facing as Ministry of Finance and that we are facing as government, what I have learnt as an individual is that there is a high demand on the fiscus. We have Ministers; they want fuel, stationery, etc. Some of these demands are short-term. Other demands are that you can get a call saying there is no water, chemicals at Marondera Municipality and that people have gone without water for a number of days. You can hear that the power stations at Hwange, one is working instead of 2 and there is no electricity. These are some of the infrastructural demands of our economy, the state of our roads and hospitals. One clear lesson is the high levels of demands that are coming. The second construction is the high expectations of our people on the inclusive government.

The inclusive government is a panacea and a paradigm that should be achieved in a matter of seconds and it should clear the economic decline that we have experienced. This country has gone through ten years of sustained negative growth from figures of minus 2% to serious figures of anything from minus 12% to minus 15%. If we take our stock for instance we have got savings that are in the region of 80%; in any decent African country, we have service stock of 20 to 25%. It is a miracle that we have been able to function as an economy and we feel we have an economy that we can talk about from 4-10% of normal production. So there has to be a management of expectations because expectations are high.

The final thing that has hit us is the low level of capacity for us to deliver at least in the immediate short-term. I just want to be frank with our figures. I will be publishing on the Ministry of finance Websites all our macro economic figures in respect of revenues and to say that we are living from hand to mouth at the present moment is a euphemism. We do not have hands, we have a mouth to feed on. We have got a very tough situation. Our original budget of the 29th January 2009 was predicated on a figure of US$1,9bn which had an underlining assumption of revenue collection in the sum of US$140 million a month. In February 2009 we collected US$25 million and just now we have just managed to collect US$30 million.

The reality of our situation Madam President, these amounts are hardly enough to pay for the allowances of civil servants of US$100. In other words what we are collecting is barely enough to pay civil servants yet we have got drugs that we need to pay for, we have chalks that we need to pay for, school textbooks, electricity, we have got the poor, those that are living with HIV/AIDS that have to be looked after by the State. We have got widows and others that need to be looked after. We have got the roads with pot holes, which need to be repaired, that is the reality of our situation.

Our anticipated monthly expenditure, everything being equal with our monthly expenditure budget the sum of US$100 million. This includes the cost of around US$15 million on importing electricity, another US$10 million on importing drugs, US$5 million importing water and sanitation an the rest of the amounts are in respect of normal expenditures like paper and so forth. Out of that US$100 million, we are only able to collect a figure of US$20 million. So that means our deficit every month is 80% and no government in the world can operate on that basis. If it was a person, can you imagine a person operating at 20% of normal capacity, doctors will declare him dead. If it were a company and declared insolvent a liquidation order would be issued. If you are a husband, a wife will run away from you.

So that is problem number one, but there is also a problem with the structure of revenue that we are collecting. Madam President, between 1996 and 2004 and in view of any normal society, the biggest contributor must be income tax. So between 1996 and 2004, PAYE was 38.65 % of our revenue which is the biggest contributor. Corporate tax contributed 11.0 % other direct taxes contributed 6.19%, so direct tax contributed 55.88% of our normal figures. Indirect taxes contributed 44.4%. Direct sales tax which is now called VAT contributed 24.03% customs duty 13.15%, excise duty 5.09% and other indirect taxes have a modest 1.84%.

Now our tax structure from January to March 2009, on PAYE which was originally 40% is now 7.47% because there are no people in formal employment and the fact that our economy has been transmitted into a shadow where the big hand of the tax payer is not reaching. The sum totality is that our direct taxes are only contributing 17.26 % of our revenue structure. This is a very skewed economy that reflects the business of our economic activity in the country. Coming to indirect taxes, VAT is a very unprogressive tax because whether you earn 10m or 20m you still pay 15%. Those are very unprogressive taxes and they are not encouraged.

As we speak, VAT is 21.9%. Customs duty is 38.6%, excise duty is 20.88% of our revenue. So if people were suddenly to stop drinking alcohol and smoking, we would have problems in getting the 20m that we want. We have a much skewed revenue structure and tax structure which is synonymous with lake of economic activity which is in our economy. This is the reality Madam President. What is immediately needed in the short term to compliment and fill in this huge fiscal deficit of 80% is to simply engage with the International community until such time as we are able to stand on our own feet and be able to reduce this deficit.

The fact that we do not have this 80% does not mean that people are not paying. People are paying in terms of our school children going to classes at schools without roofs and text books. I know some schools where teachers are using tsito instead of chalk because of this huge fiscal deficit which is 20% and 8% that we have to collect. The other reality that we have to deal with is the death of the Zim dollar. Since October 2008, the Zim dollar is no longer a currency that the public and any trader would accept. The Zim dollar has become valueless.

The level of economic transactions will be determined by the amount of foreign money which in our situation is the US dollar and the Rand increasing our tax to the required high foreign currency support critical to the GDP growth. So we need to export more than we import. In respect of national budget money is a medium of exchange, therefore a critical instrument in economic activities. Now because of the death of the Zim dollar and because it is no longer a medium of exchange, it means that the economic activity will have to contract because we do not have control over our money supply or M3 which is an immediate challenge that arises from the dollarisation of our economy.

In the short term, we need some injection of money supplies particularly from South Africa because the Rand is legal money tender. That is the first reality and the second one is that we can not engage in quasi fiscal activities which have been fuelled by our capacity to print money and use money printed to fill in the gaps; which has been a temporary solution because we have been covering crisis.

That is the reality Madam President and this has now forced us to resort to cash budget, meaning that we have to wait to collect the money and then spend it. We have resorted to the principle of contractions of hunter gatherer economics where you can only eat where you have collected or hunted. If you do not kill or gather you do not eat. Therefore going back to what I have said, we eat what we gather. It is priority to first collect revenue if you want to continue spending the revenues.

All of these are pressing issues of solutions on revenue of public revenue. However, we allow those few earning services of government to collecting revenue and retain it in the relevant ministries. One of the things that we are going to do and we have to do because of our unhappy statusquo vis-à-vis mobilising foreign resources and adequate support, we have to consider after a careful scientific analysis disposing some of the family silver. We simply have to dispose some of those assets that are owned by the state that are non strategic but are of high value in order to at least breach the fiscal deficit in the medium term.

We have wallowed into this belief that this asset is ours and we cannot sell it, for example, if you were to engage a programme with a private donor let us say from Dubai to do the road from Beitbridge to Masvingo or to dualise a road from Harare to Beitbridge, even if it is a foreigner, he will not be able to take that road to Dubai or Saudi Arabia. So we need a paradigm shift because in the reality of our situation, it is a must that we have to do that in the immediate short term until we get back on our feet.

How do we get back on our feet? We have crafted a Short Term Emergency Recovery Programme (STERP). It is the bed rock of the proposals that you are making. We are trying to make a new fiscal review in the budget simply because it is an accessory in that road where we want to go. So in doing so, we have crafted STERP. As I said at the launch and I know that many of you have a copy of the document. The foundation corner stones of STERP are three pillars. The first pillar is what we are calling the democratization. This recognizes the rule of law, crafting of a new constitution as defined in article 6 in the global political agreement. There is the restoration of political issues. There is the issue of opening up and fringe up of the media and the issue of integration of Zimbabwe into the community of nations.

Here, we have to be very frank with ourselves. We are in this situation that has given rise to the global political agreement because of the political problems we have been having. The rule of law has been questionable and also democracy. We are saying you can never address the issue of the economy and stability unless you have addressed these key political issues. There can be no freedom if people's stomachs are not full. It is not an accident that 96% of the global political agreement has these political issues around the rule of law, democracy and property rights and so on.

The second foundation is the question of our poor and the vulnerable sectors. We have crafted STERP as a primary focus to remove all the concerns to address our economy. We have issues like price controls and so forth. We have allowed the market to operate. We have done that very consciously. We have decided to protect our poor and vulnerable. So the second pillar of STERP in this programme is the social protection programme. We are trying to create escape routes from the market that we have for now allowed to operate freely. There are four critical things on the social protection programme.

The first is the question of food and humanitarian assistance. Five million people are being fed at the moment.

Government is importing about forty tonnes of maize every week. So this is humanitarian assistance we are dealing with and I need to thank the international donor community under the UNDP. The second issue is of education. In education we have a big problem, which is of teachers. Teachers constitute half of our civil service. It should be around 146 000. The figure that we paid for in January was 94 000. That 94 000 is a third. So to make them return we have to look at the issue of allowances. It is not enough to pay for textbooks and chalks without looking at the salaries because text books and chalks do not teach the children. I am appealing here to our friends to redefine the definition of assistance to teachers so that we incorporate the budgetary constraints of salaries and allowances.

The second issue is of health. We have three challenges. The first is the importation of drugs. There are three drugs in which we face challenges. The first are anti-retroviral drugs, second are malaria drugs and third are tuberculosis drugs. Those are the biggest killers in our country in Africa. So we have to make sure that we have regular supplies.

The second challenge that we have is the complete destruction of our hospital institutions, the decay in the infrastructure, the absence of hospital beds, cooking pots and so on. We know that if you fall sick right now you are totally in God's hands because of the status of our hospitals. The third thing is the remuneration of health personnel; nurses, orderlies and doctors. We have lost a number of our doctors across the world. In any country you go, you find a Zimbabwean doctor.

The third aspect of our Programme is the Strategically Targeted and Vulnerables (STVs) and this includes orphans, widows and the new phenomenon in Zimbabwe of child run households. You can find 15 year olds that are heading families as parents would have been killed by diseases or hunger. You find a 6 year old who can cook a big pot while others are playing. This is a reality in our situation. So we have to specifically provide for this in this strategically vulnerable sector and in the budget we have allocated about US$150 million. That is the second phase.

The third phase is the primary economy. What we intend to do is to increase the capacity of our economy in mining, agriculture, tourism and in construction. Construction is a serious thing that we are going to invest in because we are killing so many birds with one stone if we invest in construction. We will be providing employment, housing, disposable income to the people. We hope that in the next two to three months there will be multiple projects in the country. That is the philosophy, we want to increase capacity in every sector of our economy. To do this we have removed certain constraints, significantly we have removed legal requirements on export earning from 5 to 7 %. Secondly, we have also ensured that, particularly in mining, that mining goes back to the Ministry of Mines, chrome, diamonds, platinum and gold should go back to the Ministry of Mines where they will be run and marketed in terms of the Marketing Minerals Corporation of Zimbabwe. The Ministry of Mines would very soon be structured under the Statutory Instrument 16 of 2009. This was the structural instrument, which states that what gold or what mineral, platinum, chrome is purchased by the Reserve Bank. As regards to gold any person that has gold should go to the Fidelity Processors and they will process the gold, you get your gold back, fill in your CD1 forms and take your gold outside the country. There is absolute freedom as regards to use of FCAs. The usual regime was that if you do not use your money after twenty-one days, firstly within twenty-one days you have to apply to use it. The new regime now is that you are free to use the FCA as you want. If you have got money and you want to buy a huge Mercedes Benz for a Chief Executive we are going to be very angry but there is nothing that we can do about it. That is the supply's side of the economy.

There are other cross cutting issues that I need to mention in light of the motion that I gave Sen. Gutu to read. Some of the cross cutting issues we have to deal with is the issue of environment, gender and women, diaspora, our citizens in the diaspora. The complication on how we are going to mobilize in dealing with those issues. We will watch very careful as we debate and I am sure there will be very interesting suggestions coming from the debate. The other cross cutting issues are regional integration and so forth. There are a number of cross cutting issues.

On the micro economic side, very quickly we are going to operate on the basis of fiscal. What we kill is what we eat. We do not spend what we do not have. What we are going to have is the total abolishing of quasi-fiscal activities. Quasi-fiscal activities are very dangerous because you as Parliament do not have sight of this and therefore we do not approve or disapprove them.

The third thing, which we are going to look at, is the regime of multiple currencies. We are going to continue to use multiple currencies, the Dollar, Rand, Euro, Yen as legal tender in Zimbabwe but however, we are going to use Rand as a currency of reference. There has been a debate about whether we dollarize or we Randify. When you dollarize, you recognize just one foreign currency as a legal tender. The debate was between the use of a Zimbabwean dollar and use of the Rand, we totally refused to be drawn to that debate. There is so much money that is under people's pillows and in other places that I cannot mention in this House. We want that money so we do not want to say that we are using the Rand what will happen to that US Dollar which is under the pillow. We want that money to empower our economy. For now we are going to allow the use of multiple currency. However, we are going to use the Rand as the currency of reference. This will help us in two regards. Firstly, if we want to move towards the regional integration it means that our economy should be going in line with regional economies, Southern Africa economies talking of Botswana, Lesotho. Most importantly we need a reference currency to establish price stability in Zimbabwe. A lot of our people's mindset are still linked to the old Zimbabwean dollar. Vanhu havanyari. You finda bottle of a commodity costing US$10 because this person has no idea what US$10 means. There are many examples, the most notorious one being the City of Harare. How can you pay someone a salary of US$1 000. Your mind still thinks that US$1000 is equivalent to Z$1000. In order to make sure there is rationality in the comparison of these currencies we shall use the Rand. When I come to the budget, the fiscal review our figures will be actually in Rands and I will abandon reference to the US$. That is done deliberately so that our economy, the insanity will be regulated by the market trends in South Africa.

The next thing that is very clear to us, no economy can move without savings. Savings are the stored up value which can be used to generate future value. People go to banks to borrow in order to start businesses. They are borrowing from somebody's previous sweat, so sweat creates sweat but you have to sweat this sweat in savings. We want to see our savings stocks back to 30% normal of our GDP. This is why we are asking banks to open FCAs automatically this is why we are also retaining a regime of positive interest rates to our country. What used to happen in the past and at present is that you put your money in the bank and the rate of interest is 5%, maybe the inflation is two hundred million percent, that means in a day your money will be gone. We do not want that; we want a regime of positive interest rate. Saying that, we need Zimbabwe to be maintained as a low cost producing country. We do not want chimbadzo the rate of interest should be between 3 to 4 % not what was happening that you find interest rate of 200 to 400 %.

We have the issue of utility, water, electricity, and our roads systems, they are a problem. We have an infrastructure commitment. The figures that we originally work on are $5 billion but in reality we actually need $8 billion for the infrastructural costs. The rehabilitation of our transport networks, hospitals and schools. The medium to short term costs are US$2 billion for budgetary support at the rate of US$1 billion per month. We have to open credit lines for the manufacturing sector, mining sector and others. I will now very quickly highlight the key measures of our budget and the tax proposals that we are asking you to approve.

Madam President, the purpose of this Bill is to give effect to tax measures presented to the House of Assembly through the 2009 National budget statement. In my statement on the 2009 budget, I have proposed to review some of the revenue measures whilst at the same time introduce additional tax measures, taking into consideration post budget consultations.

The formulation of tax measures has been difficult in view of the harsh economic environment characterized by a decline in the domestic industry capacity utilization. High unemployment levels consequent to closure of companies and rapid growth of the informal sector.

Madam President, the 2009 budget proposes measures to broaden the collection of tax revenue in foreign currency as business transactions are now conducted in foreign currency. Further, the 2009 budget proposes to bring forward payment dates for VAT, PAYE and Capital Gains with Withholding tax so as to improve cash inflows to government.

In order to give tax relief to both individuals and corporates, proposals have been made through the 2009 budget to peg capital allowances, donations to schools and hospitals, tax credits and retrenchment packages in foreign currency in order to maintain their values. Furthermore, duty exemption on imported capital equipment has been provided so as to incentivise the tourism sector.

Madam President, in order to enhance the contribution of PAYE to tax revenue and also upholding regional best practices in the taxation of incomes earned in foreign currency, the 2009 budget has proposed to introduce separate foreign tax table for employees remunerated in foreign currency. I have also proposed to review the income tax-free threshold from US$125 to US$150 per month with effect from 1 March 2009, taking into account assistance levels of households.

In order to reduce costs of goods imported by companies and individuals, the 2009 budget proposes a reduction of customs duty rates on raw materials, intermediate goods, finished goods, motor vehicles, fruits and vegetables. This measure will enhance industry capacity utilization thereby increasing the supply of goods on the domestic market.

Madam President, for the convenience of travellers, a flat rate of duty is charged on excess goods that are not accommodated in the travellers' rebate of US$300 per calendar month.

I have proposed to review downwards this rate of duty in line with reduced customs duty rates in order to facilitate swift clearance of goods.

Madam President, the 2009 budget has proposed that remittances periods for VAT, PAYE, Capital Gains withholding tax be brought forward to the 3rd day of the following month. I have proposed to review the remittance date to the 5th day of the following month in order to allow traders more time to reconcile sales from their outlets.

Under the current provisions of the Customs and Excise Act, duty due is paid upon registration of a bill of entry. Importers first face challenges in effecting payments to clear their goods due to delays in the banking systems whereby transfers take as long as five days to reflect in the ZIMRA account.

In order to facilitate prompt movement of goods, I have proposed to introduce a limited credit facility to selected importers and their clearing agencies.

Madam President, although presumptive tax has been implemented for some time, contribution of the informal sector to total revenue is insignificant mainly due to non-compliance.

In order to encourage tax compliance by informal sector business, I have proposed to empower the Revenue Authority to issue a provisional attachment order after which failure to pay tax due would result in the auctioning of the attached asset.

Madam President, the above tax measures, supported by an efficient tax administration and improved industry capacity utilization will go a long way in enhancing mobilization of resources in foreign currency. Madam President, I think we need to repeat the words of wisdom from one of our friends that "failure is not an option". I now move that the Bill be read a second time.

Motion put and agreed to.

Bill read a second time.

Committee Stage: With leave, forthwith.

COMMITTEE STAGE

FINANCE (NO. 2) BILL, (H.B. 3, 2009)

House in Committee.

Clauses 1 to 60 put and agreed to.

House resumed.

Bill reported without amendments.

Third Reading: With leave; forthwith.

THIRD READING

FINANCE (NO. 2) BILL (H.B. 3, 2009)

THE MINISTER OF FINANCE: I move that the Bill be now read the third time.

Motion put and agreed to.

Bill read the third time.

SECOND READING

APPROPRIATION (2009) BILL

THE MINISTER OF FINANCE: I move that the Appropriation (2009) Bill be now read a second time.

Motion put and agreed to.

Bill read a second time.

COMMITTEE OF SUPPLY

MAIN ESTIMATES OF EXPENDITURE

Senate in Committee.

Clauses 1 to 5 put and agreed to.

Schedules Section 4: Votes 1 to 36:

SENATOR CHIEF CHARUMBIRA: I just want to give a general comment and say to the Minister given what he gave us in his introductory remarks about the state of the economy which is shrinking and you have told us that we have gone down 15% in growth, 12% over 15% which picture we got very clearly. If we look at this budget, the main expenditures are mainly recurrent. We do not have much in expenditures for those Ministries that will allow for growth. I just want to understand the prospects of growth given this type of structure of expenditure.

MR. BITI: Thank you Senator Charumbira. Indeed the budget is dealing with issues of recurrent expenditure even with this budget frame work of about US$1 billion, we are still going to experience difficulties unless we do something. We are still going to experience a budget deficit - at this stage we think it will be US$200 million. That means even on the hand to mouth matrix we are not able to look after the recurrent expenditure.

However we have done two things on the developmental side. The first one is for us to deal with the industry. We provide US$1bn to our lines of credit, to our manufacturing sector, gold sector and so on. So we expect increases in production capacity. There are three things that have been hampered in our businesses. The first has been working capital. We need to source the lines of credit. When you read the STERP document you will see that our intention is to see that 60% should go towards capital. So working capital is critical.

The second hindrance is the absence of regular supply of essentials like water, electricity, coal which is essential in the food processing, so if we do not deal with the issue of getting the money, the production capacity will fall. The third sector concerns the issue of this contextual inhibitive environment that we have created that of price controls, etc. We actually hope to register positive development of anything from 5% to 6.8%. Which is not academic and indeed as we stated in the budget, we will actually reduce the budget to single digits. We will be announcing our inflation figures for January, February and March. You should look forward to them. We will actually achieve growth and the reason being that we have bottomed up and by the time we reach at the bottom of the pitch, the only most possible way is that we are going to go up.

SENATOR CHITSA: Thank you Mr. President. Mine is a comment question that the Minister says the growth of the fiscus is not going to be that easy and it is not going to be as quick as possible because we have to manufacture. You said we have got to hunt and then we have got to eat, you cannot eat where you did not plant. In the meantime people in our constituencies are suffering, they are saying they do not have US dollar or the Rand. Children are being sent back from schools yet what the parents are holding is this paper money.

What are the parents going to do because already children especially from boarding schools have been sent back from schools because they could not pay in foreign currency? Parents can not afford and most of them have got school going children, what are they going to do in order for them to have food and pay for electricity and Municipality bills because they do not have the money in Rand or US$?

MR. BITI: The truth of the matter is that things are bad for the people out there. There are no jobs and that is the reality we are facing that there is no formal employment. So that action has to be taken in this economy. We have been fooling ourselves for a long time dealing with symptoms and thinking that monetary policies will be announced with interest rates, we will deal with the economy. We have decided to have a surgical operation in the economy so much that this economy will be functioning.

There will be a period of suffering and there is no question about it but, there will be employment and jobs created. This economy will begin to move. By its very nature, this economy is very strong. Bar South Africa, we are one economy within the region that has a competitive manufacturing that we can actually talk of an industry that has got value addition. Many of those industries had died or had reduced capacity. You come from Bulawayo, you know of huge industries that have closed, so what we are doing now is to say to these people, you were crying about surrendering values, about price controls, about exchange controls and you were being asked to change your money from 1US$ to Z$70 when the parallel market was US$4 million or US$5 per Z$1 trillion.

Now operating you have Z$3 million what should happen, increase in Agriculture, in Manufacturing, in Tourism and increase in Construction and so forth. But, a lot of our people will work and our economy will start to go above. When the economy starts to normalize hon. senators, people will become more reliant. We also need to know that the State's capacity to receive revenue we have to retrieve. Therefore the State's capacity to help the poor will also increase. For instance if we take a number of schools, we are able to give money to BEAM. It is a programme to support children in schools that are being chased away. It requires only US$80 million but if our revenue levels are normal, we should be able to have money. On that, I need to say that no children should be sent from school on failure to pay school fees. I think the Minister of Education Senator Coltart announced the fee structure two weeks ago and he made it very clear that headmasters have a duty to ensure that they need to check if the children can pay or can not pay and collect the list of the children who can not pay so that we look for the money to pay for them. That is why I said we need a reality check, things`ire bad a䁮d they are actually worse from inside than oqtside. It is going to t聡ke a while but there ere already signs that we can get Out of th)s situation of suffering when there is national h聥aling and intolerance out there because people are not feeding and(it is not a normal society.

SENATOR TAPERA: I would want to asi the Minister at what p౯int we are going to use the Zim dollar because for phe past tɨree monthsဠၰeople have beej marningȠthe Ziɭ dollar. 耠W`en are w⁥ going to use it? $

THE MINISTER OF FINANCE: At the present moment the Zim dollar is dead and can not buy you anything. So it is fictitious money that is just clogging our balances so all of you here are millionaires and billionaires. What we are considering, though this is a very informative stage, is a system where we can clean up the money that is sitting in your bank, buy it off so that you do not have this pretence of the money sitting in your account. We will restore value to the Zim dollar but this will only happen when the Zim dollar has been given value by the economy through exports and production.

If you wake up tomorrow and print new notes as you used to do, all we will be doing is just floating zeros so we will wait for production, capacity, industry and exports to give real value and resuscitate it to life but when we do it, we will not go back to the regime of controls because if we do that the black market will just laugh at you. The market itself will find its own course. You need a situation where you can walk into a bank and be asked if you want US$ or Rand.

Those of you who have been to Mozambique or Zambia will recall that there is a machine which will ask you the currency you are going to use to pay and it will give you an automatic exchange rate. So we have to wait and resuscitate the Zim dollar when the economy is sufficiently strong enough or buoyant.

SENATOR HOVE: I sympathise with the Minister of Finance and I hear what he is saying, but in certain instances it creates even greater problems. He has just referred to Mozambique and Zambia. The Zambians floated their Kwacha and the Kwacha got value on the market. That is why if you go to Zambia with whatever currency the Kwacha has value on the market. I have particular problems… .

THE DEPUTY PRESIDENT: Order I have indicated that you are to make reference to a particular ministry.

SENATOR HOVE: I am making reference to the previous Minister's statement. I am saying when we say we have resuscitated the dollar on the basis of performance of the economy I will go along with him somewhat but I do not understand when you say currently the Zim dollar is dead. If you take the retail level of our economy the greatest problem people have is cash. It is not there despite what type it is. We are not able to trade and if we resuscitate the economy on the basis of currencies that we do not make and which are in scarce supply we wonder then how long it will take to resuscitate the economy unless you are saying there is something being done to assist the dollar to wake up and function so that if you go to the market you can ask for your money in any currency that you want. What is making goods expensive on the market is unavailability of change and scarcity of money and people have to round off their figures. How then do you resuscitate the economy at this critical stage when we are so down below? I wonder how long it will take us to do that. The inclusive government should be saying we are doing something about resuscitating the dollar either by borrowing or expecting a donation then the dollar begins to function, the economy will be assisted to function and industries will begin to work. People will have enough cash to transact their business. I have that missing link with the Minister if you can help me. If you take that route it will take very long if we do not have some sort of cash which is going to come from somewhere to assist. This money we are talking about, the Dollar and the Rand, it is not easily accessible. It is other people's money. I think it is going to take us 5 years to resuscitate the dollar because of the pace at which we are to resuscitate the economy to increase the capacity because our capacity is 10%. To increase the economic activity we need some cash and God knows where it is going to come from. It is either we have to mortgage our resources to get cash so that we can jump-start the economy.

SENATOR HLALO: Mine is to comment and I am going to deal with what the finance minister referred to as his first item on the three issues that he put across. It is the democratization part. For our economy to do any thing, at least what we should do as politicians is to make sure that the rule of law is observed in the country.

Speaking as a businessman and also as a politician is that we have to understand that business can only function where the rule of law is upheld. Business can only function where it is allowed to work without any impediments. What is disturbing in Zimbabwe as we speak is that the very people we are trying to lure to come to the country to invest are scared away by what we do on the ground.

Mr. President, I thought the inclusive government was going to start doing what it should, that is to make sure that all the things that were agreed on are taken and are also executed the way they should. On the background of what we are reading in the newspapers, I do not know if it is true but if it is true then we are not going to go anywhere if we are going to have farm invasions carrying on. Investors do not like that kind of action. And if there is no action of arresting those people who are doing that then businessmen will think that if they bring their money what will happen to it if they will not have any recourse?

Business wants to also function where there is freedom of the press. They want freedom of press so that at least those who steal money could be exposed. If the law will not take its course but at least someone will write the story about money or property stolen. That is how business operates. It wants to operate in an environment where there is a recourse somehow whether physically or whether by means of a consolation of a story being written about their misfortunes. So Zimbabwe must decide where it wants to go. If you do not put those things in place, they have other places to go.

We were so fortunate that in Zimbabwe maybe they could come in and make a few dollars, more than what they could in other countries. This is something I am looking at from the perspective of being a businessman. If it is true honestly Mr. President…..

THE CHAIRMAN: I am not President I am the Chairman.

MR. HLALO: I stand corrected Mr. Chairman. So we as people in this agreement I think we need to be serious. There is a saying …..

THE CHAIRMAN: Could the Senator be specific.

MR. HLALO: All I am saying is that we need to know where we want to go. If these people who are doing the invasions are doing it at the cost of the whole nation. You heard the synopsis of our health sector. Those people who are doing these invasions are not helping anybody but themselves. I beg to differ and say that if we are serious about what we want to do let us stop all those things. So my comment is that I think as politicians there must be somewhere where we say the buck stops.

SENATOR MAKORE: First of all, I want to agree with the Hon. Minister of Finance for example in the line of $150 which is not going to be taxed. That being the case again we need to sort of encourage production for purposes not only of begging but production. This is production in terms of our industry. As far as we are looking at this budget, yes it appears bigger or small and the $1 billion that was mentioned by the Minister, could that be enough in terms of our industrial development?

Are we going to be able to sponsor it successfully to harness production? Secondly, is the efficiency that is expected in terms of the inclusive government that each of the ministries should have its own vote, which would enable efficiency in its operations. I heard the Minister also say that the premiership incorporate{ in term⁳ of that budget. My question is will it be properly distributedဠin terms of the premiership to be able to run its woၳk efficiently without 聨indrance to the disbursements of finance tha´ are requiɲed so much in the work of txe premiership in terms of their working capaciôy, opѥrations, t聲avel and e⁸%cution of their duties.

My fear is uhat in"eech of thore insti|utions, we murt prove tѯ the best ࡯f efficiency withɯutany hindrance. †I want to borၲow from other people's contributions that we are also experiencing problems in terms of currency that we are currently using. In businesses the torn notes are not accepted. In business they do not want a Rand that is sellotaped. What are the measures that we are to take in order to address those loopholes?

SENATOR MUTSVANGWA: First of all I would like to thank the minister for being very articulate to make us understand this whilst the situation looks so gloom and we are coming up with all this.

I personally feel at this stage we are very proud that we are now able to work as brothers and sisters together as difficult as it may be but when you are together focused to get solutions for your own country, when you can stop any foreign enemies getting to destruct you, solutions will be found. There is no longer fighting to destroy our heritage. It is very clear that there is no trade of insults. As Zimbabweans we will get there. As Zimbabweans, if we work together we will achieve.

THE MINISTER OF FINANCE: I will deal with the comment by Sen. Hove first. As I said in my statement, what consequences of transiting towards a regime of multiple currencies, is the contraction of the economy. I think your own money supply, the capacity of the economy, the availability of notes and coins of your own in the market is expansionary the growing factor in the economy. We do not have that, so there is contraction, we are experiencing that, that is why I said we have to do three things. One, increase our export earnings so that we get revenue from out side. Secondly, we have to get an injection that I mentioned earlier on, to increase production immediately. The third thing that I mentioned is that of disposal of family silver so that we bridge the short money supply problem that we have.

The thing that I mentioned, that we need to do, to expand in greater details is the issue of strengthening our payments in PM systems. If we strengthen our payment in PM systems, in inter bank relationship and if banks are able to accept a dialogue in respect of new currencies that are now available, we can actually move away from the cash economy to a plastic economy. A move towards a regime of returning back cheque books, debit cards, inter bank transfers, RTGS as we used to call them in hard currency, which we do not have at the moment. The return of the bank payment system will liberate us again from using cash and transiting away from a cash economy. We are quite aware of the problems and the contracting factors and the solutions.

The issue of floating, Zambia floated its Kwacha, that is why there is stability between the Kwacha and other currencies. If you walk in a bank right now in Zambia, they will ask you, "do you want your money in Kwacha or other currency", but they floated on the base of an economy that has begun to experience new growth. After Chiluba, transmitting to the late President Mwanawasa, Zambia experienced a sustained growth rate of 5% per annum. Four factors attributed to that. The first was agriculture. They suddenly had tobacco and maize because our farmers went to Zambia. The second was increase of prices in commodities. The price of copper which had gone down went up and there were a lot of activities on the copper belt in Ndola.

The third factor was investment particularly from South Africa. Zambia especial in Lusaka is now actual a supermarket of South Africa. All these South African franchises, Spar. Shoprite are all there. The fourth factor which helped them was serious external assistance from the international community. Their budget for a long time was funded 80% by the donor community. Those four factors allowed them to have the economy which allowed them to float the Kwacha and for the Kwacha to find stability because Kwacha was supported by the proper economies.

The remarks of Senator Hlalo speak for themselves. You cannot separate the economy from the rule of law. We have to deal with those issues. The remarks of Senator Makore, production is important. Capacity is important, that is why I said capacity is a very good rehabilitation programme. Without producing, we will only promote dealers, commodity brokers, speculative activities, burning of money and so forth.

The remarks of Senator Mutsakwa, I think that things are difficulty but I think that very slowly, there are signs that we are moving. What is required is patience, hard work and faith, faith in God and faith in our own capacity.

SENATOR MLOTSHWA: Are you aware that in your budget, the budget for allowances of civil servants, you also pay under the Ministry of Youth, the militia that were beating people during the elections. Teachers are crying out there that they are lowly paid. When the teachers cash their allowances and the militia also cash the same. For the teachers to get more why can you not stop paying the militia?

THE MINISTER OF FINANCE: The only thing that I can say is that we agreed that we have to audit our payroll in the S. S B. and I hope that they will solve that problem.

Senate resumed.

Bill reported without amendments.

Third Reading: With leave; forthwith.

THIRD READING

APPROPRIATION (2009) BILL (H.B 4, 2009)

THE MINISTER OF FINANCE: I move that the Bill be now read the third time.

Motion put and agreed to.

Bill read the third time.

MOTION

PRESIDENTIAL SPEECH: DEBATE ON ADDRESS

Third Order read: Adjourned debate on motion for an address in reply to the Presidential Speech.

Question again proposed.

SENATOR MADE: I move that the debate do now adjourn.

Motion put and agreed to.

Debate to resume: Wednesday, 25th March 2009.

ANNOUNCEMENT BY MADAM PRESIDENT

NATIONAL TOURISM STAKEHOLDERS CONFERENCE

THE PRESIDENT OF THE SENATE: All hon. members are invited to attend an inaugural National Tourism Stakeholders Conference at the Harare International Conference Centre which will be held from the 25th to the 26th of March 2009. The Conference will be officially opened at 0900 hours on 25th March 2009.

On the motion of THE MINISTER OF AGRICULTURE , MECHANISATION AND IRRIGATION DEVELOPMENT the Senate adjourned at Twenty Six Minutes past Four o'clock p.m.

 

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Senate Hansard Vol. 18 SENATE HANSARD - 24 MARCH 2009 VOL. 18 NO. 14