Harare: Finance Minister Tendai Biti has, undoubtedly, one of the toughest jobs in the inclusive government. He has been condemned for many things. Farmers believe he is doing little to revive agriculture while importers have no kind words for the protectionist measures he has put in place. In this Question and Answer with The Financial Gazette’s Chief Business Reporter, Bernard Mpofu, Biti speaks on a wide range of issues including the confusion at the Zimbabwe Revenue Authority (ZIMRA) and debate around the resuscitation of the Zimbabwe dollar.
BM: There is confusion regarding the ban imposed on imports of second hand undergarments. What is the correct position on this issue?
TB: The government has not banned the importation of any garment in Zimbabwe, and certainly not the Ministry of Finance because we don’t have the legal powers to do it. What the Ministry of Finance has done is to publish the Customs and Excise Tariff Amendment Notice of 2011, Statutory Instrument 159 of 2011. This was published in the Government Gazette of the 31st of December 2011. What this Statutory Instrument does is to activate the policy measures that were announced in the 2012 National Budget (including those relating to tariffs). You will recall that one of the measures announced in the 2011 National Budget aims at protecting the local textile industry and, indeed, the local manufacturing industry. What this notice has done is to try and protect our economy against cheap imports, particularly those from South-East Asia, which have killed the textile industry in this country. So, we raised duty (to protect the local industry); and that’s what we have done. I was (therefore) shocked to read that it was a ban (on second hand undergarments). I don’t know where that is coming from. However, I must say that the issue of second hand underwear is a cause for concern to the Government of Zimbabwe.
BM: In what way is it a cause for concern to the unity government?
TB: The fact that a woman has to put on underwear previously worn by another woman is a reflection of our failure as a nation. Whether or not the solution to that problem is to ban such imports is subject for another debate. But in my respective opinion, the Ministry of Health and our scientists must come up with a position on that. Secondly, from the point of view of the Ministry of Finance, our duty is to make sure that we deal with the supply side of our economy so that the economy is buoyant; it can create jobs that would enable our people to dress themselves properly without having to resort to discarded underwear from China.
BM: The shortage of coins in this economy continues to be a nightmare for many. In your budget you said it was highly unlikely that more coins would be imported by December 2011. How are you dealing with this problem?
TB: The latest position is that the person that the bankers identified wants US$12 million to transport the coins but how do you pay US$12 million to transport an equivalent of US$5 million worth of coins? So transportation still remains an issue and I hope it will be dealt with. I’m sure there will be a solution because our bankers are very creative people.
BM: Some of your critics have since your appointment criticised you for not “fully” supporting the agricultural sector. What do you say to that?
TB: We have spent US$2 billion on agriculture since 2009. In 2008 agriculture was dead in Zimbabwe. Maize (production) was 200 000 metric tonnes, tobacco production was 30 million kilogrammes. In our first year, as the inclusive government, we put close to US$600 000 and by the end of the year tobacco production was close to 120 million kilogrammes, maize was on 1,4 million metric tonnes, an increase of over 2000 percent.
BM: When are you going to launch the three year agricultural financing scheme you announced in the budget?
TB: Either in February or March.
BM: Do you still stand by your economic growth projections in light of the global and domestic developments thus far?
TB: We are very bullish, this economy has got resilience and this economy has benefited from four things. Firstly, it was the use of multiple currencies. I want to say that the use multiple currencies was inextricably linked to the turnaround of this economy in 2009. Anyone who talks of the restoration of the Zimbabwe dollar is either a thief or an enemy of that restoration or both. As long as the MDC remains part of this government, it will not allow the return of the Zimbabwe dollar. I would rather resign than to see the return of the Zimbabwe dollar. I would rather throw myself from the roof of No. 80 Samora Machel (RBZ building) than to see the return of the Zimbabwe dollar. Secondly, there has been the restoration of confidence in the economy through consistent policy . . . (interupted).
BM: One of the criticisms leveled against the government is the inconsistency in the application of policy. Has anything changed?
TB: The Ministry of Finance has been consistent from day one. We have been predictable. If you look at our budgets, they have been saying the same thing — we must live within our own means, we eat what we kill — austerity. We must expand the economy and those who create wealth must be allowed to create wealth. We also undertook to build an inclusive economy. We must look after our own poor and that has been a consistent message. Business and modern society work on the basis of a social contract and when you have dislocation and barbarism, it causes the breakdown of a social contract. There was a breakdown of that social contract until the inclusive came in.
The year 2008 was a hallmark of the breakdown of a social contract. It was the year in which the biggest criminal was the state itself. The number one person who was buying foreign currency on the black market was government itself. The biggest smuggler was government. What we have done during the last 36 months was to restore the social contract and that has given a boost to our economy. Another thing that boosted our economy is (the) strong commodity prices and lastly, it’s our people. We have vibrant people. We are, however, aware that there are merchants of destruction. We are aware that there are shareholders of insanity. I call them catfish. Catfish swim in muddy waters; they won’t swim in clean water. So the semi-clean waters of the inclusive government disturbed the catfish. The catfish wants to restore the status quo of 2008. We will not allow that.
BM: How far has ZIMRA’s restructuring exercise gone?
TB: One of the key agendas of the Ministry of Finance and one of the key agendas of this Minister of Finance is the reform agenda. We have to reform our institutions. Reform is a continuous process. You have seen what we have done at the Reserve Bank — amendments to the Reserve Bank Act and introduction of a new board. This year, in particular, I am going to come up with a series of legislation, reform legislation. There are two bywords for the Ministry of Finance this year: Action and reform. There would be reforms pertaining to the financial services sector. You are going to see amendments to the Securities Act. You are going to see major things happening at the Zimbabwe Stock Exchange (ZSE): We are going to demutualise the ZSE. We are going to have a Central Securities Depository (CSD) — the automation of the exchange. That’s reform you are going to see.
BM: How far will these reforms go?
TB: Our reform is not just going to be legislative, it’s also going to be operational. You are also going to see some amendments to the Banking Act to tighten our oversight role; prevent banking sector vulnerabilities and a systemic crisis that we have. At ZIMRA, there are four critical things:
First, was the structure of the revenue authority. We sent people to study different revenue agencies across the continent. We were the beneficiaries of excellent technical assistance from various international bodies and we then set up a steering committee consisting of the Ministry of Finance, ZIMRA officials and tax experts from this country. This steering committee has worked on a number of issues. One of them, which we are already implementing, is the issue of fiscalisation. We have introduced that (fiscalisation) as part of both our reform and action agendas. The fiscalisation is already in place albeit with a lot of problems, but we will deal with those. Anything new comes with problems.
The second thing is the issue of a new Income Tax Act. We have spent two solid years working on it. It is going to be a revolutionary bill and I hope that it will be passed by Parliament during the first quarter of 2012 for implementation on the 1st of January 2013.
We have worked on the setting up of a large taxpayers’ office. We set up a large taxpayers’ office in Marlborough and I hope that in the next few weeks we would be able to launch that.
ZIMRA has also introduced an automated clearing system working on a platform known as ASYCUDA.
BM: Can you shed more light on ASYCUDA?
TB: It is basically a platform that allows automated clearance and its working now. The only problem is that many of the clearing companies do not have hardware and software compatible to that of ZIMRA. That’s the first problem. Secondly, we have got electricity shortages that make it difficult to run the machines. The third one is possibly the biggest problem: The absence of reliable, fast internet facilities. This just emphasises why we should go on 3G platform, which is what we are doing right now to try and move to fibre optic platform — very important and revolutionary.
BM: What about the changes we have seen within the structure of ZIMRA?
TB: On the structure (of ZIMRA), we have now implemented best practices. We have a Commissioner-General, a commissioner for tax, a commissioner for customs and a commissioner for administration who is basically your chief operating officer. We also have a commissioner of investigations. Legal services and financial services are all under the commissioner of administration; they can’t be stand alone. These changes allow ZIMRA to concentrate on its core business. The original structure did not allow them to concentrate on core business.
The next level of reform pertains to firstly, the complete automation of ZIMRA. We want ZIMRA to be a paperless revenue authority. Everything has to be done through the internet; that is why we set aside US$20 million in the 2012 National Budget. We want everything to be automated as part of the reform and action agenda for 2012. We also have to make sure that we have (the) 3G platform. Secondly, at operational level, we want to see the construction of a new ZIMRA Head Office and the establishment of a tax company operated by ZIMRA. They (ZIMRA) have identified the land close to Norton Town and we are negotiating with the National Parks so that we are a given a 99-year lease.
BM: How is this going to be financed given tight fiscal constraints that this economy is facing?
TB: We don’t have to finance everything through the budget. That’s why we have things like PPPs (Public-Private sector Partnerships) and so forth. Thirdly, we are going to work on — now that we have got customs, excise duty, corporate income tax and then Pay As You Earn and royalties (we have got at least six different taxes) — an overriding Act that ensures some reconciliation with all these different Acts. So this is one of the things we will be working on in 2012. This law will also deal decisively with due process with regards to tax matters and tax disputes because they tend to take time and they are cumbersome although they shouldn’t be. We want a streamlined, quick process that ensures that litigants and ZIMRA have their day in courts very quickly, so I will be working on that in 2012.
BM: What is the fourth issue?
TB: It relates to the nightmare at Beitbridge Border Post. Beitbridge is the biggest port in sub-Saharan Africa, commercially. But because of the huge number of Zimbabweans that are in South Africa, it has also become one of the biggest civilian ports on the continent. It also accounts for major tourists because South Africans and other tourists love driving to the Victoria Falls. Beitbridge has however, hardly changed from what it was in 1897. The buildings have gone slightly bigger but in terms of it being a little port serving two colonies it has remained what it was. It has to be modernised. One of our biggest projects is to make sure that the construction of a new border post in Beitbridge commences in 2012, expanding the facilities, modernising the border post. It is one of our core agendas in 2012. Why should everyone queue there? Someone, somewhere is not thinking.
There is absolutely no reason why commercial traffic, for instance, has to be cleared in Beitbridge. You can clear and inspect commercial traffic in Harare, Mutare, Chendambuya or Dotito, that is what we are going to do in 2012 so that there is free movement.
Beitbridge, at the present moment, is a theatre of torture. You don’t know how many hours you are going to spend there. You don’t know how much money you are going to lose through bribes. We want to make Beitbridge an arena of smiles. It’s the first picture of Zimbabwe for someone who is coming from South Africa and if it is our first picture, then that picture is very ugly, very acerbic. We should be able to do it once construction has started and once we are able to make sure that there is minimal commercial clearance at Beitbridge. This may entail legislative reform or some organisational reform. I believe that Beitbridge should operate as a department within ZIMRA. ZIMRA should have a department at Beitbridge not just having a customs department alone. If Beitbridge contributes 79 percent of our customs revenue and customs is about 18 percent of our normal revenue, surely there should be a department and officers who are assigned to that and someone very senior who actually lives and works in Beitbridge.
BM: There are also concerns around the issue of smuggling. What is being done about it?
TB: We have been suffering a lot from people who bring in goods into Zimbabwe and don’t pay duty on the pretext that they are just transiting through Zimbabwe. The only way you can monitor this is through automation. We are working on that and that is one of the things we want to see in 2012.
BM: We understand that the Commissioner-General’s term of office expired last year in October. What is the ministry doing about it?
TB: It is true that the contract of employment of the Commissioner-General expired at the end of October 2011. I understand that the ZIMRA board is going through interviews, so once I’m given the shortlist as minister I will appoint the Commissioner (General) who could be Mr (Gershem) Pasi or anyone else (for as long as one has the professional qualifications defined in the Act). I will approach the issue with an open mind. We want the best person to get the job.
BM: Media reports suggest that your relationship with Pasi has been frosty. Some people cite the absence of him (Pasi) at your recent trip to Beitbridge as an example of how poor this working relation is. What do you say to that?
TB: I won’t dignify that with an answer because I went with the commissioner of customs — the man in charge. Pasi is the overall overseer.
BM: During the past year, you used to talk a lot about ZSE reforms. But in your current budget you were quiet on this subject. Was this deliberate?
B: The budget is not a Bible. I have already told you that there will be a CSD this year. But right now we are busy completing the negotiations. There will be a private company that will own the CSD and the company will have a shareholding. We would also want state entities to have at least 51 percent shareholding in the CSD. These entities may include the Reserve Bank, the Infrastructural (Development) Bank of Zimbabwe and the National Social Security Authority and then the 49 percent will go to the private sector including the ZSE.
So, right now we are busy completing (the paperwork) on the government entities that will make up the 51 percent and we will do the memorandum and so forth. I can also tell you that the private sector component of this company has already recruited the professionals who are actually going to do the work, so a lot of work has been done and the fact that we don’t talk about it doesn’t mean nothing has been done. We have sent people to India, Bombay where there is the world’s biggest stock exchange, to study how it works and so forth, so we are ready to roll. As I’ve said, in order to make sure that our markets are operating smoothly, I’m going to amend drastically the Securities Act and very, very soon, I’m going to appoint commissioners to the Securities Commission. Their terms have expired so I’m going to do that (appoint a new commission).
BM: Should a new government be elected to which you will not be part to, do you see some of these policies being implemented?
TB: When you plan as an individual, you don’t plan on the basis that what if I get involved in an accident and die. So whoever comes and doesn’t want to implement that policy, that is his or her democratic right. A pregnant mother doesn’t say I don’t want to buy clothes for my new born baby because I may have a still birth.
BM: During your presentation of the 2012 National Budget, you unveiled various facilities that were meant to bolster economic recovery. These included a US$100 million fund that seeks to support the interbank market? What is the status of these facilities?
TB: True, the budget unveiled a number of facilities. It unveiled the US$20 million Jobs Fund; the Mining Fund; loans for students; the Distressed and Marginal Areas Fund (DIMAF) run by CABS and the Interbank Fund. With regards to DIMAF, it’s a US$40 million fund. Old Mutual Zimbabwe Plc has undertaken to put in US$20 million with the Government of Zimbabwe putting in US$20 million. With regards to the US$20 million that Old Mutual said it would put in, we have started making disbursements and I will be officially unveiling the facility at a launch function (to be attended by) some of the beneficiaries of the fund.
With regards to the Jobs Fund, it’s being administered by Stanbic Bank. The bank has already started disbursing (the funds), so there is movement on that one. With regards the US$100 million Interbank Fund, this is being funded from offshore funds by African institutions. As I’m speaking, we are busy negotiating the agreements between these institutions. A traditional interbank market is run by the Reserve Bank with the privilege of the money it has because it prints money. But this is not the case here because of dollarisation. It’s money coming from outside, so there are legal issues that my experts and other experts are looking at now.
BM: How is this US$100 million going to be managed?
TB: The financiers — the owners of the money — have got a huge say here and there. There are two options (we are looking at) at the moment. The first option is to create a ring-fenced fund in the Reserve Bank of Zimbabwe (RBZ), which we would then guarantee (as the Ministry of Finance). So, the RBZ will continue to play their role but those funds will not be part of their balance sheet. That is very important because you don’t want this fund to be caught up with the legacy issues of the Reserve Bank.
The other option is to say all the banks should create a board, some kind of a monetary board that will administer this fund. But you find out (in situations like these) that he who pays the piper calls the tune. In other words, a lot is going to depend on the preferences of the financiers. But I cannot tell at this present moment if they will be in favour of a situation where the Reserve Bank plays a role so that there won’t be a lot of agreements to ring-fence this fund away from the normal Reserve Bank operations. We will let you know of the option we are going to take on unveiling the fund.
