A STRIKING feature in Finance minister Mthuli Ncube’s mid-term policy review announced last week was his unwillingness to boost spending power to stimulate demand.
Without bolstering spending power, Ncube can kiss goodbye to his ambition to rebuild Zimbabwe to its heyday.
He is creating the groundwork for a worse economic downturn because companies cannot manufacture goods that rot in warehouses.
In his wild goose chase, Ncube failed to grasp one major issue: That this is a market where only about 2,5 million people are formally employed.
This means Zimbabwean firms are funnelling their products into a very small market.
The crisis confronting Zimbabwe gets worse when one considers that the few formally employed persons earn far less than the $40 640 poverty datum line.
It would make sense for the minister to increase the tax-free threshold to at least $50 000, as requested by retailers.
This would be beneficial on many fronts.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
Zimbabwe’s already overtaxed workers would have reason to wake up and go to work because they would be able to take care of their families.
Ncube’s argument is that availing to consumers more spending power through relaxing taxes would throw the broke government into further misery.
That’s not true.
Considering that there is so much pampering of top civil servants and the politically connected, rampant theft and economic mismanagement, government, surely, has capacity to operate without feeling the pinch of the foregone, say $100 billion, which ends up driving business.
So, as long as there is no extra dollar to spend, poverty levels will deepen.
The minister should know that most workers earn the free-falling Zimbabwe dollar, but require foreign currency to fund their daily expenses.
