ZW VIEW | Budget: Put money back into people’s pockets, Mthuli

Mthuli Ncube has one job when he walks up to the mic in Parliament to present the 2020 budget; put money into the pockets of consumers.

The Finance Minister will not have missed the news from the country’s largest consumer facing companies over recent weeks; Zimbabweans have run out of money to spend.

In case Mthuli didn’t see the news, here is a rundown.

At Natfoods, which is one of the country’s largest manufacturers of basic foods, the volumes of groceries such as rice and salt, are down 47% over its last half year. Customers bought 37% less snacks and stockfeed sales were down by a quarter. Maize meal volumes fell 5%, only saved from bigger drops because of remaining subsidies.

In short, Zimbabweans can no longer afford even the most basic foodstuffs. They cannot afford to eat out too, as the results of Simbisa, which runs the country’s largest fastfood outlets, such as Chicken Inn.

In its last financials, Simbisa said the number of customers dropped 5% in the year to June this year. The company cited “pressure on consumers which has dampened consumer spend across the entire Zimbabwe consumer sector”. Simbisa is having to invest more in outlets in upmarket locations, targeting what the company calls the “higher income demographic”, a worrying sign of the widening divide between the haves and the have-nots.

Zimbabweans cannot even afford to numb their pain on the bottle. Delta, the country’s biggest brewer and beverage maker, says drinkers drank 40% less beer in the quarter to September, and about 48% less in the six months compared to the same period last year.

In the six months to September, Zimbabweans drank less than half of the amount of soft drinks they had over the same period last year; volumes were down 56%. Over Delta’s last three months, Zimbabweans drank 36% less drinks.

There was a 29% drop in the consumption of sorghum beer, such as the Chibuku Super, a brand that has previously benefitted from disposable incomes from mining and farming.

But it’s not just the Chibuku drinkers feeling the heat. Afdis, which sells spirits such as Chateau and Viceroy plus wine brands like Nederburg, has seen total volumes for its last quarter falling by 50%. The biggest drop was in the company’s ready- to-drink category – the likes of Hunters and Savanna Dry – which fell 63% from last year’s record sales due to price hikes.

MD Cecil Gombera told the Afdis AGM last week that his company was battling with falling consumer spending against forex shortages.

 “This has necessitated frequent price adjustments in order to remain viable while cognisant of the affordability issues affecting consumers,” Gombera said.

Even mobile internet is down, falling 8.2% in the third quarter this year, the first quarter in one and half years to record a decline in data consumption.

A day ahead of the budget, Dairibord has reported more bad news on the consumer front. It sold 22% less milk in the three months to September. The company also saw volumes in the food division falling by a massive 58%, while beverage volumes were down 47%.

Just hours ahead of the budget, OK Zimbabwe, the country’s biggest supermarket chain, said volumes are down 23% in the six months to September. Trading has become “progressively more unstable”, the company said in an update on Thursday.

These are among the key numbers that Mthuli will need to pay attention to. This year, the economy will contract for the first time since 2008, according to the IMF and by the Treasury’s own estimates. The IMF sees a 7.1% decline and a modest 2.7% recovery in 2020. The Ministry of Finance has forecast negative growth of 6.5% and a surprisingly ambitious 4.6% rebound for next year.

Austerity to growth?

Mthuli has recently shifted his narrative from austerity to growth. His dogged mission to tame the twin current and fiscal deficits has succeeded, but only on paper, as he has so far missed his ultimate targets, stabilising inflation and the exchange rate.

In a recent pre-budget strategy paper, he said this budget will be a “transition from austerity to stimulating growth”, saying it would focus on growth and productivity, job creation and competitiveness.

To even begin doing that, or meeting a fraction of his ambitious growth targets, Mthuli must find a way of stemming the collapse in consumer spending. With less and less customer to sell their products to, the next logical steps for companies is to scale back on operations, lay off workers, and thus continue the spiral.

Consumption is a dirty word for some bureaucrats, but it is a key driver of growth; in China, consumption contributed 60.1% to the economic growth of the world’s second largest economy in the first half of this year.

Tax breaks

Top of his list of relief measures must be tax breaks.

In July, he increased the tax-free threshold from Z$350 to Z$700. He needs to do more on tax bands. The Consumer Council of Zimbabwe, which tracks the cost of basics, estimated in October that a family needed Z$3,748 just for the basics.


In October 2018, Mthuli announced a 2% tax on e-transactions. It has been a hugely unpopular tax, earning him nicknames like “Mthtwo Percent”.

But he has stuck to it. It has done the job, helping him trim the deficit and raise revenue. In the last quarter alone, the tax earned ZIMRA Z$661 million.

In October, he said the tax would stay.

“I cannot pre-announce what I will say in the budget, all I can say generally is we want to support growth and productivity. One of the things we have to look at is obviously incentives and tax adjustments,” he said in an interview with ZTN.

Not surprisingly, he has support from ZIMRA boss Faith Mazani, who told MPS recently that the tax had helped to include those that had not been paying tax.

“The 2% tax was received negatively by the public but from our tax structure and statistics, compliance has been very low,” she said.

It is therefore unlikely that the tax will go entirely. However, now could be time to rethink the size of the tax. A cut on the tax could ease st least some of the pressure on prices and incomes.

Spend, spend, spend

Government spending, especially when done badly as has been the case, can hurt the economy. However, more productive spending can put more money into the pockets of workers and push for the recovery that Mthuli craves.

One way of doing this is increasing infrastructure spending, which has lagged recurrent expenditure under successive Finance Ministers. For the 2020 budget, the capital development budget is projected at Z$7.1 billion, which is 28% of the total expected revenue.

On November 1, Treasury said government had spent Z$464.6 million on road infrastructure this year. The Ministry released a document listing planned and ongoing roadworks, for a budget of close to Z$900 million.

If Mthuli is to increase consumer spending, he too has to spend more, using the kind of spending that spreads government wealth from its love for imported luxuries to where it matters; the pockets of consumers.

Expand safety nets

In April, a panel of UN experts said the austerity measures had been implemented without enough safety nets for the poor, deepening poverty in the country.

“We are gravely concerned that, as the situation in Zimbabwe deteriorates, the Government is pushing people further into poverty,” the experts said. “We are not aware of any Government measures to provide even minimal safety nets for those who are already living on an economic cliff-edge and who will suffer the most from these regressive policies.”

It is possible for Mthuli to expand welfare programmes, some of which he has funded from his 2%, by, for once, acting on promises to cut back on needless recurrent spending. Hope for spending cuts, however, has faded as President Mnangagwa racks up the air miles and expands his bureaucracy, breaking all the promises he made.

Over 7.5 million Zimbabweans need food aid this year, according to the UN, after the worst drought to hit the region in 40 years. With only patchy rainfall expected this season, the desperation is likely to deepen. How Mthuli’s structures his 2020 budget will tell us just how seriously this government is taking that crisis. He will need to show real steps to soften the blow.

Mthuli’s austerity measures emptied Zimbabweans’ pockets. Now that he is talking growth, it’s time he put back that money, lest the falling volumes across the economy spiral into a fresh decimation of industry.  

The success of his budget can no longer be measured by fancy accounting metrics. He will be measured by the difference he brings to the pockets of ordinary consumers.