Renowned economist predicts a tough 2024

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The year 2024 has started on a tricky note for citizens as prices of basic commodities surge in the wake of businesses implementing new government tax measures.

Prominent economic analyst Dr Gift Mugano says Zimbabweans should brace up for a tough year in 2024.

He says in 2024, the anticipated drought and commodity prices are expected to worsen the country’s economic position.

Mugano writes:

The recently gazetted Finance Act 13 of 2023 which operationalise the anti-people and anti-industry budget is a disaster!

The anti-people and anti-industry budget is coming into effect at a time when the economy is already suffering from permanent challenges such power outages; drought of confidence; command exchange rates which are creating an uneven playing fields between informal traders & formal traders in particular; high cost of finance; high tax regime; etc.

In 2024, the anticipated drought and the anticipated fall in commodity prices are expected to worsen the country’s economic position.

It is given that as a result of these permanent challenges which we carried along for decades, the country is uncompetitive when compared with its peers in the region. The new tax measures (VAT on basic commodities, 30% surchage on traders without tax certificate, toll fees, etc) are adding more salt on the wound.

Under normal circumstances, because of the drought of competitiveness which is worsened by the fact that we are using the USD, it is given that the informal traders sources from the region. Already, tuckshops and the boots are stocked with commodities from the region.

The irony is that exogenous shocks which are anticipated to hit the economy in 2024 will result in a sharp surge in cross border trading.

In view of this, our humble expectations were that the GOZ was supposed to institute measures aimed at protecting the local industry/curbing excessive imports as opposed to instituting measures which are militating against the country’s own industrial policy.

Alas, on the contrary, the GOZ cut off over 6 million traders from local value chains/local businesses, i.e., GOZ literally push traders to import from the region at the expense of local manufacturers.

Informal traders will not fold their hands and die.

Lizawabona amandla amatraders!

Simba rematraders muchariwona!

Because GOZ has refused to consider our advice, we have to pay the following price:

Massive USD price increases;

Local producers will lose business/sales and fall in capacity utilisation;

Massive job losses and rise in poverty;

GOZ will lose tax revenue in a BIG way. Local tax revenue contribution from business is expected to take a nose dive as traders opt for the regional supplies – this will have a serious bite on budget performance;

Massive disruption of production. Although this will cut across all sectors, producers of perishable products (such as bread and milk products) and low value products which traditionally can’t go through the value chains will suffer the most.

For example, is it possible to push bread/ice cream through the value chain, i.e., manufacturers, wholesalers and retailers? So, we will not see Proton trucks in distributing bread to tuckshops/vendors? Are they supposed to exclusively take their products to wholesalers and retailers in return will have to take it from the wholesalers? Does this really work?

Anyway let us leave the bread issue. Since the commodities are supposed to be distributed to wholesalers and retailers will have to source from wholesalers, what will happen to the existing business model where it is established that, as per the directive by wholesalers/retailers, manufacturers are required to use their own logistics to distribute their goods to defined branches as per the instruction of the wholesalers & retailers?

Does it mean that retailers will have to take up a new business model which requires them to invest into fleet of trucks with a view to comply with the new laws? Are our retailers ready for these new challenges in terms of financial muscles and logistical capacity/expertise?

What lead time do they need to put up the right structures and resources required to adjust to this new model? Are we not going to have shortages? What will happen to prices of goods if they eventually take up this route?

Lonyaka umumo womkhonomi welizwe lethu elithandekayo uzabe ufanana lokukhweza ubabhemi ebhasini. 2024 inzima!

Mamiriro ehupfumi hwenyika gore rino achafanana nekukwidza mbongoro (donkey) mubhazi. 2024 yakaoma.