Zimbabwe’s economy is expected to slow even further this year, the finance minister said on Thursday, worsening financial difficulties that have triggered a series of anti-government protests.

In his mid-year budget speech, Finance Minister Patrick Chinamasa told parliament the economy would grow by 1.2 percent in 2016, from the 1.4 percent forecast earlier in the year.

He said the budget deficit had already overshot the target in the first half of the year at $623 million, and that the shortfall for the whole year could rise above $1 billion.

President Robert Mugabe’s government is also expecting a slightly lower revenue of $3.76 billion for 2016 from an earlier target of $3.85 billion, Chinamasa said.

In the grip of its worst drought in a quarter century that has left 4 million people facing food shortages, the southern African nation is also running out of cash, forcing the central bank to impose limits on imports and withdrawals from banks.

Economic woes are feeding into frustration among Zimbabweans who have turned to social media to organise anti-government protests against cash shortages, high unemployment of above 80 percent and delays in payment of public sector salaries.

“The fiscal position remained under pressure during the first half of the year due to underperfoming revenues and high expenditures that exceeded the target,” Chinamasa said.

“It is imperative Mr Speaker Sir that we urgently address the wage bill, a major contributor to the growing fiscal deficit that is threatening financial sector and economic stability.”

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The 2016 Mid-Year Fiscal Policy Review Statement

“Improving Investor Confidence to Enhance Productivity”

The Mid-Year Fiscal Policy Review allows us to take stock of developments during the first half of the year, and progress with implementation of the National Budget, a key instrument in the realisation of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, Zim Asset.

Accordingly, the Review provides Honourable Members opportunity to consider necessary Budget interventions to re-align our fiscal policy thrust, informed by indications from the current and projected state of the economy, as well as anticipated public resources for the entire fiscal year.

The Review also gives progress on our on-going re-engagement process with the international financial community, including such international financial institutions as the International Monetary Fund, the World Bank and the African Development Bank, as well as bilateral cooperating partners.

This Review shall be complemented by the Monetary Policy Statement to be presented soon by the Governor of the Reserve Bank.

The 2016 National Budget Thrust

Under the theme “Building a Conducive Environment that Attracts Foreign Direct Investment”, the 2016 National Budget primarily focuses on continued implementation of Zim Asset over the period 2013-2018, with the goal of transforming Zimbabwe into an industrialised State, capable of affording its people better standards of living.

The framework for this was provided by His Excellency the President in his State of the Nation Address to Parliament on 25 August 2015, as outlined in the Ten Point Plan.

As Honourable Members will recall, the Ten Point Plan highlights the following:

• Revitalising agriculture and the agro-processing value chain;

• Advancing Beneficiation and/or Value Addition to our agricultural and mining resource endowments;

• Focusing on infrastructure development, particularly in the key Energy, Water, Transport and ICTs sub-sectors;

• Unlocking the potential of Small to Medium Enterprises;

• Encouraging Private Sector Investment;

• Restoration and building of confidence and stability in the financial services sector;

• Promoting joint ventures and public private partnerships to boost the role and performance of State owned companies;

• Modernising Labour Laws;

• Pursuing an Anti-Corruption Thrust; and

• Implementation of Special Economic Zones to provide the impetus for foreign direct investment.

Furthermore, His Excellency the President also reiterated “the importance of strengthening re-engagement with the international community … and that … the current re-engagement efforts with both bilateral and multilateral partners, including the African Development Bank and the World Bank under various initiatives should see improvement of relations and the opening up of new financing avenues for long overdue reforms and development cooperation”.

Similarly, His Excellency the President also buttressed on the importance of implementing “policies that will improve the business environment” in order to promote and attract both domestic and foreign investment, necessary for sustaining economic growth.

In this regard, drawing from Zim Asset and His Excellency the President’s Ten Point Plan, Government’s undertaking in its Strategies for Clearing External Debt Arrears and the Supportive Economic Reform Agenda, as outlined to cooperating partners in October last year in Lima, focussed on:

• Strengthening financial sector confidence.

• Accelerating re-engagement with the international community.

• Re-vitalising agriculture and the agro-processing value chain.

• Advancing beneficiation and/or value addition to the agriculture and mining resource endowment.

• Focusing on infrastructure development.

• Unlocking the potential of small to medium enterprises.

• Improving the investment climate.

• Accelerating public enterprises reform and improving public finance management.

• Modernising labour laws, aligning of laws to the Constitution and adhering to the rule of law.

• Pursuing an anti-corruption thrust.

While there are still some hurdles militating against our socio-economic transformation agenda, some milestones were achieved in a number of areas, including advancement of the re-engagement process.

Implementation Progress

Notwithstanding the challenges, allow me to outline some of the policy implementation areas where considerable progress has been noted during the first half of 2016, drawing from commitments in Zim Asset and our re-engagement programme with cooperating partners.

While details are outlined later, the achievements are summarised as follows:

Improving Public Finance Management

In the area of improving on the management of our public finances, the major gain has been the onset of implementation of measures towards sustainable fiscal consolidation.

This is anchored by measures to re-orient expenditures away from employment costs and more towards the development Budget, complemented by introduction of expenditure efficiency measures through decentralisation of public procurement, as well as savings on expenditures on public enterprises.

In this regard, public enterprises reform interventions are benefitting from establishment of dedicated monitoring and follow-up Treasury units for various entities, with a view of enhancing performance and accountability.

Focusing on Infrastructure Development

With regards to infrastructure development, interventions during the first half of 2016 focussed on water and sanitation, power generation and transmission, and ICTs.

As alluded to above, I will highlight the details in the section on developments in Budget expenditures during the six months to June 2016.

Improving the Investment Climate

The on-going review of a number of legislation, together with the removal of regulatory, transactional and administrative hurdles are also positive milestones on improving the ease of doing business environment, as well as strengthening Zimbabwe’s competiveness.

This has seen the country improving its Ease of Doing Business ranking from 171 last year to 155 this year.

Advancing Beneficiation and/or Value Addition to Resource Endowments

The economy is also set to benefit from interventions during the first half of 2016 to advance beneficiation of our domestic resource endowments.

The benefits from value adding our minerals and agricultural products as businesses re-invest into import substitution ventures are much larger over the medium term, with higher growth in contributions to GDP and decline in the current account deficit.

Already, some notable decline has been experienced in the current account deficit during the first half of 2016.

In the mining sector, the value addition of our minerals, such as gold and diamonds is already under way, and the objective is now to ensure implementation of the beneficiation plan developed by platinum producers.

Already, notable gains were registered in the gold sector during the first half of 2016, also benefitting from capacitation of small scale miners through the US$100 million mechanisation facility organised by Government and the Reserve Bank of Zimbabwe.

Increased gold sales to Fidelity Printers and Refiners also benefitted from the designation of gold millers as buying agents.

In agriculture, notable successes are also being experienced in the promotion of hides-to-leather and cotton-to-clothing value chains, among others.

Strengthening the Financial Sector

In the financial sector, we have also been able to deepen financial stability, with banks’ non-performing loan portfolios lowered, and cost of borrowed capital reduced.

Honourable Members will also be aware of recent initiatives by the Reserve Bank to ease tight liquidity constraints through promotion of plastic money, e-banking services, and broader use of multi-currencies, among other measures.

Pursuing an Anti-Corruption Thrust

I am also pleased to report on progress with Government’s anti-corruption drive, now benefitting from pursuit of coordinated Inter-Ministerial interventions, overseeing review of legislation, institutional and other administrative requirements.

These are seeing strengthening of systems of transparency through automation and introduction of online services across the entire spectrum of public service provision, including at our Ports of Entry.

Government also stepped up efforts to plug illicit financial flows as part of promoting anti-money laundering and countering the financing of terrorism.

Aligning of Laws to the Constitution

As Honourable Members will recall, out of the 299 Statutes in our books, Government has identified about 200 Statutes requiring alignment.

Work on the alignment of Laws to the Constitution is progressing well.

In this regard, out of the 200 Statutes identified as requiring alignment, 159 have been completed and processed through this August House, under the General Laws Amendment Bill and other Independent Statutes.

Realising the target of completing the remaining pieces of legislation during the remainder of the year will require that line Ministries accelerate processing timeously respective Statutes that fall within their mandates.

Unlocking the Potential of Small to Medium Enterprises

Resource mobilisation efforts and other business management supportive measures for Small to Medium Enterprises (SMEs) are sustaining their contribution to the economy in terms of employment creation, GDP and poverty alleviation.

The first half of 2016 witnessed the creation of the Small and Medium Enterprises Revolving Fund, which is administered by the Ministry of Small and Medium Enterprises through the Small and Medium Enterprises Development Corporation.

This was complemented by various banking sector SMEs windows, as well as value chain programmes linking SMEs to large established companies.

Notable examples include the Infrastructure Development Bank of Zimbabwe, with an SME Loan Facility of US$30 million, and a US$10 million Localised Empowerment Accelerated Fund co-managed by three banks, namely CBZ, CABS and POSB.

Re-vitalising Agriculture

You will be aware of various Government initiatives to empower the new farmer to fully utilise allocated land, following our Land Reform and Re-distribution Programme.

Central to this, is enhancing productivity and accountability of farmers over effective land utilisation.

In pursuit of this objective, Government intensified implementation of market based facilities as part of empowering and capacitating the new farmers.

During the first half of the year, Government introduced a US$500 million Special Maize Production Programme which targets utilisation of 400 000 hectares of land, with registration of interested qualifying farmers currently underway.

This complements such other facilities as the US$98 million More Food for Africa Programme supported by Brazil, under which farmers’ access, on a cost recovery basis, farm equipment and implements. This includes tractors, disc harrows, fertilizer spreaders, boom sprayers, among other equipment.

With regards to livestock, focus during the first half of 2016 was to control the spread of diseases, as well as rebuilding of the national herd, also prioritising dairy.

As a result, livestock numbers were on the increase in all categories, notwithstanding the drought situation during the 2015/16 season.

Way Forward

Mr Speaker Sir, notwithstanding the above achievements, the economy is still faced with a number of challenges, which cannot all be fully addressed over the short term.

Economic Developments

Growth

The economy is facing strong headwinds, with major challenges being experienced in the economy and business activity during the first half of the year than what the 2016 National Budget anticipated.

This primarily reflects downside risks associated with:

• The impact of the drought on our agriculture, with attendant supply challenges along the agro-processing linkage value chain;

• Depressed international commodity prices, particularly for our minerals;

• Limited domestic and foreign direct investment, also associated with our debt overhang;

• The growing fiscal deficit, also impacting on the liquidity of the financial system, as well as on business activity; and

• The resultant overall fall in incomes and weakening of domestic aggregate demand.

The above challenges are undermining performance of our key productive sectors, inclusive of agriculture, mining, manufacturing, tourism, construction and services.

Revenue Performance Enhancing Measures

Second quarter revenue improvement has been sustained through implementation of a number of measures geared at strengthening tax and customs administration, and the plugging of leakages.

Under the ambit of the Ease of Doing Business programme being coordinated by the Office of the President and Cabinet, Government has put in place an Inter-Ministerial Committee to oversee implementation of systems that improve on efficiency at our Ports of Entry. The Committee is further carrying out a needs assessment for all the relevant agencies operating at our Ports of Entry.

Allow me, therefore, Mr Speaker Sir, to acknowledge efforts being made by ZIMRA and other Government Agencies in plugging revenue leakages, which also contributed to collections rising by 9.4% during the second quarter of 2016.

The initiatives being targeted at improving ZIMRA operational efficiency and effectiveness included:

Automation

Enhanced full automation of ZIMRA systems is underway for improving various operations and plugging of loopholes on tax obligations.

Through the ICT systems – Systems Application Products (SAP) and ASYCUDA World, ZIMRA is strengthening its automation, including introduction of online services, which allow online lodgement of returns, application and verification of tax clearance certificates, improvement of compliance levels and the reduction of compliance costs.

The Systems Application Products (SAP) is also providing ZIMRA with an automated enterprises management resource platform covering tax and revenue management, human resources management, materials management and financial management.

Furthermore, during the first half of 2016, the automation of the sending of automatic reminders on due dates and an upgrade on the calculation of interest and penalty on late returns in the Tax and Revenue Management module was done.

This has seen an improvement in the compliance levels on return submission and payment.

On the other hand, the ASYCUDA World system is providing an internet based platform for the clearance of goods.

During the first half of 2016, the E-state warehouse management module, which provides an automated solution for the management of goods detained in the state warehouse, was piloted at Plumtree Border Post. The system will be rolled out to cover other State warehouses.

The increased use of the E-payments facility has provided convenience to clients and organisational operational efficiencies have also been enhanced.

Fiscalisation

In 2010, Government introduced the VAT fiscalisation recording of taxable transactions in order to create an interface between taxpayers’ fiscal devices and the ZIMRA platform so as to enable real time monitoring of transactions by ZIMRA.

To date, ZIMRA has set up a platform for receiving data. This is performing to satisfaction and is able to receive reports from devices that have been connected.

With regards to progress on the part of operators, two suppliers of fiscalised electronic devices have successfully managed to connect with the ZIMRA platform and are in the process of rolling out to their clients.

In addition, two operators have already started fully transacting their sales data through the fiscal devices.

Authorised Economic Operator

ZIMRA is also implementing the concept of the Authorised Economic Operator (AEO), which entails prioritising tax compliant operators who clear commercial goods through simple customs clearance procedures.

Beneficiaries of the AEO have a good tax record, hence, are subject to less stringent physical examinations.

The AEO concept became effective from 1 January 2016, hence, registered operators are now enjoying the privileges due to them.

Debt Collection

Increased debt collection efforts by ZIMRA through implementation of client tailored payment plans, appointment of agents, debt set offs, among others, have resulted in the recovery of US$326.53 million during the first half of 2016.

This exercise will be pursued on the back of other fiscal measures relating to set offs.

Review of Duty Free Allowances

In order to complement efforts to resuscitate the local industry, the travellers’ rebate, which is granted on goods imported by a traveller once per calendar month, was reviewed downwards from US$300 to US$200.

The remission of duty granted on goods imported by a person returning to the country on the same day that they departed was also reviewed downwards from a free on board value of US$50 to US$10.

Furthermore, consignments transported on behalf of third parties are now compelled to be cleared as commercial importations instead of private importations.

Automated Verification of Travellers for Rebate of Duty

Furthermore, under the auspices of the Single Window System, ZIMRA is also installing an automated travellers’ verification system to curb the rampant abuse of the travellers’ rebate in clearing commercial consignments.

Strengthening General Customs Administration

For purposes of enhancing tax compliance by all potential tax payers and, thus, increasing the tax base, ZIMRA is undertaking street mapping, spin-offs from tax audits, customs post clearance audits, which have increased the number of registered taxpayers in the first half of 2016 by 8 525 new registrants compared to 8 649 new registrants in 2015.

This is being implemented alongside tax payer segmentation according to size – and categorised as, large companies, medium-sized companies, and small-to-medium companies – and along sectors, which include mining, agriculture, wholesale and retail, services, among others.

Each segment was divided into portfolios which are being managed by dedicated focal persons.

Closed Circuit Television

Some of the measures that have already been put in place at the Beitbridge Border Post in order to promote order, transparency and improve efficiency include installation of a Closed Circuit Television System (CCTV).

The CCTV monitors adherence to border procedures by ZIMRA and other agencies.

Currently, Phase 1 of installation of CCTV has been completed. Indoor cameras have been installed, both in offices and sheds, where traffic passes through.

ZIMRA has already procured 2 imaging laptops which will be used to trace the activities undertaken at the border post.

The Second stage, to set up the CCTV in the outdoor area, is being spearheaded by the Ministry of Home Affairs.

Implementation of the above measures aims at attaining, in the end, the ZWS ISO 9001: 2008 Quality Management System certification, which is expected to be completed by December 2016.

Cooperation with other Agencies

Apart from the above initiatives, ZIMRA also received support from other Government Agencies under the following areas:

Electronic Single Window System

In view of the multiplicity of Government agencies stationed at the Ports of Entry and Exit, Government is implementing an Electronic Single Window System which entails co-ordination and co-operation of all agencies involved in regulatory requirements at the Border Posts.

Some of the functions normally exercised by Government agencies, which include collection of fees and levies and enforcement of regulations, prohibitions and licence validations, among others, are being assigned to ZIMRA.

The Memorandum of Understanding to empower ZIMRA to collect fees or perform other necessary functions on behalf of respective Government agencies has been drafted by the Attorney General’s Office.

Advance Cargo Manifest

The advance cargo manifest requires transport carriers to provide in advance, information pertaining to the list of passengers and cargo.

The advance passenger and cargo manifest was extended to other road carriers and the rail transport operators, with effect from 1 January 2016.

Electronic Cargo Tracking System

Transit fraud is increasingly becoming a major source of revenue leakage, which has a negative effect on the growth of the local industry.

Transit fraud occurs where goods destined for the domestic market are cleared through ZIMRA as transit goods for other countries, that way avoiding payment of duty.

In order to curtail transit fraud, Government is introducing Electronic Cargo Tracking, with the State Procurement Board inviting tender submissions from potential service providers.

Monitoring and Enforcement of Regulations

The proliferation of vendors, beggars and unlicenced clearing agents who solicit for business from travellers, has fuelled congestion and corruption at ports of entry.

Efforts are ongoing to decongest the Customs Controlled Area through the removal of Unauthorised Persons from the Customs Controlled Area. The Ministry of Home Affairs, as the lead agency, ensures order and security at the ports of entry.

This is further supported by other enforcement efforts, including road blocks, tax audits and customs post clearance audits.

The provision of 24 vehicles for use by security agencies, and 10 motor bikes has also facilitated monitoring of the border post and the border area by the police and army.

In addition, metal detectors have been procured by the Ministry of Mines and Mining Development for purposes of detecting any minerals being carried illegally by travellers.

Enhancement of Border Efficiencies

Beitbridge Border Post, being one of the busiest inland ports, which links the Northern and Southern Africa corridor, requires rehabilitation in terms of infrastructure and additional human resources in order to adequately cater for the high traffic volumes.

In order to enhance movement of cargo and travellers, Government will engage an independent border post expert to reorganise the Beitbridge Border Post.

The hiring of the consultant is funded under the Capacity Building for Finance and Economic Management Project, being funded by the African Development Bank.

New Border Post

Government has opened the new Mlambapheli/ Mmamabaka Border Post with Botswana. This should also facilitate trade and the convenience of travellers.

Fighting Corruption

Revenue leakages at the country’s border posts remain a major challenge, depriving the country of much needed revenue.

These leakages are through connivance among ZIMRA and other Government agencies’ officials, travellers and other individuals.

The use of fake documents, tampering of scanners by some security personnel in order to facilitate false declarations, connivance between ZIMRA officials and touts to allow entry of goods without paying the requisite duty levels, false declaration of cargo as being in transit to other countries, but ending up being sold in Zimbabwe are some of the methods being applied to circumvent legal requirements.

In its concerted effort to fight corruption and enhance revenue collection, ZIMRA, in conjunction with other Government agencies, has undertaken the following:

• Utilisation of a hotline and social media access points such as WhatsApp, Facebook and Twitter to enable the general public to report corruption;

• Client education through various media channels;

• Whistle-blower facility; and

• Implementation of National Data Processing Centres, thereby reducing face to face interface between officers and clients.

Disciplinary and criminal prosecution of perpetrators of corruption during the first half of 2016, saw 22 cases of suspension being dealt with, of which 13 cases were finalised with 4 dismissals and 9 given final written warnings.

In addition, Mr Speaker Sir, all border control agencies are redeploying their personnel who had served at the border post for more than 10 years.

In order to ensure deployment of officials of good standing, newly deployed employees are required to undertake lie detector tests.

Staff development through training of both ZIMRA and agency personnel is also being prioritised in order to instil expertise, professionalism and integrity among other essential qualities.

Outlook

In the outlook, revenue is projected at under US$3.7 billion by year end. This represents decline from the initial projection of US$3.85 billion.

External Sector

Mr Speaker Sir, the external sector is also characterised by unsustainable trade and current account imbalances, reflecting declining exports, low foreign direct investment flows, and limited offshore lines of credit, against high current account outflows, primarily in the form of imports.

Exports

As at end of June 2016, exports, which contribute over 60% of the liquidity flows into the country, totalled US$1.124 billion.

In comparison with the corresponding period in 2015, exports declined by 9% from US$1.232 billion.

Exports (US$)

	2015	2016
January	267 020 357.00	249 187 245.97
February	260 732 005.80	209 589 639.89
March	188 435 836.28	166 595 684.91
April	185 714 488.01	157 875 383.79
May	137 501 649.41	165 325 205.30
June	192 897 024.92	176 418 990.37
Total	1 232 301 361.42	1 124 992 150.23

Source: ZIMSTAT

The decline in export performance is a reflection of the overall slowdown in real economic activity in 2016, weighed down by the following factors.

• Drought-induced contraction in agriculture;

• Declining global mineral prices;

• Weakening of regional and other trading partner currencies;

• Suppressed capacity utilisation in the manufacturing sector; and

• Lack of affordable external lines of credit.

Imports

The import bill for the first half of 2016, though down 14% on the US$2.9 billion for the corresponding period in 2015, remains unsustainably high at US$2.5 billion

Imports (US$)

	2015	2016
January	519 568 574.97	395 364 970.01
February	474 425 593.24	427 727 110.01
March	499 402 078.04	478 066 878.36
April	438 407 700.50	356 493 195.37
May	452 935 239.34	408 364 622.32
June	532 342 522.07	430 555 618.58
Total	2 917 081 708.16	2 496 572 394.65

Source: ZIMSTAT

The decline in imports is also beginning to benefit from a combination of the Priority list put in place by the Reserve Bank in May 2016 to ensure effective utilisation of foreign exchange and the recently gazetted Statutory Instruments, which removed goods that are locally available from Open General Import Licence exemption.

The still relatively high import level has also meant a high current account deficit, which is estimated at US$2.5 billion during the first half of the year, and constituting 12% of GDP.

This represents a significant and unsustainable outflow of liquidity from the domestic economy.

The containment of over dependency on imports should limit the overall balance of payments projection to a deficit of US$397.6 million for 2016.

Hence, Government will take advantage of the forthcoming 2017 National Budget to propose some of the necessary measures to address any emerging gaps in order to remain on course towards the realisation of the further advancement of our Zim Asset agenda.

Policy Review Thrust

Policy Priorities

Notwithstanding the prevailing depressed economic activity, Government remains focussed on ensuring that the Zim Asset programmes and targets remain on track, with relentless efforts being directed, first and foremost at stimulating production in all key sectors of the economy.

This should be complimented by demand side measures, critical for building a conducive operating environment for our productive sectors and macro-economic stability.

Urgent priorities under the 2016 Mid-Year Policy Review, therefore, relate to the following:

• Poverty reduction;

• Stepping up efforts on stimulating productive sectors;

• Improving the investment/ease of doing business environment;

• Restoring fiscal discipline in the public sectors;

• Rebuilding confidence in the financial sector;

• Advancing the re-engagement process in order to fully normalise relations with the international financial community, that way eventually opening access to new financing;

• Enhancing efforts on mobilising domestic resources for our Zim Asset programmes; and

• Maintenance of the multi-currency regime.

Multiple Currency Arrangement

The multi-currency arrangement remains central to our policy thrust as already enunciated in the Zim Asset.

I, therefore, also want to further allay fears and concerns of re-introduction of the Zimbabwe dollar through ‘the back door’.

As I have on many occasions previously reiterated, and as has also been stated by the Governor of the Reserve Bank, the economy is not yet ready to adopt its own currency, and will remain with the multiple currency regime, until such a time when our economic fundamentals are capable of supporting a local currency.

Hence, our efforts should be directed at building reserves in the different foreign exchange reserve multi-currencies, that way also mitigating against risks associated with using one currency.

This is also in view of difficulties, on the part of traders, in accessing other currencies owing to heavy reliance on the US dollar.

Indeed, some cooperating partners are preferring to be paid in other currencies beside the US dollar.

Government has, therefore, agreed to take steps to move away from sole reliance on the US dollar and encourage the use of other currencies such as the euro and the rand.

Promoting increased use of the euro and the rand will also boost investment and trade relationships between Zimbabwe and the European Union and South Africa, which both present huge markets for our various agricultural commodities.

Stimulating Production

Allow me now to turn to respective proposals on urgent policy interventions to stimulate production across the various sectors. This will also entail me touching on some of the specific sectoral developments during the first half of 2016.

Manufacturing

Support for Local Industry

Honourable Members will be aware of the gazetting of SI 64 of 2016 which removed more goods that are locally available from Open General Import Licence exemption.

This expanded coverage of locally available goods removed from the Open General Import Licence exemption by the gazetting of SI 18-20 of 2014/15.

This implies that individuals and companies intending to import some of the specified goods would have to apply for licences and justify cause for importation of such commodities.

However, the overall objective is to support the local fragile industry from unfair competition, that way, facilitating employment creation and GDP growth.

The selection of goods that now require import licence was done after careful assessment of capacity of respective firms’ ability to supply.

The import licencing requirement, therefore, provides the necessary key leverage as there is huge underutilised capacity within the domestic economy.

Similarly, the supportive import substitution measures through SI 64 to promote domestic production of basic and essential commodities will also create scope for employment generation and enhanced industrialisation.

However, the import substitution measure being pursued by Government, should be viewed as a short term measure meant to protect the ailing industries in the face of economic shocks facing the economy and in line with the SADC Industrialisation Strategy and Road Map.

Hence, companies should take advantage of these temporary measures to grow and become resilient on both the domestic and global markets.

Consignment Based Conformity Assessment

It is also necessary that we protect local industry from the influx of sub-standard imports, some of which do not meet quality, safety, health and environmental standards in line with World Trade Organisation (WTO) Agreements.

In this regard, Government has engaged a French company, Bureau Veritas, to provide Consignment Based Conformity Assessment services, under the auspices of Statutory Instrument 132 of 2015.

The full implementation of this programme started on 1 March 2016, and only conforming listed products are being allowed to enter the country.

The programme has substantially reduced hazardous and sub-standard listed imported products, hence, protecting consumers and the industry from unfair competition.

Re-tooling

The measures Government is instituting in support of domestic industry will need to be complemented by new investments into companies to address challenges related to reliance on cost ineffective antiquated and obsolete machinery and equipment.

Over and above foreign direct investment initiatives to attract new partner investors, Government interventions in support of industry also include reviewing of customs duties on imported equipment, and lowering company costs on capital borrowed from financial institutions.

Pursuant to this, discussions on finalising the second phase of the Distressed and Marginalised Areas Fund (DiMAF) and the Zimbabwe Economic and Trade Revival Facility (ZETREF) are on-going.

With regards to partnering with other investors in industrial revival, I am pleased to acknowledge some of the new investments which were approved in 2015, and are now coming on stream, with some at advanced stages of implementation.

Total capital injection for these projects is about US$324 million, across sub-sectors such as food, drinks and beverages, transport and equipment, metal and metals products, pharmaceuticals, plastics, among others.

In addition, the Zimbabwe Investment Authority (ZIA) also processed 29 investment applications worth US$49 million for the manufacturing sector.

Value Chains

Mr Speaker Sir, allow me to also acknowledge the support we continue to receive from cooperating partners with regards to support for revival of our industries.

In this regard, in promotion of value chains, the African Development Bank is supporting the Beef and Leather Value Chain programme under the African Development Fund Technical Support Facility and Fund for African Private Sector Assistance to the tune of US$2 million.

This targets provision of resources to increase the overall competitiveness of the beef and leather value chains, targeting the dry areas of Matabeleland.

The respective agreement between Government and African Development Bank was signed on 21 January 2016 and the project implementation is expected to commence in the third quarter of 2016.

The project is expected to improve the competitiveness of the beef and leather value chain, primarily through building stakeholders’ production capacities and enabling them to access local, regional and international export markets.

Furthermore, value addition in the cotton and leather sectors is benefitting from a €4.2 million grant received from the COMESA Fund, supportive of development of the sub-regional integration agenda.

This targets the cotton-to-clothing value addition chain, as well as value addition in the hides–to–leather sub-sector. Resources from the grant are also benefiting capacity building programmes.

Export Promotion

Mr Speaker Sir, Government has also been making parallel efforts to boost industrial exports by consolidating and expanding existing markets, whilst also exploring new markets with the strategic focus on the regional markets.

In the context of deeper regional integration, the country is pursuing the industrial export promotion agenda through SADC, COMESA and the Tripartite Free Trade Area of COMESA-EAC-SADC.

Government is also involved in negotiations for the establishment of the African Union Continental Free Trade Area which is aimed at boosting intra-African trade.

Industry is, therefore, being called upon to look beyond Zimbabwe’s borders by exploring into regional export markets, taking advantage of the preferential trading arrangements the country has negotiated.

Improving the Business and Investment Environment

Investment Potential

Given our strategic geographical position, abundant natural resources, diversified industry, supported by well-developed infrastructure as well as a highly skilled labour force, we have much potential to attract foreign direct investment for rapid development of our economy.

In this regard, the rate and level of investment licence renewals also indicate high interest in investing in the country.

This requires that we concretise on all opportunities for investment, including all investment applications approved by the Zimbabwe Investment Authority (ZIA).

During the first half of 2016, most of the US$305.6 million investment applications were in manufacturing and mining.

Hence, initiatives to enhance investor confidence among existing as well as potential investors can, therefore, not be over-emphasised.

Empowerment Policy Framework

Government, in April 2016, provided clarification on the interpretation of the Indigenisation and Economic Empowerment Policy, for the guidance of Government Ministers, the business community and current and would be foreign investors.

Having clarified contentious issues around the indigenisation and empowerment policy, Government, as a matter of urgency, is now amending the respective Act in order to align the existing legislation to the pronouncements made by His Excellency the President, in April 2016.

Accordingly, I will be updating this August House on progress over this matter in the forthcoming 2017 National Budget.

Ease of Doing Business Reforms

Implementation of the Ease of Doing Business (EDB) Reforms to improve the investment climate as well as strengthening Zimbabwe’s competiveness in the global arena is advancing well.

The reforms have already begun to eliminate the disproportionate high regulatory, transactional and administrative burden that is mostly borne by businesses currently operating and wanting to operate in Zimbabwe.

The regulatory burden had left Zimbabwe ranked at 171 last year among 189 nations in the World Bank’s Doing Business indices.

Improvement in the country’s Ease of Doing Business ranking from 171 last year to 155 this year, therefore, bears testimony to the positive trajectory of our reform initiatives.

These administrative and legislative reforms were in the areas of starting a Business and Protecting Minority Investors, Enforcing Contracts and Resolving Insolvency, Getting Credit, Paying Taxes and Trading Across Borders, Construction Permits and Property Registration.

Legislative reforms are targeting the Companies Act and ancillary legislation, whilst the other facet deals with reforming the procedural, time and cost elements of doing business.

As the Ease of Doing Business initiative progresses, Zimbabwe’s ranking is targeted at below 100 by the end of 2016, with further ranking improvement anticipated in the medium term.

Impediments to Exporting

Mr Speaker Sir, the Ease of Doing Business initiative also targets removal of impediments to exporting, a major source for our liquidity.

This is more so as such impediments as border efficiency management systems often end up undermining whatever export promotion programmes and incentives we put in place.

Targeted for immediate removal are such impediments as bureaucratic export permit requirements, as well as the attendant levies and fees related to these regulations and requirements.

Other impediments relate to export documentation, required deposits, high costs of road infrastructure in view of limitations with rail transport and the multiple taxes and levies from different authorities.

Government, as part of the Ease of Doing Business reforms, is reviewing these constraints with a view of streamlining export documentation to reduce processing time, creation of one stop shop for processing of export and import documentation and the review of the related laws.

One Stop Investment Shop

As part of the Ease of Doing Business reforms, Government is pursuing operationalisation of the One Stop Investment Shop, capable of providing investors with adequate investment information and also facilitating investment licencing in a short space of time.

Mr Speaker Sir, I am pleased to report that relevant line Ministries and Departments have now seconded the respective staff capable of taking prompt decisions, at the ZIA One Stop Shop.

This arrangement is parallel to the development of an on-line investment licencing system.

This system brings benefits related to transparency, removal of travelling costs on the part of investors, speeds up the processing of investment applications, and access to information.

Special Economic Zones

Mr Speaker Sir, the set-up of the One Stop Investment Shop at ZIA to facilitate faster approval and licencing of new investments will also aid development of Special Economic Zones.

As indicated in my previous Budget Statement, Government is finalising the crafting of the necessary framework for the creation of Special Economic Zones (SEZs).

The Bill, which provides the incentive framework, has passed through Parliament and is awaiting Presidential assent to become law.

Consultations on the pilot project are ongoing and indications are that the Sunway City Integrated Industrial Park in Harare, the Victoria Falls Financial and Tourism Hub and the Bulawayo Industrial Hub would be used for trials before the SEZ initiative is spread to identified centres.

Successful implementation of Special Economic Zones will attract increased foreign direct investment, that way increasing capacity utilisation in the economy.

National Competitiveness Commission

Cabinet approved the National Competitiveness Commission Bill, which now awaits Parliamentary approval.

The Commission will be responsible, among others, for reviewing regulations on doing business in order to enhance the competitiveness and attractiveness of the country to investors.

Already, Board members comprising of captains of industry have been identified and are offering guidance on competitiveness.

In this regard, the Commission will spearhead the continuous scanning of the business environment, monitor the cost drivers and advise on measures needed to address emerging challenges.

Border Efficiency Management

In an effort to facilitate business and investment, Government has adopted a Border Efficiency Management System which seeks to promote trade facilitation and reduce congestion at the country’s border posts through encouraging efficient and joint clearances by Border Agencies.

In this regard, Government has put in place an inter-Ministerial Committee to oversee implementation of the border efficiency system.

Critical, will be success with regards to efficient and joint clearances by Border Agencies, including the rationalisation of their operations.

In the medium term, further improvements are envisaged as we transform such Ports of Entry as Beitbridge into One Stop Border Posts.

Trade Insurance

Trade insurance is essential to mitigate risks related to exporting and importing.

It is in this context that Zimbabwe applied for membership in the African Trade Insurance (ATI) Agency in 2010. The membership Agreement was signed in 2011, ratified by Parliament and is now awaiting instruments of ratification to be issued by His Excellency the President.

In the 2016 National Budget, I indicated that Zimbabwe would be expected to contribute a minimum capital subscription of US$15 million.

Of this, the AfDB pledged to support the country with US$5 million, while US$10 million was to be mobilised from local banks and the private sector.

In this regard, I am pleased to announce that Government, through the Reserve Bank, has paid US$10 million for Zimbabwe’s membership in ATI whilst the AfDB has availed UA2 080 000 (approx. US$2.9 million).