Pro-Poor Budgeting: Panacea to an Inclusive and Shared National Vision
By Samuel Wadzai
Pro-poor budgeting ensures allocation of adequate resources to basic social and economic sectors that directly reach the poor people and sectors that indirectly but greatly enhance access to economic and social opportunities. For a long time now, the Zimbabwean Government has been accused of coming up with national budgets that do not reflect the broader hopes and aspirations of the people. In other words, what delineates the Government’s strategic priorities doesn’t reflect on the social and economic longings of the citizens. This has resulted in most, if not all, recent budget statements by different ministers of finance being dismissed as either anti poor or simply ‘Elite Epistles’. This is an unhealthy scenario especially for a country that is trying to rediscover its vision and mission after many years of economic and political decadency.
There is an urgent need for the Government to foster and champion a culture of transparency, accountability and inclusivity when developing important national products such as the national budget. A national vision, no matter how good, can never be attained when there are disagreements on how national resources will be utilised. The people must always be at the centre! Therefore a national budget must echo the everyday hopes and aspirations of the people including the less privileged. I posit that an inclusive national budget can be the basis and foundation for a shared national vision because it will be a product of an all-encompassing and sincere consultative process to gather the views and priorities of the people.
In a report by the International Monetary Fund (IMF) in 2018, Zimbabwe was said to have the second largest informal economy, as a percentage of its total economy. Indeed some statistics indicate that the informal sector makes up as much as 68 percent of the country’s Gross Domestic (GDP). However, a closer analysis of Zimbabwe’s recent budget statements will leave one wondering if the informal economy has any role to play in the national economic dynamics. Fiscal policy development has always been top down thus creating challenges when it comes to implementation. The fiscal authorities do not consult all stakeholders especially those in the informal economy when developing policy instruments and this has resulted in conflict with players in the sector. We expect government through the national budget to commit to broaden its policy consultations to include players in the informal economy. As players in the informal economy ecosystem we have certain expectations that we believe should be addressed by the Minister.
The following are some of the most important issues which I feel if included in the budget will go a long way in improving the overall performance of the informal economy and foster its growth and development:
Review of tax regime
There can be no doubt that the introduction of the 2 percent tax is a great inhibitor for business in particular those in the informal economy. It is our belief that the Minister review this tax, along with the entire tax regime as part of easing of doing business and COVID-19 mitigatory measures. The prevailing tax regime makes it difficult for most informal economy businesses to acquire tax compliance certificates. Moreover, the presumptive tax which the government is eager to implement targeting such informal economy businesses as barbershops and hair saloons is unjustifiable especially when there is already a 2% tax on all mobile money transactions. Most of these operations make extensive use of electronic money and thus are already being heavily taxed. To add another tax would only make the tax burden too heavy and push most operators out of business.
Review of the National Social Security Authority
The ravages of the Covid-19 pandemic have brought to the fore the inadequacies of the National Social Security Authority (NSSA). It is our prayer that the Minister will undertake a review to ensure inclusion of the informal sector in NSSA operations so that they may make contributions at concessionary levels and can be cushioned in the event of loss of income as happened under lockdown. Social security is important for providing income upon retirement or incapacitation by accidents as such, the fiscal authorities should provide mechanisms for the informal economy to make social security contributions. This can be done by availing social security numbers to which informal sector operators can use to make monthly payments towards their social security. Such as scheme should be transparent and providing real-time data as to how much contributors are worth at any given time. I am aware of the processes that are already underway to broaden the NSSA scope and we urge the authorities to ensure that the process is as inclusive and transparent as possible.
Formalisation of the informal economy
We expect the national budget to take heed to our long-standing call to provide policy framework for formalisation of the informal sector. The current fiscal environment as it relates to formalisation of the sector is too stringent. In 2015 the International Labour Organisation (ILO) adopted the “Transition from the Informal to the Formal Economy Recommendation” commonly known as “Recommendation 204” which the government of Zimbabwe is signatory to. The Recommendation is built on a shared understanding and experience of ILO members states that it is through an integrated strategy, a policy mix and institutional coordination to promote the employment and income opportunities, the rights and social protection of the millions involved that transition to the formal economy can be best facilitated. The Ministry of Public Service, Labour and Social Welfare must be applauded for taking the initiative and rolling consultative processes that led to the development of a draft formalisation strategy for Zimbabwe. We therefore call up the Ministry of Finance to ensure that resources are availed to see through this noble intervention.
Infrastructural Fund
The advent of the Covid-19 pandemic necessitates the exercising of hygienic practices, along with social distancing. Currently, most trading places throughout the country have facilities that are woefully inadequate for these times. Provision of running water is vitally important along with paved market stalls if the disease is to be contained. Areas where vendors and other informal sectors operators are working from, especially in Harare, Masvingo, Gweru, Mutare and Beitbridge, lack basic infrastructure such as toilets and ware housing facilities. As such, wares of the informal traders get damaged thereby affecting quality and profitability. The budget must make provisions to support infrastructure construction for informal economy workers.
Consultative decision making is key to progress and it is our hope and prayer that policy makers do away with top down approach and begin to consult widely before coming up with Important products such as the national budget. Informal economy workers are ready to engage with any government department or ministry to the betterment of not only the sector but the country. The national budget must directly target the poor and generally aim at reducing poverty and the whimsical levels of inequality in Zimbabwe. To that end, I urge civil society and development advocates to develop monitoring and tracking tools to track the budget and evaluate if it meets the expectations as set out the National Development Strategy (NDS1).
Samuel Wadzai is the Executive Director of Vendors Initiative for Social and Economic Transformation (VISET) and a Human Resource Development Expert. He writes in his personal capacity.