Zimbabwe’s Minister of Finance, Patrick Chinamasa recently shared the 2016 Mid-Year Fiscal Policy Review Statement which outlined the State’s financial priorities.
The statement included Chinamasa’s recommendations to limit government’s expenditure on salaries for the civil service which currently gobble up 97% of the national budget.
This was supposed to be achieved through the suspension of bonuses and the reduction of salaries and allowances.
In the latest development regarding this proposal, the Herald has reported that the government, through a statement issued by the Minister of Information, has assured people that civil servants will get their annual bonuses and that there will be no reduction of salaries and bonuses.
This announcement has been met with a lot of criticism for the way it displays a lack of policy consistency from the government while placing a lot of pressure on the Ministry of Finance to do the seemingly impossible – plugging holes in the economy without addressing some fundamental macroeconomic principles.
Investor confidence will likely be eroded by such policy flip-flopping and this will also affect every Zimbabwean.
Clearly, there are several implications to this decision and it is worth noting that the immediate impact will be felt in a number of sectors including, of course, technology.
As the State struggles to meet all its other obligations any sort of work that was meant to be bankrolled by the government is at risk of being postponed or derailed completely.
The government’s significant involvement in the way technology is delivered in the country means that any strain on national coffers will result in some services, solutions and initiatives in technology being delayed, altered or being compromised significantly.
Some examples of where this policy shift will be felt include the following;
The national digital migration project (aka digitisation)
Zimbabwe is in the middle of a digital migration project led by Broadcasting Authority fo Zimbabwe (BAZ). the project is expected to ensure that the country adopts international standards for broadcasting and content distribution through digital channels.
The project has however encountered some major challenges, primarily regarding its financing which was supposed to be provided through a $200 million disposal of spectrum to NetOne.
That deal collapsed and while the government looks for a new buyer for the spectrum BAZ is expected to secure financial support from the government. The plan, for now, will be to borrow money from POTRAZ’s Universal Fund.
However, that is only stop gap measure. In his last address to a parliamentary committee on this issue, Patrick Chinamasa emphasised how the national treasury did not have anything slated for this project.
This unfortunate situation won’t be helped by a reluctance to re-evaluate other costs centres like civil service remuneration. Which means that we can forget about digitisation coming to pass anytime soon.
The $25 million Innovation Fund
The government has, through the Ministry of ICT, made elaborate plans to create an $25 million Innovation Fund through mobile telecoms contributions. It is envisaged that this fund will provide State support to Zimbabwean startups and innovators.
The rollout of this fund has just started with innovation showcases meant to unearth worthy recipients of financial support. It’s a worthy cause that has the potential to create opportunities for some disadvantaged tech entrepreneurs.
However, pressing financial concerns of a national importance have been known to override any planned use of ICT related slush funds.
In this same mid-term policy statement Chinamasa outlined how the national digitisation project was going to be plugged with Universal Services Fund (USF) capital which is ironically another fund mobilised through telecoms revenues.
As such there is every reason to believe that any pool under the government’s control will be exposed to the same risks, especially in cases where short-term obligations emerge as major priorities for the treasury ahead of a national Venture capital investment campaign.
Government loses out on the acquisition of Telecel
In 2015, the Ministry of ICT through one of the government’s entities ZARnet moved in to acquire a controlling stake (60%) in local telecoms operator, Telecel from its foreign owners, Vimpelcom.
The $40 million deal,was underwritten by the National Social Security Authority (NSSA) – a State-alligned enterprise – which raised $30 million required for the completion of the acquisition on behalf of the government (after ZARnet had paid the initial $10 million).
Since then there has been a legal wrangle between the government – through ZARnet, and NSSA, as the pension fund wants to secure control of Telecel since it raised financing for the deal and led the acquisition, effectively buying the shares in Telecel.
In early 2016 the chairman of NSSA, RobinVela described the deal as,
a quasi-equity participation funding which gives the equity control of Telecel International Limited to NSSA until certain conditions precedent are met by ZARNet.
These conditions specified that within 60 days of the completion of the sale between NSSA and Vimpelcom, ZARnet would have the option to purchase the sale shares held by NSSA for the $30 million, effectively passing ownership of Telecel to the government.
However, failure to meet these obligations, by way of its inability to meet payments (the government will need $30 million) will leave NSSA in a better position to bargain for complete control of the mobile operator.
These cases are hardly a conclusive summary of every ripple effect that is set to follow this change. However, they do indicate that every type of economic decision can have a major impact even on technology.