THE value for money unit proposed by Finance and Economic Development Minister Mthuli Ncube last week is seen as the “right step” towards stamping out middlemen in Government procurement where this is not necessary and the elimination of forward and double pricing, partly blamed for driving inflation.
Minister Ncube said the distortions in the domestic market and weaknesses in the current public procurement processes were compromising optimal use of public resources, giving rise to ‘tenderpreneurship’ and corruption. He said the Government was setting up a value for money unit to scale up interventions towards greater due diligence before awarding contracts to ensure fair pricing and payments.
“The operations of the unit will be such that it does not result in additional delays to the current procurement process,” said Minister Ncube. Authorities and analysts concur that weaknesses in the Government procurement system are having an impact on both exchange rate and inflation dynamics in Zimbabwe.
In an interview, economics professor Gift Mugano said the real problem with the budget was how the funds were being distributed and the discrepancies in the procurement process.
“In addressing the economic challenges, the Government of Zimbabwe is strongly advised to expedite the establishment of the Value for Money Unit,” he said.
“The Value for Money Unit can be a game changer in eradicating rampant abuse of Government funds, which is key in stabilising economy.” He implored the Government to demonstrate the “high political will” in ensuring that the unit carried its mandate as expected.
In order to address the anomalies, Minister Ncube had earlier issued a statement compelling Government service providers to use the formal exchange rate and avoid offloading excessive local currency, obtained from payments for public programmes or supplies to the Government, on the black market.
Where it is determined that funds were channeled to the illegal foreign exchange market, the suppliers will be blacklisted by the Procurement and Regulatory Authority of Zimbabwe and “will be banned from participating in any government tenders to ensure that the Government is getting full and fair value.”
While the Reserve Bank of Zimbabwe has put in place various viable measures aimed at curbing inflation and stabilising exchange rate, some critics believe such interventions have been undermined by the Government procurement system.
“The Value for Money Unit is key in ensuring that middle men are stamped out where necessary because this is costing the Government too much money… once they are paid, the money is offloaded on the black market and causing exchange rate shocks,” Carlos Tadya, a Harare based economist said. “For any rational economic agent, does it make sense for the Treasury in the first instance to pass payment of a requisition, which factored in a forward exchange rate of say $2 000 instead of $400.
“Yet, ironically, men and women in the street can easily deduct the exchange rate used on any commodity in the shop… that is why households for example know; for this commodity, it is cheaper to buy using US dollar or Zimbabwe dollars. It is encouraging that the Minister has realized the value for money unit.”
Another analyst Mr Gerald Musara said the Government should honor its obligations on time to avoid variations, which have resulted in the Treasury paying more for services.
“In some instances, the Treasury releases money to settle outstanding payments say for maize deliveries. This certainly cause serious shocks on the exchange rate because the bulk of it will find its way of the black market,” said Mr Musara. “The ‘drip’ payment system helps to avoid the release of money on the market and minimize the shocks.”
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