The Sunday Mail
NEW tax measures from the latest half-year fiscal policy review will likely impact listed companies differently, but wholesale material changes are unlikely, especially in the short term, analysts have said.
Finance and Economic Development Minister Patrick Chinamasa on September 11 introduced a 5 percent duty on both voice and data tariffs and a 25 percent customs duty on mobile phone imports, among a broad range of measures that are designed to augment revenues for the taxman and stimulate local industrial activity.
Duties on a wide range of imports including beverages, dairy produce, furniture, cosmetics, meat and meat products were also tightened as a deliberate intervention to boost local production.
Market watchers expect the new levies on voice and data to weigh on telecommunication companies’ revenues from voice.
“This (duty) will likely accelerate the existing decline in voice revenue, potentially slow down growth in data, thus negatively impacting average revenue per user (ARPUs),” stockbrokers IH Securities said in a commentary on the fiscal policy.
Mobile firms are now leveraging on data and mobile money transfer services as those from voice and SMS – the traditional cash cows – have continued to soften as consumers turn to cheaper online-based messaging services such as Whatsapp.
In the full year to February 2014, Econet, the country’s biggest mobile telecommunications company by subscribers and revenue, reported a 1,8 percent decline in voice, SMS, interconnect and roaming services.
Naturally, Econet has seen annual profits decline 27 percent since 2012 as voice income fell.
However, data and EcoCash revenue climbed 62 percent and 10 percent respectively.
IH Securities believe the hike in mobile handsets will, in the short term, have limited impact on the cellular network operator.
“Econet have recently been on-boarding clients onto data through the retailing of low-cost smart-phones.
“At this stage this is not a big part of their business and so the duty on mobile handsets will not have a material impact on existing revenue streams, but will have an impact on their future plans to grow data ARPUs by retailing low-cost smartphones,” noted IH Securities.
It is also forecast that the higher duties on imported mineral and alcoholic beverages will only marginally impact on Delta’s volumes.
Alcohol imports account for a small percentage of the beverage manufacturer’s business.
Volume growth for Delta has been under pressure from weakening consumer spending.
In the first quarter to June 2014, the sparkling drinks and beer maker reported a 1 percent growth in volume as lager and soft drink sales fell 21 percent and 8 percent correspondingly.
However, sales of cheaper sorghum beer rose 15 percent.
Analysts say other prudential interventions, particularly on crocodile skins and dairy products, will spur activity in local industry.
Mr Chinamasa exempted crocodile skins from excise duty on the basis of lack of capacity to value-add within the local industry.
The new measure is expected to be a boon for Padenga Holdings Ltd, which produced 43 000 skins last year, but reported a 5 percent decline in its bottom-line profit to US$3,2 million.
Also, listed gold miners RioZim and Falgold will likely get relief from the downward review of gold royalties from 7 percent to 5 percent.
Prices of the yellow metal have dropped from a peak of US$2 000 per ounce in 2008 to US$1 235 per ounce last week.
Last month, RioZim reported that its losses widened to US$7,4 million during the half year to June 2014 from US$2,3 million a year earlier, while last year Falgold posted a US$12,5 million loss, down from a profit of US$4 million in 2012, blaming the decline on higher labour and power costs, and disruptions at Dalny Mine, which lowered production.
Falgold has now decided to sell Dalny Mine and its associated infrastructure to African Consolidated Resources for US$7,5 million. The deal will be completed at the end of October.
