The Sunday Mail
Darlington Musarurwa and Africa Moyo
WHEN Finance and Economic Development Minister Patrick Chinamasa stands before Parliament on Thursday to present the 2016 National Budget, it will be intriguing how he responds to demands from industry to further tighten the noose on imports.
Like Charles Dickens’ literary icon Oliver Twist, Zimbabwe industry keeps asking for more.
Government rolled out various tax measures to stem the rising tide of imported goods, particularly from South Africa, in the Mid-Term Fiscal Policy Review of August 30, 2015.
But local industry still feels threatened.
The tax measures – effective September 1, 2015 – include the removal of cooking oil, maize meal, meat, sugar and flour from the travellers’ rebate.
The traveller’s rebate, a duty-free allowance granted to bona fide travellers, is currently pegged at US$300.
There were various other interventions targeted at the textiles, and printing and packaging industries to improve the fortunes of local industry.
And in the same month that these measures took effect, the seemingly stubborn avalanche of imports from South Africa continued.
Trade deficit widens
Statistics from South Africa’s department of trade and industry indicate that in September alone Zimbabwe imported goods worth US$170 million, or R2,4 billion using Thursday’s US$1:R14,1 exchange rate, from Africa’s second-biggest economy; compared to US$156 million goods bought in the same month a year earlier.
Conversely, exports to South Africa in the month under review slumped 30 percent to US$11,7 million from US$16,7 million in 2014.
A negative trade balance of US$156 million was, therefore, recorded for the month. The trend ultimately mimics the imbalances in the terms of trade between the two countries during the first nine months of the year.
In the January to September period, Zimbabwe sent goods worth US$106 million (R1,5 billion) to South Africa, but took in goods valued at US$1,3 billion (R18,5 billion), yielding a negative trade balance of US$1,2 billion. Such figures give local industry ammunition to lobby for more protectionist policies.
Upping the noise
At the recent pre-budget seminar in Victoria Falls, millers and bakers, and furniture, plastic and battery manufacturers implored the finance chief to invoke further protectionist tax measures.
The Grain Marketers Association of Zimbabwe recommended 25 percent customs duty on maize meal imports and an additional 20 percent surtax charge.
The association says a customs duty of 35 percent and a 30 percent surtax on wheat flour is in order. Furniture manufacturers, who said they needed more than US$5 million to retool, are pushing for Government to not only take the lead in buying local products, but also to impose a 40 percent duty on all imports in that sector.
“The sector also requests a 25 percent export incentive for locally manufactured products for it to be competitive on the international market. In addition, the sector recommends the removal of all wooden products from travellers’ rebate to make locally produced furniture products cheaper and competitive.
“The sector further urges Government to impose a 40 percent duty on all furniture items including those in knock down form,” are some of the proposals from the Furniture Manufacturers Association of Zimbabwe.
The Battery Manufacturers Association wants automotive batteries to be laden with a surtax of US$20 per battery imported irrespective of the source market. They add that Government has to impose an annual import quota of 18 000 units on batteries that specifically come from Botswana.
The sector, BMA says, could be in better shape if Government removed duty on polythene battery separators – a key raw material in the sector – from Europe and Asia. There are more demands.
The National Bakers Association of Zimbabwe maintains that Government has to retain the 75:25 flour quota, where local wheat flour continues to be prioritised.
Chinamasa’s headache
Underlying the difficulties that the Treasury currently faces, local industry is, in addition to make a pitch for import restrictions, lobbying for Government to consider removing duty for farming and manufacturing equipment.
Zimbabwe National Chamber of Commerce CEO Mr Takunda Mugaga said last week that removal of duty on capital equipment could help companies retool and improve efficiencies.
He also noted a need for beneficial tax incentives for exporters.
“As a chamber, we continue pushing the Government to look at such matters as they sign these FTAs (Free Trade Areas), as well as introducing beneficial tax incentives mostly to exporting companies.
“Another area of concern is the cumbersome and costly approval procedures for rebates; our problem is not the tax levels in the country (as) only Botswana has lowest average tax rates in the region, but the challenge is the cumbersome procedures that make it impossible to benefit from any available tax incentives.
“. . . the penalty regime was crafted under a weak currency and (is) now too heavy under dollarisation. In most cases, it is akin to surrendering your goods or shutting down your company. Penalties are not meant to kill,” said Mr Mugaga.
ZNCC is of the opinion that non-tariff barriers such as inefficient border posts, roadblocks and bureaucratic procedures in accessing permits, which increase the cost of doing business, must be addressed through upgrading border facilities, reducing the number of roadblocks and decentralising permit processing outside Harare.
It is also felt that Government has to improve the macro-economic environment through expediting reforms.
Some of the reforms under consideration include the launch of the e-programme that synchronises and facilitates on-line processing of investment applications.
There is also a strong belief among industrialists that Minister Chinamasa has the scope to provide relief for an industry smarting from rolling power outages by legislating for zero-duty on all imported commercial generators for industrial use until the power situation normalises.
The miners weigh in
The mining sector is also expecting key interventions it believes will improve both the regulatory environment and production.
Fidelity Printers and Refiners, a unit of the RBZ and the country’s sole gold-buyer, contends that the royalty payment system can be tweaked to make it more efficient by indexing royalties to the prevailing gold price.
This, it is argued, will be convenient for both producers and buyers.
It is also FPR’s expectation that Treasury will avail low interest rate funding to gold producers by harnessing funds from the National Social Security Authority.
The Zimbabwe Mining Development Corporation believes the Finance Ministry can do more to spur gold producers under its management, which need more than US$22 million to recapitalise.
ZMDC is also lobbying for reduction of levies by local authorities on mining companies and mining lease fees.
All these expectations, and more, almost certainly make the Finance Minister’s job unenviable.
Will Oliver get more? Or will he be kicked into the streets and told to man-up?
Summary of industry recommendations
Grain Millers Association of Zimbabwe – Customs duty of 25 percent on maize-meal plus 30 percent surtax and a 35 percent customs duty on wheat flour including a 30 percent surtax
Furniture Manufacturers Association of Zimbabwe – 25 percent export incentive for locally manufactured goods and a 40 percent customs duty on all imported furniture items.
Plastic Manufacturers Association – Exports incentives and the removal of import duty on all raw materials, including the regulation of substandard imports by the Standards Association of Zimbabwe.
National Bakers Association of Zimbabwe – Zero duty on all imported commercial generators for all industrial use until the situation normalises and the maintenance of the 75:25.
Battery Manufacturers Association – Surtax of US$20 per every automotive battery imported into Zimbabwe and an annual import quota of 18 000 units on batteries from Botswana.
