The Sunday Mail
The continued development of agriculture as a primary business engaged in by well over half the population, plus the need to ensure that these businesses are viable, were all pushed forward last week by the exemption from duty and VAT of a range of equipment and the pilot scheme on insuring crops.
The exemption of duty and VAT on imported and locally made and assembled equipment means that a farmer can stretch their dollars when it comes to properly equipping a farm.
Some might see it as a subsidy. But there is an interesting condition, the farmers or other importers need to produce their tax clearance certificates to benefit and that means a large swathe of Zimbabweans now have to make their presence known to Zimra.
This is fair enough. If farming is to be increasingly seen as a business then the business rules apply, that is, a set of records and accounts that at least meet the minimum standards set by Zimra, which are not dramatically onerous, but do imply recording all income and expenditure.
This applies not just to the farmers and family members bringing in an item, but also their suppliers. Obviously major importers and manufacturers already have the paperwork in place, and simply have to make sure they are up-to-date with their tax payments to Zimra.
These large commercial concerns will be expected to feed in the lower cost of procurement into their costing formulas to make sure their customers win.
The concessions are not being put in place to help, at least not directly, a major importer or industrialist boost their profit margins and their revenue. And someone will have to be watching to make sure that does not happen. Efforts will have to be made that competition flourishes to provide the market pressures.
Indirectly, of course, the formal companies will benefit. They will be able to sell more stuff because more farmers are able to afford their products and a business can make a lot more money with a modest margin on more sales than with a large margin when sales are very low.
But there are smaller companies and even little rural family businesses who have yet to make the acquaintance of Zimra. This latest move fits in with that range of budgetary measures that Minister of Finance and Economic Development Professor Mthuli Ncube put in place in his last budget.
As with those measures, there will be presumptive taxes and duties if you cannot produce your tax clearance certificate for those duties and for most people these taxes are higher than being honest about what you do earn. The Treasury is not desperate to collect presumptive taxes, but it does want to know a lot more about how people make money and how much they make.
In a growing economy this makes sense. Many in much of the economy at this time are not going to be paying tax, or at least very little tax, but as more producers move up the ladder, they will need to pay their share and if tax records stretch back several years this will be a simple matter.
Our rates are not that high and anyone in business has a range of legitimate deductions, such as a farmer paying for equipment.
The added advantage of having decent records and tax clearance certificates is that suddenly bank managers and others who lend money became more attentive and helpful. You cease being a nuisance who ought to be ignored and become a potential customer who can establish a decent relationship. So your business can keep growing.
Climate insurance has been pressed as a theoretical concept for several years. It is ever more a necessary part of any farming operations, so a farmer can stay on the land and stay in business even if hit by some disaster. The tobacco industry has had hail insurance for many years, and at one stage the very small premiums were compulsory for all commercial growers so that the collected pool of cash would bail out the tiny percentage wiped out.
That particular scheme is one built around cost recovery, without profit, but without a hole in the bank when the next farmer needs help, and the same system needs to be in place when the theory is turned into practice, with the first pilot scheme this season.
A pilot scheme is needed to iron out all that can go wrong and to find out just what records of every farming operation, even the smallest, must be kept. And we need to put in place the assessors who will need to check what was planted and how severe the damage is. Here the active involvement of the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development will be required, which is why the ministry is involved at the central level in the pilot schemes.
Fortunately the recent upgrades in Agritex, both at the staff level and providing the motorbikes for transport, meet that requirement. The conversion of Pfumvudza/Intwasa to a proper business system makes the insurance scheme possible. Already farmers have to keep records, and Agritex checks how much land was prepared before inputs are assigned and delivered, and then checks that the fertiliser was applied and the seeds planted, to remove that element of who would rather sell what they get instead of growing maize.
The basic records, both on these small-scale farms and at Agritex, may need to be upgraded, but at least they now exist to be upgraded. So one benefit can lead to more benefits. The level of compensation needs to be set, but the guiding light in all insurance is that the hardworking honest producer does not lose when disaster strikes. But at the same time we need to make sure that you cannot insure against laziness, dishonesty or incompetence.
For a start, we need to keep premiums, whether paid by farmers in whole or part, or paid by the Government or other supporters, as low as possible and the accumulated pool of cash is applied to help the real farmers recover. Already Pfumvudza/Intwasa has an element of insurance, with those farmers who were hit by the long dry spell late last year, getting new seed for replanting.
The fundamental thrust of our economic growth strategy is to get what is easily our largest group of producers producing more, and making sure that all are doing this. This creates wealth, spreads that new wealth and so creates the huge markets that the rest of the economy can supply and grow as well. Last week’s measures, with all their ramifications, accelerate that process and so accelerate national growth as well as helping individual farmers.
