Source: Govt introduces tax rebates but industry isn’t pumped – The Standard January 13, 2019
GOVERNMENT has introduced tax rebates for bakers, pharmaceutical companies, furniture makers and clothing manufacturers in a bid to spur productivity, but players in the industry say government should focus on availing foreign currency.
BY TATIRA ZWINOIRA
As shortages of foreign currency in the southern African economy intensify, businesses reliant on imported raw material have been going under great strain.
National Bakers’ Association of Zimbabwe president Ngoni Mazango told Standardbusiness that beneficiaries may not enjoy the benefits of the rebates because of their constrained capacity to import.
“The challenge which we have is to source for those raw materials and to pay for them from these foreign countries. It is well-appreciated and will assist in a way, but that is not the major issue we are looking for. We want the foreign currency to be able to import these raw materials…the major issue is the foreign currency which we need to be able to bring in these raw materials,” Mazango said.
Statutory Instrument (SI) 275 of 2018 will allow bakers to receive a rebate for wheat glutton, baker’s fats, propionic acids (used in the making of bread and cakes to inhibit surface mould) seed mix, palmitic acids and vitamin C and its derivatives.
Mazango said the reason why bakers were looking at increasing prices was due to the fact that most of the ingredients and machinery were imported.
Pharmaceutical manufacturers also received a rebate on customs and excise duties on many raw materials listed in SI 278 of 2018.
But, Pharmaceutical Manufacturers’ Association of Zimbabwe chairperson Emmanuel Mujuru echoed Mazango’s sentiments, noting that they did not have adequate foreign currency to import in the first place.
“It is just an addition of other materials that were not covered in the other rebate we had previously received…Obviously it reduces the costs of importing raw materials and also means that our cash outlays are also reduced. What was happening was that we were paying VAT of 15% and duty 5% to 40% depending on the material, which basically means we were outlaying about 20% up-front if we import anything,” he said.
“So, now, that money becomes available for buying raw materials and that helps our industry. However, it is overridden by the foreign currency shortages.
It is beneficial, but I think at the moment that is more critical to industry.”
SI277 of 2018 gives clothing manufacturers rebates on certain fabrics and threads widely used to make clothes.
In the 2019 National Budget, Finance minister Mthuli Ncube stated that “due to the diversity range of fabrics demanded by the market, the budget proposes to include additional fabrics that are not locally produced, under the Clothing Manufacturers Rebate”.
Players in the clothing sector and furniture manufacturers who spoke to this paper on condition of anonymity also said that priority should be the allocation of foreign currency, otherwise they would not enjoy the rebate.