THE Confederation of Zimbabwe Industries chief economist Perpetua Muzondo has said firms are spending nearly 18% of their revenue on regulatory costs, making their entry into the African Continental Free Trade Area (AfCFTA) challenging.
The government has been seeking to strengthen itself in the AfCFTA, as the trade agreement would give local firms access to Africa’s combined US$3,4 trillion gross domestic product through reduced tariffs and trade barriers.
Zimbabwe will next year begin preferential trading under the AfCFTA, allowing local companies to export products duty free, or with reduced duties.
However, at last week’s Zimbabwe Economics Society breakfast meeting, held in partnership with Friedrich Ebert Stiftung, business executives bemoaned the tax regime saying it is a cost on firms.
“With the regulatory costs, we are saying about 17,9% is the percentage of amount that is being paid by businesses on their overheads. So, this encompasses our Zinwa [Zimbabwe National Water Authority], our EMA (Environmental Management Agency), all the regulatory institutions, they are so many. So, these are some of the expenses which we are saying if they are reduced, our businesses will be competitive,” Muzondo said.
“Already we are in 2024, meaning that by 2025, 90% of our tariffs should be on zero percent.
“But, as industry, as we stand, currently our lobbying point as industry was to go to the ministry and beg for import licences so that we reduce the number of imports that are coming into the country because our industry is not yet competitive enough to compete with other countries.”
She said when 90% of the tariff lines are phased out in three months’ time, there will be an outcry from industry.
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“For us to be competitive the cost of doing business should also be reduced, which is probably the mandate of government,” Muzondo said.
Tanganda Tea Company Limited finance director Henry Nemaire said while they produced tea at US$1,05 a kilogramme compared to Kenya’s US$2,10, the tax regime in Zimbabwe was high.
“That’s when we come to face the reality of the taxation system in Zimbabwe in terms of the excess duty on fuels. There is a report that said that Zimbabwe is potentially more expensive than sub-Saharan Africa. That’s when we come across the cost around this country,” he said.
“So, if I want to send a 40-foot container to Nigeria, it costs me more in logistics to get that container to Lagos, than it costs us to land a 40-foot container in France, in Spain, in London, or anywhere in Europe, or even in China.The cost per kilometre into Africa is higher than the cost per kilometre into Europe. And this is the problem.”
Nemaire added putting the Intermediated Money Transfer Tax (IMTT) of 1% on outbound payments had weighed heavily on businesses.
“So, what Zimbabwe should do is that, minister (Foreign Affairs and International Trade minister Federick Shava), we should reform our tax system. Instead of progressing forward, what the Minister of Finance (Mthuli Ncube) did recently was to go backwards. He puts an IMTT of 1% on output-bound payments,” Nemaire said.
“That is effectively another duty on imports. And these are imports of raw materials coming into the country that we use and value add on to export into the region, to export into Nigeria, where we want to export to.”
AfCFTA will eliminate import tariffs on 97% of goods traded on the continent, as well as address non-tariff barriers.
