Business lobbies for access to funding, tax cuts

Nelson Gahadza Business Reporter

Zimbabwe’s largest business member groups have implored the Government to take measures to make provisions for easier access to affordable financing facilities for increased industrial productivity, reduce the tax burden on businesses and sustain current economic stability through the 2023 National Budget.

The Government and various business representative bodies are conducting nationwide consultations to gather input into the 2023 national budget.

The Confederation of Zimbabwe Industry (CZI), in its pre-budget document, said Industry was ready to help grow production in the country.

“The 2023 National Budget should generally be centred on removing constraints for business operations as a way of making business attractive for financing.

“The National Competitiveness Commission should finalise the regulatory impact assessment tool that they are working on for implementation on January 1, 2023 to enable the tool to be used to streamline the ease of doing business drive,” it said.

CZI added that the policy environment should ensure that the ease of doing business is prioritised, which would see the removal of all policy constraints that threaten the smooth operations of business entities.

The Industry lobby group said the positioning of the Industrial Development Corporation (IDC) as a solution to industry financing needs has been appearing in the National Budget since 2019 when the first national budget for the implementation of the Transitional Stabilisation Programme (TSP) was announced.

However, the implementation of the initiative has taken too long. “It is important for the 2023 National Budget to identify sticking issues so that industry can begin to benefit,” said CZI.

It noted that the 2022 budget set aside $2,3 billion for the provision of medium and long-term finance to enable companies across the agricultural, mining and service sectors to implement value addition activities.

“Therefore Government should make IDC functional as a development finance institution by the end of June 2023,” CZI said.

Zimbabwe received 677,4 million Special Drawing Right (SDRs) (US$958 million equivalent) from the International Monetary Fund (IMF) in 2021, as part of the bailout of member countries to cushion them from the impact of Covid-19.

The 2022 National Budget highlighted that US$30 million would be allocated towards the productive sector value chains while a retooling revolving fund for new equipment and replacement for value chains was to be created.

CZI said these funds had not yet been made available to industry. “It is hoped that the 2023 National Budget will place priority on ensuring that finance measures, including SDR resources, are made available,” it said.

The Industry lobby group noted the desire was there that the Government was aware of the need to make sure Zimbabwe develops an ecosystem for venture capital financing to thrive, which is quite evident in previous budgets statements going back all the way to 2019.

It said this culminated in the setting up of the National Venture Capital fund under the 2020 National Budget.

CZI said it hopes that in 2023 the Fund will become fully operational and CZI underlines its commitment to collaborating with the Ministry so as to promote the emergence and funding of new and innovation-driven industries through the National Venture Capital Fund.

Industry also wants incentives for encouraging locally made goods and the increase in aggregate demand will have limited trickle-down effects to the industry if the bulk of consumption is on imports.

It said the growth of the manufacturing sector only happens when output being produced locally increases.

On top of that, Industry said it hopes that the 2023 National Budget will finally see some traction in the issue as industrialisation levels expected under National Development Strategy 1 (NDS1) require fully functional enablers by ensuring that there is a balancing act on the need of ensuring that utilities tariffs enhance their viability while inefficiencies are addressed so that they are not part of the cost drivers in the tariffs.

“Prioritise ensuring that key enablers such as ZESA Holdings, NRZ, and ZINWA become fully viable commercial enterprises by the end of 2023,” it said.

In its submissions, the Zimbabwe National Chamber of Commerce (ZNCC) said there was need for the Government to provide a tax relief to the sector as the wider economy recovers from the pandemic and tries to navigate the harsh operating environment as a result of the geopolitical environment.

ZNCC said when the 2 percent Intermediated Money Transfer Tax (IMTT) was introduced, the spirit behind its introduction was to bring into taxation the informal sector which was not being taxed.

“What it has done, however, is to overly tax the formal taxpayers,” it said.

The Chamber said the Government should allow IMTT to be tax deductible and its application has to be different between businesses and consumers.

ZNCC also noted that the 4 percent IMTT on foreign currency transactions was a disincentive to banking and has resulted in starving the supply of foreign currency liquidity to the formal banking channels.

The Chamber said given the recent policy announcement that the multi-currency regime will be in effect during the entire duration of the NDS1 the Ministry of Finance and Economic Development should review the IMTT on foreign currency, from 4 percent to 2 percent.

ZNCC said on policy level, the high interest rates are making the funding of business operations and new investments unviable.

“We understand the need to curtail speculative borrowing and bring the much-needed stability in the economy by raising interest rates. However, the projected growth of 4,6 percent may fail to be attained due to a decline in investment and aggregate demand due to the high cost of borrowing,” said ZNCC.

It also said as the economy continues to recover from the pandemic, the Government’s support towards the major sectors of the economy is required.

The Confederation of Zimbabwe Retailers (CZR) on its part said given the already low levels of disposable incomes, the high inflation is further eroding demand for basic necessities as it eats into the little income.

“While we understand the Government’s need to promote stability through fiscal and monetary tightening, we also urge the Treasury to judiciously balance that with the need to ensure that sustainable demand is fostered to avoid social instability, including crimes such as robberies which are on the rise,” it said.

It said that the Confederation has also recorded declined customer traffic flow in the formal retail and wholesale sector with some shops having reported declines ranging from 25 percent to 40 percent.

Economist Mr Prosper Chitambara said the sentiments from business and industry are critical in that cost financing for the industry is important given the liquidity challenges in the economy.

He said the tax burden has been an issue over the years and it is something that the Minister of Finance and Economic Development needs to look at.

“The tax burden across the whole economy has resulted in high prices for instance the price of fuel is among the highest in the world due to the tax burden and other fuel value chain costs,” he said.

He said the Government should also focus on social sectors such as healthcare, indicating that the current state of financing for this sector is coming from external sources, hence there is a need to prioritise public spending to improve health care.