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Charity Ruzvidzo and Lovemore Zigara Business Reporters
THE Zimbabwe National Chamber of Commerce (ZNCC) has called on the government to urgently relax some of its regulatory requirements and consider tax exemptions on ailing companies to incentivise investment and growth.
Following last week’s Confederation of Zimbabwe Industries (CZI) report that industrial capacity utilisation dropped three percent this year, the business lobby group suggested tax exemptions for ailing but strategic companies whose influence has a direct bearing on the performance of other sectors.
Crispen Mugova, the regional ZNCC chairperson for Matabeleland, said regulatory bodies were demanding too much money from companies.
“A regulatory system is meant to ensure that the country is operating well. However, in Zimbabwe the regulatory system is not conducive. We’ve NSSA, Zinara, EMA, Zimra and the police demanding too much money from industry, which is already struggling.
“Also, the ordinary person is given unnecessary penalties. This affects industry because that money could have been spent on procurement of products from local companies,” he said.
Mugova said the recent increase in fuel tax will negatively affect industry. He said the increase in transport costs meant that companies were forced to pass the burden to customers, a move that also affects demand for certain products.
“Certain products are going to lose market as people may opt only for necessities. Demand will decrease since prices are going up. Companies especially in Bulawayo, are working at a scale of four out of ten. The cost of production is very high, tax hikes will only reduce the already down scale.
“Excise duty discourages the consumption of certain harmful products such as alcohol and tobacco. Putting excise duty on airtime will only discourage communication, which is vital to the survival of our industries. The government should look for other ways of sourcing revenue,” he said.
Speaking at a pre-budget consultation seminar in Gweru recently, the ZNCC Midlands chapter chairperson, Wellington Chinembiri, said giving a tax holiday to struggling companies will help them back to their feet and the benefits will cascade to the downstream industries.
He asked: “Why doesn’t Minister Chinamasa give companies such as Zimalloys, Ziscosteel and Zimglass among the so many industrial giants in the Midlands, some tax holidays to allow them to grow because their impact can be felt in the different sectors of the economy especially the downstream industries?”
Their recommendations will be forwarded to Minister Chinamasa.
Chinembiri said government needs to put finality to the Essar deal which has dragged on for over three years since New Zimsteel has the potential to stimulate growth in other industries in and around Midlands.
Midlands has suffered massive de-industrialisation which has seen major companies such as Zimbabwe Castings, Kariba Battery Manufacturers, Caridon Abrasives, among others, shutting down.
Thousands of workers have been thrown onto the streets as a result. The country’s sole flint glass manufacturer, Zimglass, has been placed under judicial management together with Zimbabwe Alloys.
ZNCC chief economist Kipson Gundani called on government to review its penalties on companies which are not paying tax on time. He said paying tax in the prevailing economic challenges erodes profits for some of the entities.
Said Gundani: “The profit margin in this environment is very small and in most cases the taxes are paid from the profit. So what it simply means is that the punitive penalties are eroding the profit base as well as the capital base.
“It then defies the need to retool and replace obsolete technology which means the behaviour of the tax collector is not in sync with the objectives of rescuing this economy.”
Zimra recently came under the spotlight for coming up with punitive fines which are hurting business.
Online Reporter