Govt lays down the law

GOVERNMENT will review all fiscal concessions, such as duty and tax incentives, issued to various companies with a view to revoking them where beneficiaries are caught abusing privileges extended with good intention.

This comes as a number of leading supermarkets and manufacturers have started pricing some of their popular products exclusively in foreign currency, despite getting foreign currency from the auction.

Confederation of Zimbabwe Industries president Denford Mutashu confirmed the pricing of key commodities exclusively in hard currency saying up to 90 percent of procurement was now US dollar-based.

Mr Denford Mutashu

A number of firms have been pricing in forex on grounds that they are not getting adequate foreign currency from the auction system, which accounts for only 30 percent of their needs.

The Ministry of Finance says the bulk of local companies’ foreign currency requirements come from the interbank market, domestic sales in hard currency and export retentions.

Secretary for Finance and Economic Development George Guvamatanga said Treasury revoked the once-off suspension of import duty facility it had given to Beitbridge Juicing Company over its decision to price its products solely in US dollars.

Mr Guvamatanga said the Government would consider harsher penalties for those found on the wrong side of the law, including possible revocation of banking facilities for entities abusing funds from the auction system.

Beitbridge Juicing Company, a subsidiary of beverages giant Schweppes Zimbabwe, had been given the special dispensation to import 10 000 metric tonnes of oranges and 5 000 tonnes of grapefruit duty-free, effective July 1, 2022.

Mr Guvamatanga said in a letter to Schweppes Zimbabwe managing director Charles Msipa on Monday that the special privilege had been revoked after the Government noted the company was now charging its products exclusively in foreign currency.

This was in direct violation of an agreement on which the privilege of suspended duty facility was based, which sought to improve affordability and availability of the company’s goods in domestic currency.

“You will be aware that beneficiaries of tax incentives are expected to complement Government interventions with responsible pricing models with a view to ensuring affordability of goods, which is key in achieving Government’s development objectives.

“In view of the above, I wish to advise that, pending conclusion of investigations on your pricing model, the suspension of duty facility has been revoked. In view of this, all new imported consignments will, with immediate effect, be liable to duty at prescribed rates,” he said.

Mr Guvamatanga said some of the privileges that had been extended to local companies with good intentions, including duty and tax incentives, were issued in recognition of some of the structural flaws in the economy.

In an interview yesterday he said; “As a Government, we are willing to listen if the players comply, but if the privileges are abused we withdraw. We may even consider withdrawing facilities for those abusing the auction system.

“The policy measures are meant to complement Government efforts to ensure affordability and availability of products on the market. As Government, we are making all the necessary measures to clear the backlog on the auction.

“These people (businesses) say they are doing this because they are not getting forex from the auction; the auction is not the source for 100 percent of their forex requirements. They have forex from the interbank, forex from domestic sales and forex from export retentions”.

He pointed out that through exchange control provisions, the Government had made available forex through four possible sources, which is a rarity only found in Zimbabwe.

Mr Guvamatanga said in other jurisdictions, which the Government did not want to follow, forex is liquidated into local currency at the ruling exchange rate the moment it was received.

“The auction only accounts for 30 percent of their total needs; the other 70 percent comes from other sources, which is (a privilege) found only in Zimbabwe, but they want to appear as if the auction is their only source of foreign currency,” he said.

Mr Guvamatanga said the economic agents in the domestic economy blamed the Government for inconsistency yet they were the ones that were inconsistent, which forced the Government to tweak its policy measures in line with market dynamics.

As such, he said the Government was looking into all the concessions it has given to economic agents and where the beneficiaries are found wanting, the privileges would be revoked.

He said the exchange control provisions that have been put in place by the Government took cognisance of the structural weaknesses of the domestic economy due to deficiencies of previous policies, which entrenched the existing challenges.

Mr Mutashu said the decision to sell goods exclusively in hard currency was based on supply chain pressures where 90 percent of suppliers and manufacturers are demanding payment in US dollars.

“Pricing should reflect 20-40 percent component of the auction market support across sectors. It is also high time we look at areas that have fewer players as our economy is too small to sustain such monopolies,” Mr Mutashu said.-herald