Fiscal consolidation bears fruit, says Treasury

THE Government’s fiscal consolidation measures are bearing fruit as evidenced by the containment of the budget deficits that previously undermined macro-economic stability, a senior official said.

Finance, Economic Development and Investment Promotion Deputy Minister David Mnangagwa said this while addressing delegates at the Chamber of Mines of Zimbabwe annual congress held in Victoria Falls last week.

Since coming to power in November 2017, the incumbent administration has been implementing a raft of measures aimed at promoting economic recovery and growth.

Such policy interventions included the two-year Transitional Stabilisation Programme (October 2018-December 2020), succeeded by the National Development Strategy I (NDS 1) 2020 and 2025.

NDS I, which will be superseded by a similar economic development policy NDS II is premised on transforming the country towards the attainment of a national vision of a prosperous upper-middle-income society by 2030.

It is in this context that the Government has been implementing measures such as the value for money principle, and directing all the Government departments and local authorities to collect all fees and levies in local currency, except in specified instances.

Such policy interventions were meant to halt inflation resurgence, curb speculative behaviour and arbitrage activities in the domestic market.

“On the fiscal side, fiscal consolidation measures implemented to date have resulted in the containment of budget deficits which previously, before the Second Republic, were undermining macroeconomic stability.

“As a result, the economy has recorded budget deficits of below three percent of GDP since 2018.

“This achievement was on the back of fiscal measures adopted towards revenue enhancement and expenditure containment measures,” he said.

“The Government will continue to safeguard this milestone which is critical for economic stability.”

Since August 2022, Deputy Minister Mnangagwa said the Government had taken a firm position to ensure that value for money was realised in the procurement of public goods and services to ensure all public funds are efficiently utilised.

He said this entailed the review of the procurement processes, including the requirement to exercise due diligence to avoid paying for overpriced products.

“The Government is currently working on strengthening the Public Procurement Act and relevant regulations to curb unwarranted price distortions and speculative tendencies on the market.

“In this regard, the Government has set standardisation of prices of goods to be supplied to all Government Departments,” said Deputy Minister Mnangagwa.

He said the Government was aware that the mining industry is one of the key productive sectors presently incurring high costs during the production processes and thus a number of tax incentives for the sector in order to minimise costs of production, have been put in place.

“These incentives include allowable deductions/expenditure, assessed losses, exemption from certain taxes and VAT deferment.

“With respect to allowable deductions/expenditure, all capital expenditure on exploration, development, and operations incurred wholly and exclusively for any mining operations is allowed in full.

“For expenditure incurred during a year of assessment on particular mining activities, the taxpayer may elect to have the expenditure allowed in the year of assessment in which it is incurred or carried forward and allowed against income from mining operations in any subsequent year of assessment,” he said.

In addition, the Deputy Minister said the Government also allowed for assessed losses and so there was no restriction on carryover of tax losses while corporate income is taxed at a special rate of 15 percent in the case of a holder of a special mining lease.

However, he said holders of a Special Mining Lease are liable to additional profits tax; payable upon attaining a formula-based level of profitability.

“In addition, the Minister of Finance may, after consultation with the Minister of Mines, also exempt the holder of a Special Mining Lease wholly or partly from non-residents shareholders’ tax; non-residents tax on fees; non-residents tax on remittances; and, non-residents tax on royalties.

“The Government also provides VAT deferment with a view to provide cash flow relief to companies, in view of the huge capital outlays required in the importation of capital equipment.

“This deferment which currently has a minimum threshold of US$500 000 is granted on capital equipment imported for a period not exceeding 180 days, subject to the conditions set by the Commissioner-General of the Zimbabwe Revenue Authority in terms of Section 12A of the VAT Act [23:12].

“It is also important to note that the Government through the 2024 National Budget Statement, announced extension of deferment period for projects with long gestation periods such as manufacturing and mining to a maximum period of two and three years, respectively, subject to approval by the Minister of Finance.”

Deputy Minister Mnangagwa said the Government is committed to the structural transformation of the economy through value addition and beneficiation of the mineral resources.

The Government will therefore continue to urge all mining and manufacturing industry sector players to participate in the strengthening of existing value chains through value addition and beneficiation of minerals creating jobs and growing exports.

“The main objective is to improve the contribution of the secondary sector to GDP and the contribution of value added to total exports, which will make a significant contribution towards realisation of our vision of becoming a prosperous and empowered upper middle-income society by 2030,” he said.

-herald