Horticulture sector lauds forex retention, but . . .

The Horticultural Development Council (HDC) has lauded the 100 percent retention on the incremental portion of export receipts as good for the industry.

However, it has pointed out that the provision largely benefits new exporters who do not have any earnings baseline set by the Reserve Bank of Zimbabwe (RBZ).

Central bank Governor Dr John Mangudya, announced in his Money Policy Statement (MPS) earlier this month the increased retention threshold for horticulture to 100 percent from the threshold of 80 percent.

However, Linda Nielsen, the HDC chief executive, said the RBZ has set a baseline for each existing exporter at a certain amount of US dollars monthly.

“Incremental exports refer to revenue over and above the base line set by RBZ only. All earnings below the base line still attract 40 percent liquidation.

“What’s more is the incremental export incentive is not applied immediately but the exporter is required to complete a form at the end of the month and apply for the benefit.

One hopes it will be efficient but we have our doubts,” she said.
She said some existing exporters have had their base set at unachievable levels meaning that they will never benefit from the policy.

“Exporters are questioning the basis for setting the threshold. This policy is not going to encourage growth and in fact the horticulture producers feel they have been prejudiced when compared to other sectors.

“They would have been much happier with a straight line system of 80 percent retention,” she indicated.

Ms Nielsen said the exporting section of the horticulture industry had been hit hard during Covid-19 with incredibly high freight rates which are not expected to reduce to pre-Covid-19 levels any time soon.

She noted that the disparity between the official rate and the rate used by suppliers to charge for all inputs including seed, fertiliser, chemicals, packaging, fuel, cleaning chemicals, hardware and equipment through services like transport, is tremendously large and in most cases 80 percent to 100 percent prejudice to the primary producer.

“In some value chains it has actually eroded the margins to an extent that it does not pay to export. Unfortunately the industry cannot sustain this ‘taxation,” she said.

She added that some members have tried accessing money on the large forex auction but like everybody are still awaiting funds from the December auction let alone the bids won in January and February.

The HDC CEO said no growing business or seasonal business could sustain this pressure on cash flow and some of the smaller producers are opting to drop or reduce export crops and focus on local crops supplied into Mbare.

Ms Nielsen said the Government should strive to reduce the exchange rate disparity between auction and market rate which would then solve the export retention issue, which is the single biggest deterrent to the horticulture industry.

“This is having a serious effect on the current horticulture season which will see an 18
percent decrease in pea production. A reduction in the retention rate would create local,
as well as foreign investment into the sector,” she said.
She noted that the sector also requires security for long-term investments, for example
the citrus industry is a 60-year industry thus in order to reach growth target of 30
percent per annum, investor confidence needs to be restored to attract the patient capital
required.
“Government should work with the private sector to attract affordable, low interest,
long-term finance,” she said.-The Herald