Manufacturers want authorities to revert to a lower export earnings surrender threshold, arguing the prevailing liquidation level has suffocated exports and removed all incentives to export.
The central bank’s Monetary Policy Committee on January 7, 2021, made the decision to increase the export surrender requirement to 40 from 30 percent on all export receipts.
The decision was taken as monetary authorities battled to ensure the auction system, which was introduced last year in June, continues to be able to supply adequate forex to importers.
Zimbabwe is a net importer of a number of key products including raw materials, machinery and equipment, fuel and groceries and needs forex from every potential source to sustain this.
This comes as the Southern African country is now a member of the African Continental Free Trade Area, a large US$3,4 trillion market place that became effective in January this year.
Captains of industry told Business Weekly this week that at the current liquidation threshold, plus the myriad of other high taxes, exporters were effectively being levied at over 100 percent.
Previously, exporters were required to liquidate 20 percent of their export earnings at the prescribed rate, currently the ruling auction rate, and would receive the local currency in exchange.
The monetary authorities made a blanket review of the surrender or retention rules, and now requires all exporters to liquidate at least 40 percent of their earnings at the auction rate. But the exporters of processed or branded products say the Reserve Bank of Zimbabwe (RBZ) should return to the previous liquidation level (20 percent) to incentivise the export of brands. Other key but predominantly raw and unbranded exports from Zimbabwe include minerals (gold, platinum, chrome, nickel, diamonds etc) and tobacco, which are the biggest export earners.
Chairperson of the Confederation of Zimbabwe Industries (CZI) trade committee Henry Nemaire, said reverting to the previous lower surrender threshold would boost manufactured exports.
“Monetary authorised previously recognised exporters of brands, but the RBZ has standardised exports and that should be reversed; that is one big elephant in the room,” Nemaire said.
Although exporters enjoyed a special income tax rate of 15 percent, provided they exported at least 50 percent of their produce, its benefits have been overtaken by the new liquidation rules.
Nemaire said exporters also face the burden of a multiplicity of other taxes and costs, including intermediated money transfer tax, which have greatly compromised the viability of businesses.
He said exports also incur significant costs developing export markets and while they are allowed a double reclaim of this later, it does little to improve the viability challenges they face.
“The 40 percent is liquidated at $84 to US$1 yet the (open) market value is $120. The difference of about $36 is effectively a tax. If you add the 2 percent tax and 15 percent tax (plus interest rates of around 40 percent) it means exporters are being taxed at over 100 percent,” Nemaire said.
He added that things got bad when the RBZ scrapped its 5 export incentive.
“There is nothing left for the exporter. There used to be concessionary funding for the exporter, but that too was dropped while lending rates are (high) averaging 40 percent per annum,” he said.
“Exporters have less access to their foreign currency (yet when they sell it) at a substantially lower value to the market value. An exporter needs to realise that market exchange gain.”
CZI former president Busisa Moyo recently also implored authorities to remove impediments to export business by streamlining the expansive export procedure, permits and licences.