Business

Funding bottlenecks hit Zimbabwe’s horticulture sector – NewsDay

Nielsen said farmers prefer to remain informal as there were no limitations like market compliance costs and magnetic resonance imaging (MRI) tests to sell their produce in the local market through illegal buyers.

The US$30 million Horticulture Export Revolving Fund (HERF) which was set by the government to facilitate access to the export market for small farmers has been structured by banks not to benefit smallholder farmers, forcing them to turn to illegal buyers, it has been revealed.

Only 1,6% of the HERF that was launched more than a year ago in September 2022 has been disbursed.

At the time of its launch, the Reserve Bank of Zimbabwe, FBC Bank, NMB Bank, CABS Bank and the AFC Land and Development Bank signed a memorandum of agreement and term sheet that allowed the central bank to disburse the HERF funds to banks.

The supporting banks later expanded to include Ecobank Zimbabwe Limited and CBZ Bank.

Horticulture Development Council chief executive officer Linda Nielsen told Standardbusiness that specific entry requirements for the HERF exclude the beneficiaries the fund was meant for.

Nielson said the banks that disburse the funds had different specific requirements that complicated the process.

“The fund is being channelled through five commercial banks and each bank has its own credit department and has specific entry requirements,” she said.

“Unfortunately, the funds then exclude the very beneficiaries that the fund was meant for, that is the smallholder farmers.

“They don’t have the collateral; they don’t have audited financials, and a long list of other requirements that only the formal sector has.”

The government would provide the banks with cash cover in case any of the farmers defaulted in paying back the loans.

But, since the release of the HERF only US$19,5 million has been covered.

“Suppose you try to sell to a local farmer the idea of coming to the formal sector when there is ‘makorokoza’ (illegal buyers) coming to get the product from the farm gate and paying up cash, no logistics, no export document costs, no MRI testing, or market compliance costs,” she said.

“In that case, he is going to sell it to the guy who gives him cash at the gate.

“The idea is to build a policy environment that will get more exporters in the formal sector.”

Zimbabwe’s horticulture industry is seeking to grow the area under horticulture from 36 600 hectares (Ha) to 55 300Ha by 2025, gross value to US$3,9 billion by 2025, and target an annual export value of US$1,32 billion by 2025.

“Access to finance and the availability of a bankable document is basically still a challenge. We need a resolution,” Nielsen said.

“We need to sit down with the government and the banks and find ways to go about this because it has become a huge barrier for us.”

Nielson said high interest rates were also hindering access to funding and that farmers were working on alternative lines of funding.

“Another thing is high interest rates. By the time you get the fund, the interest would be up to 10% interest,” she said.

“It then becomes a very expensive financial model.

“So, we are working on getting alternative funding to bite down the costs on the farmers and build more inclusive funding for the sector.

She also urged the government to address the multi-currency system that is affecting foreign logistics payments for exporters.

“For a local investor in the country, it’s a hustle to operate, what more for foreign investors.

“It is not easy to explain four different currency systems to a foreign investor. It scares investors away so; we just need a more conducive policy to deal with this.

“It is also affecting our ability to pay for our logistics which are so far foreign-based.

“We need a way forward. A team Zimbabwe approach to reach that 1 billion export for the agriculture industry is going to mean a force of action.”

Business

Mthuli squeezes consumers, businesses – NewsDay

In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.

GOVERNMENT yesterday announced a cocktail of tax increases, pushing up the cost of living and ease of doing business after reviewing its 2024 revenue projection upwards by 22,22% to ZWL$53,9 trillion.

In his 2024 national budget presentation in Parliament, Finance minister Mthuli Ncube increased taxes to raise an additional ZWL$10 trillion to meet the new revenue targets.

Treasury initially projected revenue collections to total ZWL$44,1 trillion for the 2024 fiscal year.

“Mr Speaker Sir, in line with the projected economic growth of 3,5%, total revenue collections in 2024 are estimated at ZWL$53,9 trillion, (18,3% of GDP), broken down as ZWL$51,2 trillion tax revenue and ZWL$2,7 trillion non-tax revenue,” Ncube said.

“Guided by the expected revenue envelope and the desired fiscal path, expenditures in 2024 are projected at ZWL$58,2 trillion (19,8% of GDP).”

Ncube announced an upward review on the Strategic Reserve Levy by US$0,03 and US$0,05 per litre of diesel and petrol, respectively, with effect from January 1, 2024, pushing up the cost of fuel.

Ncube also raised tollgate and passport fees beginning next year.

“I, therefore, propose an upward review of toll fees on premium roads, that is, Harare-Beitbridge and Plumtree-Mutare and other roads, with effect from January 1, 2024. Revenue derived from the increased fees will be remitted to the Consolidated Revenue Fund,” Ncube said.

“I, further, propose that passport and selected fees charged by the Central Vehicle Registry be increased, with effect from January 1, 2024. Additional revenue generated from the above measures will be ring-fenced towards road infrastructure development.”

Ncube also introduced a US$0,02 levy per gramme of sugar contained in beverages, a development that will push up the prices of beverages.

He said the move was in response to growing concerns on the adverse effects of the consumption of sugar contained in beverages. Tax on beverages has also been implemented in a number of countries, including in the Southern African Development Community.

Ncube also introduced a new wealth tax to ensure that high-income earners pay taxes.

“In order to ensure that every person contributes to the fiscus in line with their levels of income. I propose to introduce a wealth tax levied at a rate of 1% of market values of residential properties with a minimum value of US$100 000,” he said.

“Resources derived from the levy will be ring-fenced towards urban infrastructure development, in particular roads, water, sewer and community health centres. Principal private residential properties owned by elderly persons above 70 years will, however, be exempt from the tax.”

While the minister reviewed the tax-free threshold on incomes to ZWL$750 000, from the previous ZWL$500 000, inflation has rendered the move mute because of the rising cost of living.

Ncube also targeted foreign companies by introducing the domestic minimum top-up tax (DMTT).

The tax ensures that qualifying entities located in Zimbabwe with an aggregate effective tax rate below 15% be charged a top-up amount, raising the cost of doing business.

“Under the GloBE Tax Rules, where a tax incentive results in an effective rate of less than 15%, the tax jurisdiction where the multinational is headquartered collects the difference between the effective tax under the tax incentive and the minimum effective rate of 15% (the top-up tax),” Ncube said.

“The DMTT allows the country where the low tax profits arise from the tax incentive to collect the top-up tax rather than ceding taxing rights to the headquarter jurisdiction.”

He said the calculation of the DMTT would be based on the effective tax rate charged on the jurisdictional profits, not the jurisdictions’ statutory corporate income tax.

“I, therefore, propose to enact DMTT rules to guard against ceding taxing rights to foreign jurisdictions on top-up tax arising from tax incentives that are provided to those investments,” Ncube said. The corporate tax rate was also reviewed upwards to 25% from 24%.

Ncube, however, reduced the mandatory value added tax (Vat) registration threshold to US$25 000 from US$40 000, starting next year.

Operators with a minimum annual turnover of US$25 000, or local currency equivalent thereof, are now required to register for Vat.

Failure to register will see applicable penalties invoked, Ncube said.

He said traders registered for Vat purposes and in possession of valid tax clearance certificates would be eligible to procure goods from manufacturers.

“The tax deferred will, however, be fixed at the foreign currency amount payable at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of importation, albeit, payable in local currency at the prevailing exchange rate at the time of payment.”

Business

Mthuli squeezes consumers, businesses – NewsDay