The government of Zimbabwe may suspend its unpopular decisions regarding trading and Value Added Tax (VAT) to engage in talks with businesses, newZWire reported citing a leading industry group. Finance Minister Mthuli Ncube announced new measures that required retailers to purchase goods only from wholesalers, excluding unregistered informal traders, who constitute a significant portion of Zimbabwe’s commerce, from buying goods directly from manufacturers and wholesalers. Additionally, VAT exemptions on certain basic goods were removed, leading to price increases for essentials like bread and meat.
The Confederation of Zimbabwe Industries (CZI) CEO, Sekai Kuvarika, stated that the government has agreed to a moratorium, allowing businesses to continue trading based on the conditions of December 2023 while discussions are ongoing. Kuvarika said:
As business we met with government this (Saturday) morning to receive feedback on the various submissions we have made on the Finance Act as well as SI 249 of 2023 and SI 248 of 2023 and a moratorium was given. We are pleased to advise that the government has provided a moratorium so business can continue to trade on the basis of December 2023 conditions while the engagements are being finalised.
The meeting between business representatives and the government addressed various issues, including the route-to-market problem, the zero-rating of basic goods, a sugar tax on beverages, and the 10% margin on the exchange rate for formal businesses. According to the CZI, the new trading measures will result in foreign goods replacing local products. CZI highlights that around 30% of certain manufacturing sectors are already occupied by smuggled goods, and giving up this market means losing revenue and jobs. This will lead to a decrease in industry capacity utilisation, job losses, and a decline in government tax revenue.
CZI argues that manufacturers should have the freedom to choose the trade channels that suit their products, rather than being obligated to sell exclusively to wholesalers. They emphasise the importance of maintaining the integrity of various trade channels, including small traders and the informal sector. CZI proposes a 3% presumptive VAT on goods sold to traders who are not registered for VAT, with the collected money being remitted to the Zimbabwe Revenue Authority (ZIMRA).