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Local manufacturers are grappling with severe power cuts lasting over 18 hours daily, forcing them to rely on expensive diesel generators, which significantly increases production costs.
Zimbabwe requires about 1,700 megawatts (MW) of electricity during peak hours, but the state-owned power utility, ZESA, was generating just over 800 MW on Wednesday, October 30.
The Confederation of Zimbabwe Industry (CZI), the country’s largest business lobby group, described the situation as dire. Said the CZI:
<blockquote>
Industry members have reported going for between 12-18 hours without electricity and report that power is being restored between 11 pm and 7 am in the majority of cases.
The absence of a load schedule that is strictly adhered to has exacerbated the effect of the power cuts as affected companies cannot plan employee deployment resulting in redundant working staff for periods when power is unavailable.
The other consequence of unscheduled power cuts is that machinery requires a systemized shutdown process in order to ensure raw materials are fully utilized and the machinery itself is properly shut down.
Sudden power outages result in loss of raw materials and equipment damage.
</blockquote>
Some machinery requires process heating, which involves applying heat during industrial operations. This heating can take 3 to 5 hours before production starts.
Consequently, if electricity is available for 8 hours, effective production time is limited to just 3 to 5 hours. The CZI said:
<blockquote>
However, the electricity bill will reflect usage of 8 hours against actual production of only 3-5 hours. In sectors that heavily rely on electricity such as the plastics and cement industry this can mean failing to achieve the economies of scale necessary to cover production costs.
This situation is particularly severe for companies that do not have dedicated power lines which are normally found in the small to medium sectors.
Companies have sought to mitigate the effects of power outages through the installation of solar energy and battery storage for use at night.
However, this is often very expensive and requires significant funding that many firms struggle to secure.
</blockquote>
Christopher Mugaga, CEO of the Zimbabwe National Chamber of Commerce (ZNCC), told <a href="https://businesstimes.co.zw/power-crisis-deepens-3/">Business Times</a> that power outages will significantly affect the country’s economic performance in 2024.
He said the ongoing rolling blackouts could reduce the Gross Domestic Product (GDP) by 0.6 percentage points.
Mugaga operating generators is costly, which companies are using for 14 to 18 hours daily.
This situation not only deters investments but also leads to substantial losses in foreign direct investment (FDI), estimated between $120 million and $150 million annually due to power shortages.
Oswell Binha, chairman of the CEO Africa Roundtable, said power outages can last 18 hours or more, and in some cases, the power quality is so poor that businesses cannot operate even when electricity is available.
He described the situation as critical, with many companies relying on costly generators. This dilemma forces businesses to choose between raising prices or facing severe shortages in stores.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Pindula News

Manufacturers in Zimbabwe are suffering because of long power cuts, lasting over 18 hours every day. This means they have to use expensive diesel generators, making production more costly. The lack of a proper schedule for power cuts is causing problems for companies who can't plan their work properly. Some companies are trying to use solar energy as a solution, but it's very expensive. The power cuts may harm the country's economy and lead to a loss of foreign investments. Overall, the situation is critical for many businesses in Zimbabwe.

Manufacturers Struggle Under Burden of Daily 18-Hour Power Cuts

Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer, Chris Mugaga, said the reason businesses put a premium on the official exchange rate when setting prices was that there was no foreign currency readily available in the formal market.
In an interview with <a href="https://www.businessweekly.co.zw/no-mercy-for-violating-exchange-rate-treasury/">Business Weekly</a>, Mugaga said businesses are forced to source foreign currency from the black market because it is not available in the banks. He said:
<blockquote>
The reason why our constituency put premiums is that they have acknowledged that we cannot get (adequate) forex from the banks. If you go to the bank looking for forex you will not get it.
So, if you cannot get the forex from the banks, where else can you get it other than the black market?
Like it or not, the black market remains a major source of forex for most businesses.
</blockquote>
On Wednesday, Finance, Economic Development and Investment Promotion Minister, Mthuli Ncube, warned that businesses caught pricing their products or services using an exchange rate higher than the official rate risk severe penalties.
Responding to questions from legislators during a National Assembly sitting, Ncube said there is no longer any “basis” for shops to use any rate above the official rate after the government recently removed the legal provision allowing traders to put a 10 per cent margin above the ruling interbank exchange rate.
However, Mugaga argued that the stability of the ZiG currency counted for little as long as businesses struggled to secure foreign currency to import raw materials. He said:
<blockquote>
What the minister is saying does not define what is happening on the ground. What is happening is that if you go to the banks looking for foreign currency you are not able to get it.
If the minister wants a comprehensive approach, he must look at the whole supply and demand of forex.
If he considers only the stability of ZiG, he will be starting from the front end of the demand and supply chain.
</blockquote>
Some business executives say they are now allowed to price products at the exchange rate at which they would have purchased forex from their banks.
When contacted for comment by Business Weekly on the new position, Central Bank Governor John Mushayavanhu could only say “We will issue a statement to clarify.”
Zimbabwe’s economy is nearly 80 per cent dollarised and several businesses have also learnt to survive largely on their domestic foreign currency sales receipts, which they say remain inadequate to cover their needs.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Currency Scarcity Drives Premium Pricing, Says ZNCC CEO Chris Mugaga

Captains of industry are in talks with the Government to reconsider the sugar tax currently pegged at US$0.001/gram, which has resulted in a sharp rise in beverage prices.
Speaking to <a href="https://businesstimes.co.zw/industry-govt-in-talks-over-sugar-tax/">Business Times</a>, Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza confirmed the ongoing engagements. He said:
<blockquote>
We are engaging the authorities. Yes we understand the validity of these taxes, but the increase of prices is extreme.
So we are engaging with the Government so that we can see ways in which prices can accommodate everyone at large.
There is an added tax on sugar which is US$0.001per gram and due to that tax producers of sugary products to cater for it, prices have to go up and you have seen prices of products like Mazoe Orange Crush and Beverages products they have gone up as a way of covering the US$0.001/gram tax which was put in place.
This will only mean that manufacturers of beverage products will lose market share, their volumes will go down because the consumers will not afford to purchase for the products and this will even force them to produce very few products hence a downturn in business.
</blockquote>
Zimbabwe National Chambers of Commerce (ZNCC), Mike Kamungeremu, said there is nothing they can do except factor the new sugar tax into the pricing of products. He said:
<blockquote>
Government is trying to raise revenue at the same time in some cases they are trying to discourage consumption of the same products, where you then say prices are going to come down, but prices are not going to come down regarding those items except if the tax is reduced or removed.
But as it stands because the tax has already been introduced it means those prices will now stay where they are and what we then anticipate to see is probably a reduction in their consumption or probably workers getting more so that they can afford them, but the truth of the matter is that the tax has been introduced and the prices have already gone up so it is a reality that we have to live with.
</blockquote>
An economic analyst Victor Bhoroma warned that the sugar tax will make Zimbabwean products less competitive on foreign markets. He said:
<blockquote>
The sugar tax has several ramifications on food and beverages in the country. Sadly, a noble cause to raise tax revenues has a direct bearing on the cost of production, cost of produce, final prices and food consumption patterns.”
It is inevitable, that the majority of already poor Zimbabweans will no longer afford their homegrown renowned brand.
It speaks to the impact of taxation and monetary regulations on the competitiveness of local products. We are pricing ourselves out of a few export markets we were left with.
</blockquote>
Economist Vince Musewe said the sugar tax is a misinformed policy that ignores the social impact. Said Musewe:
<blockquote>
This sugar tax is a mere means to collect more taxes and not about health. We will see reduced demand for affected products and cheaper imports which works against the imperative to industrialise while stifling local companies that are producing drinks. For me it’s a misinformed policy that ignores social impact.
</blockquote>
Earlier this month, Finance, Economic Development, and Investment Promotion, lowered the sugar tax from US$0.002 to US$0.001 per gramme of sugar.
Ncube had announced the 0.002 cents per gramme in the 2024 national budget statement in November 2023.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Industry Engages Govt Over Sugar Tax

Business executives and captains of industry are bracing for a tougher 2024 which may force companies to slash jobs, putting thousands of workers out of work to contain rising costs.
Some of the challenges facing industry are power outages, a liquidity crisis, currency volatility, and shortages of foreign currency.
Speaking to <a href="https://businesstimes.co.zw/brace-for-a-tougher-2024/">Business Times</a>, the president of the Zimbabwe National Chamber of Commerce (ZNCC), Mike Kamungeremu warned that 2024 will be tougher than 2023 due to El Nino, which will adversely affect farming, load shedding, and depressed commodity prices on the international market. He said:
<blockquote>
The year 2024 will be tough. I think even the government themselves have predicted a reduced growth rate compared to 2023 so already that confirms that the year will be a bit tougher than the previous one.
Added to that we have also been told about the drought induced by El Nino that will be coming in 2024 and that drought will affect our agricultural sector and the ripple effect will be felt across the entire economy.
The other effect of the reduced rainfall which has been predicted to be normal to below normal will affect electricity generation capacity at Kariba Dam.
What that means is that the power challenges that we have been facing are also likely to continue in 2024 and that will also affect industry.
Then over and above this commodity prices for our minerals on the international market have been depressed and that is also spilling into 2024 and that will also affect the revenue we are going to receive from the minerals and naturally if the revenue is reduced then we would also face problems because of the requirements that we have as a country which needs to be met.
</blockquote>
Kamungeremu urged fellow businesspeople to implement risk mitigation strategies. He said:
<blockquote>
So apart from recent monetary policy changes, there are other factors which I have highlighted which will then make the year difficult.
We appeal to fellow business people to put in place risk-mitigating measures for example when it comes to power issues, and power challenges they need to invest in alternative energy so that business can continue even in times of power cuts, it is important.
Then with regards to government policy as ZNCC we will continue engaging for the improvement of the same so that the environment is better for our business people in Zimbabwe.
</blockquote>
Kurai Matsheza, president of the Confederation of Zimbabwe Industries (CZI), said the new taxes implemented on 01 January by the Treasury will increase the cost of doing business because they will push prices up. Said Matsheza:
<blockquote>
The new measures which are toll fees, fuel levy, and VAT increase from the 2024 budget have meant price increases and hence increased cost of doing business…
Water allocation at Kariba was cut from 22.5 BCM to 8 BCM. This means generation from Kariba will be significantly low and hence load shedding will persist affecting capacity utilization.
This has so many unintended consequences such as a decline in sales, increased informalization as traders opt for importing and an increased working capital cycle.
</blockquote>
He also stated that businesses will continue to experience challenges as a result of the government’s inability to resolve the currency problem.
Meanwhile, earlier this week, the Minister of Finance, Economic Development, and Investment Promotion, Mthuli Ncube reversed a directive that prevented manufacturers from selling to retailers.
He said retailers can now purchase from manufacturers as long as they have obtained a valid Tax Clearance Certificate, and are VAT registered.
Ncube also reviewed the sugar tax on beverages to US$0.001 per gramme from US$0.02 per gramme.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Business Executives, Captains Of Industry Warn Of A Tougher 2024

The Zimbabwe National Chamber of Commerce (ZNCC) has implored the Government to ensure that there is policy consistency and the creation of an environment that is conducive to business.
Speaking to <a href="https://businesstimes.co.zw/zncc-calls-for-policy-consistency/">Business Times</a> on the sidelines of the ZNCC business conference held in Harare last week, ZNCC president, Mike Kamungeremu, said:
<blockquote>
They (Government) must simply create an enabling environment. In terms of service provision and infrastructure development, we want good roads, among many others. Those are the things that businesses want.
They want an enabling environment in which they will be able to do their business without fear and then they can sell their products and make money and pay taxes to the government at the end of the day.
</blockquote>
He said the majority of businesses were also having trouble obtaining bank loans over the uncertainty of the tenure of the multicurrency system. Said Kamungeremu:
<blockquote>
There was uncertainty about that. The (tenure) of the multicurrency was extended from 2025 to 2030 and this is a one key policy because you will find all banks not lending beyond 2025.
It was very difficult for businesses to get capital. Now that the extension has been granted, we have not received feedback as yet but we expect banks to start lending until that time.
</blockquote>
Kamungeremu also pleaded with the Government to refrain from competing with businesses. He said:
<blockquote>
Critically businesses want the government to be a regulator and they should play the role of regulator in everything that we are doing, not for them to also compete with business.
We gave an example of the insurance sector, where there are insurance companies that are making a lot of money from third-party insurance.
So if the government takes it away, it is more like they are being crowded out of the space so businesses feel that the government must not get in there.
</blockquote>
Presenting the 2024 National Budget on 30 November, Finance, Economic Development, and Investment Promotion Minister Mthuli Ncube said that the Government plans to take over the running of third-party motor vehicle insurance with effect from April 2024.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

ZNCC Pleads For Policy Consistency

The Zimbabwe National Chamber of Commerce (ZNCC) says it is fully behind the Government’s policy to destroy all illicit goods especially cigarettes on the spot.
The Minister of Finance and Investment Promotion Mthuli Ncube recently said that the Government was introducing Anti-Illicit Trade Policy Measures to curb the illicit trade in cigarettes.
Organised crime syndicates allegedly comprising prominent politicians and business moguls have been linked to the smuggling of cigarettes into South Africa and Zimbabwe.
The illicit trade not only costs the two countries a significant amount of money but is also now viewed as a threat to national security because dealers fund criminal gangs that engage in lawless activities.
ZNCC chief executive officer Christopher Mugaga told <a href="https://businesstimes.co.zw/zncc-pushes-govt-to-destroy-illicit-goods/">Business Times</a> that the destruction of illicit products will ensure that they will not find their way back into the market. Said Mugaga:
<blockquote>
Regarding the destruction policy, we fully support and urge the Ministry of Finance and Investment Promotion to follow through with its promise to draft and issue a Destruction Policy for illicit goods.
The conclusion of this policy is essential in enabling the Zimbabwe Revenue Authority [ZIMRA] to destroy all confiscated illicit cigarettes, thus ensuring illicit goods do not find their way back into the market.
In working towards achieving these very important milestones to curb illicit cigarette trading, we are committed to assisting further by inviting experts on production counters and associated supply chain verification systems, to help marry the current ZIMRA audit process with the new complexity of monitoring and auditing of production counters.
</blockquote>
In its submissions to the Finance Minister, the ZNCC suggested several measures that can be put in place to combat the illegal cigarette trade. It said:
<blockquote>
The current system can be enhanced further by making it mandatory for all cigarette manufacturers to install cameras and close-circuit televisions at all production lines, which will provide real-time information on production volumes to the ZIMRA.
In addition to the above measures, we propose that ZIMRA should analyse the operational data of each manufacturer to fully understand and benchmark the costs of production in the industry.
Furthermore, the Revenue Authority should monitor the recommended selling prices of each brand for the purposes of calculating the ad valorem excise component.
</blockquote>
On 12 June 2023, the Customs Division of the South African Revenue Service (SARS) <a href="https://www.sars.gov.za/latest-news/media-release-destruction-of-smuggled-and-illicit-cigarettes-valued-at-r43-million/">said he had begun to destroy illicit and smuggled cigarettes</a>, valued at R43 million, at the Beitbridge border post.
The SARS Deputy Commissioner, Johnstone Makhubu, said a huge volume of cigarettes was set to be destroyed, in total 2000 master cases, or 20 million cigarettes.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

ZNCC Urges Govt To Destroy Illicit Goods

Zimbabwe National Chamber of Commerce (ZNCC) CEO, Chris Mugaga, has said President Emmerson Mnangagwa should appoint a fresh set of permanent secretaries with the requisite skills to lead the ministries.
Mnangagwa on Monday appointed a new 26-member cabinet following his re-election for a second and final term last month.
Speaking to ZBC, Mugaga said there should be deeper changes in the civil service and those who fail to deliver should be fired. He said:
<blockquote>
What is much more of a concern is not necessarily the personalities who comprise the Cabinet, but rather the institutional framework on deliverables.
The culture of delivery must be in place. Those who fail to deliver should be shown the exit door.
It’s also vital to appreciate that Cabinet (ministers) work with permanent secretaries.
We want to believe that, going forward, there will also be a review of the calibre of skills leading different ministries in the form of permanent secretaries.
If that’s done, then we can analyse the impact these Cabinet ministers will have.
</blockquote>
Ministers provide policy direction in government, with Permanent Secretaries responsible for running the Ministries.
Permanent Secretaries, who act as the CEOs of Ministries, are supported by directors of various units.
In 2021, Mnangagwa introduced performance-based contracts for Cabinet Ministers, Permanent Secretaries and heads of parastatals.
Meanwhile, Mnangagwa retained several individuals from the previous cabinet, among them Mthuli Ncube (Finance and Investment Promotion), Kazembe Kazembe (Home Affairs and Cultural Heritage), Ziyambi Ziyambi (Justice Legal and Parliamentary Affairs) Anxious Masuka (Lands and Agriculture), Amon Murwira (Higher and Tertiary Education) Oppah Muchinguri-Kashiri (Defence and Security), and Frederick Shava (Foreign Affairs and International Trade).
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

ZNCC Urges Mnangagwa To Appoint Fresh Set Of Permanent Secretaries

Mike Kamungeremu, has been re-elected to serve a second term as the Zimbabwe National Chamber of Commerce (ZNCC) president, reported <a href="https://businesstimes.co.zw/kamungeremu-retains-zncc-presidency/">Business Times</a>.
Kamungeremu, who is the Tendo Electronics managing director, was re-elected at ZNCC’s annual general meeting and was confirmed at the presidential dinner held Thursday night.
In his acceptance speech, Kamungeremu expressed gratitude to the ZNCC executive committee for their trust in re-electing him. He said:
<blockquote>
I am humbled to be re-elected president of the ZNCC for a second term. It’s a show of confidence.
What I promise is the same energy, the same determination. I promise that for the next year, I will put my all into this.
</blockquote>
Kamungeremu was first elected ZNCC president in July 2022 following the end of Tinashe Manzungu’s tenure.
He holds a Bachelor of Accountancy (Honours) Degree and a Master of Business Administration from the University of Zimbabwe.
Chalton Chambira, the general manager of Holiday Inn Bulawayo, was also re-elected as ZNCC deputy president.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Kamungeremu Re-elected ZNCC President

The Zimbabwe National Chamber of Commerce (ZNCC) says the removal of import controls is promoting excessive hoarding of cheaper basic grocery items from abroad.
In its latest report, ZNCC said this is being done in anticipation that the controls might be returned later and traders intend to take advantage of importing duty-free and quota-free regimes. ZNCC said:
<blockquote>
This hoarding for future supply will result in a long-term supply of imported goods that will continue to affect the local industry for a longer period of time and will render useless some of the tools that were spelt out to promote industrialisation in the Zimbabwe Industrialisation Development Policy.
Even when the controls are returned later, they will have no effect as the hoarded supplies will continue to be distributed and pose serious competition to local producers.
For example, when the SI 98 of 2022 expired in November 2022, some warehouses were still filled with goods that could supply the informal and formal sectors for the next three to four months…
The move to import goods duty-free will reduce government revenue collections, at a time when the national budget has already been eroded by inflation.
Removing import controls on basic commodities might also reduce demand for local raw materials that feed into local industries.
As demand for cheaper imported finished products grows, the market for locally produced goods’ will contract, which will also reduce local production and demand for raw materials used in their production, especially in the agro-processing sector, which is a key value chain in Zimbabwe.
</blockquote>
In May this year, the Government removed duty on 11 selected imported basic grocery items and allowed shops and other Zimbabwean businesses to keep 100 percent of the foreign currency they get from sales.
The products that will be imported duty-free include maize meal, rice, milk, flour, sugar, salt, cooking oil, petroleum jelly, toothpaste, bath soap and washing powder.
The move came after shops hiked prices and some started to charge for certain products exclusively in foreign currency following a sudden fall in the value of the Zimbabwean dollar against other currencies.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Removal Of Import Controls Promoting Hoarding - ZNCC

Captains of industry and commerce have urged the Reserve Bank of Zimbabwe (RBZ) to lower its bank policy interest rates downwards to between 80 and 100 per cent from 200 per cent.
They say this will enable businesses to have access to affordable financing.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Christopher Mugaga said companies are now being forced to borrow in United States dollars due to high-interest rates, which he said threatens their viability. Said Mugaga:
<blockquote>
In the upcoming monetary policy statement, we expect interest rates to be reviewed downwards to margins between 80 and 100 percent this is because as private sector we understand that the rate of inflation is still a threat to the overall macro-economic stability, but having it come down to those levels will at least give us a breathing space.
Right now, most of the companies are borrowing in US dollars and it’s not sustainable at all.
</blockquote>
RBZ governor John Mangudya is expected to present this year’s monetary policy statement next month.
In its third quarter of 2022 business and economic intelligence report, the Confederation of Zimbabwe Industries (CZI) said:
<blockquote>
… an interest rate of 200 percent compounded monthly effectively eliminated ZWL$ borrowing, as businesses could not afford such high borrowing costs.
While speculative borrowing was reduced (which also helped contain the growth of money supply), the policy virtually eliminated borrowing in local currency as a way of finance and reduced industry expansion prospects.
</blockquote>
Persistence Gwanyanya, a member of the RBZ Monetary Policy Committee said:
<blockquote>
Certainly, the forthcoming monetary policy will be presented before the end of next month but a date has not been set as yet.
One of the expectations from industry and commerce is the downward review of interest rates from the current levels.
In December, as the MPC we postponed the review of the interest rates on account that there should be sustained currency and inflation stability, if sustained stability is there by the time the monetary policy statement is presented, the interest rates will be reviewed downwards.
</blockquote>
| <a href="https://www.herald.co.zw/industry-wants-interest-rates-reduced/">The Herald</a>

Captains Of Industry Expect RBZ To Reduce Interest Rates

About 90% of clothes being sold in Zimbabwe are smuggled second-hand clothes.
This was said by Zimbabwe National Chamber of Commerce president Mike Kamungeremu during an interview with <a href="https://businesstimes.co.zw/90-of-clothes-in-zim-is-second-hand/">Business Times</a>.
The government banned the importation of second-hand clothes but they are being sold across the country, even in some remote areas an indication that corruption is rampant at the country’s porous borders.
Kamungeremu said support should be given to the textile industry and duty should be increased on clothes imported for resale in order to support the recovery of the local industry. He said:
<blockquote>
There is policy inconsistency with regard to the sale of second-hand clothes (mabhero) – it is illegal to import second-hand clothing (bales) but legally permissible to sell them.
The City Councils levy businesses selling second-hand clothing and surely the local textile industry cannot be resuscitated this way.
About 90% of clothes being sold are smuggled second-hand clothes.
</blockquote>

"90% Of Clothes Sold In Zimbabwe Are Second-hand"

The government has failed to avail the ZWL$18 billion stimulus package it promised companies in 2020 to help them recover from the adverse effects of the COVID-19 pandemic.
In 2020, Finance and Economic Development Minister Mthuli Ncube promised to bail out embattled local companies.
However, Zimbabwe National Chamber of Commerce president Mike Kamungeremu told <a href="https://businesstimes.co.zw/govt-fails-to-avail-promised-zwl18bn/">Business Times</a> this week that businesses are still waiting for the rescue package. He said:
<blockquote>
The 2020 (ZWL$18bn) support package did not reach the businesses which needed it the most.
</blockquote>
The rescue package was equal to 9% of Zimbabwe’s gross domestic product or 28.6% of 2020’s National Budget.
The package was aimed at assisting businesses to get back other feet following the economic slowdown caused by COVID-19.
At the time the ZWL$18 billion package was announced, critics questioned the mechanisms to fund the economic recovery and dismissed it as pie in the sky.

Govt Fails To Avail Promised ZWL$18 Billion Stimulus Package

The Zimbabwe National Chamber of Commerce (ZNCC) has urged the Finance and Economic Development Ministry to adjust the cigarette tax regime.
This comes amid indications that the country is losing US$248 million annually to illicit cigarette deals owing to a mixed taxing regime that benefits cartels at the expense of industry players.
Finance Minister Mthuli Ncube recently increased excise duty on cigarettes to 25% + US$5/1000 from 20% + US$5/1000 cigarettes saying it was a regional benchmark and the move will curb illicit flows.
In its latest report, the Zimbabwe National Chamber of Commerce (ZNCC) implored Treasury to do away with the ad valorem rate of 25% and remain with the specific rate. It said:
<blockquote>
We request that the Ministry of Finance and Economic Development remove the ad valorem rate of 25% and remain with the specific rate of US$16 per mile of cigarettes.
The ad valorem component is subject to manipulation and is a huge cost as production increases.
The estimated fiscal benefit from this proposed move is US$248m per annum based on the current production rate and the prospects of future production once it is removed.
We also strongly urge the Ministry of Finance and Economic Development to put in place a predictable cigarette excise duty regime.
</blockquote>
The Confederation of Zimbabwe Industries (CZI) also called for the removal of the current mixed excise duty on cigarettes. CZI said:
<blockquote>
CZI recommends that there is a need to migrate from the current mixed excise duty regime for tobacco to a specific excise duty regime, which brings certainty to investors while also maintaining revenue inflows for the government as well as eradicating illicit cigarette markets.
The current ad valorem excise duty is prone to manipulation by cigarette companies through falsification of ex-factory prices or controlling sales transactions with third parties so that the ex-factory price is lowered to reduce the excise amount.
</blockquote>
Meanwhile, ZNCC has called on the government to provide tax relief to the sector as the wider economy recovers from the COVID-19 pandemic. | <a href="https://businesstimes.co.zw/zim-loses-us248m-to-illicit-cigarette-deals/">Business Times</a>

Zimbabwe Loses US$248 Million To Illicit Cigarette Deals

Captains of industry have warned that rolling power cuts will have a negative impact on Zimbabwe’s economic growth.
Finance and Economic Development Minister, Mthuli Ncube, revised the projected economic growth this year from 5.5% to 4.6% due to various factors that include foreign currency challenges, liquidity crunch, runaway inflation and exchange rate volatility.
Speaking to <a href="https://businesstimes.co.zw/power-crunch-threatens-economic-growth/">Business Times</a> this week, Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza warned that the 4.6% growth rate may not be attainable due to constant load shedding. He said:
<blockquote>
Rolling power cuts are the biggest threat to the 4.6% gross domestic product [GDP] projections as businesses have significantly cut operation hours and this is going to impact the industry’s capacity utilisation.
We are at the peak period where there is huge demand and we are not producing enough.
With rolling power cuts expected to continue into November, the damage could have been done to limit the economy to reach its projected growth as machinery depends on power to continue operating.
</blockquote>
The Zimbabwe National Chamber of Commerce (ZNCC) president Mike Kamungeremu concurred. He said:
<blockquote>
If a solution is not found soon the GDP growth projections are likely not going to be met as subdued growth means reduced output thereby affecting the overall economic performance.
Production is disrupted and there is a likelihood of serious implications to our projected growth.
</blockquote>
Some companies have reportedly cut their production capacity by 30% due to the prolonged power cuts.
Zimbabwe’s electricity shortages have been attributed to ageing power plants but ZESA Holdings’ power distribution subsidiary, ZETDC, recently said strong winds are to blame for power cuts as they are affecting electricity transmission infrastructure.

Load Shedding Threatens Economic Growth

Industry has rejected ZESA’s proposal to increase electricity tariffs in United States dollars from the current US$0.0981 per kWh to US$0.1221 per kilowatt hour (kWh) to ensure adequate supplies.
Last week, ZESA held a crisis meeting with industry representative bodies including the Confederation of Zimbabwe Industries (CZI), the Zimbabwe National Chamber of Commerce (ZNCC) and the Chamber of Mines of Zimbabwe where the proposal was tabled.
However, the captains of industry stated that they do not have the capacity to pay increased power tariffs as they depend on the Reserve Bank of Zimbabwe’s foreign currency system to access forex.
Speaking to <a href="https://businesstimes.co.zw/industry-rejects-zesa-tariff-hike/">Business Times</a>, CZI president Kurai Matsheza the association’s members are struggling with forex shortages, high cost of production and liquidity crunch. He said:
<blockquote>
Industry does not have the capacity to pay such a tariff. As you know we have predominantly participated in the forex auction system to access forex hence a US$0.12 tariff is very difficult for the members.
</blockquote>
ZNCC president, Mike Kamungeremu, also argued that the majority of their members have no capacity to pay high electricity tariffs. He said:
<blockquote>
Most of the members are struggling to meet ZESA’s demands and this will take a knock on most companies.
Only big corporations have agreed to pay such huge amounts.
The situation is very tough for manufacturers.
</blockquote>
Zimbabwe has been struggling with power shortages for several years now but the situation became more precarious over the past few weeks due to low generation capacity at ZESA’s ageing power plants.

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