Accounting conundrum hits Zim companies

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Gamuchirai Tsokota

Listed retail concern, Powerspeed Electrical Limited has described the company’s accounting system as a nightmare due to the “mixture” of United States dollars with bond notes and real time gross settlement (RTGS)balances in the financial statements.

The company’s managing director, Hilton Macklin, labelled the mixture as “zollars’, highlighting that there was need to read the income statements with caution because of this headache. The headache appears to be spread across all companies in Zimbabwe where government has said it would maintain the 1:1 exchange rate.

“We are mixing (US) dollars and Zollars and we are putting them into the accounting system as if they are equal when we all know that they not equal,” Macklin at the company’s analyst briefing on Tuesday.

He said in addition to the headache,  companies also have an additional burden in the accounting system, especially on how to treat the two percent tax per every transaction, recently introduced by Finance and Economic Development Minister, Mthuli Ncube.

“Unfortunately we keep on having this burden of regulations and bureaucracy and difficulties put on top of what is left of the formal sector for example we just had the two percent tax on transactions.  Yet there is no way of differentiating the transactions…so we need to
go through every single transfer and see if we should have been charged or not. If we were charged when it was not supposed to we have to go back to the bank and get it reversed; it is just an added burden. We now need more clerks and that means increased costs.”

Recently, Zimbabwe Revenue Authority (ZIMRA) commissioner general Faith Mazani directed that companies that sell their products in the United States dollars would be required to pay their tax obligations with the greenback.

“Now we have been told that we have to pay our value added tax (VAT) in US dollars when you have one accounting system and all dollars are accounted for as the same. How do we separate the VAT in dollars to ‘zollars’?” Macklin asked.

“We also have the VAT withholding tax every time we pay our supplier we have to withhold a third of VAT and give that to ZIMRA and get a copy of that transaction and give it to the supplier so that they can claim it off their VAT. Say we are supposed to pay the supplier a $100 we now pay $110 with the $10 for VAT the other $5 of the VAT goes to ZIMRA. Reconciling this is a nightmare,” he added.

In its financial results for the year to September 2018, Powerspeed reported a 53 percent increase in turnover to $82, 5 million compared to $53, 9 million recorded in the previous year. Gross profit rose by 66, 2 percent to $22, 1 million during the period under review from $13,3 million reported in the previous year.

The worsening foreign currency situation has forced companies to source the foreign
currency from the black market, where premiums are higher, adding on to the costs of doing business. Macklin, however, told Business Times that the concept of foreign currency shortage was just a propaganda fallacy.

“Forex shortage is a fallacy that is being used for propaganda,” he said. “If I have an ounce of gold and I say I want $ 2 000 for it no one will take it but if I say I want $ 1 000 for it will go just like that.  If you try and force somebody to take something of a lower value in return of something of higher value but if you have something of value there is no problem of getting dollars in.