Retailers, industry sing the blues

NDAMU SANDU

Some suppliers have stopped delivering products to retailers while others are demanding to be paid in foreign currency as collateral damage over the new monetary and fiscal measures take a toll on the economy.

Last week, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya ordered banks to separate nostro FCA and RTGS FCA with effect from October 15 in a bid to strengthen the multi-currency regime.

Finance minister Mthuli Ncube reviewed the intermediated transfer tax to 2 cents per dollar for transactions above $10 from the 5 cents per transactions in a bid to raise additional revenue for the economy which is reeling from runaway foreign and domestic debt.

Ncube said transactions above $500 000 would attract a flat tax of $10 000. While the tax is yet to be effected as the Statutory Instrument has not been gazetted, prices of basic commodities have risen triggering panic buying.

The separation of FCA accounts has increased demand for the dollar pushing parallel rates up. Local companies procure at least half of their foreign currency requirements on the parallel market to import raw materials as demand for the greenback has outpaced supply with RBZ struggling to allocate the dollar.

Confederation of Zimbabwe Retailers president Denford Mutashu told Business Times that the supply constraints have to be addressed.

“Retailers do not manufacture any products and we rely solely on our manufacturers and suppliers for consistent supplies. There is need to reconsider some of the new policy measures especially separation of FCA RTGS account from FCA nostro which has caused panic in the market as both business and the general public stand to lose their savings,” he said.

Mutashu said some suppliers have asked retailers to come and pick the products instead of them delivering the goods to cut on costs. “Some are demanding payment in US dollars which we all do not have,” he said. Mutashu’s remarks come at a time retailers have started restricting purchases to stem hoarding amid a thriving parallel market for basic commodities.

At Food World supermarkets, a customer is allowed to buy one item per product. At OK supermarkets, they are limiting to two per product. While Government is fine-tuning the tax regime to come up with a Statutory Instrument that would spell out the tax to be paid, companies and suppliers have already factored in the tax thereby increasing prices.

Industry is also reeling with its largest grouping, Confederation of Zimbabwe Industries (CZI) warning Ncube last week that the proposed 2 percent tax had repercussion on the sector and the competiveness of the economy.

In a letter to Ncube, CZI president Sifelani Jabangwe recommended a $2 cap per transaction. The 2 percent tax is designed to tap into the informal economy which, for long, has escaped the taxman. Jabangwe said the tax would negatively affect the formal sector.

CZI said a company would do electronic transactions of approximately two times its turnover every month due to loan repayments, transfer between bank accounts and normal payments made in the normal course of business.

“Therefore, a 2 percent tax on all electronic transactions will effectively represent a tax of approximately 4 percent of turnover.

Most companies are not even making a profit as high as 4 percent of turnover therefore the entire profits will be wiped out if they are required to pay a 2 percent on all electronic transactions,” Jabangwe said. He said margins in the retail sector were thin and the measure means they lose 2 percent of their revenue when they make payments.

Jabangwe said the tax would have serious repercussions in the value chain and makes the economy uncompetitive.

“So value chain which has five steps will have a 2 percent charge at each step compounding up to a tax value of 10%. Unlike VAT, this will not be a tax that can be reclaimed on exports. Therefore, this will prejudice the competitiveness of Zimbabwe value chains against foreign value chains. And the deeper the value chain, the greater the negative impact of its competitiveness,” he warned.

The deteriorating economic environment has riled labour with the Zimbabwe Congress of Trade Unions calling for demonstrations today in the country’s cities and towns to force Government to address the crisis

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