‘Zimdollar suffering death by policies’

MIKE Kamungeremu was recently elected as the new president of the Zimbabwe National Chamber of Commerce (ZNCC), which is one of the major business membership organisations in the country. Deputy business editor Kudzai Kuwaza (KK) caught up with Kamungeremu (MK) to discuss a number of issues including his plans during the tenure of office, the economic crisis and expectations from the mid-term fiscal budget to be presented by Finance minister Mthuli Ncube this month. Below are excerpts:

• Is the managing director of Tendo Electronics Pvt Ltd.
• He holds Bachelor of Accountancy Honours Degree (UZ), Bachelor of Laws Degree (Unisa), MBA Degree in Financial Services (UZ) and has attained full CIMA qualification.
• Has won several awards over the years among them:- ZNCC Businessman of the year-2014;  Megafest Top20 Businessperson of the year-2015; Megafest Platinum Director of the year 2019; and Zim CEO Network – CEO of the year 2020.
• Sits on the Zimbabwe School Examinations Council, Zimtrade, Net Professional Business Academy and Ramola Security boards.

KK: What are your objectives as the recently elected ZNCC president?

MK: My number one objective is to build on what is already there. The chamber’s mandate is to be the leader in business development in the national economy and a channel of communication between business and the various authorities in Zimbabwe. In this regard, my main aim as the new president is to make ZNCC the preferred channel of communication between business and the various authorities through evidence-based policy advocacy and lobbying, capacity building of businesses, value chain development, financial resource mobilisation, maintaining good working relations with policy makers and relevant stakeholders, promoting and empowering women and youth-owned enterprises and ensuring the sustainability of the ZNCC Training School.

KK: You are coming in at a time when some of your members have been accused by government of unfairly raising prices of goods and contributing to the current economic challenges. What is your response to this?

MK: Well, through continued and truthful engagement with our policymakers, we want to ensure that the blame game between the private sector and the government is put to rest. We need to find each other and work towards the common good of the economy. Surely, prices cannot remain constant when the costs of production are going up; you look at the electricity tariffs, fuel prices, transport costs, bank charges, regulatory fees, and water tariffs, among others, they are all going up. These are the main cost drivers especially with an unstable rate of exchange (runaway parallel market rate).

KK: Government recently announced a raft of new measures to address the economic challenges such as that of rising inflation. In your view are these adequate?

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MK: Money supply growth has been the major contributor to the rising inflation and the rapid depreciation in the exchange rate. The measure to have a 0% growth in reserve money is a huge statement towards curtailing money supply growth. However, broad money continues to grow at unprecedented levels from year to year and we have recommended that the Zimbabwean situation requires a broad approach than just focusing on reserve money.

Confidence building measures should be continuously implemented and the engagements with all key stakeholders should be a continuous process. We will help each other in finding lasting solutions to the challenges we face as a nation.

Sound management of the political economy is also required as well as central bank independence as we approach the 2023 general elections. As long as there is tempering with the institutions of macroeconomics, the envisioned stability cannot be achieved. Businesses thrive well in a stable macroeconomic environment and we should prioritise macroeconomic stability as espoused in the National Development Strategy 1.

KK: There has been an outcry over the measures by government to penalise those who trade in prices which is beyond a 10% addition to the interbank rate. What is your comment to this development?

MK: As the chamber, we are the biggest proponent for good corporate citizenship and we urge all our members and the entire business community to abide by the rules and regulations in our country. We, therefore, expect all our members to comply with this regulation, which was announced by the President of the Republic of Zimbabwe, Emmerson Mnangagwa.

This is in anticipation that the interbank market will serve as an efficient and market-driven price discovery platform for foreign exchange. That way, businesses can refrain from indexing the prices of goods and services to the parallel market rate.

KK: The fall in the value of the Zimbabwean dollar has prompted calls by workers unions for workers to be paid in the US dollar. Is this feasible?

MK: The government has US$1 billion in its coffers and revenue collection in US dollars is only about 30% of total government revenue. Thus, paying civil servants’ salaries in US dollars is unsustainable. The private sector often ‘eats what it kills’ meaning those that are exporting and earning foreign currency may be able to pay US dollar salaries in part or in full but those that are not exporting will not sustain USD salaries.

We, therefore, need to continuously promote the use of the local currency. Issues to do with stability of the prices and exchange rate need to be solved to silence such calls for USD salaries. The Zimbabwean dollar is suffering “death by policies”. All government taxes must be paid in local currency so that government is not seen as rejecting its own currency. If the issuer of the currency cannot accept it, who then do they expect to accept it? Right now Zimra (Zimbabwe Revenue Authority) are penalising companies that paid corporate tax in Zimbabwean dollars after transacting in US Dollars for years 2019 and 2020 despite companies trying to demonstrate that all the US dollars earned were consumed by costs and profit realised was realised in local currency.

They have devised a formula which is being imposed on us which assumes that the ratio of taxable income to sales that applied on Zimbabwean dollar revenue is the same that should apply on US dollar revenue and then calculate the tax bill using that. They even put 100% penalty despite the fact that they were paid that tax in Zimdollars three years ago. They cannot defend their own currency and this is particularly worrying for me.  We need to get our policies right to reduce erosion of value and ensure continued quality service delivery from government ministries and departments.

KK: You presented a paper to government recently in which you expressed concerns over the deterioration of the economy. What has been the response and has there been any engagement with them over what you presented?

MK: There has been some positive response on the concerns raised by stakeholders. We have engaged the Office of the President and Cabinet, the Ministry of Finance and Economic Development and the Reserve Bank of Zimbabwe since then. We also participated at the Polad (Political Actors Dialogue) Currency Indaba towards the end of June 2022 where we continued to press on with regards to our position as the Chamber. We also had a fruitful conversation with the Minister of Industry and Commerce, Sekai Nzenza, during the sidelines of the 2022 ZNCC Annual Congress, which was held in Victoria Falls from June 29 to July 1, 2022.

KK: Inflation has shot up to 191,6% for June. Where do you project inflation by the end of this year?

MK: One of the 2022 ZNCC Annual Congress topics was on the second half of 2022 Economic Outlook where experts gave their projections for the next six months. With the food price and oil price shocks having a toll on the domestic economy coupled with adverse expectations on the account of the election campaign season, we project the inflation rate to reach levels between 350% and 410% by December 2022 if concrete measures are not put in place to address the current trajectory.

KK: The mid-term fiscal budget will be presented this month by Finance minister Mthuli Ncube. What are your expectations from this?

MK: The budget is expected to contain measures that enhance smooth running of businesses. To achieve macroeconomic stability, we expect the minister to curtail expenditure electioneering that has seen broad money growing at unprecedented levels. Limiting the tight monetary policy stance to reserve money growth only where the Reserve Bank of Zimbabwe has total control will not be sufficient to control inflation. In this regard, Treasury has to strategically dispose-off its local currency holdings to avoid surprising the market by once-off payments towards financing of on-going projects in which case the Zimbabwean dollars would end-up chasing US dollars on the parallel market. However, the recently introduced gold coins can be a good alternative to the US dollar in terms of value preservation.

We expect the minister to remove all levies on fuel, particularly petrol like what he did on diesel and also reduce the duty rate on both petrol and diesel. With fuel prices going up globally and fuel being one of the major cost drivers, the mid-term fiscal budget should address the impact of this cost burden on operations. There is a need to scrap the Road Haulage Fuel Import Duty of US$0,05/litre so as to reduce the cost of fuel in the economy.

We expect the statement to address the Intermediate Money Transfer Tax (IMTT). With about 44% of the population falling into the extreme poverty bracket, and most of them using digital money, it is imperative to suspend the 2% IMTT.

We also expect the minister to revisit the recently introduced 4% IMTT tax of local foreign currency transactions. It is simply discouraging banking with some players having already started rejecting USD transfers in favour of cash. Ever since this was introduced, coupled with surrender requirements, we have seen the number of reported robbery cases involving large sums of money increasing.

Regarding the Global Compensation Agreement to pay former commercial farmers US$3,5 billion; resources should come from farming profits through the imposition of a land tax and to ensure that the obligation is not a burden to the general tax payers. We expect the following: Downward revision of the excise duties on cigarettes from the November 2021 upward review to 25% + US$5.00/1000 to US$16 per mille for players to continue operating at an optimal level and ensure sustainability of operations; Removal of the Special Excise Duty (SED) on airtime; and revision of the incentive structure for investing in Special Economic Zones (SEZs).

We expect that the minister introduces a zero percent tax for a period of 10 years from the first year of commencement of works in a Multi Facility Economic Zone or Industrial Park, on dividends declared on profits made on exports by companies operating in the economic zones. For years 11 to 15, only 65% of profits should be taxed. The incentives issue need to be addressed to spearhead investment in SEZs.

An upward review of the tax-free threshold in local currency is also expected given the continued depreciation in the local currency and that about 44% of the Zimbabwean population is languishing in poverty.