HOSPITALITY firms were thrown off balance by the shocking devaluation of the Zimbabwe Gold (ZiG) in September, which compounded pressures from heavy taxation, according to a top industry official.
The central bank devalued ZiG by 43% on September 27, after it struggled to hold ground against major currencies, five months after introduction in April.
In an interview with businessdigest, Brian Nyakutombwa, president of the Hospitality Association of Zimbabwe, said the disparity between the official and the black market exchange rates was distorting prices.
“The impact of devaluation on the industry has been huge and probably is one of the reasons why we end up with a pricing regime that is distorted, which is very painful to deal with while we are also dealing with multi-currencies,” Nyakutombwa said.
He said complexities always emerge when firms buy in US dollars, but selling products in the local currency.
“There is a huge gap,” he said.
“We are required to be trading using the official exchange rate, but reality on the ground is saying that the official exchange rate is just on paper, so that is causing a lot of pain to businesses and how we interact and transact with the general public.”
He also expressed concern over the heavy tax burden imposed on both individuals and corporations, as it hindered business’ ability to invest and grow.
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“The major area is the tax regime, as it is quite heavy on the individuals and corporates. You have got the Intermediated Money Transfer Tax, on top of that Value Added Tax, pay-as-you-earn and corporate taxes,” he said. “The appeal, really, is to say if there could be a relief in what is taken from the individual or the corporate that would also assist with promoting the spending in the industry as a lot of money is going away from the individual or the corporate.
“Obviously, that is against the background of the national economy at large. If they (taxes) are reduced, then it means other areas will suffer, but again, at the same time, for as long as they continue, it means other areas are suffering from the operator’s perspective.”
