Confusion is reigning over the $1 billion dualisation of the Harare-Beitbridge highway as conflicting statements have emerged on the granting of tax concessions to the contractor, Geiger International.
While Transport and Infrastructure Development Minister Joram Gumbo recently said Zhejiang Bayong Highway Engineering International, the Chinese company contracted to undertake construction work for the dualisation of the $1 billion Beitbridge-Harare Highway had approached the Ministry of Finance and Economic Development seeking national project status, it has emerged the project was granted National Project Status and secured other tax concessions as early as February this year.
However, it is understood Minister Gumbo, the contractor and other players such as tax authorities are waiting for a Statutory Instrument to be gazetted, putting in place the exemptions. This has caused confusion with some key Government actors demanding the project be re-tendered on grounds Geiger is dragging its feet on a critical infrastructure project.
According to a Finance and Economic development Minister Patrick Chinamasa’s February 2 letter to Geiger International vice president, Treasury acknowledges the importance of the Harare-Beitbridge road as a strategic regional gateway for Zimbabwe and its neighbours and thus granted the project a number of concessions to act as enablers.
“In this regard, I am pleased to advise that Treasury has granted the following tax concessions: National Project Status to enable duty free importation of eligible products which include components or materials that form a permanent part of the finished product; and exemption from Non-resident’s tax on fees payable in respect of any services of a technical, managerial administrative or consultative nature,” reads part of the letter which was also copied to Minister Gumbo.
In addition, the taxable income of an approved Build-Own-Operate-Transfer (BOOT) or Build-Operate-Transfer (BOT) project is levied at 0 percent during the first five years and 15 percent thereafter. “With respect to interest earned on foreign loans, no tax is payable following repeal of the statutory tax provision.”
As recently reported by our sister paper, The Herald recently, officials from Bayong International, a company contracted to dualise the Beitbridge-Harare Highway by Austrian firm Geiger International, met Finance and Economic Development Ministry officials in August seeking duty exemption on the equipment they want to import from China. Geiger is financing the project.
Minister Gumbo said a Statutory Instrument to that effect by the Ministry of Finance and Economic Development is expected to be gazetted soon.
Minister Gumbo said Geiger International was contracted by Government to carry out the project under a 25-year build-operate-transfer (BOT) model at a cost of $984 million and is expected to complete the construction work by 2020. He said 45 engineers from the company were on the ground as of August and work is expected to commence by end of October.
High ranking officials close to the project management said Minister Chinamasa and Minister Gumbo have been discussing at various levels in their respective Ministries to expedite the deal. It is also understood the matter has been escalated to the Presidium for enablers to the key strategic project.
“They have been in communication and officials in the two ministries, together with Zimra have been meeting, but the outcomes of the meetings remain unknown,” said a source who requested not to be named.
Officials at various levels in government and the private sector are fixated around the $1 billion project given the economic benefits expected to accrue to the nation as well as the profits to be reaped by contractors. The value of the project is equivalent to 25 percent of the country’s annual budget for 2016 and 2017.
Currently, Geiger has millions worth of earth moving and other equipment stuck in neighbouring Zambia as the company waits for government to make good on the promised tax incentives.
So critical are the tax concessions that the total cost for works, without the tax breaks, would swell.
As recently reported by our sister paper The Herald, Government and Geiger International are expected to meet all preconditions set to kick-start dualisation of the $1 billion Harare-Beitbridge Highway by end of September.