eBusiness Weekly
Getrude Mawire
The commonly held belief is that imports are bad for the economy because they bloat the import bill and thereby resulting in a negative balance of trade (BOT). A positive BOT is considered to be more favourable therefore we need to control imports.
However, it should be noted that at some point we do need imports. If skilfully managed, they can actually help a country achieve sustainable economic development. In a way, our Government has shown that it is aware of this as it has introduced a host of rebates of duties, suspensions and other initiatives in order to support imports of raw materials and capital goods. On the other hand, controls such as import licence requirements are imposed on importation of finished goods.
Most literature regarding our import bill structure points to the fact that the bulk of our imports are for finished goods. If this is true then we need to change this situation as we really need to increase our productive capacity.
This author is saying; let’s get our priorities right as individual importers, business organisations and Government.
Government appears to have partly played their part by putting in place some import incentives on the importation of capital goods and raw materials to improve our productive capacity. My only qualm with them is the reactive mode in which these incentives are introduced. They only come after a few informed parties lobby for them which greatly contribute to the widespread lack of awareness by those who would also otherwise benefit from them.
These importation incentives are real. It’s time to make a conscious decision to invest in raw materials and capital goods.
It is also time to include importation decisions in our strategic planning sessions. We need to start thinking about how we are going to structure our international buying decisions right from the beginning. Customs management consultants are there to assist.
Besides lack of awareness, businesses lack financial muscle to invest in capital and raw materials. Personally, I believe it’s a case of “wrong priorities”. But this is an argument for another day. There are hosts of cost saving measures initiated by the government in order to encourage entrepreneurship backed by external physical capital in most sectors of the economy. Customs Duty bill should not have to be barrier to investment. The following are some of the examples:
Rebates of duty
Industry specific provisions are available in statutory instruments for example Statutory Instrument 6 of 2016 which is the same as Section 144T (144U if using Optima Legislation) of the Customs & Excise General Regulations Statutory instrument 154 of 2001. This rebate of duty is given to an importer of capital goods by businesses in the agricultural sector, mining sector, energy sector, manufacturing and industrial sector.
From my industry experience, the ministries are very eager to support businesses which can show that they are serious and want to improve the economic well-being of the country.
At least 100 percent of the applicants assisted to get these rebates were granted the rebates. The only challenge was the processing time as the rebate application must go through three high level approvals before they can be granted.
These approval processes are done at the business’ parent ministry, the Finance and Economic Planning Ministry and at Zimra. Applicants had to undergo an average of a three-month processing period.
This is where businesses are encouraged to factor in these issues within their strategic planning processes. Three months against a saving of thousands of dollars should be negligible for any serious business.
This rebate is highly inclusive and can be granted to almost every company in the productive sector. A notable industry which is not included in SI 6 of 2016 is the Tourism Sector. It is provided for separately under Section 144L of the General Regulations (sic — error in numbering in the legislation). The section provides for a rebate of duty on capital equipment for use in Tourism Development zones. SI 5 of 2016 has the same provisions.
The effect of these rebates is that the business will never have to pay both the Customs Duty and Import Tax unless if they breach any of the conditions set in the rebate. One of the conditions is that the equipment cannot be disposed of within a period of 10 years from the granting of the rebate. Zimra will also specify its own conditions in the Rebate letter.
Company Specific Rebates
Organisation specific dispensations are also available in the General regulations. For example the following sections provide for rebates as stated:
Section 144D and 144E provides for a Rebate of duty on parts of certain railway locomotives & rolling stock of the National Railways of Zimbabwe (NRZ) and others.
Section 144H provides for Rebate of duty on goods for use by approved statutory bodies for incorporation in the construction of approved water projects.
Section 144I provides for a Rebate of duty on engine spares, special purpose motor vehicles and components of the National Railways of Zimbabwe.
Section 144J allowed a Rebate of duty on goods for use by the Zambezi River Authority
Section 144K provides for a Rebate of duty on water treatment chemicals imported by ZINWA or any local authority
Section 144L provides for Rebate of duty on Aircrafts, aircraft engine spares & components of Air Zimbabwe. We expect this to be amended to include other airlines?
There are several other sections in the Customs & Excise General regulations which provide for duty free importation of goods for prospecting and search for minerals, petroleum exploration and production, goods for construction of approved projects and others.
Exports are also supported through the granting of rebates on importation of materials used in the preparation and packaging of fresh produce. Development of new technologies need not be an expensive affair because you can import samples for destructive testing duty free on rebate of duty.
Even where a business cannot afford to buy the equipment but only to hire it, there is a rebate of duty for temporary importations. Greenfuels has utilised this rebate to import expensive equipment for a while now.
Please note that some of the rebates only ‘rebate’ the duty component. You will still have to pay the Import VAT. Again this is where the strategic planning for imports comes in. All companies registered with Zimra can apply for deferment of import VAT payment by 90 days as provided for in the VAT regulations.
Duty Rebate Quotas
For a while now, Industry or product based rebates have been granted to those who are aware for products usually raw materials in the Furniture Manufacturing, Soap and Food manufacturing, Clothing, Luggage ware Manufacturing, Motor vehicle assembly, and for some finished goods e.g. buses, refrigerators.
Some of these rebates are issued for limited quantities and then allocated to applicants who qualify by the respective parent ministries. If you are in any of these industries, why not explore and join in the gravy train.
Suspensions of Duty
Many businesses can explore suspensions of duties in terms of the Customs and Excise Suspension regulations 257 of 2003. This means that duties are suspended to the specified levels.
These are usually applicable for products imported by specified importers for example Wheat, maize, wheat flour, gumboots, agro-chemicals, raincoats, and maize seed, gloves etc imported for agricultural purposes or by specified importers.
As with Rebates, Industry or product based Suspensions are granted to those who are aware for products usually raw materials in the Dairy industry, Fertiliser industry, tyre manufacturers, and white cement. They are issued for limited quantities and then allocated to applicants who qualify by the respective parent ministries. Qualification for suspension of duties also heavily depends on the parent ministry’s support for the application in addition to other considerations.
Disclaimer: This Article is not meant to create a consultant/client Relationship. Readers are advised to consult their Consultants for specific advisory services.
Gertrude Mawire is a Fiscal Compliance and Investment Advisor based in Harare. She writes in her personal capacity. Gertrude, a member of ZNCEE ( customs & excise experts) holds an MSc in Finance & Investments (NUST) Bachelor of Business Studies (UZ), IOBZ Diploma various other Certificates. She can be contacted on [email protected], [email protected] and 0712 437 256.
