“Zim Retailers Deserve Wage Subsidy”
BY THE ZIMBABWE RETAILERS CONFEDERATION
While the government was optimistic in medium-term fiscal policy and revised upward projections for gross domestic product (GDP) growth for 2021, from 7.4% initially forecast in November last year to 7 , 8%, growth projections for the wholesale and retail sectors were reduced from 5.7% to 5.1%.
This downward revision reflects how the retail sector has been significantly affected by the national foreclosures imposed during the first half of the year as well as other factors.
Going forward, if no concrete steps are taken to support the retail sector, there will be a further decline which will also lead to job losses and weak overall economic growth as the retail sector retail also contributes significantly to GDP.
We strongly believe that there should be targeted measures that support the retail sector at the political level, as opposed to a holistic approach.
While medium-term fiscal policy spoke of “tax reforms that depreciate employees,” the policy itself left personal income tax non-taxable at a very low threshold of $ 10,000 and below, which means that practically all employees are taxed, including low income earners whose income is already very low.
While the Confederation had proposed raising the tax-free threshold to around $ 50,000, the Treasury kept it at $ 10,000, which in our opinion is not pro-poor and will continue to stifle demand. domestic, in particular for low incomes who have a higher marginal propensity to consume.
The biggest challenge with the current tax-free personal income threshold is that the government will take more from buyers who will have much less money in their pockets.
While we understand that personal income tax is the third largest contributor to total tax revenue, contributing 17%, and the government is trying to maximize its revenue collection, we believe that the employee does low income, who is also the consumer, is already overtaxed as they also have to pay additional taxes such as the 2% intermediated money transfer tax, among others.
We strongly recommend that the non-taxable personal income tax threshold be at least linked to the poverty line, as measured by the total consumption poverty line, which stood at $ 36,756 for a family of six people in July 2021.
Otherwise, taxing the personal incomes of those who are already considered poor will only worsen their poverty and weaken domestic demand.
According to our own survey, Zimbabwe has the lowest non-taxable personal income tax threshold in the region.
In the first five months of the year, Zimbabwe reported an increase in its trade deficit to $ 416 million, from $ 340 million recorded in the same period the previous year.
While the country’s exports jumped 31% to US $ 2.02 billion between January and May 2021, from US $ 1.53 billion in the same period the previous year; imports also increased by 30% to reach US $ 2.43 billion.
Given that around 60% of the country’s exports are concentrated in just two countries, South Africa and the United Arab Emirates, the confederation believes that more efforts should be made to diversify exports in order to reduce risks of external shocks, such as the recent disruption and looting that took place in South Africa in July 2021.
We are also convinced that the top 10 exports of the country should be value-added products, as opposed to the current scenario where all the top five exports are raw materials, which we do not fully benefit from their export because they are simply products. that have had no added value.
This is also in line with the national trade policy, which aims to increase the contribution of exports of manufactured goods to total exports from 15% in 2018 to 30% in 2023.
Zimbabwe’s annual inflation rate for the month of July 2021 slowed to 56%, from a high figure of 362.63% recorded in January this year.
We also believe that weak demand has contributed, to some extent, to the reduction of inflation, although we also applaud the various inflation targeting measures deployed by the government.
While the authorities are aiming for an inflation rate of 25%, we believe that this figure is still high, because inflation must be understood in terms of the moving vehicle; even if it would have slowed down, it would continue to advance at this reduced speed, but would affect consumers especially in this low income environment in which we operate.
In light of the above, the Confederation urges the authorities to be pragmatic in containing inflation while reconciling this with measures aimed at increasing purchasing power and ensuring policy coherence on the measures. which support price stability, as opposed to legal instruments such as SI 127 whose effects have resulted in the inflationary pressures that build up.
Furthermore, we note with concern that the inflation rates for some individual basic products and services are still very high and in fact well above the overall annual inflation rate of 56.37% for the month of July.
Examples include meat, whose annual inflation was 63.42% in July 2021.
Meat prices have been pushed up by outbreaks of tick-borne diseases that have resulted in the deaths of many cattle across the country.
Zimbabwe has also received too much rainfall this year, with some areas even inundated, which has also caused an outbreak of other livestock diseases that have claimed lives. It affected beef prices.
In the poultry industry, the shortage of day-old chicks has also caused their prices to increase significantly, putting pressure on chicken prices as well.
The price of feed has also almost doubled from three years ago, further discouraging poultry farmers and putting pressure on chicken prices again.
It is hoped that in the second half of the year, feed prices will decline relatively as the bumper harvest this year comes into effect.
The inflation rate for milk, cheese and eggs was also high at 64.78% in July, for the same reasons discussed above.
The inflation rate for fruits 81.53% and vegetables 63.25% also matched.
Inflation for medical aid contributions was also 167.54% and auto insurance 136.76%.
The inflation rate for electricity is still very high at 208.79%, and given that it is a basic necessity, especially for city dwellers and businesses, the high prices of electricity electricity is always a challenge for their well-being.
Gas inflation also stood at 55.34% in July.
University fees recorded a very high inflation rate of 353.92%.
Restaurants and cafes recorded a relatively high inflation of 87.32%, largely due to their low capacity operation, forcing them to somehow charge relatively higher costs in order to recoup their fixed and variable costs. .
Animal-drawn vehicles also recorded relatively higher inflation of 59.42%.
However, some individual products actually recorded inflation rates well below the overall rate.
During the first half of the year, most retail players saw their wages and salaries drop from less than the recommended 3% of total revenue to the current 7-10% of total revenue. , in large part due to the lower turnover compared to a constant salary. invoice.
We also hope that there will be consistency in government policies as we are already in an uncertain environment marked by different variants of the coronavirus and blockages occurring in different parts of the world.