- OTHER RECOMMENDATIONS
The Committee recommends the following:
3.1 Government must conscientiously implement the proposed expenditure rationalisation measures which, in essence, are not new and have been proposed over the years without implementation. Enforcement of the proposed measures will ensure fiscal indiscipline through strict adherence to legal provisions related to the management of public finances including the Constitution, Public Finance Management Act (PFMA), Audit Office Act, Public Procurement and Disposal of Public Assets Act, Public Debt Management Act and other laws. In that regard, all implementing units should timeously submit monthly, quarterly and annual reports to parliament to facilitate oversight of policy implementation.
3.2 Exporters (Mining, tobacco etc) should be exempted from payment of taxes in originating currency bearing in mind that they only retain between 50% and 55% of revenue in foreign exchange while the remainder is liquidated at 1:1. If the payment of tax in originating currency proposal is to be implemented across the board, there is then need for a corresponding upward adjustment of retention thresholds to capacitate these firms to absorb paying taxes in foreign exchange.
3.3 Government should allow royalty to be deductible as a tax expense in line with best practice taking into account that royalties are a direct and significant cost of production and the need to maintain the viability of the mining sector which has become the “goose that lay the golden egg”. This issue has been raised since 2014 and the Ministry of Finance should clearly pronounce itself on this matter. According to Earnest and Young study (2015), countries such as Mozambique, Zambia, Democratic Republic of Congo (DRC) and Tanzania have more than doubled their Foreign Direct Investment (FDI) in the mining sector after adopting low and stable mining royalty regimes.
3.4 Mining fees and charges should be aligned to those of major mining jurisdictions in SADC, North America and Australia. This again has been recommended over the years with no action on the ground. The Ministry should bear in mind that as a country, Zimbabwe competes for the same investors with these countries.
3.5 The setting up of the Mining Cadastre Information System must be finalised in 2019, given that the US$1.7 million has been prioritised. This is an important system which should increase transparency in the mining sector.
3.6 The US$59.6 million allocated in support of various social safety nets designed to reduce poverty and inequalities is insufficient given the outstanding debts for programmers like BEAM and past record with regards to levels of spending on Drought Mitigation, health assistance, flood victims, accident victims among others. The Committee therefore calls on the Ministry to increase funding to these social safety nets to at least $ 100 million and to ensure timely disbursements of the funds. This increase is also justified by the need to absorb the unintended consequences of the reforms and austerity measures.
3.7 Government must prioritise a payment plan towards obligations to the International Air Transport Association (IATA) so as to revive the tourism sector.
3.8 Government must prioritise Establishment of a Commodities Exchange for marketing of agricultural goods which has been on the cards since 2010. As such, Parliament should get quarterly reports on the matter. The Committee recommends building on efforts that have already been done in this regard including several study visits, registration of a private company Commodity Exchange In Zimbabwe (COMEZ) on 8 June 2010 which culminated in the release of seed capital of US$1million in 2013.
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