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Prices will fall – Mutashu

Prices will fall – Mutashu

By Vimbai Kamoyo

President of Confederation of Zimbabwe Retailers, Denford Mutashu, said the skyrocketing prices are expected to fall as interventions are being sought.

In a statement, Mutashu said his organization was working with the government on modalities that would see the easing of inflationary pressures caused by the taxes introduced on some products by the Minister of Finance Mthuli Ncube.

“We have noted various concerns expressed in the media and by the public regarding the prices of basic commodities, stemming from the change in VAT status and the reintroduction of duty on basic commodities, effective February 1, 2024. We would like to provide an overview of the current status and outline the measures we are implementing to ensure the availability and optimal pricing of basic foods.

“As of January 1, 2024, SI 248 of 2023 exempted VAT on all basic foods such as Maize Meal, Rice, Sugar, Cooking Oil, flour, and bread. The only change was the transition from zero rating to VAT exempt, resulting in suppliers being unable to claim input VAT on taxable supplies. We estimate the cost of this change to be between 2 and 3%.

“We understand this decision was made by the government to address the negative impact on the fiscal due to massive VAT refunds on zero-rated products and the anticipated El Nino-induced drought and lower commodity prices which are likely to lower tax revenue in the short term.

The impact of the 2-3% change was deemed insubstantial and a fair compromise given the circumstances. This aligns with regional parity VAT,” Mutashu explained.

Mutashu said it was only prudent for the government to exempt rice from having import duty, as it was a staple diet in some families and institutions.

“Other basic items such as soap, washing powder, and petroleum jelly have always been subject to standard VAT rates. They were temporarily exempted for a period of six months, from February to August, before the exemption was extended to January 31, 2024. We appreciate the government’s intervention to alleviate price hikes during that time.”

“This is particularly crucial in light of the expected El Nino-induced drought and to ensure regional parity, as rice is exempt in the region. Locally, being subject to standard VAT will result in a 15% higher cost compared to cross-border traders from South Africa and Mozambique, potentially leading to informal sector trade and rendering local retailers uncompetitive,” he said.

Mutashu assured consumers they will closely monitor the situation maintain ongoing communication with local manufacturers and swiftly engage the government should local pricing exceed import parity.

He added, “We will now approach the government regarding the exemption of VAT on rice. Overall, we believe the policies implemented are fair and will ensure price stability.

His Excellency President Dr ED Mnangagwa and the government, have committed to ensuring that basic commodities are affordable to all, with pricing equivalent to or better than that of regional countries'” he said.

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