Rice Price Hike Looms in Zimbabwe as Millers Challenge New Tax

Grain Millers Appeal to Reverse 15% VAT, Warning of Costly Consequences for Consumers and Local Jobs

by Oluwatosin Alabi

In a significant development that could impact the price and accessibility of rice in Zimbabwe, grain millers have issued a stark warning following the introduction of a 15% Value Added Tax (VAT) on rice by Finance Minister Mthuli Ncube. Announced through Statutory Instrument 15 of 2024 on February 9, 2024, this tax imposition has stirred concerns among stakeholders within the country’s food supply chain, particularly the Grain Millers Association of Zimbabwe (GMAZ).

Tafadzwa Musarara, the President of GMAZ, has raised alarms over the potential repercussions of this new tax policy. According to Musarara, the additional VAT could drive the retail price of a 2kg bag of rice from its current rate of US$2 to as high as US$3. This price adjustment not only threatens to burden consumers but also risks undermining government efforts to bolster revenue through taxation.

One of the key issues highlighted by Musarara is the competitive disadvantage that locally processed rice will face against imported variants, particularly those coming from South Africa where rice is exempt from VAT. The fear is that the Zimbabwean market will soon be inundated with cheaper, untaxed rice imports, thereby jeopardizing the livelihoods of approximately 2,800 local workers employed in the rice sector. Furthermore, the potential dominance of imported rice could render massive local rice processing infrastructure redundant, ultimately failing to generate the anticipated revenue for the government. This scenario could lead to lower VAT collections and a decrease in employment-related tax revenues due to job losses, further straining the country’s fiscal health.

Rice holds a significant place in Zimbabwe’s dietary preferences, being the second most preferred staple food after maize. Monthly consumption stands at 15,000 metric tonnes, with projections indicating a potential increase to 22,500 metric tonnes by 2028. The GMAZ emphasizes the nutritional benefits of rice, noting its low fat content, absence of cholesterol, high fibre content, and lower glycaemic index compared to maize-meal. These attributes make rice a critical component in the national diet, especially in the context of combating non-communicable diseases such as diabetes. Additionally, rice’s gluten-free nature makes it an essential food choice for individuals with gastrointestinal health issues.

The imposition of VAT on rice comes at a time when Zimbabwe is navigating complex economic challenges. With food security and nutrition being paramount, the government’s tax policy on essential food items such as rice is a matter of considerable debate. The GMAZ’s appeal to Minister Mthuli Ncube to reconsider the 15% VAT reflects broader concerns over food affordability and the economic well-being of the populace.

As Zimbabwe continues to strive for economic stability and growth, the decisions made regarding taxation on essential commodities like rice will have far-reaching consequences. Balancing fiscal needs with the imperative to ensure affordable access to nutritious food remains a critical challenge for policymakers. The dialogue initiated by the GMAZ with the government underscores the need for collaborative solutions that safeguard the interests of consumers, local industries, and the national economy.

This situation also highlights the interconnectedness of regional economies, where tax policies in one country can have ripple effects on trade dynamics and competitiveness across borders. The potential influx of untaxed rice from South Africa into Zimbabwe exemplifies the complexities of managing domestic industries while remaining attuned to global market forces.

In summary, the grain millers’ request for a reversal of the newly introduced VAT on rice by Finance Minister Mthuli Ncube is a pivotal moment that encapsulates the broader challenges of economic policy, food security, and nutritional health in Zimbabwe. As stakeholders await a response from the government, the outcome of this policy debate will undoubtedly have implications for the country’s efforts to navigate its economic recovery and ensure the well-being of its citizens.

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