KEY POINTS
- Investors demand extensive tax and duty-free perks in Zimbabwe.
- Government officials urge caution to avoid harmful investment deals.
- Revamping tax incentives may help boost tax revenue and attract real investors.
Zimbabwe is at a tipping point, especially in its bid to secure foreign direct investment (FDI) in the country.
Government ministers, including the Finance and Economic Development Secretary, George Guvamatanga, disclosed that many potential investors are asking for massive incentives like tax-free for their personnel and free importation of supplies such as stationaries among others.
These demands make people question if such deals will prove to be beneficial to the country in the long run.
Investors want more than usual perks
This was revealed by Guvamatanga during a Zimbabwe Investment and Development Agency (ZIDA) workshop a few weeks back when he exposed the investor outlooks.
Most firms interested in the Zimbabwean market are looking for out-of-the-ordinary incentives. While some investors have insisted on tax-free wages for workers, others have gone to the extent of calling for duty-free importation for such items as office desks and stationery.
These expose Zimbabwe to numerous predicaments, where the long-term advantages of such regimes for the country are limited.
“In some cases, many incentives are provided and at the end of the day, Zimbabwe is left with nothing,” Guvamatanga stated. He also said some of the projects are of relatively small life span implying that Zimbabwe will not benefit much at all once incentives expire.
This comes at a time when the country is struggling to attract FDI after years of economic volatility and unpredictable policies that have chased away investors.
Currently, President Emmerson Mnangagwa has been at the front line preaching the “Zimbabwe is open for business” campaign and to an extent the government has delivered this through ZIDA, which has been issuing licenses worth over $1. 8 billion in the second quarter of the year 2024—a sharp rise from the $ 622 million licensed in the first quarter.
Is Zimbabwe getting a fair deal?
Although there is heightened awareness towards Zimbabwe on the global market, Guvamatanga noted that the government should be wary when signing contracts.
This means that while Zimbabwe loses out, foreign investors will be the beneficiaries of this kind of deal. There is evidence that some investors use them to evade the formal banking system and tax, and remit their profits home.
There are also indications that certain enterprises depend only on cash transactions and have not installed fiscialized cash registers which record value-added tax and other amounts. This leads to Zimbabwe losing essential tax revenue.
According to Guvamatanga, certain investors seem to have special backing from influential politicians, allowing them to bend the rules in their favor. Such actions could potentially be detrimental to the economy of the country in the long run.
Time to put Zimbabwe first
As Zimbabwe continues with the Vision 2030 agenda that aims at turning the nation into an upper-middle-class economy, authorities should target investors who genuinely want to contribute to the nation’s development.
This translates to job creation, growing businesses, and making tax payments that act as a source of income for the nation’s economy. In particular, the government should reconsider its policy of taxation incentives for foreign investments, yet it should avoid the use of the wrong incentives which would lead to a bad impact on the economy of Zimbabwe.
There is increasing awareness that “briefcase” investors, those who only want to exploit a few hours or days at the expense of the future of Zimbabwe’s economy, ought to be shunned. In essence, ZIDA has to be very selective on the kind of deals to approve, and shun those that are detrimental to the country as a whole.
The government cannot mortgage its future in an attempt to get short-term gains.
