THE government should reduce taxes and licensing fees as part of the process of internal devaluation in order to improve the ease of doing business and to enhance competitiveness of local industry in the country.
Internal devaluation is an economic and social policy option whose aim is to restore the international competitiveness of a country mainly by reducing its labour costs — either wages or the indirect costs of employers. Competition and Tariff Commission chairman Dumisani Sibanda told a Confederation of Zimbabwe Industries symposium on internal devaluation yesterday that the government should urgently align its pricing structure to affordability.
Sibanda said the government should address monopolistic pricing structures, which have contributed to the weakening of Zimbabwean companies.
Zimbabwean companies are battling a liquidity crunch, lack of lines of credit and more importantly, high costs.
Key cost drivers include energy, power, fuel, labour, finance charges and a host of taxes, levies and fees accruing to the government.
CZI president Busisa Moyo told the symposium that high costs were contributing to the rising unemployment levels and therefore internal devaluation has been identified as the logical way forward as Zimbabwe does not have its own currency.
He said high prices, salaries and wages meant that business can only absorb fewer employees than when salaries and wages are lower.
Reserve Bank of Zimbabwe governor John Mangudya said the re-engagement that the government is pursuing will lead to the lowering of the country risk, which will in turn pave way for a reduction in the cost of foreign capital.
Mangudya said there must be a change of attitude starting from company level.
“We’re talking about cost control at a company level. If you don’t reduce cost you’ll not make a profit and if you can’t make a profit you may be forced to close the company. We need to increase productivity in Zimbabwe and to control costs. Zimbabwe has kwashiorkor of capital. We need new money,” said Mangudya.
The government has also set up bad debt buying unit ZAMCO, which has taken over non performing loans to clean the balance sheets of companies.
“As a central bank we’re working on the cost of doing business through ZAMCO. What ZAMCO does is to make sure that the companies that have a going concern are assisted to ensure that they restructure their debt and over a period of time they’ll be able to pay back. They’ll pay back at interests, which are much lower than the 20 percent that’s being talked about,” he said.