The Government’s decision to remove the intermediate money transfers tax (IMTT) for the 2022/23 wheat marketing season will enable grain millers to access more wheat at reduced prices, which will see the price of bread falling too.
In his Budget presentation last week, Finance and Economic Development Minister Professor Mthuli Ncube said Government had increased IMTT on domestic foreign currency transfers from two to four percent to boost use of local currency.
“However, to mitigate against higher wheat prices and consequently the price of bread and other wheat products, I propose to exempt from IMTT, the transfer of funds to farmers, for the purchase of wheat by private off-takers approved by the Agricultural Marketing Authority, for the period September 1, 2022 to 31 March 2023,” he said.
Grain Millers Association of Zimbabwe (GMAZ) chairman Mr Tafadzwa Musarara commended the decisions saying it would reduce the cost of doing business and urged the Government to make it permanent.
“We welcome the suspension of IMTT on payment of wheat to farmers and contractors. This will enable us to buy more wheat and reduce drastically the cost of doing business. We hope the IMTT exemption becomes permanent,” said Mr Musarara.
Food Crop Contractors Association (FCCA) chairperson Mr Graeme Murdoch echoed the same sentiments saying the announcement would enable farmers to get the full value of their wheat and reduce the acquiring cost by private millers.
“This was a major concession from the Minister of Finance and much appreciated by farmers. The waiver of IMTT payments to farmers means farmers will realise the full value for their wheat.
“It also levels the playing field between private players and millers and will result in more deliveries direct to millers thereby reducing the burden on the fiscus,” said Mr Murdoch.
Meanwhile Stockfeed Manufacturers Association of Zimbabwe (SMA) executive administrator Dr Reneth Mano said there was need to broaden the products under the IMTT exemption, as it has proved to be a major cost driver with the negative effect of increased product prices to consumers.
“The IMTT is a big cost driver on all businesses and the business community had advocated its complete and total removal to reduce cost of doing business transactions intermediated through banks.
“In the case of wheat payments to farmers, those paid by the Grain Marketing Board (GMB) would enjoy the exemption from IMMT, but private wheat contractors would deduct IMMT from the wheat producer price disadvantaging those wheat farmers contracted by the private sector. In essence the Minister has merely levelled the playing field,” said Dr Mano.
However, Dr Mano believes the real challenge is the Government approved high wheat producer price of US$620 and US$680 per tonne for standard and premium wheat grades respectively.
“These wheat producer prices are way higher than the landed cost of wheat at between US$480 to US$520 per tonne that are presently subtending the current retail bread price of between US$1 to US$1,20 per loaf.
“While the industry is still awash with cheap imported wheat and wheat flour to probably take the country past the Christmas period, there is a very big risk that retail prices for a loaf of bread would rise by as much as 30 percent when baking industry starts utilising the bulk of the locally-produced expensive wheat. Prof Ncube should have accommodated the 30 percent wholesale price subsidy,” added Dr Mano.
He observed that 1,429 tonnes of wheat were needed to produce one tonne of bread flour and 1, 666 standard loaves of white bread.
Thus, the 30 percent increase in cost of wheat from the landed cost of US$500 to the GMB wholesale average price of US$650 per tonne is going to push the retail price of bread made from GMB procured wheat by 30 to 40 percent, all other things being equal.
Wheat producer prices in the region are between US$450-500 per tonne in Zambia while in South Africa they are from US$340 to US$380 per tonne.
Dr Mano, however, said the high wheat producer price offered by Government should encourage farmers to produce wheat yields above 6,5 tonnes per hectare considering that an investment of US$2 700 would have been incurred for every hectare of wheat.
In the event that the projected wheat harvest of 340 000 tonnes is realised, a wheat subsidy is needed to protect bread consumers from unfairly bearing the burden of implicit taxation of about US$51 million or $35,7 billion, he added.
“Any attempt to pass the burden to consumers would see bread prices rise culminating in further reduction in family demand and per capita consumption of bread especially among lower income families countrywide,” concluded Dr Mano. – The Herald
