Time to suspend Statutory fees on national projects With EMA requiring $22 million for the Hwange expansion project, Zimbabwe’s Statutory fees are higher than those in most countries in the region which scares away investors
With EMA requiring $22 million for the Hwange expansion project, Zimbabwe’s Statutory fees are higher than those in most countries in the region which scares away investors

With EMA requiring $22 million for the Hwange expansion project, Zimbabwe’s Statutory fees are higher than those in most countries in the region which scares away investors

Lloyd Gumbo: Mr Speaker Sir

Treasury’s recent suspension by a year of import duty on Zesa equipment is indeed a welcome development for the country as it will go a long way in reducing the cost of power projects and subsequently tariffs, though more still needs to be done to enhance the ease of doing business in critical sectors of the economy.Mr Speaker Sir, it is important to note that the development comes at the back of concerns raised by the Parliamentary Portfolio Committee on Mines and Energy last year that revealed that statutory fees in the country were too high.

While the latest development does not touch on statutory fees, there is every reason to be hopeful that ultimately Government will scrap these fees that run into millions of dollars.

If truth be told without fear or favour, statutory fees on power projects have made it difficult to attract investors as noted by the committee which observed that: “Most potential investors in the energy sector are being scared away by a number of statutory fees that the investors are required to pay.

“When these investors compare these fees with what is obtaining in other countries in the region, Zimbabwe’s fees are higher than in most countries in the region. For example, the Hwange expansion project, EMA requires fees to the tune of about $22 million.

“The committee therefore recommends that large and national projects which have the capacity to solve the energy problems be exempted from paying these fees or the fees are significantly reduced.

“Another option would be to defer the payment of the fees to a later time when the investor would have started operating and have recouped a large part of the capital outlay.”

Mr Speaker Sir, the committee hit the nail on the head no matter how unpalatable it would have been to some quarters.

Zesa chief executive officer, Josh Chifamba summed the benefits of this move when he said: “We welcome the development because it will reduce the cost of capital projects as this means that duty is suspended on capital equipment.

“This will also reduce the tariff to our clients since the duty component would have been waived. On the part of ZENT, it means that the company will make their products very competitive as there would be no duty on their raw materials.

“We are glad that Government has realised that this is a sector that needs investment. So by suspending duty, it means most of our capital projects would not be too expensive.“

There is need and reason for the country to pull in one direction when it comes to development.

In this case, everyone knows that the country is in need of investment in the power sector, as such there must be convergence among all the Government departments on the need to suspend some of the statutory fees that inhibit development.

While Kariba South and Hwange Thermal Power expansion projects were declared national projects, the fact that statutory fees were maintained defies logic as to whether there is understanding in Government on the need to give priority to national development to personal or departmental interests.

For instance on the Kariba South expansion project, almost $10 million went to statutory fees to National Parks and Wildlife, Zimbabwe Energy and Regulatory Authority and Environmental Management Agency.

Mr Speaker Sir, what makes this untenable is the fact that these are extra costs that must be borne by the Zimbabwe Power Company, which had to borrow from development partners.

This means that it increases the project cost with far-reaching consequences on the tariff as the power utility would want to recover its cost within an agreed payback period.

The fact that loans for these power projects will be paid from electricity sales shows that electricity users will be the ultimate losers as this means that tariffs may be increased in order to recoup investment.

Government departments must understand that they are not there to compete or feed off each other by demanding exorbitant payment from sister-departments whom they know do not have the money.

This is not a problem affecting the power utility alone as there are other departments within Government who drag each other to court demanding statutory fees from their sister-departments.

Information, Media and Broadcasting Services secretary Mr George Charamba early this year told the Parliamentary Portfolio Committee on Information, Media and Broadcasting Services that the Forestry Commission demanded levy for digitalisation transmission towers that were being erected on the commission’s properties.

He questioned the rationale of such a move given that television broadcasting was not meant for profit-driven interpersonal communication but a social good.

Mr Charamba said that the commission went to the extent of suing its sister-department demanding payment for the transmitter towers.

Mr Speaker Sir, it is important that Government comes up with mechanisms to exempt State-owned institutions and national projects from paying statutory fees given the fact that the country is currently facing economic challenges yet it requires serious investment in various sectors.

At the very least, Government can defer the statutory payments and allow the projects to be completed first because we run the risk of having incomplete projects as funds go towards statutory payments.

Some of these projects have the potential to generate revenue. Demanding these statutory payments in essence destroys the revenue bases for the country.

The effect of suspending or deferring these statutory fees is that it lifts the financial burden in the implementation of such projects.

 

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