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RBZ governor, John Mangudya’s remarks at the Confederation of Zimbabwe Industries (CZI) meeting to unveil the Manufacturing Sector Survey report for 2015 stunned guests, as it brought to the fore the cat-and-mouse games between companies battling to preserve scant earnings and the Zimbabwe Revenue Authority (ZIMRA) struggling to meet revenue targets.
Mangudya did not say how much, in terms of taxes due to the State, had been lost through diversion of corporate funds into individual accounts.
But he noted that it was one of the reasons behind a plunge in revenues to ZIMRA, which has undermined government’s capacity to fund critical social operations, including servicing a US$10 billion public debt.
In July ZIMRA announced that net collections for the period were six percent below target for the first half of 2015.
The sustained decline in tax has affected government operations.
“Companies are depositing funds into individual accounts to avoid ZIMRA,” Mangudya told industrialists.
“They are doing creative accounting because they know that funds in individual accounts are free funds. That is why ZIMRA revenues have gone down,” said Mangudya, who revealed that the economic crisis buffeting the country had lumped Zimbabwe among African States considered to be fragile.
These include Somalia, Eritrea and Sudan. In the case of Zimbabwe, the RBZ boss charged that the country had chosen to be poor due to delinquency and corruption.
The CZI Manufacturing Sector Survey highlighted that 43 percent of 250 industrialists polled cited corruption as one of the worst factors affecting the business climate.
Mangudya said Zimbabwe had made a number of mistakes, including failing to repay debts owed to local and foreign lenders.
These include the World Bank (WB) and the International Monetary Fund (IMF).
Could the diversion of funds to shady accounts by industrialists be a response to the heavy handed manner in which ZIMRA, which estimates that over US$1 billion in taxes due from the private sector companies are in arrears, has handled firms that have failed to pay taxes?
As the CZI survey showed yesterday, over 50 percent of survey respondents said companies were no longer viable, and were battling to fulfil their obligations, including paying for raw materials.
But the taxman has been ruthless, garnishing accounts of defaulters and leaving some of them bankrupt. However, could it also be that the country’s captains of industry have become part of the scourge of corruption that has ruined our economy?
Deputy Minister of Industry and Commerce, Chiratidzo Mabuwa, revealed last year that industry captains had abused a US$40 million package unveiled under the Distressed and Marginalised Areas Fund (DIMAF) by servicing existing expensive loans and buying top of the range range vehicles and mansions to fund personal lifestyles.
DIMAF was jointly funded by insurance giant, Old Mutual and government.
“Firms benefited,” said Mabuwa. “But they just simply did not repay,” she told a conference in October last year.
Yesterday, the RBZ boss hit out at deceitfulness by Zimbabweans, saying they should learn to repay debts at the individual level right up to government level.
“We have made a choice to be poor when we are rich,” he said, as he re-emphasised the need to honour a commitment Zimbabwe made in Lima, Peru two weeks ago to repay US$1,8 billion by April to the IMF, the WB and the African Development Bank (AfDB) as part of a debt settlement strategy.
“This economy is an economy in a vicious cycle of low productivity, low capacity utilisation, lack of capital formation and no capacity to service debt . . . the wicked borrow and they do not repay. If Zimbabwe borrows from other countries and we don’t repay, we are also wicked,” said Mangudya.
He said government had made a position to repay its debts, starting with the AfDB, IMF and the WB, before going on to the Paris Club to negotiate other debt repayment plans.
After that, the country expects further re-engagements with major global lenders, leading to the unlocking of vital capital to rebuild the economy.