Siphakeme .Mnindwa
Harare Bureau
ZIMBABWEANS can look forward to a much improved 2025 after Finance, Economic Development and Investment Promotion Minister Professor Mthuli Ncube said the economy will grow at a much faster pace than it did this year.
It is anticipated that, by close of 2024, the economy will grow by 2 percent. However, it is expected to pace up in 2025 with a 6 percent growth rate.
A growing economy, often measured by its Gross Domestic Product (GDP), brings numerous benefits to a country and its citizens. As the economy grows, businesses often expand, leading to job creation and higher pay. This increased income allows people to afford better housing, education, healthcare and other goods and services.
Economic growth can lift people out of poverty by creating opportunities for employment and entrepreneurship.
According to Minister Ncube, this growth is expected to come from the recovering agriculture sector, as well as the energy sector.
Presenting the 2025 National Budget Statement on Thursday, Minister Ncube said the projected strong economic performance is expected to emanate from the recovery in the agriculture sector, which is poised to grow by 12,8 percent, electricity generation by 10,6 percent, information technology by 9,9 percent and mining by 5,6 percent.
Private consumption is also expected to be at the forefront of this growth.
According to Minister Ncube, private consumption is projected to drive economic growth by 6,6 percent due to strong recovery in household spending, while the public sector is expected to register a growth of 5,3 percent.
A private sector-led economy, where businesses are the primary drivers of economic growth, offers numerous advantages. Private businesses are the primary source of job creation, leading to increased employment opportunities and reduced unemployment rates.
Competition among private firms drives innovation, leading to the development of new products, services and technologies. This, in turn, boosts productivity and economic growth.
Government support
To achieve this growth, the Government has also put in place measures that are meant to allow industry to flourish. In support of the expected rebound in agricultural output, interventions in the sector will be guided by the Agriculture, Food Systems and Rural Transformation Strategy and the Agriculture Recovery Plan, Minister Ncube said.
To support these interventions, ZiG22,9 billion has been set aside and will be channelled towards dam construction, irrigation development and rural development, among other projects.
When governments support the agriculture sector, the move has a significant impact on citizens. Some of the benefits include an increase in farmers’ yields, leading to greater food production and reduced reliance on imports.
By ensuring a steady supply of food, Government support can help stabilise food prices. This makes food more affordable for consumers.
Development partners are expected to complement Government support by providing US$77,9 million in 2025. This will go towards drought mitigation and building resilience against climate change shocks, as well as increased food production.
A total of ZiG400,6 million will be provided for irrigation rehabilitation and development. The target will be to increase functional irrigation from the current 217 000 hectares (ha) to 350 000ha by exploiting the potential of existing dams.
Investing in irrigation rehabilitation and development offers a multitude of benefits, particularly in regions prone to water scarcity or unpredictable rainfall patterns. Irrigation can mitigate the impact of climate change and unpredictable weather patterns, ensuring consistent food supply.
For those in rural areas, the Government is setting aside ZiG670 million to support Rural Development 8.0 interventions, which are anchored in value-adding and beneficiating agricultural produce, raising incomes for communities and ensuring national food security at household level.
According to Minister Ncube, Rural Development 8.0 interventions will create the much-needed rural industrialisation and spur economic development, uplifting the livelihoods of the rural population and reducing rural-to-urban migration through economic empowerment.
In mining, Minister Ncube is still pushing for mineral beneficiation, in line with the Government’s medium- to long-term thrust to reduce the export of raw minerals.
The Government will also intensify awareness and enforcement of the responsible mining initiative to ensure compliance with the country’s laws and curb illegal mining.
Measures will also be put in place in the manufacturing sector, which has a low growth projection of 2 percent in 2025. However, with the sector facing funding challenges, the Government has set aside ZiG100 million as industrial development finance under the Ministry of Industry and Commerce to support the tooling and working capital requirements for greenfield projects. These initiatives and many others are expected to grow the nation’s economic cake, as well as boost Government coffers.
Revenue collections are estimated at ZiG270,3 billion (19,6 percent of GDP), comprising ZiG218,2 billion in tax revenues and ZiG52,1 billion in non-tax revenues.
Overall expenditures are estimated at ZiG276,4 billion or 20,1 percent of GDP, with recurrent expenditures of ZiG235,8 billion or 17,1 percent of GDP; and acquisition of financial and non-financial assets (capital expenditure) are set at ZiG40,6 billion or 3 percent of GDP.
According to Minister Ncube, the expected revenue out-turn takes into account the existing tax policy regime, supported by enhanced revenue administration measures to reduce leakages, as well as additional measures aimed at widening the tax base.
Widening the tax base essentially means expanding the pool of people and activities that are subject to taxation, leading to increased Government revenue. A wider tax base can create a more equitable tax system, where everyone contributes their fair share. A wider tax base can provide the Government with the resources needed to invest in infrastructure, education and healthcare, which can stimulate economic growth.
The additional measures include taxing fast foods; earnings from betting; and everyone running certain businesses, including car dealerships. Over the years, sports betting punters were not taxed for their winnings.
However, in order to embrace punters into the tax base, Minister Ncube proposed to introduce a 10 percent withholding tax on gross winnings of sports betting punters, with effect from January 1, 2025. The minister also proposed to introduce a fast foods tax.
The tax will be on the value of the items sold by fast food retail outlets and restaurants. It will be at a rate of 0,5 percent on the sales value, with effect from January 1, 2025. The food items include pizza, burgers, chips, chicken and doughnuts.
While the tax, as the minister said, is modest, it will cause a lot of headaches to consumers and businesses. For example, a US$12 pizza will attract US6 cents in tax, making the product cost a total US$12,06, which will be difficult to administer on customers who pay cash.
It is either business is going to absorb the tax, or will just increase prices, which will again make the items less affordable.
Interestingly, Minister Ncube did not call any businesses informal; he used the term emerging sector. He said a survey had shown that most of the so-called emerging businesses qualify to contribute to the fiscus through personal and corporate income taxes, as opposed to presumptive tax.
He proposed mandatory registration for corporate and personal income tax for operators such as fabric merchandisers; clothing merchandisers/boutiques; spare parts dealers; car dealers; grocery and kitchenware merchandisers; hardware operators; and lodges.
The operators are also mandated to regularise registration of their operations with the Zimbabwe Revenue Authority (Zimra), transact through point-of-sale machines and maintain records of all transactions by January 1, 2025.
Failure to comply will mean such businesses will be compelled to pay tax of between US$9 000 and US$15 000. Zimra was also empowered to temporarily close businesses that fail to adhere to the above requirements, including failure to register for tax purposes, until such registration and payment of applicable taxes are completed.
Taxing the emerging sector can generate additional revenue for the Government, which can be used to fund public services and infrastructure. It can create a more equitable tax system by ensuring that everyone contributes their fair share, regardless of their employment status.
Minister Ncube also descended heavily on smuggled products such as cement, clothing and dairy products. Imported products would be deemed smuggled, unless the seller provides documentary evidence to Zimra that customs duty has been properly accounted for. Failure to provide such documentary evidence will lead to seizure of the smuggled goods, as provided for in the Customs and Excise legislation. In addition, the seller or owner of such goods will be subject to payment of duty, including prescribed penalties, said Minister Ncube.
Tax relief measures
The minister also introduced tax relief measures, including reduction of capital gains tax for marketable securities to 1 percent from 2 percent. The sugar tax on beverages, which caused an uproar in the 2024 National Budget, was reduced from US$0,001/gramme to US$0,0005/gramme, with effect from January 1, 2025.
According to Minister Ncube, the 2025 National Budget seeks to improve the economic environment for the private sector to thrive, creating jobs and widening the revenue base.
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