Companies in Zimbabwe are grappling with exorbitant transaction costs totaling around 8%, comprising a 5% bank charge, 2% Intermediated Money Transfer Tax (IMTT), and 1% administration fee by the Reserve Bank of Zimbabwe.
However, the government has declined to intervene, leaving businesses to bear the brunt, which ultimately translates to consumers purchasing expensive goods and services.
In a parliamentary session on Wednesday, Deputy Minister of Finance David Mnangagwa stated that the government has adopted a policy of non-interference in bank charges and transaction costs.
“As far as high transaction charges are concerned, Madam Speaker, that falls within the banks’ purview. We have adopted a policy of non-interference in bank charges and transaction costs but continue to engage our banks to reduce some of these fees, making it easier and more accessible to use electronic money,” he explained.
When questioned about the impact of these high transaction costs on businesses, Mnangagwa appeared unconcerned.
“We are not overly concerned about the pricing of these goods but rather the exchange rate being used,” he said.
The government’s focus on the exchange rate, rather than the high transaction costs, has raised concerns among businesses. Mbizo legislator Corban Madzivanyika posed a question, “Will those manufacturers and retailers be able to recover the cost if they are allowed to sell at the prevailing interbank rate?”
He further asked, “Hon. Minister, are retailer prices not cost-recovery prices? When we compare the transactional charges for a company to get money from the bank, the bank charges 5%. Then there’s IMTT, which has been increased to 2%. Lastly, there’s a 1% administration fee by the Reserve Bank of Zimbabwe, totaling around 8%. So, will those manufacturers and retailers be able to recover the cost if they are allowed to sell at the prevailing interbank rate? Is it possible, Hon. Minister, to look into that so that you do not polarize those doing business legally?”
Mnangagwa’s response did not address the concern, stating, “We will take no notice or heed to the pricing and rather let market forces deal with that, but what we will monitor is the exchange rate.”
United Kingdom based and British-born Zimbabwean writer, development economist and technology architect Chenayi Mutambasere said the tax on electronic transfers is making it harder for businesses in Zimbabwe to operate.
She added that the country’s currency liquidity crisis has made electronic transfers necessary.
Mutambasere added that the frequent changes in policy make it hard for businesses to predict their finances.
As a result, she said, the businesses may increase prices to cover their costs, leading to more inflation and economic instability.
“The punitive tax regime is exacerbating the challenges within the domestic market, especially as electronic transfers have become the primary mode of payment for businesses in Zimbabwe. The persistent currency liquidity crisis since 2016 has necessitated the reliance on electronic transfers, making them not just acceptable but essential.
“However, this tax imposition will likely lead to inflationary pressures on prices in both USD and the local currency. Moreover, the sudden and critical policy changes reflect a lack of comprehensive planning, resulting in constant fluctuations that hinder businesses’ ability to make accurate liquidity projections.
“To mitigate this uncertainty, businesses may incorporate provisions, ultimately passing on increased costs to consumers. Consequently, this cycle fuels price instability and hyperinflation, exacerbating the economic challenges faced by Zimbabwe,” she said.
