It has been a day since Finance Minister Mthuli Ncube presented the 2020 National Budget under the theme “Gearing for higher productivity, growth and job creation”. From the onset, the budget is touted as one which marks the end of austerity. The thrust is now more on growth and employment creation according to the Finance Minister. Let us look at the major highlights of the budget.
According to Minister Mthuli Ncube, The economy is expected to shrink by about -6.5% this year with hopes of recovery by 3% in 2020. However, this will only happen if we receive good rains, electricity supply improves and we achieve macro-economic stability among other ifs. As usual, agriculture and mining are expected to be the major drivers of this growth.
Subsidies that were being given to Grain Millers by the Grain Marketing Board (GMB) will be removed with effect from January 2020. This will see the GMB selling maize and wheat at market prices. Fears of bread and cooking oil price increases are expected to be addressed by reimbursement systems that will target producers of bread, cooking and mealie meal. However, details of this system are still sketchy at this point in time.
Job Creation and Entrepreneurship
A youth Employment Tax Incentive (YETI) has been introduced to give tax credits to employers who employ job seekers who are under 30. Certainly, this is meant to encourage employment creation. In addition to the YETI, a National Venture Capital Fund of ZWL $500 million will also be started. The fund will give affordable loans to young entrepreneurs. Funding is also provided for to a number of institutions like the Women Development Fund, Empowerbank and the Zimbabwe Women Microfinance Bank among others. The purpose here is to fund entrepreneurs.
The budget seems to have come up with relief for taxpayers. The tax-free threshold has been reviewed from ZWL $700 to ZWL $2 000 from 1 January 2020. On bonuses, the tax threshold has been reviewed from ZWL $1 000 to ZWL $5 000.
Intermediated Money Transfer Tax
The 2% tax stays. However, the tax-free threshold has been reviewed from ZWL$20 to ZWL $100. In addition, the maximum tax payable per transaction by corporates has also been reviewed from ZWL $15 000 to ZWL $25 000 on transactions exceeding ZWL$1 250 000. This is also with effect from 1 January 2020.
Value Added Tax (VAT)
The VAT has been reduced from 15% to 14.5% with effect from 1 January 2020. This, according to Minister Mthuli Ncube is meant to stimulate aggregate demand.
There is something to smile about in the budget for the girl child. A ZWL $200 million provision has been set aside for sanitary wear for learners from Grade 4 to Upper Sixth, starting with those in rural areas. Furthermore, the exemption on customs duty and vat on sanitary wear has been extended by another 12 months. Sanitary wear now also includes sanitary cups and pants.
The next few days will see experts and indeed laymen, trying to dissect the budget with regards to what its impact will be both to businesses and individuals. At the end of the day, the more the economy grows and the more jobs we create will be a strong indicator as to whether the Finance Minister has done a good job or not.