Major firm tells Govt: Command agric won’t work, you have too much red tape, taxes too high

Surface Wilmar Chairman Narottam Somani (right) during an April tour at the Surface Wilmar plant in Chitungwiza by VP Chiwenga, ex-Finance Minister Chinamasa, ex-Industry, Minister Bimha, and Agriculture Perrance Shiri (Pic: Memory Mangombe/Herald)

Command agriculture is not sustainable, foreign currency shortages are discouraging investors, Government bureaucracy is frustrating businesses and taxes are too high.

This is according to Surface Wilmar, the country’s biggest cooking oil manufacturer and maker of Buttercup margarine and Olivine brands. The company says this in a statement that is rare for Zimbabwean big business, which has always shied away from openly criticising Government policies, preferring appeasement.

It is a “congratulatory note” to President Emmerson Mnangagwa for his election, and to his two deputies. The company also congratulates the recently appointed Minister of Industry and Commerce, Mangaliso Ndlovu, new Finance Minister Mthuli Ncube, and reappointed Agriculture Minister Perrance Shiri.

But the accolades only provide some diplomatic padding for hard-hitting commentary that reflects what many businesses are saying in private; there is a lot that is broken in Zimbabwe’s economy, and it needs more than just rhetoric to fix it.

Surface Wilmar, a joint venture between Singapore agribusiness giant Wilmar and Midex Global of India, bought into Olivine Industries in 2015. The investment revived the company, bringing back household brands that had disappeared; Jade, Perfection and Olivine baked beans, among others. The company also makes Pure Drop cooking oil. Surface Wilmar has recently been eyeing a takeover of Cottco, the struggling cotton company.

Surface Wilmar invested $15 million in 2015, and plans to invest $73 million into the country. But those plans are in danger, Surface Wilmar says, because of the forex shortage and a range of policy problems.

“However, we are still facing huge challenges in availability of forex and low oilseed production, which is not only pulling down our existing investment, but also quite concerning for our shareholders, both foreign and local. They are discouraged from further investment, as the returns are hampered by insufficient foreign currency allocations to support importation of raw materials and new capital equipment,” the company says.

The company lays out what it thinks is going wrong, and how it must be fixed.

Command agriculture, the centrepiece of Mnangagwa’s campaign, is not sustainable in the long term and must be replaced with a better plan, Surface Wilmar says.
“The command agriculture has been declared as a great success, and has given food sufficiency to the country. This was the need of the hour, however, the model has costs that are not sustainable in the long term. We stand ready to propose a model that will seek to empower the farmer as well as reduce the costs of doing so.”

Government is paying subsidies on the wrong end, the company says. Seed and fertiliser prices in Zimbabwe are 40 percent higher than in the region.

“We recommend that Government provide subsidy on inputs like seed and fertiliser rather than paying the farmer prices above the regional market price,” the firm advises.

Zimbabwe is also not using its land well.
“The country achieved excellent farming results about two decades ago, much ahead of the neighbouring countries, and the production numbers recorded in those years have not been repeated of late. This clearly indicates that the farm land is available, while the occupants/owners have not been productive.”

Underutilised land should be reallocated to “skilled and financially capable farmers”, and lease rates should be increased and proceeds used to subsidise inputs.

“Large scale commercial farmers used to exist and were running successfully. Only a few are left in working condition and are operational. They all need long term investment in infrastructure, large size equipment for modern farming and good irrigation systems.”

The term “ease of doing business reform” has been the buzz for years, but like many other investors, Surface Wilmar is frustrated that this is actually not showing on the ground.

The Ministry of Industry and Commerce already has the list of raw material imports needed by companies, but still insists on applications for import permits, delaying business. The company is also struggling to get export permits quickly due to red tape.

“Decision making is still somewhat slow, no timelines are set for processing, and there are no clear accountabilities for the officers and directors concerned.”

Government must give an interest subsidy and higher rate of depreciation for tax purposes to allow industries to be competitive on the export market. There must be a tax holiday on both VAT and income tax for both existing and new factories, as is the case in other developing economies.

Income tax is too high and is dampening consumer spending, the company says. “Reduction in income tax will reduce the burden on the exchequer, as the net take home pay of civil servants will increase, without increasing their salary.”

The post-dollarisation period after 2009 is often touted as a successful period for the country, as forex was freely available. But Surface Wilmar says this was all a mistake, as Zimbabwe forgot to put limits on cash withdrawals when it dollarised.
“No country in the world allows withdrawal of large cash without justifiable reasons, and we need to adopt proper controls on cash withdrawals and remittances.”

In a sign that such rare frankness is seen in corporate Zimbabwe as taboo, Surface Wilmar felt it needed to put in this disclaimer in its statement: “Zimbabwe is a free democratic country. With the President’s assurance of freedom of speech, we are expressing our views on priorities, in the interests of the nation.”