By Alois Vinga
ZIMBABWE’S biggest seed processor, SeedCo Limited says tax reductions extended to business by government last year, will be eroded by inflation at a time when the company’s sales volumes have gone down 244%.
In a trade update, SeedCo company secretary, Terrence Chimanya said while the measures introduced by government are welcome, there is risk that inflation will erode the benefits.
“While there are meaningful reductions under four taxation headings the positive impacts are at risk of being eroded by inflation,” he said.
The tax reductions being alluded to were announced last year by Finance Minister Mthuli Ncube on input tax and value added tax (VAT) and AIDS Levy.
In the nine months ended December 31 2019, sales volumes went down 24% when compared to a similar period in the previous year while third in the quarter of December 2019 volumes went down minus 3%.
Low onset of the season and unfavourable weather forecasts which discouraged farmers from purchasing seed.
The seed producer blamed the negative impact of low disposable incomes on consumer demand, reduced government uptake of seed; fuel shortages affecting land preparation by farmers and electricity shortages for the sales decline.
The company also blamed the late onset of the rain season which eventually became pronounced as drought year as having contributed towards the sales decline.
“Local currency depreciation largely attributable to a mismatch between local money supply and availability of foreign currency.
“Food shortages putting pressure on the government’s import bill and exchange rate coupled with high cost of production driven by exorbitant prices in local currency for critical inputs like fuel, chemicals and packaging were key challenges during the period,” he said.
However, the company continues to implement measures to preserve value in a challenging environment by securing funding to pay for all seed deliveries from growers and funded the processing of the seed in readiness of the selling season.
“Striking a balance between cost containment and continuing in business (operating and retaining skills) profitably is now part of the company’s challenging daily routine,” said Chimanya.