Govt Ups Forex Retention Thresholds, Incentivizes VFEX Listing
Exporters licensed under the Special Economic Zones (SEZ) and those listed under the Victoria Falls Stock Exchange (VFEX) will now retain 100 percent of their foreign currency earnings while the rest of exporting entities hold 80 percent of foreign currency earnings, Finance and Economic Development Minister, Professor Mthuli Ncube has said.
Prior to the latest announcement, all exporters, including those under the SEZ and VFEX retained only 60 percent of earnings in foreign currency with the remaining 40 percent settled in local currency using the ruling exchange rate.
The development is part of efforts by the Zimbabwean authorities to boost productivity in exporting firms and also luring investment into the VFEX which has underperformed since its inception.
“In order to complement the country’s efforts in reforming its trade system and taking complementary measures in other policy areas to create an environment conducive to diversifying production and exports away from the export of unprocessed products, Government through the RBZ has put in place an incremental export incentive scheme that seeks to achieve the following;
To boost productivity by firms currently engaged in exporting business as well as encourage entities that are not exporting so that they may venture into exporting business, generate sustainable growth in export revenue, fine tune the policy on the export receipts retention threshold so that the benefits accrue directly to the exporters of goods and services and to encourage listing and participation of firms on the Victoria Stock Exchange and Victoria Falls Offshore Financial Centre,” said Prof Ncube.
The VFEX was launched in October last year and since then; it has struggled to gain traction with only one listing to date- SeedCo International Limited.
A few years ago, government designated six areas as public SEZs namely Belmont-Kelvin-Donnington-Westondale Corridor in Bulawayo, Imvumila (Bulawayo), Masuwe (Victoria Falls), Sunway City Pvt Ltd (Harare), Beitbridge (Beitbridge) and Fernhill (Mutare).
However, the country has struggled to lure investment into these areas.
Large-scale gold producers that qualify for the 80 percent retention threshold shall also be entitled to directly export the incremental portion of the gold to enable them to secure funding and gold loans to enhance their gold production.
The latest policy interventions are likely to lessen exporting entities ‘concerns over the retention scheme which they felt was depriving them of the much needed foreign currency to meet rising production costs in local currency.