Published: 3 hours ago

The Zimbabwe National Chamber of Commerce (ZNCC) has called on the government to accelerate payments to contractors to prevent a worsening liquidity crisis that could undermine tax compliance and stall business growth.

The delays stem from Treasury's value-for-money expenditure monitoring programme, a policy designed to prevent inflated invoices and protect the value of the Zimbabwe Gold (ZiG) currency by tightening public spending. Under this system, ministries withhold payments to suppliers and contractors until the verification process is complete.

While the policy aims to instil fiscal discipline, it has inadvertently created a cash flow squeeze across several sectors, including construction, agriculture, and mining services. Business member organisations warn that the backlog of unpaid invoices is trapping liquidity in government accounts, starving the private sector of working capital and slowing down tax remittances.

"Delayed payments to government contractors strain private sector liquidity. Unpaid export surrender balances make exporting less competitive and add to an unfavourable debt position," ZNCC said in its latest newsletter. "Contractors' and exporters' cash flow challenges reduce tax compliance, worsen arrears, and stifle business growth."

To ease the pressure, ZNCC has proposed a contractor payment clearing system that would require all certified government invoices to be settled within 90 days. It also suggested issuing tradeable Treasury Bills to settle arrears, which companies could use to offset tax liabilities.

Following the 2025 gross domestic product (GDP) rebasing, Zimbabwe's tax-to-GDP ratio dropped to about 14% from 18%, falling well below the Southern African Development Community (SADC) convergence target of 25% and the 22–25% average for middle-income countries.

ZNCC noted that non-tax revenue contributes only 4% of total collections, leaving 96% dependent on taxes in a largely informal economy. It criticised the current 2% intermediated money transfer tax (IMTT), saying it raises transaction costs, distorts supply chains, and encourages the use of cash - contrary to the Reserve Bank of Zimbabwe's drive toward a cashless society.

The chamber also raised concerns about the growing number of value-added tax (VAT)-exempt products under Statutory Instruments 15 of 2024 and 248 of 2023, saying the inability to claim input tax increases operational costs. "Formal businesses carry a disproportionate tax burden, undermining competitiveness in the regional market," ZNCC said, adding that a narrow tax base amid high rates promotes informality and reduces compliance.

ZNCC further proposed the scrapping of the IMTT altogether, arguing that it discourages electronic transactions and entrenches the cash economy. The organisation also urged the repeal of Section 4A of the Finance Act and Section 38(4) of the VAT Act, which compel companies to pay taxes or duties in the currency of trade.

It recommended allowing the offsetting of input and output VAT across currencies using prevailing exchange rates and expediting VAT refunds through risk-based audits and published timelines.

Last month, ZNCC held discussions with the Treasury and the Zimbabwe Revenue Authority (ZIMRA), presenting its recommendations ahead of the 2026 National Budget. The chamber emphasised the need for timely settlement of government arrears, fiscal discipline, debt management, and a reformed tax framework that broadens the base and reduces the cost of doing business.

It also urged authorities to focus on industrialisation and value addition in agro-processing, mining, and manufacturing, as well as improving border efficiency, reducing corruption, and supporting formalisation through lower compliance costs and an enabling business environment.
- Newsday

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