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Mthuli Ncube to expend 5% fuel levy on Chirundu Highway

by Staff reporter
19 Nov 2019 at 20:35hrs | Views
Finance and Economic Development minister Mthuli Ncube has allocated 5% of the excise duty revenue collected on fuel towards the construction of the Beitbridge-Harare-Chirundu Highway as international financiers remain elusive.

The total cost of the project, that has stalled for years and yet facilitates regional trade and the movement of goods, is estimated at US$1,2 billion.

Presenting the 2020 National Budget last Thursday, Ncube said he was going to fund the rehabilitation of the highway through internally generated funds emanating from 5% fuel excise duty.

"This has undermined rehabilitation and dualisation of the Beitbridge-Harare-Chirundu Highway which government has undertaken to fund from internally-generated resources. It is, therefore, critical to secure additional resources for the Beitbridge-Harare-Chirundu Highway, which facilitates the movement of goods along the North-South Corridor."

"I, therefore, propose to ring-fence 5% of excise duty revenue collected on fuel towards the construction and rehabilitation of Beitbridge-Harare-Chirundu Highway."

This comes after it was reported that government had assigned local contractors to undertake roadworks on the highway.

The entire excise duty, fuel included, contributes 20% to total revenue.

Statutory Instrument 161 of 2019, Customs and Excise (Tariff) (Amendment) Notice 10, 2019, Excise Duty on directed fuel imports was pegged in foreign currency at rate of US$0,45 and US$0,40 per litre of petrol and diesel, respectively.

Economist John Robertson said Zimbabwe was not in a position to finance the highway project as it was struggling economically and that it was unrealistic for the 5% to raise enough capital to fund it.

"This is a difficult issue; even now those that had been given contracts to construct the highway have not been paid. The billions needed to finance the project are too much and we are really not in a position to raise such an amount of money. We are really in a difficulty situation considering that we are finding it challenging to pay those that we already have contracts with. It's hard to believe that this 5% will in anyway raise enough capital," Robertson said.

"As a country, we are already struggling and cannot borrow money from anywhere. So we are in no position to finance this big project. The statement, which was announced is confusing, as it suggests that this project will be financed by money that is yet to be collected, money that is not already there. I cannot find where the money will come from."

Economist Persistence Gwanyanya said this was a good move, as the collected revenue was being channelled towards developing the country which benefits the taxpayers.

"I think this is a good approach; collected taxes should contribute to the growth of the economy. As taxpayers, we want to see where the money is going and what it is used for. We have always encouraged the government to channel the money towards something tangible and this addresses the issue of fuel tax and where the revenue collected is going. People will now pay tax knowing that they will get some results from their money," Gwanyanya said.

He added that the project would not be capitalised by external investors, hence the need to source resources within the country to ensure that it is completed.

"On the sustainability issue, we need to be realistic; the project is one of the risk investments that external investors do not capitalise in. Investors are not going to put any money on this project, hence we need to mobilise domestic resources to ensure that this road is constructed and finished. This move may not be sustainable, because we are over taxing our people. It is bad, but it is also the only way out because we are seriously constrained and do not need any room for leakages."

The tender to dualise the Chirundu-Harare-Beitbridge Highway, which has been on the drawing board for the past 16 years, was initially awarded to ZimHighways — a consortium of local companies — in 2002, but the company failed to implement the project for over a decade because of hyperinflation.

When the government cancelled the deal, the contractor sought recourse at the High Court before dropping the legal battle in 2013, paving way for the Geiger International deal, which was finalised in 2016 after talks that dragged on for over four years.

Last year, government cancelled the tender after Geiger failed to fulfil its part of the deal even after government invoked a clause giving it a 180-day and later a 60-day ultimatum. Fresh negotiations were launched with Anhui Foreign Economic Construction (Group) Co Limited (AFECC).

Source - newsday

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