THE new dawn Government needs to pay extra attention to the manufacturing sector which has not performed to the expectation of many in terms of adding value to the economy.
This is so because Zambia’s manufacturing sector has the potential to deliver socio-economic development in the country through its forward and backward linkages to other industries.
We agree with the Zambia Association of Manufacturers (ZAM), when it says the sector’s contribution to the Gross Domestic Product (GDP) lagged at an average of seven per cent and other growth at an average of 4.4 per cent for the last 10 years.
Last week, Finance Minister Situmbeko Musokotwane delivered the 2022 National Budget, where he pronounced measures to attract investments into the Multi Facility Economic Zone (MFEZ).
We want to believe this was done to mainly encourage the flow of investment particularly in the manufacturing sector, where both local and international firms can set up industries to stimulate growth and create employment for the Zambian people.
The MFEZs are the catalyst for growth if well developed and managed no wonder the Government’s proposal for tax holidays towards these particular undertakings.
In the 2022 National Budget, the minister has proposed the reintroduction of tax holiday where dividends on profits and profits on exports are zero rated for 10 years, and also reduced the threshold for Zambians to invest in the MFEZ and access incentives from US$100,000 to US$50,000.
By reducing the threshold for local investors, the Government’s thrust is to see more Zambians establish factories to drive economic development.
Further, we agree with ZAM chief executive officer Florence Muleya when she says the measure will help attract more investment into the MFEZ.
But we note with concern that this particular tax incentive seems to favour exporting companies as opposed to those who are only into manufacturing for local consumption.
This is so because only companies exporting are the ones to apply for the incentives while non exporting entities will not receive any incentive, thereby disadvantaging manufactures involved in the production for local consumption.
We are informed that regardless of whether the firm is in the MFEZ, as long as there is no component for exporting, the entities do not qualify for the tax incentive.
In addition to this, ZAM raises an issue of prohibitive cost of land in the MFEZ, which is preventing many Zambians from setting up factories despite given the incentives.
We feel the reduction in the threshold for Zambians to access incentives in the MFEZ does not address the prohibitive cost of land which limits local investment.
Other measures borders on reducing the cost of doing business in the manufacturing sector or enhancing value addition and trade.
Overall, the 2022 National Budget has measures that have set the foundation for economic structural transformation that positions the manufacturing sector as the driver of the economy.