Bakers speak on bread price hikes

THE National Bakers Association of Zimbabwe (NBAZ) has called for an urgent readjustment of the new taxes that caused bread prices to rise to between US$1,20 and US$1,30 per loaf, as capacity utilisation has fallen to below 50%.

At the start of the year, a slew of new taxes went into effect, triggering price hikes as businesses passed on the costs to the consumers.

However, the most devastating revenue enhancing measure was the removal of basic commodities from the value-added tax (VAT) exemption schedule.

While the Treasury says bread is VAT exempt, this has not stopped the prices from soaring.

“Previously, when bread was zero-rated as a taxable supply, bread manufacturers could claim, from the Zimbabwe Revenue Authority, input tax charged on production and distribution costs,” NBAZ president Lucky Zinyama said.

“Bread manufacturers were, therefore, not factoring these costs into the pricing of bread.

“In the new Finance Act, bread has been changed to an exempt supply status, implying that input tax is no longer claimable.”

Zinyama said manufacturers were compelled to incorporate the tax portion into the cost of production and distribution.

“The new tax regime actually increases costs. Hence the increase in price of bread,” he added.

“Taxation increases costs. Removal of these taxes keeps prices low. As bakers, we need a lower price because we’re operating at less than 50% capacity utilization.”

As a result of bread price increases, some consumers have resorted to coping strategies such as the home baking of the chimodho, a popular form of cornmeal bread that is common in Zimbabwe.

“In our view, in our perspectives as the Combined Harare Residents Association (CHRA), I think over time we have seen an increase in prices of goods and even some services,” CHRA director Reuben Akili told Standardbusiness.

“I think, for all of us, we are aware that the Finance minister (Mthuli Ncube) announced the 2024 national budget, which had many different types of new taxes.

“So, when we entered this year, we began to realise that prices of many goods and services have increased and that inflation has also been increasing as a result. “To that effect, bread has not been spared in the increase. We have seen bread in different retail shops, outlets, going between US$1,20 to US$1,30 per loaf which is unaffordable.”

He said these prices had seen a decline in the consumption of bread.

Akili confirmed that residents were resorting to alternatives like chimodho as well as eating rice and magwinya known in English as fat cakes.

“As you are aware, bread is a basic commodity or basic good. Especially for school children, they require bread in the mornings and some take sandwiches to school,” he said.

“And again, you realise this (the raising of bread prices) has seriously impacted not only consumption, but the food carried by children to school,” Akili said.

“This poses a serious danger to children if when they are going to school, they do not have something in their lunch boxes when they get hungry.

“Breakfast now has become seriously expensive which the government needs to respond to.”

The United States Agency for International Development funded food security initiative, the Famine Early Warning Systems Network, predicted that from December 2023 to January 2024, the number of households facing crisis would increase.

Some of the consumption coping strategies would include skipping meals or reducing meal sizes.

Other significant tax increases that have added to the cost structures of businesses include the 1% wealth tax on property valued at US$250 000 and above as well as the domestic minimum top up tax.

The US$0,001 tax per gramme of sugar contained in beverages has also added costs to beverage companies who are expected to pass that on to the consumer.

The Treasury also raised fuel levies, tollgate and passport fees, the corporate tax rate, presumptive taxes, car registration fees, and required enterprises with US$25 000 in yearly income to register for VAT.

It also granted authorities permission to raise power tariffs in line with inflation.