Formal regulation and levies associated with good order in production and marketing are normal within a well-functioning national and regional beef value chain. Maintenance of veterinary and health infrastructure and compliance with international law to contain disease transmission is normal and recovering elements of cost through charges to users rather than to society in general through taxation is prudent.
In recent times, Zimbabwe has developed an elaborate set of formal and, increasingly, semi-formal regulatory and compliance mechanisms. These policies go beyond normal domestic regulation as, in some cases, they seek to levy aspects of the value chain with the aim of redistribution of funds to fund other policy initiatives (including the ‘Command’ policies as outlined above). These levies and charges are a significant element of cost in the beef value chain (see Table 18). This analysis is derived from Chamboko and Erasmus (2014) and interviews conducted by the Team.
We note that in addition the Team found a range of other taxes and surcharges that impact on the sector but which were not included in Chamboko and Erasmus and for which, at the time of field analysis, implementation was unclear. For example, the EMA (Effluent and Solid Waste Disposal) Regulations of 2007 also applies to livestock processing plants including abattoirs and milk processors. Operators are required to pay an annual registration fee, inspection fees, and a
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quarterly discharge fee for abattoir and milk processing wastes and boiler waste water. Also the tax on waste in slaughter houses, including a surtax of $0.75 per kilogram on the export of raw hides and skins produced at abattoirs in order to encourage local beneficiation. However, given the current price of hides on the international market, this has effectively amounted to a ban on exports. Under-investment in local tanneries has caused the low uptake of hides by tanneries, leading to stock build-up and spoilage at abattoirs. The Ministry of Local Government, Public Works and National Housing has, though a model by-law, encouraged rural district councils (RDCs) to charge a levy of 10.5% on all live cattle sales. This includes cattle traded between farmers for herd building as well as those for slaughter26. The Agricultural Marketing Authority (AMA) Statutory Instrument (SI) 147 of 2012 has led to increases in the cost of these raw materials in the stockfeed sector. Value added tax (VAT) of 15% charged on molasses used in cattle feeds is inconsistent with SI 273 of 2003 which zero rates by-products used for feed production. The current policy of the Grain Marketing Board (GMB) of buying maize at prices that exceed import parity has led to side-marketing by contracted maize farmers to the GMB and thereby discouraging contract farming relationships. Further, GMB's policy of reselling maize at lower prices to its feed and milling divisions is an unfair trade practice that impacts upon private millers and stockfeed plants.”
26 We got mixed reports on whether taxes applied for inter-farmer exchange. In Chiredze the Team was told that
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Element of cost Farm type Notes and relevant legislation
Commercial Partially communal Communal $/animal sold Farm to abattoir Fixed costs
Land unit tax 18 13 13 Ranges from $1-2/ha/year
depending on Natural Region. Collection variable/sporadic. Rural District Councils Act Environmental
Management Agency
5 5 - Environmental Management
Acts
Farmers Union 4 1 1 All farmers who sell cattle
have to be in an association. Farmers Licensing and Levy Act Zimbabwe National Water Authority 1 1 - Environmental Management Acts Sub-total fixed costs 28 20 14 Variable costs Rural Development Council Levy
75 68 68 Various levies being used.
Regulation unclear. Grading and inspection 4 4 4 Agricultural Products Marketing Regulation Movement permits (actual cost)
1 5 5 Animal Health and Stock theft
regulations (various) Movement permit
(time and transport costs)
3 18 18 Includes time and costs of
obtaining permits
Sub-total 83 95 95
Total Farm to abattoir costs
111 115 109
TABLE 18: ESTIMATES OF REGULATORY COSTS
Source: Adapted from Chamboko and Erasmus (2014) plus interviews We draw a number of conclusions from this analysis. Firstly, we have excluded the regulatory costs identified and that are specific to processing and distribution as Chamboko and Erasmus found these to be inconsequential (e.g., just over Z$1/animal). Secondly, broadly speaking, levies and taxes seem to fall fairly equally between different scales and types of production. This suggests that many of these levies are designed to be sources of income rather than active policy instruments aimed at promoting national developmental strategies. Thirdly, by far the highest proportion of these levies falls to Rural Development Council (RDC) ‘taxes and levies’ of various different kinds. Many of these, according to interviews, seem to be levies focuses on easily identifiable points of rural economic activity (e.g., auctions, police halts, veterinary halts) where collection of cash is relatively simple. A
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final element highlighted by Chamboko and Erasmus is the high transaction cost associated with regulatory compliance. This is particularly noticeable and egregious for farmers with lower off-sales who have to spend a lot of time travelling to points where permits are issues and waiting for their issuance.
Cattle marketing is a clear and obvious rural economic activity in Zimbabwe. In a country where the economy has been struggling for some years, it is not surprising that many economic actors have migrated towards this source of value as a means of income. In addition, the number and scale of formal compliance requirements in beef cattle marketing may have driven informal marketing channels with lower compliance costs. Numerous interviews conducted by the Team supported this proposition.
Crudely speaking, Table 18 shows that commercial farmers save money on movement of animals because they can do so at scale, whereas partially commercial farmers who have fewer animals entering the market spend proportionately more on compliance and informal marketing costs. How widespread the impact of compliance costs are on purely communal farmers are either not entering the formal market or by-passing it is hard to say.
Most actors interviewed mentioned formal and informal compliance costs and levies. When asked how these were subsumed into the cost of doing business it was universally agreed that these in- chain costs are passed on to producers in the form of depressed farm/auction/abattoir gate prices.