By Inzwirashe Chenai Muwonwa, recently in Bulawayo

The Clothing Manufacturers Rebate which was introduced in 2015 through statutory instrument 151 of 2015 and amended by SI 155 of 2017, 277 of 2018 and 39 of 2019 is expected to boost the local clothing manufacturing industry which has been facing viability challenges. In a consultative meeting organised by ZIMRA Region 2 Customs and Excise Division with clothing manufacturers in Bulawayo, it was revealed that the rebate has immense potential to benefit the local clothing industry. The sectorial meeting which forms part of the ZIMRA’s strategic nationwide taxpayer education campaign that ZIMRA launched in 2018, gave ZIMRA an opportunity to explain recent changes in legislation and also understand the challenges manufacturers were facing in importing much needed raw materials.

Recent changes brought by SI 39 of 2019 saw a removal from the rebate of raw materials for clothing manufacturers like warp knit fabrics of synthetic fibres, unbleached or bleached, dyed, of different colours and printed, which had been included under the Customs and Excise Clothing Manufacturer Rebate Regulations statutory instrument 151 of 2015. The rebate allows manufacturers to import textile materials duty free and tax free, which will help reduce import costs. The rebate is granted on goods listed in the Second Schedule of the regulations, when they are imported or taken out of bond for use in the manufacture of garments. The rebate covers fabrics, sewing thread, buttons, button moulds, fasteners and other garment accessories.

The clothing and textile industry has been weighed down by the influx of cheap sub-standard fabrics that continue to flood the local market leaving little room for growth of the industry. This is despite a raft of measures to protect local players which has included legislation banning the importation of second-hand clothing and import restrictions imposed by the Government. A rebate was therefore granted with the aim of boosting clothing manufacturers industry. However, concerns were raised over its abuse through transfer pricing, under-invoicing, and incorrect declarations. Some manufacturers have been accused of abusing the system by reselling the imported fabric. Players in the textile and clothing industry once called for the total removal of the rebate due to its abuse by some manufacturers.

In this regard, measures have been put by ZIMRA to guard against such abuse, which include a three-tier clearance process and strict adherence to procedures. Accordingly, goods are to be cleared at a Customs office nearest to the premise of the manufacturer. Manufacturers are not to dispose of the rebated goods to another person, except with written authority from the ZIMRA Commissioner of Customs and Excise and payment of the rebated duty. The rebated goods should be kept in the rebate store which are inspected by ZIMRA and no other goods are to be kept in the rebate store, than the rebated goods.  Manufacturers are also required to keep a stock book and records for at least 6 years, submit an annual report to the Ministry of Finance and Economic Development as well as to maintain a production register showing disposal of the compensating products.

During a Question & Answer session at the consultative meeting, clothing manufacturers raised concerns over the three-tier clearance process which was tedious and expensive. ZIMRA acknowledged the concern and advised the manufacturers that the issue had already been escalated and discussions are on-going for possible policy changes. Manufacturers also raised other concerns relating to the long process of registering a bond, where they recommended ZIMRA to simplify and shorten the process. Again, this matter was regarded as a policy one, which the clothing manufacturers could, through their associations, engage policy makers for amendments.
The manufacturers who attended the meeting with ZIMRA, applauded Region 2 Customs management Regional Manager Bekezela Majokojoko and Station Manager Nicholas Nkomo, for open critical stakeholder engagements and physical visits to manufacturers’ work stations to understand the nature of their work and challenges. The supervisor in charge of Rebates, Bonds and Excise, Makhosazana Kuture was named outstandingly as giving out ‘110% effort’ in engaging them.