By Tawanda Musarurwa

HARARE - Government could be losing out on revenues of at least $18 million, amid claims that some local ciga-rette firms could possibly be circumventing the payment of excise duty on their products.

Excise duty is a tax charged or levied by the Government on certain domestic production of prescribed goods and ser-vices, and one of these goods in Zimbabwe are cigarettes.

In terms of how it is paid, excise duties are self-as-sessed by the particular manufacturer through Excise returns that are submitted on a monthly basis.

British American Tobacco Zim-babwe Holdings Ltd (BAT) managing director Ms Clara Mlambo told an analyst brief-ing this morning that although there hasn’t been an influx of

cigarette products from the region, a major concern was the proliferation of what she termed “suspiciously priced products”, which had the dou-ble whammy of hurting BAT’s

margins and Government’s revenue collection efforts.

Locally, excise duty on cig-arettes was raised from $15 per 1 000 sticks to 20 dollars

News Update as @ 1530 hours, Thursday 18 February 2016Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

Govt losing millions on “suspiciously priced products,” claims BAT

per 1 000 sticks in the 2015 National Budget Statement.

“We have seen what we call suspiciously priced products in the market particularly in quarter four, from October last year we started seeing an increase in those products.

“Now let me talk about sus-piciously priced products, excise charges on a pack of cigarettes translates to 40c a pack, so when you see prod-ucts selling on the streets at 50c a pack its actually difficult to understand how you can pay excise and still charge 50c can be paid, because you have to factor in all your production costs, distribution costs and remaining with 10c to make a profit,” said the MD.

She said the company will be engaging Government to look into the matter.

“We are seeing an increase in these suspiciously priced products and it’s an area that we need to deal with as an industry and with Govern-

ment, because looking at Q4 last year, the Government probably lost about $2,3 mil-lion in excise because of the suspiciously priced products, and translating that to a full year, the Government could be losing around $18 million so that needs to be dealt with.”

BAT posts ‘good numbers’

BAT posted a profit for the year of $15,4 million up from $13,4 million in the prior year.

The rise in net profit also rep-resents a increase in earnings per share, which jumped to $0.75c from $0.65c previ-ously.

Group revenue rose by $0,70 million compared to 2014, driven by marginal gains from pricing net of the impact of the excise increase in Novem-ber 2014, inspite of sales vol-ume decline.

BAT’s total sales volumes for the period under review were down 9 percent compared to prior year.

“The sales volumes for the local brands declined by 10 percent, while our Global Drive Brand, Dunhill grew by 12 percent albeit in the con-text of a lesser market share,” said BAT.

Gross profit improved by 12 percent to $32,4 million, which management attrib-uted to reduced raw materials prices, productivity initiatives and cost containment measure in the firm’s manufacturing system.

Other income included pro-ceeds from the disposal of a warehouse situated in Ardben-nie, from which the company recorded a profit of $1,4 mil-lion.

Going forward, Ms Mlambo said the manufacturer would focus on investing in ‘brand equity’, distribution excel-lence and implementing cost efficiencies where required.

BAT declared a dividend of $0,44c per share for the period.●

2 NEws

BH243

By Funny Hudzerema

HARARE - Cables manufac-turer Cafca recorded an 84 percent decline in profit dur-ing the first quarter of Janu-ary due to a decline in exports and low demand for copper in the country.

Speaking during an annual general meeting Cafca man-aging director Mr Rod Webster said the loss was due to tight liquidity and low demand of copper on the market.

“As we stand the end of Jan-uary volumes are 25 percent down, sales are down 31 per-cent and profit is down 84 percent,” he said.

Mr Webster said that the decline in copper prices from $6 500 to $4 400 per tonne affected their sales as they only received $600 000 from the 150 tonnes they sold instead of $950 000.

On exports Mr Webster said the weakening of regional

currency such as the rand, Kwacha (Malawian and Zam-bian) and the Metical made it difficult to sell their copper in those markets.

“If we look at our exports the weakening of the rand made our copper a bit expensive in that market and the option to export to South Africa is no longer there. Exports into Malawi were also affected by devaluation,” he said.

With respect to Zambia, Mr Webster said exports were affected by low prices in that

market while in Mozambique exports was affected by a rise in the tax base.

He said that prospects for recovery were slim since exports and local sales were down.

“The situation does not allow us to recover as all the sec-tors are struggling, the min-ing sector is reeling from low commodity prices and the agriculture sector is not hav-ing a good year because of the EL Niño.

“In terms of borrowings we accumulated maximum bor-rowings of $1,5 million and by the half of the year we will be at half a million and by the end of the year we are expecting to cleared the amount.

“The balance sheet is stil l strong we have got lot of stocks and lots of debtors and some creditors so the balance sheet is not a problem,” he said.●

4 NEws

Cafca profits decline 84pc

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HARARE - The Government will soon intervene in the stand-off between the Grain Market-ing Board (GMB) and its former workers who are camped at the company headquarters demand-ing their unpaid dues.

Hundreds of former GMB work-ers have been camping outside the company headquarters in the capital since last week, demand-ing their unpaid 10 months sal-aries.

The ex-workers, who were dis-missed on three months’ notice last year following a landmark Supreme Court ruling, are still to

get their salaries which the para-statal owed them before it sacked them.

Vice President Emerson Mnan-gagwa, who is leader of Govern-ment business in the National

Assembly, told legislators during the question and answer session that the Government would inter-vene to solve the situation.

“I think it is necessary for Govern-ment to react to the plight of the

people stationed at GMB,” he said. “Let me assure the House that everything possible will be done to attend to their plight.”

Some of the former workers, who have travelled from as far as Bul-awayo and other areas, have vowed not to go back until they get their dues. The workers have expressed concern over failure by the GMB management to priori-tise their concerns.

The GMB has been facing serious financial challenges, resulting in its failure to pay farmers time-ously for grain delivered.- New Ziana●

6 NEws

Govt to intervene in GMB, former workers stand-off

BH247

By Tawanda Musarurwa

HARARE – Struggling logistics and passenger transport group Unifreight Africa will convene an extraordinary general meeting (EGM) next month to seek share-holder approval for the disposal of its controlling stake in Tredcor Zimbabwe (Pvt) Ltd (TrenTyre) for $2 000.

The EGM has been pencilled for March 11.

Unifreight owns a 51 percent stake in Tredcor, but the subsidiary is weighing heavy on the group after the latter’s liabilities exceeded its assets by $5,7 million as at mid-last year, and further deteriorated to $6,1 million as at year-end.

In a circular to shareholders today, Unifreight said “the primary rationale for the proposed trans-action is to immediately stem the losses from TrenTyre which losses are unlikely to reverse in the fore-seeable future, given the current difficult operating environment and undercapitalisation of the

business.”

Unifreight plans to sell its 51 per-cent stake to ScanLink (Pvt) Ltd for $2 000. ScanLikn is a local firm owned by Mr Hamish Rutland, who is also a director and bene-ficiary shareholder of Unifreight and Tredcor.

Unifreight is concerned that if

the transaction falls through, its consolidated financial position will continue to reflect the histor-ical and anticipated future losses TrenTyre.

For the half-year to June 2015, Unifreight’s operating loss degen-erated to $1,2 million compared to $476 000 last year on the back of increased restructuring costs.

The group closed its Botswana subsidiary last year and has since disposed of Pioneer Transport to its employees through a manage-ment takeover.

The cost of stopping the Botswana unit amounted $82 000, while Pio-neer Coaches suffered losses of $390 000 and TrenTyre incurred a loss of $603 000.●

8 NEws

Unifreight seek shareholder approval for Tredcor sale

BH249

HARARE - The mainstream industrial index registered an 8th loss on the trot lost 0.28 to close at 99.11 after cable pro-ducer CAFCA slipped $0,0405 to trade at $0,2800, while Mashonaland weakened by

$0,0032 to close at $0,0168 and Proplastics eased $0,0030 to $0,0180.

Also in the red was clothing retailer Edgars and Masimba which both traded $0,0020 lower at $0,0580 and $0,0070

respectively.

On the upside giant telecoms Econet added $0,0003 to set-tle at $0,2205 and Padenga gained $0,0004 to close at $0,0600.

The mining index was again flat at 18.74 as Bindura, Falgold, Hwange and RioZim main-tained previous price levels of $0,0090, $0,0050, $0,0300 and $0,1040 respectively

. - BH24 Reporter ●

ZsE10

Equities sink deeper into the red

BH2411

MovERs CHANGE TodAy PRiCE UsC sHAKERs CHANGE TodAy PRiCE UsC

Padenga 0.67 6.00 MASIMBA -22.22 0.70

ECONET 0.13 22.05 MASHONALAND -16.00 1.68

PROPLASTICS -14.28 1.80

CAFCA -12.63 28.00

EDGARS -3.33 5.80

ZB FINANCIAL -0.39 2.50

iNdEx PREvioUs TodAy MovE CHANGE

INDUSTRIAL 99.39 99.11 -0.28 points -0.28%

MINING 18.74 18.74 +0.00 POINTS +0.00%

12 ZsE TABlEs

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BH2413

14 diARy oF EvENTs

The black arrow indicate level of load shedding across the country.

PowER GENERATioN sTATs

Gen Station

16 February 2016

Energy

(Megawatts)

Hwange 476 MW

Kariba 285 MW

Harare 30 MW

Munyati 26 MW

Bulawayo 23 MW

Imports 0 - 350 MW

Total 1250 Mw

—18 February 2016 - 70th Annual General Meeting of the members of CAFCA ; Place: Boardroom at the company’s registered office at 54 lytton Road, workington, Harare; Time: 12:00 hours

—23 February 2015 - 38th Annual General Meeting of the members of Powerspeed Electrical limited; Place: Powerspeed Board-room, Gate 1, Powerspeed Complex, Corner Cripps Road and Kelvin Road North, Graniteside, Harare; Time: 1100 hours

25 February 2016 - Extraordinary General Meeting (“EGM”) of the shareholders of Radar Holdings limited; Place: Tanganyika House, 6th Floor Boardroom, Harare; Time: 0900 hours...

25 February 2016 - The 49th Annual General Meeting of Mashonaland Holdings limited; Place: The Boardroom, 19th Floor, ZB life Towers, 77 Jason Moyo Avenue, Harare; Time: 1200 hours...

26 February 2016 - The sixty-ninth Annual General Meeting of Ariston Holdings limited; Place: Ariston Holdings limited Main Boardroom, 306 Hillside Road, Msasa woodlands, Harare: Time: 14.30 hours:

THE BH24 diARy

BH2415

lUsAKA-Zambian President Edgar Lungu’s cabinet has approved a plan to introduce a mine-royalties system that varies based on copper prices as it seeks to keep operations open and prevent further job cuts.

Levies will range from 4 percent to 6 percent, Amos Chanda, the president’s spokesman, said by mobile phone yesterday. That’s a narrower band than the 3 percent to 9 percent the gov-ernment proposed in Decem-ber. Royalties are currently 9 percent for open-pit mines and 6 percent for under-ground operations.

“This review in the taxation

regime is deemed necessary to sustain continuous opera-tion of existing mining com-panies and avert the con-tinuation of suspension of mining operations and job losses,” Minister of Informa-tion Chishimba Kambwili said in an e-mailed statement.

Zambia, Africa’s second-big-gest copper producer, has struggled to find a tax sys-

tem that suits both the coun-try’s revenue requirements while encouraging invest-ment. The country last year backed down on changes that increased royalties that are charged on sales to as high as 20 percent, while remov-ing profit tax, after opera-tors threatened thousands of job cuts and closures. A mining lobby group proposed the sliding-scale royalty sys-tem as a way to protect the industry as prices linger near

6-year lows.

Job Cuts

Mines owned by Glencore Plc and Vedanta Resources have cut more than 10 000 jobs and halted output at some shafts as they struggle with prices that have fallen as low as $4 331 per metric ton in London. Power costs have also increased as Zambia faces its worst power short-age yet.

For minerals and base metals other than copper, royalties will be fixed at 5 percent, Kambwili said. Producers of precious met-als and gemstones will pay a 6 percent levy. Cabinet also approved the suspension of a 10 percent export duty on ores and concentrates for materials where there are no processing facilities in Zam-bia, and removed the variable profit tax for mining opera-tions. Corporate income tax remains at 30 percent.

In addition to ensuring mines are sustainable, the changes are aimed at “sustaining oper-ations in the mining industry, securing jobs for the citizens as well as collecting more tax revenue in times of relatively high copper prices,” he said.

The changes need the approval of parliament before it ’s dissolved in May ahead of the August general elections before they come into effect.

An official from the Zambia Chamber of Mines declined to comment on the changes immediately, saying the lobby group would issue a state-ment today.- Bdlive ●

REGioNAl NEws 16

Zambia Plans Price-Based Royalty for Ailing Copper Mines

Keillen Ndlovu

BH2417

loNdoN — Rating agency Standard & Poor’s downgraded Saudi Arabia, Brazil Kazakh-stan, Bahrain and Oman’s credit ratings on Wednesday, in its second mass cut of large oil producers in almost exactly a year.

S&P cited the pressures being created by the drop in oil prices for the moves, which included double-notch downgrades of Saudi Arabia to A- negative from A+ stable and stripping Bahrain of its investment grade status.

"The decline in oil prices will have a marked and lasting impact on Saudi Arabia’s fiscal and economic indicators given its high dependence on oil," the ratings agency said in a state-ment.

The plunge in oil prices since mid-2014 had already brought a blizzard of downgrades for oil producers, including Saudi Arabia, Russia, Brazil and Ven-ezuela, where the oil rout has raised the fear of a sovereign default.

The moves were a near repeat of similar co-ordinated cuts made this time last year. The

firm’s head of sovereign ratings in Europe, the Middle East and Africa, Moritz Kraemer, said in January that another such move was being considered.

One country that was spared this time was Russia. S&P said Moscow’s fiscal buffers gave it more leeway, although it could still cut its BB+ rating again if those were eroded faster than expected or if international sanctions were "significantly" tightened again.

Brazil was kept on a negative outlook, meaning a roughly one

in three chance of another cut as its rating dropped one notch to BB from BB+. However, it was Brazil’s political difficulties as much as the economic pres-sures from falling oil prices that were cited for the move.

For the Middle East there is far more intense pressure from low oil because many currencies, including the Saudi riyal, are pegged to the dollar, limiting scope for currency weakness that could stimulate the econ-omy.

Authorities are also having to

dig into reserves to keep spend-ing at levels that support their highly dependent economies. Like Saudi Arabia, Bahrain’s rating was cut by two notches.

Significantly, though, it also lost investment grade as it went to BB from BBB-. Oman was lowered two steps as well to BBB-stable from BBB+ neg-ative while Kazakhstan was cut one notch to BBB- from BBB but left on a negative outlook due to concern about inflation, exchange rate pressures and banking sector stability.-Reu-ters●

iNTERNATioNAl NEws 18

s&P downgrades large oil producers

BH2419

By Mike dolan

Financial markets that pre-dicted eight of the last six recessions may be yet be wrong again, but market stress itself is now part of the calculus and leaves the world more open to left-field shocks.

Given the violence of this year's slump in equities, where more than $8 tril l ion has been wiped off global stock market values, it is remarkable how few econo-mists stil l see recession as the most likely outcome.

Yet more and more believe it will be a close-run thing; pro-tracted market volatil ity itself could well tip the balance and investors are in no mood to hang about for a confirma-tion.

Anxiety is high, with few extraordinary policy measures now likely or even available, and more negative interest rates in Europe or Japan seen by many as part of the prob-lem rather than the solution

for a bruised banking system.

It may take a nervy few months for clarity on whether the worrying slide in global industry, trade and invest-ment late last year has deep-ened, or to see if indebted

consumers and a stil l-grow-ing service sector will save the day.

While they wait, investors are scrutinizing the many geo-political risks and systemic concerns that would typically

be ignored in periods of more robust growth, but which may now be magnified as addi-tional threats to businesses' and households' investment or spending plans.

In cutting its world growth forecast for this year to 2,7 percent from 3,1 percent - stil l above the 2-2,5 percent level many see as a baseline to avoid an effective per-cap-ita global recession - Axa Investment Managers flagged concern about systemic as well as cyclical risks for mar-kets in this climate.

"When global growth is so sluggish, when corporate profits are so miserable, when pay rises are so small - you don't need a very big shock to disturb global mar-kets significantly," said Eric Chaney, Chief Economist at French insurer Axa.

A sudden change of financial and economic policy thinking within China's ruling commu-nist party was one possible shock it outlined. The political

20 analysis20 ANAlysis

with recession lights amber, brittle markets vulnerable to all shocks

21 analysis21 ANAlysis

and central banking dilemma surrounding the euro zone's incomplete banking union was another soft spot.

But on a knife edge in terms of probabilities is a referen-dum on Britain's possible exit from the European Union, likely to be held by the end of June. For AxaIM, this contains huge uncertainties for world financial markets, for Britain as a top five world economy and the wider EU as a durable construction.

"London is the number one financial center, for example. If there was any destabiliza-tion of the financial industry in the UK, it would transmit quickly around world mar-kets," said Chaney, adding that this went beyond loca-tion and into questions about the extent to which English law, which dominates global financial contracts, is influ-enced by EU law.

"london is systemic."

Flirting with recession

But is the world in a better place than markets let on? Some banks, such Morgan Stanley and Societe Gen-erale, put the chances of a global recession this year at about one-in-five.

Others, such as Citi, say the risk is rising all the time. Bank of America Merril l Lynch sees a 20 percent chance of a US slump.

Whoever you believe, reces-sion is no longer off the radar. The energy shock saw world industrial activity barely grow at all in 2015 and it tailed off alarmingly in the back end of the year.

World trade growth too has stalled as China splutters, and huge annual drops of between 11 and 18 percent in Chinese exports and imports in January should ring more alarm bells. Global shipping freight prices have collapsed to record lows.

Yet, JPMorgan points out that since 1970, global factory

output has slowed to a near-halt year 12 times but only six were associated with sub-sequent recessions. And ser-vices, while weakening, are stil l expanding at least.

Stock markets, on the other hand, appear to have priced in a recession already. "Equity markets are correct-ing lower only a little more aggressively than in the past if we assume that a global recession starts this year and finishes mid-2017," according to Citi strategist Jeremy Hale.

so, is this prescient or just cautionary?

More often than not US equity market drops of 15-20 per-cent over a year do pre-empt recessions. But they're not infallible. Alliance Bernstein points out that similar drops over six month periods were recorded in 1988 and 2002 without a subsequent down-turn.

Forecast corporate profit declines this year anywhere

between 7 and 10 percent might justify equity market fears. But, here again, JPMor-gan research shows there have been periods in the 1960s, 1980s and 1990s where prof-its and markets peaked and then both rebounded quickly without recessions.

The worrying difference back then was each episode was met with sizeable policy eas-ing that is harder to execute now.

And it's not just equity fright. Corporate bond spreads have moved more squarely into recession territory, according to JPMorgan, and currency and commodity price move-ments have by now completed their average trajectory of the last six recessions.

"If financial stress continues to build, a much more pro-nounced downturn will be the result," said Standard Life Investments Chief Economist Jeremy Lawson.-Reuters●