A bold policy from Zimbabwe’s Minister of Finance, Economic Development and Investment Promotion’s Mid-Term Budget Review on how duty and levies on fuel imported under Removal in Transit (RIT) are handled came into effect on 10 August 2024, following the Zimbabwe Revenue Authority (ZIMRA) public announcement. According to the new regulation, duty and levies on fuel must be paid upfront at the port of entry, with reimbursement at the port of exit upon compliance with all transit procedures, including submission of proof that the fuel has been exported. The policy mandates that all types of fuel, including petrol, diesel, paraffin, and Jet A1, transported by road through Zimbabwe are subject to these new duties. This measure excludes entities sourcing fuel directly from the National Oil Infrastructure Company of Zimbabwe (NOIC) at the Msasa Depot or other entities approved by the Minister.
The upfront payment requirement is designed to minimize the risk of fuel being diverted for local consumption without proper duty payments, a practice that has led to significant revenue losses in the past. ZIMRA has been grappling with transit fraud for years, and while the Electronic Cargo Tracking System (ECTS), introduced in 2017, was a step forward, it has not entirely resolved the issue. This new regulation seeks to address these shortcomings by aligning with the Customs and Excise Act [Chapter 23:02], which mandates that all goods, including fuel, pass through designated ports for proper recording and monitoring. The Act empowers the Commissioner to establish transit sheds and customs areas for secure storage and examination of goods and grants the Minister authority to implement regulations ensuring compliance and protecting revenue.
However, significant concerns have emerged regarding the efficiency and practicality of the refund process, especially in light of ZIMRA’s existing challenges with VAT refunds. The requirement for upfront payment of duties and levies places an immediate financial burden on businesses that may already be operating on thin margins. ZIMRA’s public notice explicitly states, “Consignees and/or their representatives should approach ZIMRA at the port of entry to initiate the fuel clearance and payment process. For the refund process, once the fuel has been exported they should approach ZIMRA at the port of exit to initiate the requisite refund process.” Under the Customs and Excise Act, goods are deemed exported when all border formalities are completed. This is the time when the bill of entry or other export document is delivered to and stamped by an officer at the port of exit or when the goods cross the borders of Zimbabwe, whichever is earlier. This process could realistically take at least three days from the time the goods enter and to when they exit Zimbabwe.
For many, this upfront cost could make Zimbabwe an unattractive transit route, especially when alternative routes, such as the Kazungula border, offer less financially onerous options. The administrative burden associated with the refund process cannot be overlooked, as it involves multiple verification steps at both the port of entry and the port of exit, risking delays and bottlenecks that further complicate the supply chain and increase costs for businesses. Given Zimbabwe’s deteriorating road network, challenging geography, and significant traffic volumes, transit through the country has become increasingly difficult for Southern African transporters. The combination of stringent speed regulations, slow ZIMRA payment approvals, and the heavy burden of road user fees further complicates the route. These factors, coupled with stringent practices by traffic police and prolonged customs procedures, often drive businesses to explore alternative, more efficient routes, undermining Zimbabwe’s position as a key transit hub.
Instead of relying solely on upfront payments, the government could consider enhancing existing measures by improving the current tracking systems, designating specific stop areas for transit vehicles, and refining the sealing of transit goods.
While ZIMRA emphasizes that these measures are crucial to combat transit fraud, the broader implications for business liquidity and regional trade dynamics remain a significant concern. This situation risks undermining the objectives of the African Continental Free Trade Area (AfCFTA), which aims to facilitate regional trade by opening borders and reducing trade barriers. Instead of promoting seamless trade across the continent, Zimbabwe’s new policy could inadvertently encourage businesses to bypass the country entirely, leading to a reduction in transit traffic and associated economic benefits.
Adding to the complexity, the premature publication of the Zimbabwe Revenue Authority’s (ZIMRA) Public Notice has raised legal and constitutional concerns within the business community, particularly because it was issued without the backing of Statutory Instruments (SI) or any supporting legislation. The notice cites the Minister’s Mid-Term Budget Review Statement as the basis for these new rules, but no formal legal framework was in place at the time of its publication. This move follows a recent Supreme Court decision in the Zimplats vs. ZIMRA case, where the court upheld the legal force of ZIMRA’s Public Notices. This development raises concerns about ZIMRA’s expanding role, potentially overstepping its authority as it encroaches on legislative functions—a reality that must be examined against the Constitution. It also warrants scrutiny to ensure that the Supreme Court’s decision is not taken out of context.