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Mr President Before You Give Tax Incentives To Foreign Investors For Job Creation, Have You Looked At Startups?

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Young men walking along a railway line

Today’s Herald carried a headline that said, ‘ED mulls tax incentives to lure investors.’ The Herald wrote:

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Tax holidays and incentives, the President said, will help attract more attract foreign investment into the country, which will go a long way in creating decent jobs for the populace and help the country to attain the Government’s agenda of making Zimbabwe a middle income state by 2030.

The president who was touring the new plant by Varun Beverages who are manufacturing Pepsi locally said:

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When I arrived (at Pepsi’s plant) I saw Patrick Chinamasa, Minister of Finance (and Economic Planning), I said why are you here, 

He said I just wanted to see whether this is a taxable entity and I think he is smiling, but Minister (Chinamasa), such investments also require incentives.

I know he (Minister Chinamsa) will agree with me. As Government we will have more companies coming here if we give them incentives, tax breaks. . .

While this investment (by Varun Beverages) attests to the steadily increasing attractiveness of our business climate to investors from far and wide, my Government is continuously monitoring our investment climate to ensure that it remains conducive and open for business to grow and succeed

His chief official for tax doesn’t agree

The ZIMRA boss, Faith Mazanhi earlier warned the government against tax breaks. She’s on record as having said:

We need to be aware of the fact that tax concessions which are granted to investors, tend to erode the revenue base. Therefore, checks and balances to ensure that concessions- extended to investors do not outstrip the envisaged benefits to the economy must be employed,

For example, some companies in sectors such as mining are in perpetual losses while also receiving refunds. Some companies close at the end of the tax period and come in under new names for further concessions. Non-tax measures therefore also need to be considered to lure investors

It’s hard being a startup

It’s not the easiest thing being a startup in Zimbabwe. Added to the dog eat dog world of giant corporates that want to wrangle your neck before you draw your first breath, the government seems clueless to the needs of startups. The regulations are made for an economy that doesn’t exist anymore or at best for an economy that is extractive in focus.

The Zimbabwe is open for business mantra seems to be only targeted at foreign investors. It feels as if foreigners are the only ones who have business to do and the rest of us are their customers and employees. There are startups that have invested more into Zimbabwe than some of the foreign deals that are touted and they have to invest extra because they are working against regulation itself.

Startups can bring in the foreign investment themselves

In the first quarter of this year, we here at Techzim were inundated by a lot of calls from outside Zimbabwe. Why? Most of the callers were investors who were calling to find out about the startup ecosystem in Zimbabwe and how they can invest in it. Some of these people actually came into the country and we met a few of them. I know of a particular one that confirmed investment into a startup I had recommended.

This clearly shows that there is money already looking for startups whilst our government only considers big mining firms as the investment that is worth talking about. Unfortunately, mining and such kind of investments don’t have as much impact on the economy dollar for dollar than investment into startups. This is what countries like Kenya, Uganda and Rwanda are taking advantage of.

Startup is not equal to SME

I get annoyed when I talk to government and banker types that they interchange the words startup and SME. The two are not equal. A startup may be an SME but an SME is not necessarily a startup. Our government has a ministry dedicated to SME’s and I shudder to think of that ministry as the ministry to which my business belongs. We need a department focused on startups maybe within that SME ministry or directly under the office of the president or wherever.

What is a startup equal to? Startup is equal to growth! I hope I will get time to explore this definition in greater detail in some other article. For now let’s just understand that a startup is a business that can scale. Not every upstart is a startup. If your cousin opens a barber shop they are a good businessperson and they own a business of category SME perhaps but they are not a startup.

That’s not to say that there is anything wrong with a barber shop, no I would look like a billy goat if there were no such good businesses. They are just not startups.

A clear example perhaps to show the difference: a taxi driver runs a business but he/she is not a startup even if the business has been registered and is very successful but when Uber launched they were a startup. A hotel even the best in the world when it started was never a startup but AirBnB was. An Ecoicash agent is not a startup but Ecocash is even though the Ecocash agent is an entrepreneur in their own right. Is it sinking in?

This difference is why the word startup is becoming synonymous with tech startup. Tech is allowing businesses that would never have been able to scale to achieve scale. This is why the people looking from outside call on Techzim to tell them about the startup ecosystem. Does that make me happy? No. I would rather the government is equipped to handle these enquiries. I wish the government understood the unique needs of startups and thus be able to integrate policy on startups into all other programmes.

Startups are not youthies

To those who are not Zimbabwean: youthies are young sloganeering people whose life purpose is to boot lick politicians in exchange for patronage gestures. I almost get infuriated every time in reference to developments in tech some lofty politician or bureaucrat says something like, “We need to do something for our youth.” No you don’t! The youth don’t need you to ‘do for them.’

Startups have nothing to do with age or disenfranchisement. Startups are scalable businesses that are poised for growth. Just to be clear, the age of the business has nothing to do with whether it’s a startup or not either. Techzim is almost 10 years old but is a startup. The status is attributable to how much growth is still possible and can it be exponential.

Startups need an open Zimbabwe

Around the world startups are raising billions in investor funding. In Kenya, Nigeria, Senegal, South Africa, Ghana and a few other African countries multi million dollar investments into startups are happening, sometimes double digits. We need to capture some of that action here too.

No Mr President, our dream of an open Zimbabwe is not to have coffee with you or government ministers whenever we like: we are too busy for coffee and besides that will be an patronage economy. We don’t need patronage to excel, it will on the contrary hold us back. The starting point to an economy that is open for startups is a government that understands what a startup is. First point, it’s not a cute hobby by youths….


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7 thoughts on “Mr President Before You Give Tax Incentives To Foreign Investors For Job Creation, Have You Looked At Startups?

  1. I like this. And if only more people understood that. You have an idea and you want to start something different and with a potentially huge benefit or simply improving certain things by being different, but you’re looked at funny and people think you’re not a viable idea to invest in, or choke you dry.

    1. I admit there are not too many but there are some hey for example PayNow
      We have struggled to give a solid list of serious startups to those who have asked though I admit. I think it proves the point though that this area has to be looked at and given support. What starts: viable startups or a startup friendly environment? A chicken and egg problem is it? I don’t think so, I think the environment must of necessity change first. Just as they want to change a few things to attract investors they can also change a few more to enable a strong startup ecosystem that can attract investment

  2. I disagree, we need to start from the basics 1st which was once depleted. Startups is a great initiative for stronger economies as you also need forex and money. I would love to do POP Shipping, but I need forex. I really don’t think people understand what a mess our country was driven into!

    1. I disagree with you. I think startups are vital even now if not more when we are in the place we are in. I do agree that our country was raped, the important thing is to start having these conversations. Of course they should lead to action

  3. President Munangangwa has pledged to re-open closed companies, while Zimra chief is fixated on closing the companies that are struggling to survive by choking them with random estimated penalties and garnishing their bank accounts just to meet her quarterly revenue targets and please Chinamasa! Flogging a dying donkey! Zimbabwe is not open for business.

    smebusinesslink.wordpress.com

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