Zimbabwe to slap 20% tax on dried bud exports, investors not happy

Zimbabwe Cannabis Export Tax | The Zimbabwe government has announced there will be special taxes on cannabis exports, prompting unhappiness among investors.

Following fairly quickly in the wake of gazetting of new cannabis license regulations, the government in Harare says it plans the following taxes:

• 20% on the export sales value of dried bud

• 15% on the value of bulk extracted medicinal cannabis oils that require further processing, and

• 10% on the export sales value of finished packaged medicinal products ready for resale;

   

In a document sent to Business Day South Africa, and published on 29 November 2020, Zim finance minister Mthuli Ncube said:  “The potential value of cannabis exports for medicinal purposes is estimated at about US$1.25bn for the year 2021. I therefore, propose to introduce a Cannabis Levy, chargeable on the value of exports, at the after varied rates of tax that correspond to the level of processing”

You want to tax us how much for this?

Zimbabwe export tax will be ‘crippling’ for Cannabis Farmers

Investors have reacted with dismay, particularly on the levy on exporting dried bud, saying that it will drive up production costs and make it difficult to be competitive. One investor, who wanted to remain anonymous, told Cannabiz Africa that besides exorbitant taxes, there were two other main issues preventing investment flows into the Zim cannabis industry:

• Guarantees around electricity supply
• A ‘stability agreement’ whereby the government would undertake not to introduce new taxes

Zimbabwe is cash-strapped and in the grip of runaway inflation. It wants to boost foreign exchange earnings through the sale of medicinal cannabis. It also wants to reduce its reliance on tobacco, one of the main export revenue drivers.

Prisons used to grow cannabis – good security, cheap labour

Earlier this year the government dropped restrictions on foreign ownership of local cannabis operations saying that no local partner was necessarily required. It also waived normal economic empowerment regulations and identified three special cannabis export zones: around Harare, Bulawayo and Vic Falls.
The Zim government has also come up with the novel idea of using prisons as grow-spaces. This has the double advantage of providing security  and a non-unionised, inexpensive workforce! The Zimbabwe Prisons and Correctional Services is one of the chief players in growing cannabis as prisoners are used as cheap labour to work on the fields.
Zimbabwe began harvesting its first crop of legally cultivated industrial hemp in February 2020 after it sanctioned cannabis farming in 2018 to tap into the lucrative industry.
About 40 approved investors have shown interest in producing cannabis for medicinal or scientific purposes. They are allowed licences valid for up to five years, and have to produce the crop under strict monitoring.

A year of trial and error in Zim hemp research

In 2019, the Zimbabwe Industrial Hemp Trust planted five varieties of European industrial cannabis on a 10ha plot at Harare Central Prison. Preliminary results showed that of the five varieties planted, only two performed well. Growers blamed poor rains and high temperatures. The results also showed that the crops grew and budded faster than expected.