Zimbabwe’s “juice card” economy

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After announcing to Zimbabweans in 2009 that cigarette and alcohol taxes had sustained their crumbling economy, despite the country’s vast untapped diamond reserves, Finance minister Tendai Biti last Thursday again argued that the Southern African nation’s economy was in 2010 largely sustained by value added tax (VAT) derived from “juice cards”.

Early November, Delta Corporation, an associate unit of SABMiller, reported a 16% increase in total beverages volumes to 2.8 million for the six months, a high last seen before an economic crisis heightened in 2005.

The increase in larger consumption gave the country’s treasury something to smile about: the beverages group’s contribution to the cash-strapped fiscus through income tax, value added tax and excise duty amounted to US$60.3 million, with excise duty having grown disproportionately by 77% due to the swing to lagers.

But despite this and other achievements, Tendai Biti, on Thursday, November 25, told his countryman that the economy was in 2010 largely sustained by value added tax (VAT) derived from cellphone airtime.

Biti told the Zimbabwe House of Assembly in a presentation of his 2011
spending plans that tax on cellphone usage had sustained government’s
recurrent expenditure this year.

“…. Whereas last year the bulk of our income was coming from customs
and excise duty, the bulk of our income here is coming from VAT,”

“So in 2009 up until the first half of the year, cigarettes and alcohol supported this economy. In 2010 we have graduated a bit and juicecards are actually supporting this economy.

“So we have graduated from cigarettes to juice cards,” he said drawing laughter, even from President Mugabe during the live television presentation of the budget.

Telecom firms have expanded rapidly over the past one and half years in Zimbabwe where mobile phones lagged well behind other developing countries.

The county’s largest mobile operator, Econet, run by exiled Zimbabwean entrepreneur Strive Masiyiwa, posted profits of US$235.5 million in the first half of 2010.

Econet, has a subscriber base of 4.6 million and recently introduced broadband facilities.

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