INTRODUCTION OF LOCAL CONTENT-BASED INCENTIVE TO PROMOTE MANUFACTURING
Under tax incentives, the Minister proposed to introduce a local content allowance for income tax, relating to the use of selected local raw materials, at the rate of 2%.
The incentive, aimed at encouraging local content and value addition, is a big step forward towards the implementation of the National Local Content Strategy promoting the use of local products and services in growth sectors.
The aim is to encourage local manufacturing and processing of products that use mangoes, pineapples and cassava, which are produced in significant quantities in Zambia.
This proposal also seems to resonate with the Minister’s simultaneous announcement: ‘the Industrial Development Corporation will establish a tomato and fruit processing plant in 2021. I urge our farmers to take advantage of this development’.
Governments the world over, especially following the 2008 financial crisis, have been using local content requirements, despite the highly controversial debate about their success or failure. The popularity of local content requirements is likely to increase post-COVID-19.
The restrictions brought by the pandemic have demonstrated that lengthy and remote supply chains are more vulnerable to disruption.
Therefore, we hope the 2% incentive is substantial enough to sway beverage manufacturers to substitute imported raw materials with locally produced fruits, to boost local value addition, to stimulate demand for locally grown fruits, and to lessen the risk of disruption to their supply chain.