Energy investors get 50% allowance


Finance Minister Alexander Chikwanda has proposed an increase in the capital allowance for implements, machinery and plant used in the generation of electricity to 50% from the current 25% to encourage the development of sustainable and alternative sources of energy.

Mr. Chikwanda also said there was need to extend the 10-year period for carrying forward of losses for businesses engaged in the generation for electricity using hydro and thermal, to business generating electricity using other sources of energy such as wind and solar.

He said this yesterday when he presented the 2016 national budget whose theme is; “Fiscal Consolidation to Safeguard Our Past Achievements and Secure a Prosperous Future for All.”

Mr Chikwanda said there was need for claiming input Value Added Tax as an intending trader for electricity generation to four years from two years as well as the removal of 5% customs duty on Pitch Coke and the 15% customs duty on Petroleum Coke.

The minister also noted that the revision of electricity tariffs towards cost reflective levels will encourage capital investment in the sector thereby increasing on generation of electricity as the sector would attract more investment.

“Sir, in addition to the revision of electricity tariffs towards cost reflective levels, I am confident that these tax concessions will encourage capital investment and act as a catalysts to enhance the development of the energy sector,” Mr Chikwanda said.

Mr. Chikwanda said the negative effects of electricity deficit the country was experiencing which has resulted in load shedding has a negative impact on the economy of the country has they work towards reduction in production.

He said Government had taken a number of measures to address the problem of power shortage in the short term such as the importation of emergency power, adding that although it has helped it was not sustainable because it came at a huge cost.

Mr. Chikwanda said the long term solution lies in promoting private sector participation in the generation of electricity.

“We have a number of such projects in the pipeline such as the 300 megawatts coal-fired thermal plant in Mamba which is near completion. We want to encourage private sector investment in electricity generation and ensure that investors get a fair return on their investments, electricity tariffs will continue to be adjusted to make them cost reflective,” he said.

He said Government had invested in Kalungwishi hydro power project as well as the Itezhi Tezhi power project.

Mr. Chikwanda said Government was also looking at Chishimba Falls mini hydro power plant, Musonda falls and Lusiwasi for increased power generation from their current states.

He noted that the manufacturing industry was one of the sectors in the economy which would be of great importance to government’s diversification programmes and that government attached great importance to the sector and would ensure that it created a an enabling environment that would encourage competitiveness.

Mr Chikwanda also said Government would also broaden the base for non-traditional exports by removing duty on greenhouse and rose seedlings.

“Mr. Speaker, the development of the manufacturing sector remains key to achieving our objective of diversifying the economy. Government will therefore, continue to promote manufacturing by providing an enabling environment that will encourage competitiveness of the sector. To this effect, I propose to suspend exercise duty on clear beer to 40% from 60% in order to spur local manufacturing, promote investment and curb smuggling.

“Mr. Speaker, to further promote economic diversification and expansion of the base for non-traditional exports, I propose to remove the 15% and 5% customs duty rates currently applicable on greenhouses and rose seedlings, respectively,” he said.

Meanwhile, Mr. Chikwanda has suspended customs duty on transmission apparatus for television and radio for a period of two years while increasing customs duty on selected categories of motor vehicle.

“Mr. Speaker, to reduce the cost of upgrading of existing infrastructure for digital migration and encourage the establishment of community-based television and radio stations, I propose to suspend customs duty on transmission apparatus for television and radio for a period of two years. Sir, as a result of these measures, government will forego K138 million.

“Mr. Speaker, I propose to adjust upward customs duty on selected categories of motor vehicles excluding buses and trucks. Furthermore, I propose to introduce a surcharge of K2, 000 on motor vehicle older than five years from the year of manufacture. Mr. Speaker, the estimated gains in 2016 as a result of these measures will be K93.9 million,” he said.

Mr. Chikwanda also proposed the increase on duty rate on cigarettes, plastic bags, and refined edible oils in order to promote local manufacturers.