Mozambican government removes VAT on bread to prevent price rise

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Mozambican government removes VAT on bread to prevent price rise

8:41 CAT | 26 Jul 2016

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The Mozambican government has announced the lifting of VAT and other administrative fees from the bread industry as a way of forestalling a price increase and easing the cost of living in Mozambque.

Deputy Minister of Industry and Trade Ragendra de Sousa told a press conference at the end of a meeting with the Mozambican Association of Bread (Amopao) that inspection costs were to be eliminated and that “VAT has also been removed”.

Ragendra de Sousa said the government would continue to seek out other costs in the bread production chain which could be eliminated, for example in the importing, processing, production and sale of wheat.

“We are working very hard to identify other costs where we can act to affect pricing across the whole chain,” added Ragendra de Sousa.

The newly sworn-in deputy Minister of Industry and Trade indicated that the bread price freeze would last until March 2017, as that would allow effective monitoring of any macroeconomic changes that might justify a new assessment of the situation.

“As a time frame, March is more than enough to identify the behaviour of any macroeconomic fluctuations,” Ragendra de Sousa said.

The bakers association announced a bread price rise in early June on the grounds of the increased cost of raw materials and the recent increase in minimum wages in the industry, but the Mozambican government persuaded the industrial sector to suspend the measure, saying it the needed to study alternatives.

According to the bakers’ proposal, a 250 g loaf of bread should go up from 7.5 meticais (0.10 euros) to nine meticais (0.12 euros) and 200 g loaf from six meticais (0.08 euros) to seven meticais (0.09 euros).

In October 2015, the government suspended bread subsidies in force since 2010 as unsustainable, claiming it had disbursed more than 1.7 billion meticais (over EUR 35 million) in subsidies between 2010 and 2015.

The subsidies were introduced in 2010 when a rise in the price of bread and other commodities caused a popular revolt in Maputo which degenerated into clashes and resulted in several deaths.

The last time the country saw a rise in the price of bread was in October 2015 when the 250 g loaf went up from six meticais (0.12 euros) to 7.5 meticais (0.15 euros), 200 g increased from 4.5 meticais (0.09 euros) to six meticais (0.12) and 150 g from three meticais (0.06 euros) to 4.5 meticais (0.09 euros).

Source: Lusa