K49 Billion VAT Refund Crisis Strains Zambia’s Manufacturing Sector
Zambia’s manufacturing industry is under severe pressure due to an estimated K49.4 billion backlog in unremitted VAT refunds, significantly affecting cash flow and operational efficiency.
A report by USAID Zambia and the Zambia Association of Manufacturers (ZAM) reveals manufacturers wait an average of 845 days for refunds, far exceeding the Zambia Revenue Authority’s (ZRA) standard 30-day processing period.
Over 74% of surveyed manufacturers face cash flow difficulties, forcing reliance on costly loans, disrupting production, and halting expansion plans. Current ZRA measures, like the “first in, first out” refund principle, have provided minimal relief due to limited treasury allocations and inefficient audits.
The report proposes securitising VAT arrears into government bonds, allowing manufacturers to liquidate claims. However, concerns include liquidity challenges, discounted valuations, and increased government debt risks, potentially raising inflation and borrowing costs.
Manufacturers urge stakeholders to overhaul the VAT refund system, ensuring timely payments to safeguard Zambia’s industrial growth and economic diversification goals.
