Business banks on US$ sales
• As formal platforms struggle to supply enough fx
LIVINGSTONE MARUFU
Businesses are depending on US$ sales for their foreign currency requirements as the formal platforms have failed to supply them with adequate supplies.
The businesses have been relying on a parallel market system but with a bit of stability from the end of August, companies have been cashing in the greenback as most customers preferred US$ which has no charges since the exchange rate was near convergence.
In its latest report, the Confederation of Zimbabwe Industries (CZI) said local companies would like the exchange rate stability to continue to get the greenback.
“US$ domestic sales remain the primary source of foreign currency. When measured in terms of statistics 45% of the companies’ forex sources are coming from sales, the forex auction platform is the second source with 19%, alternative market with 17%, willing buyer willing seller 10% and exports 9%,” CZI said.
The official exchange rate is at ZWL$661.71 per US$1 against the parallel market rate at ZWL$850 per US$1.
Retailers have a leeway of putting a 10% premium to the official rate to sell at ZWL$ 725 per US$1.
The Confederation of Zimbabwe Retailers president Denford Mutashu told Business Times that retailers are harnessing the US$.
“With the current economic stability, many customers are coming into the shops with the US$ which is critical to sustaining our operations.
“I can tell you that for the past three months now, the moneychangers at entry points suffered a huge blow as customers preferred to use the hard currency,” Mutashu said.
The Reserve Bank of Zimbabwe (RBZ) recently dumped the forex auction platform as a price discovery platform into an allocation mechanism.
RBZ made the willing buyer willing seller platform the official system that the market uses but the platform is too thin to support the economy which needs over US$5bn to unlock value.
It is understood that the businesses have failed to acquire the required money from the official platforms as the current liquidity squeeze means the companies have limited ZWL$ to spend on the auction system.
This means businesses also cannot go on the parallel market as they have little local currency to spend.
This means the businesses have no option but to depend on local US$ sales for their forex requirements.
This comes as customers in leafy suburbs no longer go to downtown town tuckshops as they can easily buy from formal retailers at competitive prices.
With formal businesses eager to maintain a grip on the US$, the hard currency price is relatively low compared to the ZWL$ price.
The development comes as banks have escalated US$ borrowing as the liquidity crunch continues.
“We have observed that US$ borrowing is coming in as a lifesaver and the hard currency inflow to the formal economy has peaked up in the past months due to the scarcity of ZWL$ and reduction in demand.
“We have also observed that there is increased business with informal economy from formal businesses as they don’t want to lose business to informal businesses,” CZI said.
