Business demands bold actions

LIVINGSTONE MARUFU AND CLOUDINE MATOLA

Business leaders have strongly urged the Reserve Bank of Zimbabwe (RBZ) to implement measures that foster economic stability, promote growth, and reduce regulatory costs.

These demands come as local companies face increasing constraints, underlining the urgent need for policies that create a conducive business environment.

It comes as the RBZ Governor, Dr. John Mushayavanhu, is set to present the 2025 Monetary Policy Statement in the coming weeks.

In their position papers  industry and commerce voiced expectations for meaningful reforms.

The CEO Africa Roundtable (ART) has highlighted the detrimental effects of inconsistent policies and currency management. The organization emphasized that the lack of stability in financial markets has fueled a rise in informal economic activities, with over US$2.7bn reportedly held outside the formal banking system due to diminished trust in RBZ policies.

“A vicious cycle of volatility in inflation and exchange rates has driven formal businesses into informal operations,” stated the CEO ART.

“The decline in trust toward local currency ZiG stems from poor policy management and insufficient consumer demand for its usage.”

The ART called on the government to lead by example, mandating the use of local currency in key transactions while addressing structural inefficiencies to reduce arbitrage opportunities.
Business leaders stressed the importance of rebuilding trust in monetary institutions. This includes timely publication of credible financial data and market-driven decision-making processes.

ART advised the RBZ to build and maintain foreign reserves equivalent to at least three months of import cover. This, they argue, would strengthen the central bank’s capacity to guide monetary and financial markets effectively.
With approximately 70% of economic activity occurring in the informal sector, business leaders urged the government to integrate these players into the formal economy through education, incentives, and tailored policies.

The Zimbabwe National Chamber of Commerce (ZNCC) suggested reducing transaction fees to encourage digital payment adoption, particularly among Micro, Small, and Medium Enterprises (MSMEs).

The business lobby group highlighted that a coordinated approach between the central bank and the Treasury is critical for consistent and sound policy-making. This will foster an inclusive and stable economic environment.

The ZNCC has identified stabilizing the exchange rate as a priority for the upcoming monetary policy. It noted significant challenges in the interbank market, where the “Willing Seller, Willing Buyer” model suffers from limited foreign currency supply.

High transaction costs and the dominance of cash-based transactions in the informal sector exacerbate liquidity challenges.

The ZNCC recommended incentivizing private sector players with surplus foreign currency to participate in formal markets by offering competitive exchange rates and reducing transaction costs.

“Despite some stability, the 20% premium between the official and parallel market rates erodes confidence in ZiG,” the ZNCC said. “This gap perpetuates inflation and undermines the local currency.

Business leaders are  also advocating for measures to enhance the usability and appeal of ZiG.

Recommendations include:

• Issuing higher-denomination notes to facilitate large transactions in a predominantly cash-based economy.
• Collaborating with commercial banks to improve the availability and circulation of ZiG notes.

The ZNCC also proposed maintaining a dual currency system in the short to medium term while gradually increasing the share of transactions conducted in local currency.

The Confederation of Zimbabwe Retailers (CZR) has expressed similar concerns, particularly regarding exchange rate volatility and its impact on business operations. CZR President Denford Mutashu noted that fluctuations in the value of ZiG against the US dollar disrupted pricing strategies, eroded consumer confidence, and reduced purchasing power.

While tight liquidity measures have narrowed the gap between official and parallel market exchange rates, CZR emphasized the need for sustained efforts to ensure long-term stability.

“CZR recommends that the RBZ continue monitoring liquidity management frameworks and enhance the Foreign Exchange Auction System to improve transparency and accessibility,” said Mutashu.

Retailers have highlighted the widespread preference for US dollars in transactions, with dollarization estimated to account for 80% of economic activities. This trend undermines the adoption of ZiG as a medium of exchange and store of value.

To address this, Mutashu stressed the importance of policy consistency, stating, “Stable and predictable monetary policies are essential for rebuilding trust in the local currency. Incentives for businesses that prioritize local currency transactions can help restore confidence in ZiG.”

With the informal economy contributing significantly to Zimbabwe’s GDP, stakeholders have called for deliberate efforts to integrate informal players into the formal system. This includes pricing key services, such as fuel and rentals, in both US dollars and ZiG to promote dual currency usage.

As the RBZ prepares to unveil the 2025 Monetary Policy Statement, the business community’s demands highlight the critical need for bold actions to stabilize the economy, restore market confidence, and foster sustainable growth.

By addressing systemic inefficiencies, promoting transparency, and aligning fiscal and monetary policies, the central bank can create a robust foundation for a more inclusive and dynamic economic environment.

The path forward requires coordinated efforts, policy consistency, and a commitment to fostering trust among stakeholders. These measures will not only stabilize the macroeconomic landscape but also unlock the potential for long-term prosperity in Zimbabwe.