Cash crunch hits industry

LIVINGSTONE MARUFU/TANATSWA KANDENGA AND CLOUDINE MATOLA

The struggle to access hard currency from local banks, particularly the greenback, has led to a dramatic drop in commercial activity forcing companies to halt expansion plans and even consider layoffs, business leaders have said.

They claimed this could hinder production and cause basic goods shortages in the market.

It appears to be a response to the significant rejection of the recently introduced Zimbabwe Gold (ZiG) currency, which may be the cause of the rise in demand for the greenback.

Mike Kamungeremu, the president of Zimbabwe National Chamber of Commerce confirmed the crisis saying it could cause significant harm  to the economy  and businesses.

“Reports that we have received so far from members indicate that banks are still very slow in providing foreign currency and we are afraid that if this is not attended to as a matter of urgency, backlogs will start accumulating again. We appeal to the central bank to look into this as a matter of urgency,” Kamungeremu told Business Times.

He added: “What is more critical is ensuring that when the businesses want foreign currency to import raw materials and machinery, they get it on the interbank market at interbank rate. If that happens then everything will be fine. Challenges will emerge if businesses can’t access foreign currency at that rate.”

Kurai Matsheza, the president of the Confederation of Zimbabwe Industries, concurred saying banks were struggling to meet companies’ forex demand.

“The issue is that our members haven’t been able to satisfy their adequate forex requirements especially those companies with huge needs and this has affected production levels,” Matsheza said.

President of the Confederation of Zimbabwe Retailers Denford Mutashu also affirmed that local businesses were having trouble getting forex.

“Various companies wishing to purchase foreign currency  to import raw materials have not been receiving favourable responses from the banks.

“The absence of measures to capacitate banks to support key productive sectors continued to create challenges in promoting the acceptance and wider use of the new currency, as well as guaranteeing its stability,” Mutashu said.

Forex is mostly used for foreign payments, according to Fanwell Mutogo, CEO of the Bankers Association of Zimbabwe.

“Companies with genuine invoices can easily access foreign currency from their banks. It is important to note that foreign currency is exclusively available to those intending to use it for international transactions, and not for domestic purchases,” Mutogo said.

Lawrence Nyazema, the group CEO of CBZ Holdings Limited, said:  “Banks buy foreign currency from those who want to sell it for ZiG or a portion of the 25% of exports proceeds from the central bank. This is the foreign currency that banks sell to companies that require it. Most companies are now generating their own foreign currency by selling goods and services in multi currencies that are legal tender in this country.”

Recently, the Finance and Economic Development and Investment Promotion Minister Professor Mthuli Ncube said all bona fide and legitimate demands  for foreign currency through the banking system will  fully be met.

“In order to stabilise the value of the ZiG, the Government has introduced a liberalised foreign exchange market, where the exchange rate is freely determined by the local currency money supply in circulation.

“The availability of such reserves will ensure that all bonafide and legitimate requests for foreign currency through the banking system will be fully satisfied,” Prof Ncube said.