Zimbabwe is facing more difficult times ahead of elections set for August 23 this year with various shocks ravaging the economy, captains of industry said yesterday.
The captains of industry said the economy now stands at a crossroad, suffering from the rising inflation, currency crisis, exchange rate volatility and weak aggregate demand, among many other headwinds.
All the economic challenges are exhibiting themselves at a time the country goes for elections where government is expected to spend a lot of the little resources available in the coffers.
FBC Holdings group CEO, John Mushayavanhu warned on the takeover of foreign credit facilities by the Treasury saying: “The taking over of the foreign credit facilities by the Treasury from the Reserve Bank of Zimbabwe will lead to drought in facilities in future.”
“One may ask why these lenders were lending to the Reserve Bank of Zimbabwe and not Treasury. The other question is that have you [Treasury] discussed with lenders on change of borrower. What guarantee is there that the lenders are going to continue supporting Zimbabwe because the government has a history of not paying debts,”
He added: “On the 90- day forex surrender, there will be no exporter who will be willing to allow forex to be taken over through the 90-day export surrender. I foresee export proceeds being delayed, meaning the economy will not be oiled.”
Fidelis Ngorora, a director at the Ministry of Finance and Economic Development said if exporters do not liquidate forex to the market, “obviously it’s going to create challenges”.
“We, however, expect exports to channel these to the market,” Ngorora said.
The Zimbabwe dollar is in a free fall. This week, the Zimbabwe dollar was trading at more than ZWL$4 000 to the United States dollar on the parallel market. On the formal market, the Zimbabwe was trading at ZWL$2 500 to the greenback.
The economic and financial crisis, which has spiraled out of control, forced the Minister of Finance and Economic Development, Mthuli Ncube, to announce measures as part of efforts to deal with the crisis, including assuming all foreign currency debts from the Reserve Bank of Zimbabwe from today.
Ncube has also directed that export proceeds that remain unutilised after 90 days will be liquidated onto the interbank market. The other measures were that the weekly auction be limited to a maximum of US$5m and exporters to be charged VAT, among many other measures.
Chief secretary to the President and Cabinet, Misheck Sibanda admitted that the fragile stability that was experienced in the economy at the beginning of the year has been “shaken”.
He said it was critical for government, industry and commerce to work together to stabilise the economy.
Sibanda said the government continues to champion dialogue to come up with recommendations to “frog march our nation to stability”.
“There is a need for an inclusive process to come up with policies to move our country forward. We need to work together as business and government for the development of our country. Stable macroeconomic conditions enhance business,” he said.
Confederation of Zimbabwe Industries president, Kurai Matsheza said the situation was dire as industry was already uncompetitive.
“So, the introduction of the 15% VAT on exports will definitely worsen the exports’ competitiveness. We are price takers. In terms of global standards, they don’t practice that, as exports are VAT-exempt. There is a need for dialogue to see how we can refine this measure,” Matsheza said.
He said the opening of the border for 16-line products would kill local industry, urging the government to rethink the measure.
Matsheza also said all taxes to the government must be paid in local currency.
“We have requested the Ministry of Finance and Economic Development for engagement. We hope this is going to happen in the next few days,” he said.
ZNCC president Mike Kamungeremu said he had received some information that some manufacturers are stopping their plants because they cannot compete with imports after the government announced the opening up of the borders.
“It’s something we are closely looking at. The other thing is that all taxes must be payable in Zimbabwe dollars. Also consulting before policy announcement is key so that we can also go as champions to try and build confidence,” Kamungeremu said.
He said business was worried about market distortions.
“At the auction system, the problem has been the issue of arbitration. There has been money creation emanating from the way money was being allocated. The new limit of US$5m per week is too little given the numbers.
The other problem is that there are serious concerns over auction backlogs. Now that the auction has been taken over by the Treasury, what will happen to these backlogs? Kamungeremu asked.
Olivine Industries board chairman, Peter Madara US$5m was too little.
“We likely to see companies scrambling for the little US$5m at the auction, something which is going to impact the exchange rate,” he said.