Firms demand 90% retention threshold

LIVINGSTONE MARUFU

Local companies want their foreign currency retention threshold increased to 90% from the current 75% as they battle serious working capital challenges and rising cost of production.

In its latest position paper, the Zimbabwe National Chamber of Commerce (ZNCC) said the current retention level of 75% has destroyed the industry as the companies are already struggling.

“We also believe that a competitive and market-driven exchange rate will also avoid losses for exporters, and in the absence of such a competitive foreign exchange market, then surrender requirements should be substantially reduced to levels of between 10 and 15%.

“Exposing exporters to surrender requirements at uncompetitive exchange rates is akin to killing the goose laying the golden eggs, especially noting how domestic foreign currency sales have no surrender requirements,” ZNCC said.

The call by ZNCC comes after the Treasury said it would now fund the local currency component of the 25% foreign currency surrendered by exporters in order to “eliminate the creation of additional money supply”.

This also comes as the Confederation of Zimbabwe Industries (CZI) is pushing for the removal of the forex retention threshold to wholly retain their foreign currency proceeds arguing that the economy has dollarised and there is no need for taking a portion from companies’ hard-earned cash.

“From our perspective, the surrender requirement threshold is no longer necessary as the economy has redollarised therefore they no longer serve any purpose as they continue to hurt struggling entities. There is no need to review them but to remove them,” CZI president Kurai Matsheza (pictured) said.

He added: “We know that the economy has redollarised and there is no need to continue with such punitive measures as rising costs in US$ are affecting the competitiveness of our goods.

Matsheza said the central bank would have done some considerations to relook at the surrender requirements as they are affecting the companies’ balance sheets.

Industrialist Sifelani Jabangwe said the sector has become more unviable.

“We need higher forex retention to return the competitiveness of our goods as the rising costs of production are eating into our margins,” Jabangwe said.