Govt in partial dollarisation



Government has ordered the Zimbabwe Consolidated Diamond Company (ZCDC) to invoice all sales of the precious stones in United States dollars even for local buyers, effectively flying in the face of its claims that bond notes and RTGS are at par with hard currency.

Zimbabwe ditched its local currency for a basket of foreign currencies mainly dominated by the greenback in 2009 due to runaway inflation. In 2016, the central bank introduced a fiat currency ostensibly as an export incentive. The bond notes were introduced at par with the US dollar but low exports have resulted in the value of the fiat currency being wiped out. The introduction of bond notes also fuelled arbitrage on the market.

Treasury has projected the capital intensive sector to register a 26 percent growth driven by strong performance in gold, coal, chrome and diamonds.

Information at hand suggests measures to compel all high value minerals – with initial focus on jewelry making minerals such as gold, diamonds, platinum and emeralds – to be paid for in foreign currency and monitored are to be introduced.

Highly placed sources in the local diamond market told Business Times a group of local manufactures and buyers of diamonds, including Reserve Bank of Zimbabwe (RBZ)’s Aurex Jewellery, ditched parcels they had won in the recently ended diamond tender after being ordered to pay in hard currency.

The manufacturers and buyers had a series of marathon meetings with the Mineral Marketing Corporation of Zimbabwe (MMCZ), Ministry of Mines and ZCDC officials to work out a solution.

MMCZ, said a source, was sympathising with local buyers on grounds they have no foreign currency while ZCDC insisted it was working under a directive from Mines Minister Winston Chitando.

Chitando, the source said, claimed to have been enforcing a Cabinet directive. The new directive is seen pushing local manufacturers out of business.

“We had a lot of meetings all day with the MMCZ, ZCDC and Ministry of Mines. We had to break to contact Chitando who is in Brussels when his officials needed clarity on some issues, but we didn’t get anywhere,” said a buyer who was in the meeting.

Buyers are, as a result, backtracking and leaving parcels they won in a tender which included foreign buyers.

Local buyers are invited to participate at MMCZ’s discretion in international tenders. They also enjoy 10 percent of the produce which is reserved for locals. However, even the 10 percent will be sold in US dollars.

“We can’t find the foreign currency anywhere and it is no secret that the rates are not the same that’s why you find we could easily bid three or more times more than foreign buyers because of the exchange rate,” the buyer said.

“Now we can’t pay otherwise it becomes more expensive. Even using the black market rates, our bids are far better than foreigners, but we don’t have the foreign currency.”

Efforts to get an official comment from Chitando were fruitless.

“I am in a meeting in Brussels, please text,” he said before hanging up.

ZCDC CEO Morris Mpofu could also not respond to questions.

“I will revert back to you,” Mpofu said.

Deputy Chief Secretary for Presidential Communications George Charamba said discussions to compel all diamond buyers to pay in foreign currency were held in Monday debriefings.

“What I am not sure of at this time is whether or not this then escalated to a Cabinet directive,” Charamba said, adding he could have checked with his office for the information.

Charamba said the local buyers retain 70 percent of their foreign currency when they export hence they can afford to pay in hard currency.

“This is unfair, they retain 70 percent of their foreign currency and they want to pay in RTGS. We would understand if they were saying they want time or to set up offshore,” Charamba said.

“You can’t ask to pay in bond notes when you are beneficiating for a foreign market. Where is your foreign currency going? It is this 70 percent that is finding its way to the black market. This business of buying in bond notes and selling in US dollars won’t fly.”

While the US dollar value is at par with bond notes, Charamba said, the surrogate currency is not trade-able outside Zimbabwe and cannot be used to pay for fuel imports.