LIVINGSTONE MARUFU
Captains of industry across the mining, banking sector and manufacturing sectors are pushing for an upward review of foreign currency retention levels to 80%, it has emerged.
The business leaders also want the surrender requirement to be reviewed to increase the viability of all economic sectors.
The push comes as the Reserve Bank of Zimbabwe governor, John Mangudya is expected to present his Mid-Term Monetary Policy Statement this week.
In its submissions, the Chamber of Mines of Zimbabwe said the Chamber has witnessed a disproportionate increase in pressure on the 60% foreign currency retained by mining companies following the gazetting of the Statutory Instrument 118A of 2022 which embedded the multi-currency system into law.
“Given that the multicurrency system was embedded into law, we are of the view that there is a need to review the foreign exchange retention framework in line with the new policy changes.
“We are proposing an upward review of the minimum retentions from 60% to 80%. Information gathered from mining houses shows that mining companies now require at least 80% of their foreign currency earnings to meet the increased demand for forex and fund their operational requirements and expansion projects,” Chamber of Mines said.
“For the remaining surrender portion, we propose an increase in the proportion of taxes paid in local currency at the willing buyer willing seller rate as well as providing a price incentive to compensate for the loss of value of the remaining portion of foreign currency earnings liquidated at the interbank rate.”
With most mining companies undertaking expansion projects, the available foreign currency is inadequate to fund operational requirements and the implementation of capital projects.
The Confederation of Zimbabwe Industries said a 40% surrender requirement “reduces viability for the manufacturing sector exporters, especially given the exchange rate distortions in the market, hence is also another form of taxation.
The Bankers Association of Zimbabwe (BAZ) said there is need for uniformity on foreign currency surrender requirements.
“The need to have uniform sectoral foreign currency surrender requirements per sector as this eliminates exemption arbitrage and thus levels the playing field.
“Liquidation of unutilised exports was once repealed after outcry by the industry as it was viewed as retrogressive with potential to undermine companies raising funds for importation of equipment.
“For example, on the other hand, it may force holders of forex to prematurely utilise their funds in an attempt to avoid liquidating part of their hard currency,” BAZ said.
“Against this background, this policy is unlikely to lead to improved availability of foreign currency and erodes the confidence in the sector.
“We therefore recommend a repeal of this requirement and encourage the holders of forex to liquidate their US$ through a fair exchange rate that is reflective of demand and supply conditions,” banks said.
BAZ said the banking sector operations thrive when there is certainty and stability at policy level.
“There have been numerous policy changes in recent years which have not promoted the development of trust in the financial system.
“We recommend deeper multi-sector stakeholder consultative processes which lead to policy consensus before changes are announced,” BAZ said.
