Local manufacturers have asked government to liberalise the foreign exchange market as most companies continue to face challenges in accessing the elusive greenback from the Reserve Bank of Zimbabwe amid a flourishing parallel market and rising inflation, Business Times has learnt.
This comes as Zanu PF recently read the Riot Act on local firms calling for stiffer penalties on those that adopted a three-tier pricing model triggered by foreign currency movements on the parallel market.
Since adopting the multicurrency regime in 2009, the country’s manufacturing sector, one of the most diversified in the region, has been struggling to access concessionary funding to retool and access throughput materials offshore. Estimates from the country’s industrial lobby group show that foreign currency backlog for companies now hovers around $600 million.
In 2016, government introduced bond notes which traded at par with the dollar to stimulate exports.
Information gathered by the Business Times shows that the Confederation of Zimbabwe Industries (CZI) yesterday submitted a report on price stability and availability of commodities to Industry and Commerce minister Mangaliso Ndlovu.
CZI president Sifelani Jabangwe confirmed that the industrial lobby group’s technical committee had finalised drafting the document which it presented to government following a meeting with Vice President Constantino Chiwenga and other government officials . It is also understood that on Tuesday night captains of industry also met Ndlovu over the issue where they undertook to submit a paper to government.
“At this stage I’m not at liberty to disclose the contents of the report suffice to say that we will make our submissions to the minister today. The submissions will be on commodity pricing and availability,” Jabangwe said.
However, sources close to the developments confirmed that the CZI is pushing for a forex platform or rather an open market for foreign currency trades. Currently companies local firms request forex from the central bank which has admittedly been struggling to meet demand due to low exports.
The dollar which in August traded at a 50 percent premium against the country’s surrogate currencybond notes is now exchanging hands at a 350 percent premium pushing for prices of basic goods and services. The price hikes saw annualised inflation reaching 20,85 percent in October, the highest since the introduction of the multiple currency regime mainly dominated by the dollar. In November inflation further rose to 31 percent, eating into disposable incomes of workers. Already some companies like Simbisa Brands have announced that they will maintain the multiple tier pricing model to widen their foreign currency revenue inflows. A slump in agriculture productivity has seen most companies relying on imports mainly from South Africa for throughput. Local firms are also grappling to access foreign currency to pay fees for their franchises
. In October, fast food outlet KFC, temporarily closed shop citing viability problems triggered by the foreign currency movements.
Government has maintained that bond notes remain at par with the dollar despite challenges and backlogs in accessing the greenback from the formal banking system.
The country’s currency issues has also caused headaches for local firms in managing their financial statements as government maintained that the local currency was at par with the dollar. Interestingly government has already partially dollarised demanding payment of duty on imported cars in foreign currency.
Economist Ashok Chakravarti said liberalising the foreign exchange market could save industry.
“The position is that the economy could worsen unless government liberalises the foreign currency exchange market because businesses are saying they are not willing to trade at equivalent exchange rate of 1:1 between the greenback and the surrogate currency. They (businesses) are saying it’s not viable and that should be dropped otherwise more companies will close next year,” he said.
“To ensure that the economy doesn’t deteriorate further, government must also create an interbank foreign currency exchange market, control inflation, control fiscal deficit and control government expenditure.”