Mangudya dares industry
As exchange rate spirals out of control
LIVINGSTONE MARUFU
The Reserve Bank of Zimbabwe (RBZ) has blamed industry for causing inflation and pushing up the parallel market exchange rate amid revelations that companies price goods and services above the auction rate despite getting cheap foreign currency.
RBZ governor John Mangudya told industrialists that they are accessing money at an exchange rate of US$1:ZWL$124 yet they are charging between US$1:ZWL$220 and US$1:ZWL$240.
“The industry always complains about the limited forex on the forex auction system and the prolonged settling of bids but the companies are the ones which access the forex at the auction and sell at a parallel market. The industry is passing on the burden to innocent customers who are not accessing the money from the forex auction system,” Mangudya complained.
Last year, RBZ penalised various companies for abusing forex that they were getting from the forex auction system.
The central bank said it would invoke Statutory Instrument 127 of 2021 and Bank Use and Promotion Act to instill discipline in the market.
Mangudya said industry’s receipts were miniscule.
“In 2021, the manufacturing sector earned US$176m yet they benefited between US$800m and US$1.2m from the auction system. Even if the country has over US$9.7bn, that money is not yours, it’s for the likes of Zimplats, Unki and RioZim or miners in general that money is not yours,” Mangudya said.
The industry acknowledged that they have low export receipts and there is a need for capital to start performing better.
“It’s not like we are getting all 100% forex requirements from the auction system but we are sourcing around 70% from the parallel market hence we use a blended rate which leaves near US$1:ZWL$200 hence we can’t use US$1:ZWL$120 as our rate,” Confederation of Zimbabwe Industries president Kurai Matsheza told Business Times.
“On top of that we need capital [US$2bn] to retool, we still have high taxes and we are still surrendering the 40% requirement to RBZ and these are some of the bottlenecks that continue to affect us as the industry.”
The 40% surrender requirement portion from the mining sector is mainly used to fund the auction system where the manufacturing sector is benefitting with mining firms not benefitting.
Mangudya said he will pin down the industry to control inflation.
“I will do everything within my power to control inflation as I recently signed a performance based contract to take down inflation and the exchange rate hence I will crack the whip at the industry by increasing the interest rates so that borrowing will become more and more difficult,” Mangudya said.
Mangudya said he would pursue a tight monetary path to curb inflationary pressures, sustain the auction system as a dependable and inclusive source of foreign currency, strengthen demand for the local currency, support domestic industries affected by Covid-19 and build foreign currency reserves to back the local currency.
The prices of basic commodities are skyrocketing everyday beyond the reach of many with a monthly family basket for six exceeding ZWL$75 000.
The prices keep going up on a weekly basis at a time when salaries remain stagnant.
The Confederation of Zimbabwe Retailers president Denford Mutashu told Business Times that manufacturers were causing havoc in the market as they continue to increase goods prices.
“We are painted as greedy people who are profiteering but we are getting a very thin margin because manufacturers are selling goods at inflated prices yet they are the ones that are accessing forex at a rate of US$1:ZWL$124,” Mutashu said.
“The consumers see the constant changing of prices and they blame us, yet the manufacturers are the ones who are increasing prices on a weekly basis.”
Mutashu added: “Now that the borders have reopened the local manufacturers will face stiff competition from imports. You may want to support locals but their prices are out of this world.”
