Zimbabwe’s central bank governor, John Mangudya, this week claimed the southern African country does not need “anyone’s money” to extricate itself from its economic woes.
The country, which is in dire need of foreign direct investment, has failed to unlock fresh financing from international financial institutions after it failed to clear debt arrears.
Mangudya told Business Times that Zimbabwe can extricate itself from the crisis without any assistance from international financial institutions.
“We don’t need anyone’s money as we can do it on our own. Sometimes it’s just the mindset and belief to achieve that,” Mangudya said, adding the forex starved economy could leverage on its natural resources to exploit and bail out the country out of the crisis.
“We should increase production to increase exports and when we increase exports we can build strong reserves and we will have foreign currency for our usage.”
President Emmerson Mnangagwa has been vigorously pushing the ‘Zimbabwe is open for businesses’ mantra as part of efforts to re-engage the international community with the view to end Zimbabwe’s isolation in order to attract meaningful domestic and international foreign investment.Foreign investors have been giving Zimbabwe a wide berth saying Harare had unfriendly policies and a “poisoned political environment” which scares away foreign capital.
But Mangudya said: “We should increase production to increase exports and when we increase exports we can build strong reserves and we will have foreign currency for our usage.”
Zimbabwe’s economic crisis has worsened over the years with inflation remaining high at over 300%.
Zimbabwe has been hit by severe foreign currency shortages, which have escalated in the recent past.
Although the central bank introduced the weekly foreign currency auction system, several company executives early this month told Business Times that what they were getting was inadequate to import critical raw materials and equipment.
They are now clamouring for the return of letters of credit which the central bank abandoned last year in June soon after the introduction of the foreign currency auction system.
Mangudya said Zimbabweans should desist from treating forex like an asset when it should be a currency used for paying off debts.
He said Zimbabwe has one of the best climatic conditions and soils in the world and one of the largest platinum, diamond and gold deposits among other natural resources.
Over the years, Zimbabwe had been dependent on tobacco, gold and platinum exports as international financiers closed the tap on borrowing because of the country’s failure to clear debt arrears.
Zimbabwe has been relying on the Cairo-headquartered Afreximbank for lines of credit. Since 2017, Afreximbank has advanced US$1.4bn for the purchase of strategic commodities and currency reforms.
Mangudya said Zimbabwe has to exploit its vast natural resources which have the potential of turning around the economy.
“Like what oil is to Nigeria, gold is to Zimbabwe. The precious mineral alone has the potential to turn around the country’s fortunes,” Mangudya said.
The yellow metal is Zimbabwe’s single largest foreign currency earner. However, unfavourable policies such as delay in payment for deliveries and the retention thresholds have fuelled the growth of the parallel market. It is estimated that Zimbabwe loses about US$1.2bn annually in gold leakages.
The RBZ chief said Zimbabwe has got 13 million tonnes of proven gold reserves but has extracted 600 tonnes since 1980.
According to official data obtained from the RBZ, gold has remained one of Zimbabwe’s major exports, raking in as much as US$13bn between 1980 and 2020.
Gold exports amounted to US$2.3bn between 1980 and 1990 before growing marginally to US$2.5bn between 1991 and 2000.Between 2001 and 2009, gold exports stood at US$1.9bn before peaking to US$3.3bn in the period between 2011 and 2015 mainly on account of increased production due to new investment in the multiple currency regime that brought stability in the economy.
Between 2015 and 2020, gold receipts were above US$4bn on account of incentives and huge capital investments.
The central bank chief underscored the need to expand production in major sources of foreign exchange into Zimbabwe, especially tobacco and gold, which account for over half of the earnings.
Mangudya said the forex crisis in the economy would be resolved when the tobacco marketing season opens next month.