RBZ chief ‘ignores firms on commercial paper’

LIVINGSTONE MARUFU 

Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mushayavanhu, has remained mum on the plan to convert all companies’ outstanding foreign currency auction system allotments into a two-year ZiG denominated instrument or commercial paper at an interest rate of 7.5% annually, it has emerged.

This follows the central bank’s decision to stop operating the forex auction system, a situation which has had a negative impact on the industry.

The big problem, though, is that companies were compelled to surrender the Zimbabwe dollar equivalent to the central bank in advance, but didn’t get their hard currency.

As a result, the frustrated companies are now forced to source the greenback from the alternative market, where the premiums are punitive.

Business executives also told Business Times this week that Dr Mushayavanhu has not responded to demands by companies to permit the commercial paper to be transferable so that they can start receiving interest from the instrument and have immediate working capital.

However, according to business leaders, Dr Mushayavanhu, had not moved quickly or kept the business community updated on the status of the commercial paper.

This is concerning to the local companies, as they are already struggling to fulfil daily needs with their limited working capital.

Mike Kamungeremu, the Zimbabwe National Chamber of Commerce president, told Business Times that considering how dire the situation was for the companies, Dr Mushayavanhu’s silence on the commercial paper was troubling.

“We engaged the governor to make the (commercial) paper transferable to other companies but the central bank chief hasn’t gotten back to us.

“According to the feedback we are getting from our members, they haven’t even received the commercial paper yet. It’s now very difficult for them to do business,” Kamungeremu told Business Times this week.

He added: “The governor indicated that the companies will get the commercial paper which will mature in 24 months and it earns an interest of 7.5% per annum which means for the duration from the day the announcement was made, owed firms are already three months behind as far as the interest payments are concerned.

“We want to make sure that companies are not going to be prejudiced as they are owed the money despite the fact that the document has not come.”

The captains of the industry are hoping that the central bank will still honour the period that the companies  have been waiting for the commercial paper.

According to Kamungeremu, the industry’s tolerance is currently running low.

“The governor made an appeal to us to make a bit of sacrifice for the purposes of stabilising ZiG and we said we are willing to carry part of the load to stabilise the economy.

“No wonder why, despite how difficult it is, we accepted that to be converted to commercial paper.

“Now we are saying what they promised us they should give us, may the commercial paper come,” Kamungeremu said.

He added: “This is why we then made a recommendation to the central bank that they make this document transferable without paying it off or creating extra liquidity.

“It must be transferable from one holder to the next so that if I am really under pressure, I have an option of selling it to you then you will give me the money and hold the paper till it matures. That is the request that we have made.”

Oswell Binha, the board chairman of the CEO Africa Roundtable concurred saying the RBZ was inconveniencing the business sector.

“We are yet to receive a commercial paper from the RBZ as none of our members have advised us on the issue.

“The fact that we are yet to receive the commercial paper for the money that has already been acquired by the central bank shows there is an administrative loophole on the part of the central bank,” Binha said.

He claimed that the delay will ruin the already vulnerable companies.

“The companies are already feeling the pinch as that   money was supposed to be utilised for raw materials, equipment, machinery and working capital. This means the more the delay some will go down.

“The situation is dire and a serious and unnecessary inconvenience to the business,” he added.

All efforts to get a comment from Dr Mushayavanhu were futile.

In April, however, Dr Mushayavanhu vowed that in order to control money supply, the central bank would not reverse its decision to convert outstanding forex auction allotments into a commercial paper.

Dr Mushayavanhu is said to be concerned that the outstanding payment, estimated to be more than US$80m, may have an effect on reserves and money supply.

“…We had to lock the money up. I would rather inconvenience a few comrades than jeopardise the whole economy,” Dr Mushayavanhu said.