FOREIGN suppliers are reportedly cancelling credit terms with local firms, demanding cash up front before making any deliveries, as the forex crisis in the country continues unabated, industry officials have said.
BY MTHANDAZO NYONI
In separate interviews with NewsDay, industry officials said the government should quickly resolve the issue of cash challenges to avoid more losses.
“Some [businesses] are failing to import raw materials because foreign payments are not being processed. Some businesses have seen customers cancelling orders because of the delays with some foreign supplier accounts being closed because of delays in payments,” the Zimbabwe National Chamber of Commerce president, Divine Ndhlukula, said.
As a result, she said some local suppliers have doubled prices to allow themselves to buy foreign currency.
The Association for Business in Zimbabwe chief executive officer, Victor Nyoni said many companies were facing viability challenges due to their inability to make foreign payments for raw materials.
“The few companies that have remained operational are facing going concern threat due to inability to make foreign payments for their raw materials. For businesses said to be on the ‘priority list’ it takes banks no less than two months to facilitate a foreign payment,” he said.
Nyoni said nostro accounts, through which foreign transactions were conducted, were not funded simply because the export sector is poorly performing, and that there is no foreign direct investment coming through.
“Sensing high default risk, foreign suppliers have cancelled credit terms with local firms and now demand cash up front before making any deliveries. The foreign payment difficulties worsened soon after the introduction of bond notes,” he said.
Considering the high unemployment rate as well as the high levels of informalisation in the economy, Ndhlukula said the demand for cash remained high notwithstanding the policy incentives towards plastic money.
“The membership of the chamber continues to lose loads of productive man-hours as employees spend disproportionate amounts of time queuing at the banks. There is, therefore, need to resolve the cash challenges urgently in order to restore confidence,” she said.
Ndhlukula said in some unfortunate instances bond notes were being traded at a rate of 5% against the United States dollar, while Real Time Gross Settlement transactions were being conducted at a premium of between 15 and 20%. This is imposing an unsustainable implicit taxation on their membership that imports raw materials or machinery, she said.
Financial institutions in Zimbabwe are currently battling a foreign currency payments backlog.
In a bid to solve the puzzle, Reserve Bank of Zimbabwe governor, John Mangudya, recently revealed that the central bank was negotiating for a $600 million nostro stabilisation facility from Afreximbank to manage the cyclical nature of Zimbabwe’s foreign currency receipts.