THE Reserve Bank of Zimbabwe governor, John Mangudya says foreign currency demand from manufacturers is too much, considering their low exports.
BY TATIRA ZWINOIRA
His call comes after imported raw materials rose to 36% from 16% last year.
Addressing guests at the launch of the Confederation of Zimbabwe Industries (CZI) Manufacturing Sector Survey 2017 yesterday in Harare, Mangudya said the appetite for foreign currency was unwarranted considering manufacturers do not generate foreign currency.
“The utilisation of foreign currency is too much. You have seen yourself last year when there was a drought, we were utilising 84% (raw materials) from the local market, now there is no drought in 2017, they are utilising 64% but output has gone up. If they (manufacturers) are using foreign currency, they are using imports to produce,” he said.
Mangudya said he was “concerned by the statistic”.
“We need to increase production, but the problem with manufacturing sector is that the production is increased by using foreign currency. I have never seen a sector that utilises foreign currency like you (manufacturing), I think that is in Zimbabwe. This sector called the manufacturing sector, they only export 13% if you include other minerals, which are manufactured but if you take pure manufacturing products in this country, they are between 5 and 10% for exports,” he said.
The survey covered the period January to September 14.
“… so, it means that this year, the companies in industry are now using more foreign currency than before,” he said
According to statistics from RBZ, 100% of exports from the manufacturing sector are retained by the sector, raising concerns over the rise in forex demand.
The high demand stems from manufacturers wanting to pay foreign suppliers as credit terms were no longer being offered. Despite this, manufacturers were still being frustrated by the banks.
The survey reported that the foreign currency backlog was $651 million.
According to the survey, 22% of the companies have to wait more than three months for foreign currency, with 23% waiting one to two months and another 23% less than two weeks.
Companies said they were now sourcing 25% of their foreign currency from the parallel market, leading them to raise their prices to accommodate the 20% to 50% premium spent to purchasing the cash.
Mangudya warned companies to stop using these premiums to determine their pricing, as some companies got 75 to 100% foreign currency allocations from RBZ and banks.
“You need to change to ensure that prices in Zimbabwe are reasonably priced. Some people, companies and firms get 75% to 100% foreign currency from the RBZ, but they still choose the marginal opportunity cost pricing system, I think that should desist this is why you cannot be competitive,” he said.
About 97% of the companies that participated in the survey said they were negatively affected by cash shortages and foreign currency challenges.