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RBZ should prioritise forex allocation


NON-EXPORTING importers of raw materials and machinery for local production have complained that they are not getting enough foreign currency as per the Reserve Bank of Zimbabwe’s (RBZ’s) forex priority list for foreign payments.


So dire is the situation that some have gone for more than a year without receiving their forex allocation.

Zimbabwe is facing severe forex challenges owing to low production levels, forcing companies to source it from outside the formal channels at a high premium.

Despite the central bank prioritising productive and critical areas such as fuel and health, industry officials and analysts say RBZ has failed to implement its priority list policy.

“Largely, what we are seeing is that there has not been much progress in terms of availability of forex. Some companies have gone as long as six months, some seven months depending on which sector you are in (without getting forex).

“Some have gone for one year and some none,” Zimbabwe National Chamber of Commerce Matabeleland chapter chairman, Golden Muoni said.

“The small to medium enterprises are not getting anything out of this because they are not a priority.

“They look at big companies and big corporates.

“The foreign currency issue is becoming more of a problem and its becoming worse.

“Our prayers are that let the elections come and go maybe the focus would be on the economy.

“Honestly speaking, the industry is not getting anything. There is nothing that we can talk about foreign currency. Problems are getting worse by the day.”

Association for Business in Zimbabwe chief executive, Victor Nyoni concurred, saying the situation was getting worse.

“The reality is that RBZ does not generate foreign currency,” he explained.

“Companies, especially in our mines and the manufacturing sectors, are supposed to generate the much needed forex. The problem we have is that the economy is not performing and the sectors that are supposed to generate forex are subdued.”

Nyoni said the government had not proffered a solution to the forex crisis that is not dependant on the productive sector.

This, he said, has created an “egg and hen” scenario.

“The little forex being generated is, therefore, pushed into buying fuel.

“This is understandable because fuel is also an important input for almost all companies.

“However, the RBZ must strike a balance between allocating to the fuel sector and manufacturing companies.

“The increase in the allocation of forex to fuel importers is in itself not a bad thing, but must take into account the situation in our manufacturing sector, which is on the verge of closing up shop,” he said.

Zimbabwe Clothing Manufacturers’ Association chairperson, Jeremy Youmans said the issue was not the shortages of foreign currency in the country.

“We spend up to $20 million a month in importing crude cooking oil when we could grow and utilise enough cotton and soya seed to supply all the cooking oil ourselves.
“There is an allocation problem.

“Firstly, many imported finished goods can cope with costing in the premium on the black market for forex and so they are plentiful, however, local manufacturers cannot pass on the inflated cost of sourcing forex into their products and still be price competitive.

“So, they cannot use the informal channels to get forex.”

Youmans said the more finished goods the country imports the less demand for locally manufactured ones

“If the local manufacturers are also starved of forex to import the raw materials they need to import because they are not made in Zimbabwe, they cannot produce, and we continue on a path of de-industrialisation,” he said.

As a result, Youmans said more jobs are lost and there are less people to buy the imported goods and the slide into further decline continues.

However, banks hit back saying they do not generate any forex.

“It is just the fact that there is a general lack of foreign currency.

“It is not as if the banks are withholding foreign currency.

“If we have forex, we allocate it to our customers following the RBZ priority list,” Cabs managing director, Simon Hammond said.

Another banker, who preferred anonymity, said exporters, who generate foreign currency, have first right of refusal for their forex earnings.

“Banks don’t generate any foreign currency. So when a company that does not generate foreign currency approaches a bank, which doesn’t generate foreign currency, where does the foreign currency come from?” the banker asked.

Financial expert, Persistence Gwanyanya said the clothing sector was unlikely to be prioritised.

“With payment backlogs of about $700 million or so, the chances of [the] clothing [sector] being prioritised in respect of forex allocation are slim,” he said.

The solution

To address forex challenges, Gwanyanya said Zimbabwe needed to increase production while reducing non-productive expenditure.

“Currently, RBZ is prioritising fuel and the recent shortage of the product is largely attributed to the forex challenges in the country.

“The current forex challenges speak to the need for a permanent solution to our cash situation,” he said.

“Zimbabwe should increase production while reducing non-productive expenditure. We also need to have our own currency to buttress this rebalance.”

Youmans said the government needed to find a way to ensure that more forex was allocated for raw materials for value-addition within Zimbabwe so that economic growth could be achieved through industrialisation.

“Mining and agriculture will continue to dominate our economy for many years but, as experience has shown us, we cannot rely on these sectors alone and we need to increase value addition and formal employment within these industries doing the value addition,” he said.

The banker, who preferred anonymity, said what was required, therefore, was a drive for export growth.

“The companies that are lining up for foreign currency are mostly non-exporters.

“So, until we are exporting at the right level, there will remain a critical shortage of foreign exchange.

“Strictly speaking, this is not a banks issue when analysed correctly,” the banker said.

“What we need in the economy are policies that encourage forex exchange to be channelled through the formal banking system.

“The current policy environment is not conducive for earners of foreign exchange to channel it through the formal system because of price misalignments … hence, we have a lot of foreign exchange being traded outside the formal system … when a company goes onto the parallel market, they can easily meet all their foreign currency needs because the price is correct.”

The banker said the shortage of foreign exchange in the formal banking system was due primarily because of the fact that the price of forex on the formal market was not reflective of the true economic value of foreign exchange.

Efforts to get a comment from Bankers’ Association of Zimbabwe were fruitless.

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