Business slams Ncube’s forex committee

BUSINESS leaders say the setting up of a forex allocation committee by government will not solve the prevailing foreign currency crisis.

BY FIDELITY MHLANGA

Finance minister Mthuli Ncube last Friday set up a forex allocation committee comprising four members from the central bank, two drawn from the Finance ministry and one each drawn from Industry and Commerce, as well as Energy and Power Development ministries.

Government is under pressure to provide foreign currency for the procurement of drugs, fuel, wheat and critical raw materials for the industry, a situation that has seen some companies pricing their products in United States dollars.

Last week, government shot down Delta Corporation’s move to sell its products in US$.

Zimbabwe National Chamber of Commerce chief executive Christopher Mugaga slammed the setting up of the committee, describing it as a charade.

“Seeing this forex allocation committee composition is proof that whoever set it doesn’t understand our challenges, let alone solving them. You can’t have the cake and eat it simultaneously,” Mugaga posted on microblogging site, Twitter.

“Medieval banking is when you choose to set up a forex allocation committee, worse still compromising bureaucrats who are there to empower Reserve Bank of Zimbabwe even more. Forex generators like miners and tobacco farmers are sitting in a room wondering whose forex will be under the purview of this kangaroo committee.”

Economist Kipson Gundani said government must accept the reality that the bond note cannot be equated to the US$.

“To me, putting a committee does not address the real problems affecting this economy. Which forex will this committee allocate? By now, government should know that they should allow the bond note to freely compete with the US$, not this 1:1 fiction. They should allow the market to allocate forex,” he said.

“These problems have been addressed with a wrong prescription. Why is it government’s business to allocate forex to fuel dealers? They are finding themselves in this mess because they have created this artificial economy.”

Gundani said “committee or no committee, we are in a fix”, adding government must allow the issue of market forces to play, that is through the law of demand and supply.

“There should be an open auction for a willing-buyer and willing-seller. They are trying to sustain the inevitable. The system will erupt and collapse,” he said.

Industrialist Busisa Moyo called for a weekly or quarterly public report on forex allocation by the central bank to enhance transparency.

“I think the allocations should just be made public and transparent, each week on Wednesday after allocations on Tuesday. (It should be) reported publicly, quarterly and we should be good. We are not looking for extra work. Running factories is already tough and a full time job,” Moyo commented on Twitter.

13 Comments

  1. Funny how the govt .. ZIMRA can charge forex but no-one else. Good old “double standards”

    What a shame

  2. i think moyo is spot on by raising the issue that what is just needed is transparency as the demand for forex is out stripping supply and unfortunately another player is trying to introduce the issue of bond which has no place in this whole process and for heaven sake bonds have nothing to do with the current temporary economic dip.

  3. Nothing Good can come out of Zanu PF….chokwadi in Zimbabwe right now we dont have people who can lead us….and kwatiri kuenda kune kuchema kuzhinji…..hurumende inoita kunge ikuita money laundering.

    1. Asi leadership from where, hope u not advocating for Chamisa coz hapana hapana

  4. tendai chaminuka

    Pakadai Bob waishevedzera kuti bodo kubookish economics.

  5. There is a simple saying that ‘when in a hole stop digging’ ‘when sinking stop screaming’ free advice to Mhtuli i just hope he will understand the drift – he is proving to be the dulliest finance minister Zim has ever had.

  6. That committee, is the same as putting jackals in charge of the chicken house.

  7. I will repeat once more, “Cursed is the nation run by a Mafia mob”

  8. They must instead form a forex generating committee.

  9. Watch this Space

    Possibly this forex committee will be granting favours to certain people
    This country is full of committees of the Committee so the person at the top look like they are doing something positive and at the end of the day nothinig transpires except for the very priviledgd. Eish

  10. Creation of a forex allocation committee runs counter belief and confidence in free markets; it is a recipe for rent-seeking and corruption. In any event, Govt does not generate a significant quantum of forex; neither can it claim legal rights to a resource generated by private exporters as part of their cash flow.This initiative is premised on a grand fallacy and will create more market dysfunction.
    Best international practice enatils letting exporters retain 100% retention of forex earnings on the understanding that they sell any excess – and there will be significant excess cumulatively – in a revamped interbank forex trading market. This market will be required to publicly display buying and selling rates to ensure transparency, with critical imports accorded priority access. This is more efficient than letting bureaucrats allocate, an opportunity for rent-seeking.

    Banks have not distinguished themselves professionally during the last decade or so, as evidenced by being the most enthusiastic supporters of fake and dysfunctional beare cheques and bind notes. Integrity has taken a big hit during that period, evidenced by bank executives abusing depositors funds for personal and imprudent/conflicted lending. Sustainable solution is for the Minister of Finance to summon bank shareholder respresentatives and giving them a month or two to weed out all delinquents employed by banks in order to restore public confidence in this strategic pillar of the economy. Restoration of public confidence through enhanced and embedded professionalism will enable the attraction of forex into the banking system, and more critically result in an efficient and transparent interbank forex trading market alluded to above.

    Above all else, proposed and overdue banking reforms ought to start at the apex bank, the RBZ, generally perceived by the public as the number one delinquent and source of dysfunction in the financial services sector during the last 20 years. To the public, perception is reality, and Government ignores it at its peril.

    In any event, embedding life-time jobs in a dysfunctional financial services sector – in any sector for that matter, including the civil service – is tantamount to institutionalizing inefficiencies and maladministration, besides depriving significant sections of young professionals from gaining vital professional experience.It undermines the creation of a new replacement professional cadre across the entire economic architecture.It is simply a very retrogressive practice which embedds avoidable inefficiences. This partly explains why State institutions have become moribund during the last 20 years, retarding sustainable economic and social progress.

    Indeed, it it time for radical mindset change and far-reaching economic and political reform in order to avoid the Zimbabwe economy fossilizing further in the midst of a rich natural resources endowment.

  11. LOL… Eliasha, ‘bonds have nothing to do with the temporary economic dip’… really?!! Sounds like a Herald headline hahaha

  12. Very helpful and Great information,
    we appreciate advise especially coming from a professional.
    Thanks again and keep up the great work!

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