BY HARRIET CHIKANDIWA/SHAME MAKOSHORI FOREIGN suppliers have started turning down credit facilities to Zimbabwean companies overwhelmed by payment delays, pushing industries deeper into crisis.
At the heart of the fresh crisis revealed by the Zimbabwe National Chamber of Commerce (ZNCC) on Monday, are backlogs of funds allocated to companies at the Reserve Bank of Zimbabwe (RBZ)’s foreign currency auction system, ZNCC president Mike Kamungeremu told Parliament.
Introduced in 2020 to ameliorate a dire foreign currency crisis in Zimbabwe, where firms have been forced to source greenbacks from the black market, the auction system initially offered hope.
Up to US$45 million was being raised weekly with RBZ saying that about US$2 billion has been injected into the economy through the system.
However, in the past year, the central bank has struggled to fund allocated bids, triggering a crisis that industry now says could end with many bankruptcies.
“The auction has not been able to supply business with enough foreign currency to meet creditor and investor requirements,” Kamungeremu said in a submission to the Parliamentary Portfolio Committee on Finance and Economic Development.
“As a result, some of the foreign creditors have declined continuing supplying local businesses due to long outstanding debts which do not fall under the categories list covered by the auction and they now require cash up front. A reduction in the bids allocation settlement time will greatly improve service levels from suppliers,” the ZNCC boss said.
The central bank had undertaken to settle allocated bids within two weeks, but foreign currency shortages resulted in further delays.
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“It was anticipated that the auction would bring about stability in the economy. However, the experience with the auction system has not entirely yielded the perceived outcomes,” he added.
Kamungeremu also called for the suspension of the small-to-medium-scale enterprises auction system.
“The forex auction system currently in place is mainly serving as a foreign currency allocation mechanism through the priority list, which is depriving other market players access to the price discovery platform,” he said.
Last week, the Confederation of Zimbabwe Industries (CZI) also said the RBZ had struggled to fulfil undertakings to clear the backlogs.
It said firms were still depending on the black market.
CZI called for a speedy resolution to the crisis to address high production costs and rocketing basic commodity prices.
“The authorities once again (early this year) made the promise to clear the backlog, this time by the end of May 2022,” CZI said in a paper titled Inflation and Currency Developments Update.
“However, this date, like a few others before, has been missed as the backlog is yet to be cleared. The backlog puts pressure on the parallel market, as companies look for alternative markets of foreign currency in a bid to fill the void created by the backlogs. Successive failure to clear the backlog as promised dents the credibility of corrective policy announcements,” CZI said, warning that consumers were also under pressure.
“While the average annual inflation is 191,6% and the average month on month inflation is 30,7%, oil and fats have increased by far much more. On the same trend are bread and cereals, which on a month-on-month basis increased by 36%, well above the national average. The price of cooking oil and bread is thus now out of reach for many people, especially those earning in local currency, despite them considered basic products by many consumers,” CZI said.
It also warned that inroads achieved during Zimbabwe’s battle to arrest an inflationary charge have been ‘wiped out” due to policy failures, and the country could be headed towards a “catastrophic” outturn.
“The month-on-month inflation rate for June 2022 raced to 30,7% from 21% in May 2022,” CZI said.
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