Business turns up the heat

LIVINGSTONE MARUFU

The standoff between Zimbabwe’s business sector and the Reserve Bank of Zimbabwe (RBZ) reached a boiling point this week as tensions over the country’s currency and economic policies exploded into an intense high-level confrontation.

Business Times, a market leader in business, financial and economic reportage, can report that the Zimbabwe National Chamber of Commerce (ZNCC) met with RBZ Governor Dr. John Mushayavanhu last Friday to discuss the pressing economic headwinds crippling the country’s businesses—issues that include severe currency instability, liquidity shortages, and increasingly punitive lending rates.

At the heart of this rare confrontation is the Zimbabwe Gold (ZiG) currency, whose role in the economy remains marginal at best.

Despite the RBZ’s efforts to drive a move toward dedollarisation, the ZNCC has made it clear that businesses are frustrated by the limited use of ZiG in day-to-day commercial activities.

In a candid meeting, the ZNCC pushed for urgent action from the RBZ, but the central bank is unwilling to yield on many of the contentious policy issues.

In a detailed report presented to the RBZ seen by Business Times, the ZNCC highlighted several key challenges that are affecting the private sector’s ability to operate effectively in Zimbabwe’s volatile economic climate. Central to the report was the limited functionality of the ZiG currency.

While the RBZ has championed the ZiG as a cornerstone of its dedollarisation strategy, businesses contend that the currency is simply not usable for most commercial transactions.XD

 “The Chamber’s presentation was guided by formal submissions previously shared with the RBZ and centred on key concerns: the functionality of the ZiG, which remains marginal in everyday use, largely confined to petty transactions, while the US dollar continues to dominate all commercial activity,” said the ZNCC.

The lobby group called for the introduction of higher denomination ZiG notes to improve transactional efficiency, particularly in rural areas where the local economy is overwhelmingly dollarised, with estimates suggesting that over 96% of transactions are conducted in foreign currency.

In addition to the currency issues, the ZNCC raised alarms about Zimbabwe’s ongoing liquidity crisis.

Despite claims from the RBZ that liquidity surpluses exist in the banking system, businesses continue to face a severe credit crunch.

The high interest rates—ranging from 40% to 47%—have left many businesses unable to access the affordable loans necessary to maintain or expand operations.

 “Despite reported liquidity surpluses in the banking system, access to affordable and productive credit remains limited. High lending rates and the ineffectiveness of the Targeted Finance Facility have left many businesses, particularly SMEs, unable to access critical funding,” the ZNCC said in its report.

One of the major concerns raised by the business community was the failure of the Targeted Finance Facility (TFF) to provide credit to businesses, particularly small and medium-sized enterprises (SMEs). The TFF was designed to support businesses in need of affordable credit, but the ZNCC noted that banks were often unwilling to lend due to high interest rates and a perceived lack of creditworthiness among applicants.

Dr. Mushayavanhu responded by confirming that less than 50% of the funds allocated under the TFF had been disbursed, primarily because many businesses were deemed uncreditworthy by banks.

The RBZ’s stance was clear: without addressing these underlying issues of creditworthiness, no amount of policy intervention would make a difference in improving access to credit.

“The bank reported over ZWG16bn in deposits as of May 9, 2025, up from ZWG12bn in December 2024,” said Dr. Mushayavanhu.

“However, 80% of liquidity is concentrated in one to three banks, with limited interbank trading.”

While the RBZ’s focus on liquidity surpluses in certain banks is part of its policy strategy, business leaders argue that these surpluses do little to support the broader economy, as most businesses continue to face significant barriers to accessing working capital.

Business Times can also report that another contentious issue raised during the meeting was the recent repeal of Statutory Instrument (SI) 81A of 2024, which had imposed strict exchange control measures.

While the ZNCC welcomed the repeal, they expressed concerns that it came too late, as businesses had already suffered from the penalties and distortions created by the regulation.

 “The repeal of SI 81A was welcomed, though it was seen as delayed. Businesses had already suffered penalties and market distortions,” said the ZNCC, emphasizing the need for more timely action in addressing economic challenges.

The ZNCC also called for a full repeal of the Exchange Control Act, arguing that it remains a significant barrier to market flexibility.

While the ZNCC’s position on exchange control was clear, Dr. Mushayavanhu defended the RBZ’s policies, arguing that a more controlled approach was necessary to stabilize the economy and prevent further currency instability. The governor reaffirmed the RBZ’s commitment to controlling the exchange rate and ensuring that it remained in line with the government’s broader monetary policy goals.

Perhaps one of the most contentious issues discussed during the meeting was the RBZ’s policy on export surrender requirements.

Under the current system, exporters are required to surrender a percentage of their foreign currency earnings to the central bank, a policy that the ZNCC has strongly opposed.

While the ZNCC called for a reduction in the surrender threshold to 25%, Dr. Mushayavanhu defended the current policy, stating that the export surrender was not a tax but rather a necessary tool to stabilize the currency and ensure sufficient foreign exchange reserves.

 “Export surrender is not a tax. We look at Tanzania’s move to outlaw US dollar transactions as a potential policy reference. Our commitment is to return to a local mono-currency by 2030, with a target of reserve cover of at least six months of imports,” Dr. Mushayavanhu explained.

However, the ZNCC warned that increasing export surrender requirements or implementing any policy changes without proper stakeholder consultation could have unintended consequences, including a rise in informality and a decline in export production.

As Zimbabwe grapples with rising inflation and currency instability, another growing concern has been the proliferation of counterfeit notes. The ZNCC highlighted the impact of counterfeit currency on businesses, noting that it has become increasingly difficult to conduct transactions without encountering fake notes.

In response, Dr. Mushayavanhu urged the public to embrace digital payments and move away from cash transactions, which he argued only fuel the circulation of counterfeit money. The RBZ has increasingly focused on promoting a cashless economy, with the central bank warning against cash hoarding and encouraging more businesses and individuals to adopt digital payment methods.

 “The RBZ is committed to enhancing the digital economy, and we encourage the public to use electronic payments wherever possible to reduce the risk of counterfeit currency,” said Dr. Mushayavanhu.

As the rare confrontation between the RBZ and business leaders continues to unfold, it is clear that Zimbabwe’s economic path forward is fraught with challenges.

While the RBZ has made strides in accumulating foreign exchange reserves and stabilizing the currency, the private sector remains frustrated by the slow pace of reform and the ongoing struggles with liquidity and credit access.

The ZNCC’s call for greater consultation, policy transparency, and a more flexible exchange rate regime underscores the growing divide between the government and the business community.

Analysts weigh in: ZiG slipping to the periphery

Independent economists have weighed in on the worsening credibility crisis facing the ZiG, which remains at the center of Zimbabwe’s dedollarisation efforts—but increasingly only in name.

Imara Asset Management, in its latest strategy note, said ZiG has failed to gain traction despite an extremely tight monetary regime.

 “Dollarisation levels have increased. An extremely tight monetary regime has made ZWG scarce… yet demand remains low. Its lack of convertibility and the presence of stable alternatives like the US dollar and rand have relegated it to the periphery,” Imara noted.

Prominent economist Tony Hawkins described the local currency as a “virtual unit” with no meaningful function in the real economy.

 “ZiG is not a store of value, not a medium of exchange—except peripherally. It exists largely in bank records. The policy is self-contradictory and riddled with propaganda,” Hawkins said.

Vince Musewe echoed similar concerns, saying the government has “inadvertently dollarised the economy” through its own policies.

 “ZiG is largely used for state transactions—ZESA, council, taxes—but in real economic life, it’s negligible. Informal markets, which drive our economy, prefer hard currency,” Musewe said.

University of Zimbabwe’s Moses Chundu warned that the tight money supply, while curbing inflation, has created an unpopular but stable currency.

 “We risk having a paradox of a stable but irrelevant currency. The money supply is too tight to support economic functions,” Chundu explained.

However, some experts see a possible turnaround. Tafara Mtutu of Morgan & Co said the long-term strategy of the RBZ could still work if monetary discipline is maintained.

 “If current policies hold, we may see a drastic fall in ZiG inflation by next year. That would be the start of true acceptance,” Mtutu said.

Investment consultant Enock Rukarwa added a cautiously optimistic note.

 “There’s still room to restore confidence—if we can anchor inflation and reduce exchange rate volatility. What matters now is consistency and communication.”

Still, for now, business remains skeptical.

Whether this confrontation triggers policy shifts or marks the beginning of an entrenched standoff, one thing is clear: Zimbabwe’s monetary tug-of-war is far from over.

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