RBZ inflicts pain on industry

 

LIVINGSTONE MARUFU

 

The Reserve Bank of Zimbabwe (RBZ) has turned the heat on industry and commerce by failing to  release allotted  hard currency -estimated to be over US$3m – from the foreign exchange auction trading system, the captains of industry and commerce have said.

 

The  business leaders   claim  that  the central bank stopped  making payments in November last year, meaning the backlog  has grown  to more than 120 days or four months, a situation which is afflicting pain on local companies.

The crux of the matter is that companies have  been severely harmed  by the onerous requirement  that those who take part  in the  forex  (FX) auction system, which hasn’t been operating since the beginning of this year,  are required  to surrender  the Zimbabwe dollar equivalent to the central bank in advance.

 

This has forced the frustrated companies to bear the cost of  the RBZ settlement delays as they are sourcing the greenback  from the black market, where the premiums are punitive.

 

Despite the implementation of the willing Buyer Willing Seller foreign exchange trading system, which is managed by banks as a component of efforts to liberalize the exchange rate, the market’s volumes are still extremely small.

 

Business executives who are frustrated stated that the backlog has left their organisations struggling with limited working capital holdings, some of which are negative, and reduced leverage ratios, raising doubts about their capacity to fulfil short-term obligations.

They claimed that as a result, businesses were finding it difficult to survive.

They said that the RBZ has not made an effort to get in touch with the companies to explain why payments were abruptly stopped as well as potential timelines for clearing the backlog.

 

“….We are in a difficult position right now given various headwinds in the economy hence we need an urgent  payment to ensure smooth flowing of the operations. Some of our members are owed as back as the start of November 2023. Given that situation, companies are strained as they depend on that money for day to day running of the companies,” the president of the Zimbabwe National Chamber of Commerce , Mike Kamungeremu told Business Times on Tuesday this week.

 

He added: “The thing is that a company would have taken all the Zimbabwe dollars to buy United States of America dollars on the auction but with no payment  over a period of  over 120 days means the company will have a huge hole in its coffers.”

He said prompt guidance on the auction operation’s continuation or discontinuation should come from the central bank.

 

In agreement with Kamungeremu, Kurai Matsheza, the president of the Confederation of Zimbabwe Industries, told Business Times that the backlog has left a significant hole in the balance sheets of numerous businesses, as these companies require the funds to increase output during this unstable and uncertain period of the economy.

 

” Some of our members are still to be settled for November auctions, but with auctions having not taken place this year, we’re hopeful they will catch up,” Matsheza said.

 

According to him, the industry is worried about the amount of time that has passed without receiving its money because they no longer have Zimbabwean dollars to pay for the responsibilities that call for local currency.

 

The central bank, according to captains of industry, did not communicate with the market or attempt to advise it on the decision.

 

All efforts to get a comment from the departing RBZ governor, Dr. John Mangudya, were futile.

 

 

However,  RBZ sources with knowledge of the situation told Business Times that the Monetary Policy Statement will signal to the market the central bank’s stance on the matter.

 

“Since November, export receipts have drastically gone down due to prices of the commodities on the international market hence we could not get as much, that is why we have that gap. We will certainly give direction on auction and backlog settlements soon. The good thing is that the forex backlog is not accumulating because the auction has not been active since the beginning of the year,” a source said.

 

According to President Emmerson Mnangagwa  and the Minister of Finance, Economic Development and Professor Mthuli Ncube, the government would shortly implement and tighten policies meant to restore economic stability and confidence while removing chances for exchange rate arbitrage.

 

 

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