We welcome RBZ measures : CZI

15 May, 2016 - 00:05 0 Views
We welcome RBZ measures : CZI

The Sunday Mail

Busisa Moyo

Industry and the manufacturing sector have continued to persevere in an environment where operating costs are high due to the use of a strong currency against weakening regional currencies.
General confidence is low and, lately, cash shortages have arisen to further constrain business activity.
The Confederation of Zimbabwe Industries has advocated dialogue around the issue of currency for the last two years, and suggestions have ranged from internal devaluation to introducing the rand as a local currency or pegging a local currency to the rand.
CZI was also in support of the bond coins that were introduced in 2014, even though public sentiment was negative in initial phases. The coins were to support and facilitate local internal trading activity. We also have challenges with corruption in various forms; included in these are illicit financial flows. CZI has always been and always will be against externalisation of cash.
As CZI, we welcome the introduction of the bond currency backed by a facility provided by Africa Export Import Bank, which will be disbursed as a five percent export incentive. We understand that the idea behind this is to ensure the US$200 million being brought in does not disappear overnight and to provide an incentive for exporters and to restore liquidity to the market, thereby solving the cash shortage.
Zimbabwe has become a fishing pond for hard currency as people from foreign lands are coming in to take the USD.
This measure surely should curb leakages of cash and improve liquidity, making domestic business easier to transact.
The market reaction to the introduction of bond currency has unfortunately been very negative.
People are rushing to the bank to withdraw whatever they can as the significant concern is that people’s hard-earned savings, which are currently hard currency-denominated may soon be changed into a denomination of soft currency.
However, we have the assurance of the Reserve Bank of Zimbabwe Governor Dr John Mangudya himself that no hard currency balances in foreign currency accounts will ever be converted to any softer currency. We do, however, recommend a Press release to reassure the market and general public that this is the official RBZ position regarding this matter.
We recommend that the use of bond currency be made entirely voluntary and announcement to this effect be made.
The five percent export incentive facility aimed at improving and increasing exports is commendable as this will make export more profitable and should help drive export growth and economic development.
The world over, countries provide export incentives and that is usually why some products still end up landing in other countries cheaper than the price on the domestic market. As CZI, we also believe that initiatives focused on import-substitution industrialisation have yielded progressive and encouraging outcomes in the recent past and this should also not be over-looked when talking of economic development.
A combination of industrialisation strategies is of paramount importance to revive some key sectors within the economy as one strategy might be more expedient in one sector than the other since no two sectors are the same.
As one analyst, Masino Pietro, indicated, East Asian countries that became economically successful used a combination of selective import substitution and export promotion policies tailored to their national industrial strategies.
The two concepts should not be seen as mutually exclusive, but experience shows that a combination of the two could be a critical step towards economic development. The introduction of a priority list for foreign payments to ensure scarce foreign exchange is used for the highest priority outcomes is welcome.
There has been close consultation with CZI as to what should be on that list and the priorities are agreed.
We do also applaud the suspension/removal/reversal of the proposal to convert new USD export receipts to 10 percent Euros and 40 percent rand as this was going to introduce significant exchange risk for exporters, which, in turn, would increase the cost of doing business.
Instead of tackling the issue of USD arbitrage and promoting the use of other currencies by converting export receipts, we might want rather to understand how we can use a softer currency for our cost structures of businesses: For example, Zesa, local authorities, salaries and wages. If costs are to be paid in a softer currency like the rand, then there will be no need to oblige exporters to convert to the rand or any other soft currency. They will do so of their own accord to meet local costs.
In order to also address some of the challenges precipitating cash shortage and promoting local production and uptake, CZI believes there is need to expedite the development of the Buy Zimbabwe Act, which should clearly articulate the need to promote making and buying of local products. The Act should also clearly state minimum local content rules.
The imperative to address competitiveness through internal devaluation can never be emphasised enough.
Addressing this will help reduce the cost of doing business, making local products more competitive both locally and internationally.

◆ Mr Busisa Moyo is president of the Confederation of Zimbabwe Industries.

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