Business leaders laud ZiG stability, effect on planning

Tapiwanashe Mangwiro

ZIMBABWE’S business community has lauded the economic stability that has prevailed since the introduction of Zimbabwe Gold (ZiG) in April this year, saying it is critical for effective short-term planning.

After years of sustained or intermittent hyperinflation and currency volatility, companies are now able to make forecasts with greater certainty due to the more stable environment.

The exchange rate stability and the clampdown on inflation have created a more conducive and predictable environment for sustainable business operations.

In an interview with The Sunday Mail Business, the Zimbabwe National Chamber of Commerce (ZNCC) immediate past president, Mr Mike Kamungeremu, said the business community was not necessarily looking at inflation figures at the moment but wanted the current stability to prevail.

“What we are appreciating more now is the stability that we are experiencing right now given where we are coming from the past years. It is starting to give us a sense of short-term planning, where we worry less about currency volatility and hyperinflation. We appreciate that and we are not fazed by the negative inflation or the near zero inflation,” Mr Kamungeremu said.

“The generality of the membership is still cautious because they feel it is still early days since it is just about 120 days after the Monetary Policy Statement (MPS).

“We are not celebrating too much, and what we wish for is stability, as we close the year.”

Incumbent ZNCC president Mr Tapiwa Karoro said the business community was starting to see wider usage of the domestic currency.

This comes after the central bank recently said ZiG now accounted for 30 percent of transactions in the economy.

“We are beginning to witness more transactions being cleared in the local currency, with some seeing value in it and some trying to make the next tax payment date with an adequate local currency component,” Mr Karoro said.

However, some have said the near-zero inflation level was not good for business. They said there was need for some marginal inflation increase in the economy for businesses to grow.

In response, the Reserve Bank of Zimbabwe (RBZ) said inflation would be experienced but at desirable levels.

RBZ Governor Dr John Mushayavanhu told this publication: “We are definitely going to witness inflation, but will be a single-digit inflation, which is also predicted by the International Monetary Fund (IMF). The inflation figures for May and June are testimony to the fact that the introduction of ZiG has resulted in price and exchange rate stability.”

He added: “We are not going into deflation and our MPS projects that ZiG inflation will end the year at between 2 percent and 5 percent, with the IMF projecting 7 percent, as per their recent statement.”

As a result of prudent monetary management, the ZiG month-on-month inflation rate was -0,1 percent in July 2024, shedding 0,1 percentage points on the June 2024 rate of 0,0 percent; whilst the US dollar month-on-month inflation rate was -0,1 percent, gaining 0,2 percentage points on the June 2024 rate of -0,3 percent.

The weighted month-on-month inflation rate, which includes both ZiG and the US dollar, was -0,1 percent in July 2024, gaining 0,1 percentage points on the June 2024 rate of -0,2 percent.

“Stability is the foundation of any successful business strategy,” said Mr Tinevimbo Shava, an economist.

“For the first time in years, businesses can plan for the quarter ahead without the looming fear of drastic economic shifts.”

The authorities have made significant adjustments to the fiscal and monetary policies to sustain the prevailing stability and increase the use of the local currency in transactions.

The RBZ’s Monetary Policy Committee (MPC), at its last meeting in June this year, decided to maintain its tight monetary policy stance to sustain the country’s economic stability.

It emphasised the importance of existing measures in fostering a stable economic environment and stated its commitment to proactively address any emerging risks.

The key policy measures maintained by the committee include keeping the bank policy rate at 20 percent per annum, with an interest rate corridor of 11 percent to 25 percent.

The statutory reserve requirements for demand deposits, as well as savings and time deposits in ZiG, were kept at 15 percent and 5 percent, respectively.

In its statement, the MPC highlighted its readiness to address any risks that might threaten the current economic stability.

“Going forward, the MPC fully commits to proactively address any emerging risks on current stability. The MPC will ensure that growth in money supply remains consistent with the achievement of the envisaged pro-growth inflation levels of 5 percent,” the statement read.

To spur the widespread acceptance of the local currency, the Minister of Finance, Economic Development and Investment Promotion, Professor Mthuli Ncube, in the mid-term budget review, proposed a 50:50 tax payment split between the US dollar and ZiG for businesses that generate more than 50 percent of their revenue in hard currency.

He said where a company’s forex revenue exceeds 50 percent in the local currency, tax shall be payable proportionately in the unit of trade thereof.

“To promote the circulation of the ZiG within banking channels, curtail practices of money laundering, thereby combating the financing of terrorism, I propose payment of all presumptive taxes in local currency, regardless of currency of trade,” said Prof Ncube.

This newfound predictability is allowing companies to make informed decisions on inventory, pricing and investment, fostering a cautiously optimistic outlook for the remainder of the year. Business also urged the Government to implement deeper structural reforms to ensure that this period of calm is not just a fleeting moment, but the beginning of sustained recovery.