The full aftershocks of the Monetary Policy Statement (MPS) are yet to be felt. What we have now is the expected speculation, anticipation, anxiety and sometimes panic, as businesses try to figure out how they are going to operate going forward. It may take a while to get the real picture and impact but companies are already taking steps to protect their investment, preparing for a softer landing.
South African Airways (SAA)
Soon after the MPS announcement, SAA issued a statement directed at its agents. “In view of the Monetary Policy Statement announced on 20 February 2019, clarity is being sought from the RBZ as to the implications of further collections in RTGS for Air Tickets after 20 February 2019. Therefore, as a temporary measure, tickets can be issued only for same day travel and not beyond. Updates will follow once clarity has been received… Where customers want to pay for tickets outside these parameters, they are welcome to do so in USD cash or credit card,” the statement read. Clearly, SAA does not want to make a loss during this transition. Anyone paying for future travel would need to do so using a more stable US dollar or credit card.
Fresh in a Box
Fresh vegetable produce start up, Fresh in a Box has decided to suspend operations while awaiting any exchange rate movements. Founder and Vendor in Chief, Kuda Musasiwa posted on Twitter, “Running a business in Zimbabwe is an extreme contact sport. We cannot Learn to be prophetic in projections and never sell in advance. Not in Zim… With the welcome move to devalue the hocus pocus money, we now wait how the market will react. So yes, of course, we had to close our app for ‘maintenance.’ Our farmers are panicking. And we all want to know how the dust settles. So more lost days of trade. More uncertainty.” This sums up the position of many businesses right now. No one can be sure what the future holds so the most reasonable thing to do is to pause, wait and see.
The exchange rate
The key issue here is the exchange rate. For a long time, government has been insisting that the bond note was at par with the US dollar even though evidence on the ground showed the exact opposite. The parallel market rate, though illegal, was hovering around 1:3.9 in trading prior to Monetary Policy Statement. Now that the central bank has decided to empower the market to decide the rate, businesses know that any movement in rates will have a bearing on their business one way or the other. In a breakfast meeting on 22nd February 2019, Reserve Bank Governor Dr John Mangudya indicated that the exchange rate will start at 1:2.5. The black market is doing business at around 1:3.9 and despite its illegality, it remains a trusted reference point and source of forex for many, business included.
In the coming weeks, the dust will eventually settle. The hope for many is that the exchange rate will stabilise as this will allow them to price competitively and operate with a greater certainty. This is all that is needed, trust and certainty.