The Confederation of Zimbabwe Industries (CZI) has come up with proposals to curtail what they have termed a crisis in industry. In a statement titled “Crisis in Industry: Urgent measures to avert business collapse”, CZI touches on foreign currency issues and their effect on industry where some companies have either scaled back or shut down completely. We take a look at CZI’s proposals in this article.
Allocation of foreign currency
CZI notes that most companies falling under the 14 essential commodities and which should be getting forex through the Reserve Bank of Zimbabwe (RBZ), are not getting it for a long time now. They are concerned that forex allocation is biased towards public sector players at the expense of the private sector. As solutions, CZI says, “We immediately request that the following be done as a matter of extreme urgency:
- Reconstitute the foreign currency allocation committee on a 50:50 weighting between public sector and private sector representatives.
- Introduce a system where foreign currency allocation is publicly posted weekly on the RBZ website.
- Let the allocation committee be considered as a temporary measure up to when full deregulation of foreign currency market is done within six months.”
Forex allocation has long been shrouded in secrecy and the above proposals make sense in a lot of ways. But, will government listen, having appointed a Foreign Currency Allocation Committee recently.
Export and imports
With regards to exports and imports, CZI proposes a system whereby importers get forex from exporters using the banking system. This, they say, is in line with the Transitional Stabilisation Programme (TSP) which advocates for an exporters incentive fully funded by importers who benefit from export proceeds generation. According to CZI, the specifics of doing this are there but implementation of the document is being delayed by the Vice President’s Office, the Ministry of Industry and Commerce and the Ministry of Finance and Economic Development. Government bureaucracy perhaps.
It is surprising that the CZI now advocates for some kind of dollarization, a phenomenon they are known to have discouraged strongly before. CZI now says, “Our considered view is that we should move as fast as possible to a situation where everyone sells in foreign currency as enshrined in the current official multi-currency policy, reaffirmed by Government through President E.D. Mnangagwa.” Here, the CZI is lamenting the excess liquidity that the RTGS and Bond Notes has created and which they believe has aggravated inflation. In any case, dollarization is already underway, notes CZI.
As the final desired outcome, the CZI want to see the return of our own currency backed by adequate reserves. Minister of Finance and Economic Development Professor Mthuli Ncube has already announced that a new currency is coming in a matter of months. We await further information in this regard.
The CZI further suggests that all policies that have failed to achieve desired results should be reviewed and changed. Chief among the policies that have not worked are S.I 122 and the 1:1 policy. With regards to S.I. 122, CZI suggests import substitution which have the objective of reducing pressure on forex requirements. CZI therefore proposes that such policies should be reviewed every three months.
While some of the proposals by the CZI can be useful, it is worrying that government does not seem to give them the attention they so crave. That they have shifted from complete disagreement with dollarizing the economy to embracing it, is an inconsistency which they may have to work on in future. Or maybe they have been forced by prevailing conditions to accept that dollarization may be the only viable panacea. Without doubt, the CZI should keep pushing their cause to prove that they deserve a seat at the table, and undivided attention from government.
As the CZI says, “The house is burning.” Fuel price hikes will likely worsen the situation. Solutions are urgently required. The coming weeks and months will be crucial for both industry and government.