The government of Zimbabwe made official plans to require all exporters and foreign currency earning businesses to be billed in and pay for electricity in foreign currency. The Reserve Bank of Zimbabwe via the government Gazette on Friday the 29th of November said that ZESA will be allowed to bill in United States Dollars or other foreign currency. This marks efforts to raise foreign currency to pay for imported electricity which the nation has become heavily dependent due to low power generation caused by a multiplicity of issues including drought and an unsustainable tariff structure.
The directive further expressly stated that the money that ZESA collects in foreign currency be used for electricity importation, spare parts, offshore insurance payments and offshore loan repayments. With a currency that continues to fall in value while the interbank market tries to uphold non-existent value, foreign currency is very hard to come by and making payments for the imported electricity is very hard to come by. Remembering that ZESA previously defaulted on debt and had to renegotiate the terms are tight and the government is surely feeling the pressure.
That the move which many have labelled soft dollarisation comes only 5 months after the official end of dollarisation will not sit well with those in charge at the ministry of finance. Months after being cautioned on the lack of readiness of the nation of Zimbabwe to embark on a path of its own currency the plan proceeded anyway. Now the wisdom of the move must surely be called into question by decision-makers as they have since been forced to make many exceptions to the rule this being the latest. A few months ago they saw fit to create further legislation to outlaw billing, quoting, pricing and transacting in any currency other than the Zimbabwean dollar.
With another low rainfall year on the horizon, Zimbabwe as a nation will need to dig deep and think fast. Many companies are going the solar route and if the adoption continues at scale governments plan to provide ZESA’s foreign currency needs through billing ZESA may fall flat on their face. While assisting ZESA to meet agreement payments manages the present situation investment in infrastructure and generation capacity is what the nation sorely needs to move on from the current state and what it threatens to become.