ZIMBABWE’S current and capital accounts for last year were for the fifth consecutive year in deficit, figures from the Ministry of Finance show. By the end of last year, the current
account was in a deficit of US$463,7 million and the capital account at minus US$211,5 million.
The current account takes into account the country’s exports and imports, while the capital account takes into account issues such as foreign direct investment, portfolio investment, long-term and short-term capital.
By the end of 2003, the current account recorded minus US$511,9 million while the capital account recorded minus US$220,9 million.
Since 1999, Zimbabwe has been experiencing massive capital flight because of a hostile operating environment, which was made worse by the shortage of foreign currency.
This was exacerbated in 2002 by company invasions by war veterans and Zanu PF supporters.
President Robert Mugabe has dubbed 20005 the year of “investment” and accordingly appointed what he called a “development cabinet”.
In January, the Reserve Bank of Zimbabwe tightened regulations for firms wishing to pull out of the country by raising the remittance to 20 years from a 72 months timeframe.
However, in terms of current exchange control policy, divestiture proceeds after May 1993 are freely remittable. Investors may remit offshore any capital plus appreciation as well as dividends in full, and when they accrue.
“Accelerated remittance is possible where there is localisation (15%) (sic), discount (75%) to the company’s net asset value and dividend savings,” the RBZ said.
To appease local exporters, the central bank also agreed that exporters who in the past sold their foreign currency in exchange for local currency could now retain more than half of it in local foreign currency accounts.
The policy means local exporters no longer have to dispose of their earnings at the official rate of $824 against the American dollar.
In the past, exporters were forced to dispose of all their foreign currency earnings to the central bank in exchange for local currency within a 60-day period, with at least a tenth of the money sold at $824 against the US dollar.
However, despite the incentives, exporters have been failing to break even because of the artificial auction rate of the greenback when compared to that prevailing on the black market.
Exporters have also raised concerns that most of the auction bids are being turned down, largely because of foreign currency scarcity.
Most companies are facing closure. “Our export performance has not been good during the past five years. Our main cash crops, tobacco and the horticultural sector, have not done well,” one analyst said.
The analyst said although there had been some export incentives, the results would not be immediate “since export benefits are only felt at most after six months at the earliest”.