LOCAL firms are struggling to obtain foreign currency on the RBZ’s foreign currency auction floor and they say the exchange rate should be reviewed to attract greater inflows from Zimbabwe
ans in the diaspora.
In a set of financial results released recently, several companies pointed out that the exchange rate regime was crippling the export sector.
“Difficulty with obtaining currency on the auction is being experienced,” Todd Moyo, chairman of National Foods Holdings Ltd, said in the company’s results for the year ended December 31, 2004.
Moyo said their business was reliant on foreign currency to import raw materials so they engaged the Reserve Bank of Zimbabwe to try and find a solution.
Truworths, a major clothing retailer, also said the availability of foreign currency to procure fabric was of major concern. “With respect to the export market, a sensible exchange rate policy is critical,” Kenneth Schofield, the chairman of Radar Holdings Ltd, said in a statement accompanying the results for the half-year to December 31 2004.
Schofield said it was not helpful to any sector of the economy to ignore the realities of the value of the Zimbabwe dollar.
“If there is no paradigm shift in the way this economy is managed, this year will be difficult to say the least and many sound companies will not survive,” he warned.
“As the group exports most of its products, the exchange rate in combination with the high inflation rate will result in future losses,” said Border Timbers Ltd (Border) said.
Border said the current exchange rate cannot be sustained and unless there is a meaningful change in the short-term, the group’s viability was seriously threatened.
However, economic analyst John Robertson said demand for foreign currency was too high on the auction because it was too cheap.
“Demand is too high on the auction because foreign currency is too cheap compared to the parallel market,” Robertson said.
He said there was need to devalue the Zimbabwe dollar to match the producer price index (PPI). Robertson said there was need to revive sectors of the economy that contributed significantly to the country’s foreign currency inflows.
“We should regain investor confidence and get foreign direct investment, not the Chinese who do not invest but look for trade.”
The foreign currency auction was established by the RBZ in a bid to get rid of the parallel market that was flourishing.
In January, 2 466 bids were rejected out of a total number of 2 554, indicating the worsening shortage of foreign currency on the auction.
The Zimbabwe dollar is currently trading at $15 000 to the US dollar and $20 000 to the British pound sterling. On the foreign currency auction the rates are $6 049 and $11 480 for the two respective currencies.