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Forex auction system hurts

Ngoni Chanakira

WHILE some firms are busy toasting the success of the Reserve Bank of Zimbabwe’s (RBZ) foreign currency auction system, others are cursing it, accusing the system of retarding progress.

“The system is hurting some companies but others are benefiting from it,” said Confederation of Zimbabwe Industries (CZI) president Antony

Mandiwanza. “It is two sides of the same coin and it really depends on whether you are an importer or an exporter.”

The CZI, the country’s largest and most powerful business grouping, recommended the foreign currency auction system to RBZ governor Gideon Gono who introduced it on January 12.

Mandiwanza, who is chief executive officer of Dairibord Zimbabwe Ltd, told businessdigest in an interview that the popular tendency nowadays was to “cry and cry without coming up with solutions to problems”.

He said the auction system had unlocked substantial amounts of hard cash hanging speculatively outside the formal system.

Zimplow chairman Oliver Chidawu blasted the system saying it had “adversely affected export viability”.

Chidawu, who sits on several boards, said the net effect of the foreign currency auction system had been the halving of Zimbabwe dollar export revenues.

Auction rates have hovered between $4 000 and $4 200 against the United States greenback. On Monday the auction rate stood at $4 205,03 to the US dollar.

On the parallel market however some companies are buying the currency at between $5 500 and $6 000 because it is not readily available on the auction floor.

“The recently introduced forex auction has adversely affected export viability,” Chidawu told shareholders in his report for the period ending December 31. “The net effect has been the halving of Zimbabwe dollar export revenue. With the decline in local market activity, Zimplow was forced to rely on exports to survive. Now Zimplow faces an uncertain future.”

He said major Zimbabwe customers had also been affected by the new monetary policy and were finding it difficult to liquidate their debts to Zimplow.

“The future is a question mark,” Chidawu said. “These factors have combined to adversely affect cash flows. It is therefore felt that to declare a dividend in these unpredictable circumstances would be unwise.”

Zimplow exports to the Democratic Republic of the Congo and Angola.

Cafca chairman and prominent lawyer Honour Mkushi, who also chairs Standard Chartered Bank of Zimbabwe, had unkind words for the RBZ’s auction system.

“Given reasonable economic, fiscal and monetary policies, the company had set targets to significantly increase exports and to reinforce or increase our position as a major player in the region,” Mkushi told shareholders in his report.

“However, the negative impact of the new monetary policy on the group’s exports activities owing to the current official surrender rate on export proceeds has led to the suspension of export orders.”

Mkushi, whose group is a major producer of cables, said while the new monetary policy had “noble objectives”, changes particularly reduction of inflation, were not going to “happen overnight”.

Interfresh Holdings chairman Lysias Sibanda in his report said while trading conditions for his company were not ideal, especially with respect to “export viability and returns based on current auction rates”, management was confident of its ability to operate within its core skills and exploit opportunities as they arose.

Sibanda is chief executive officer of Kingdom Financial Holdings Ltd.

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