EXPORT incentives introduced by the Reserve Bank of Zimbabwe (RBZ) will not help exporters restore profitability but only reduce the amount of losses they are currently incurring, economists say
“The export incentives will not have a great impact until the $824 component is removed,” Trust Holdings chief economist David Mupamhadzi said in an interview.
Exporters are allowed to receive 80% of their earnings in foreign currency at the auction rate and 20% at $824. The auction rate stood at $5 304,71 against the United States dollar on Monday.
Mupamhadzi said the exchange rate system should be reviewed as a whole because the $824 component significantly reduces the amount of profits earned by exporters.
“Although several measures announced by the governor are beneficial to exporters, the bottom line is that the benefits can only reduce losses and will not restore profitability,” economic consultant Eric Bloch said.
He said the cause for this was that most exporters could access advance payments for their exports or early payment after shipment since foreign competitors are willing to extend credit to customers.
“As a result most exporters will not benefit from the governor’s ‘carrot-and-stick’ measures,” Bloch said.
He said individuals were under the impression that exporters were making vast amounts of profit by virtue of their previous realisation on the parallel market, yet in practice exporters were subjected to huge cost increases for a very long time.
Interfresh Holdings Ltd chief executive officer Evan Christophides said the group did not perform well mainly because of export earnings, which were adversely affected by the exchange rate.
“The current economic environment especially in terms of exchange rates for export proceeds makes export viability a concern going forward,” Christophides said.
Costs increased but exporters could not increase their foreign currency denominated selling prices for doing so would render them uncompetitive against other suppliers.
RBZ governor Gideon Gono introduced the “carrot and stick” export retention scheme in a bid to encourage exporters to timely acquit their export proceeds for all advance payments or prepayment proceeds.
Under the scheme, exporters are allowed to retain 80% in their foreign currency accounts (FCAs) and the remaining 20% is sold to the government at $824 for each United States dollar.
Gono however said “in light of the significant impact on productivity of early repatriation of foreign currency, the carrot and stick incentive on advance payments and prepayments has been enhanced to allow exporters to retain 80% in their FCAs and sell the 20% at the ruling auction rate”.