HomeBusiness DigestRBZ throws exporters lifeline

RBZ throws exporters lifeline

Ngoni Chanakira

THE Reserve Bank of Zimbabwe (RBZ) says it has introduced various incentives that should have a significant impact in shoring up waning exporter viability.

=”Verdana, Arial, Helvetica, sans-serif”>Exporters have been crying foul saying they are facing logistical constraints inherent in bulk shipments and consignment exports and are being prejudiced because of shipping delays sometimes faced due to payment hiccups.

Economist John Robertson says for legitimate exporters, who were trying to maintain efficient businesses and pay wages to their workers before the new monetary policy statement was introduced, the situation has been extremely difficult.

“With almost no access to supplier credit or lines of credit from international banks, Zimbabwe’s exporters had to face an unequal struggle in trying to keep their operations going,” Robertson said. “The country had forfeited all hopes of foreign aid as well as balance of payments support because of the government’s policy choices, but as producers were determined to continue, the parallel market proved to be the lifeline they needed.”

RBZ governor Gideon Gono, who announced the new measures recently, said the Memorandum of Deposit (MOD) facility for exporters should reduce under-invoicing and help speed up repatriation of export proceeds.

The MOD scheme administered by the RBZ, initially provided pre and post shipment financial help to tobacco merchants/buyers only.

In his April monetary policy statement review however Gono extended the facility to all exporters with confirmed export orders.

Offshore funding under this scheme, whose cash covered security, was provided by the RBZ, at concessional rates to enhance exporter viability. For those exporters with no access to offshore lines of credit and hence could not access the MOD incentive the RBZ introduced post shipment foreign exchange bills.

Exporters have been complaining that they are being left out of RBZ facilities and yet the central bank is quick to penalise them for slow repatriation of funds.

The MOD facility enables exporters to pre-sale their confirmed exports on the back of secured offshore lines of credit.

“This should reduce under-invoicing and assist to speed up repatriation of export proceeds,” Gono said.

He said the recent monetary policy statement also enhanced the 15% free on board export incentive that seeks to reimburse import duty through tax credits by reducing the turnaround time from 14 days to five working days and also by making the duty certificates applicable against any corporate payments to the Zimbabwe Revenue Authority (Zimra).

Zimbabwe is struggling to earn foreign currency because of reduced exports caused by economic uncertainty. The RBZ has decided to harness foreign currency from citizens in the diaspora. More than 3,4 million individuals are understood to be in the diaspora for various reasons.

Gono said importance of diaspora funds had gained significant prominence in world financial flows, with the World Bank estimating that as much as US$95 billion is transferred worldwide each year.

In countries such as Mexico, diaspora fund transfers bring in as much as US$13,2 billion annually, becoming the second largest foreign exchange earner after oil exports.

In Zimbabwe since the sending of foreign currency from the diaspora was relaxed about US$8 million has been sent into the country through the money transfer agencies.

“The export sector also stands to benefit under the recently introduced post-shipment foreign currency bills, which allow an exporter to access concessional funding at competitive international interest rates on the back of confirmed export shipments,” Gono said.

Tobacco farmers who have also been crying foul over lack of incentives for their industry have now benefited from a $750 a kilogramme tobacco support price which would act to shore up grower’s effective take home proceeds.

“In recognition of the important role tobacco growers play, and the fact that historically, they have not benefited from the broad incentives awarded to direct exporters due to the intermediation in tobacco trading, as monetary authorities, we introduced a tobacco support price of $750 per kilogramme which would act to shore up growers’ effective take home proceeds,” Gono said.

He said the new monetary policy framework was also supporting the tourism industry through a special dispensation allowing operators to convert 100% of their proceeds at the ruling auction rate or the floor price, whichever is higher.

“The sector also continues to bene fit from the concessional financing facilities being accessed by other productive sectors,” Gono said.

He said gold continued to be a key foreign exchange earner for Zimbabwe.

Under the new monetary policy framework, the gold support price for both small-scale and large-scale producers at $71 000 a gramme.

“The new policy framework also removed the 3% levy which was payable on all gold deliveries,” Gono said. “The savings arising from this supportive measure are expected to translate into higher deliveries at the Reserve Bank thereby boost scope for building strategic foreign exchange reserves.”

He said other supportive measures for exporters included special banking facilities for diplomats, non governmental organisations and international organisations at the RBZ, exempting individual foreign exchange inflows from the 25%/75% surrender requirements, allowing 100% conversion of inward dividends for individuals at the ruling auction rate, formalising operations of the “Makorokoza” through establishment of buying agents, who will buy the gold at the enhanced support price of $71 000 a gramme.

Makorokoza are illegal gold panners.

It said other incentives included extending the duration of the 30% productive sector facility on exporters to June 30, 2005 at a concessional interest rate of 50%.

The RBZ has also enhanced the waiver on incremental exports from quarterly assessment to monthly assessment, effectively bringing forward exporter’s cash flows under the scheme.

“As monetary authorities we are highly confident that these comp-rehensive measures would have a significant impact in shoring up exporter viability,” Gono said. “It is critical that as stakeholders we work together and in good faith to chart the self-corrective path we have collectively chosen for the betterment of our economy.”

Robertson however says government should take all the blame for the low export earnings because of its lopsided foreign currency pricing and low rates offered to companies.

‘Significant proportions of all goods sold by retailers and manufacturers were paid for with money earned abroad and most of this money would not have been brought or sent into the country if the rigid official rates had ruled for its conversion into Zimbabwe dollars,” Robertson said.

He said the decision to punish individuals for trading on the parallel market is thus unjustifiable and unfair.

“All of this activity arose from the distortions that were injected into the financial system through the adoption by the authorities of unworkable, irrational and illogical exchange rate policies. The faults lay entirely with the policy-makers, not with the individuals who found they could take advantage of the gaps opened up by imposed distortions,” Robertson said.

“Government should now accept full responsibility for the entirely predictable behaviour patterns that emerged. Its own active involvement in the parallel market was ample proof of the inadequacy of the laid-down policy directives and the maintenance of these defective measures year after year is proof of the incompetence of the policy-makers.”

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