RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya has identified uncompetitiveness, low productivity and lack of confidence as the critical issues that need to be urgently addressed to breathe life into the ailing economy.
In his 2015 Monetary Policy Statement on Wednesday, Mangudya said uncompetitiveness was caused by the high cost of local products.
“The major causes of uncompetitiveness of local products are the higher costs of production emanating from high mark-ups to sustain high overheads epitomised by high utility tariffs, finance charges and wages and salaries which are higher than those obtaining in neighbouring countries and beyond,” Mangudya said.
“In addition, the continued appreciation of the US dollar against the country’s major trading partners’ currencies has made imports cheaper thereby making local goods uncompetitive.”
He said the combination of uncompetitive factors has continued to put pressure on the balance of payments position of the country as imports of finished goods have become the order of the day leading to company closures and job losses.
“Lack of competitiveness therefore needs to be urgently addressed across all sectors of the economy,” Mangudya said.
He said the central bank’s response to the scourge of uncompetitiveness “has been to procure the small denomination coins, bond coins, as change for the US dollar paper money to deal with the rounding up of prices by businesses”
Mangudya said the introduction of coins is beginning to have a positive impact on the price of goods and services.
He said as a result, monetary authorities “do not see any room for wage and salary increases within the national economy.”
The RBZ governor said the prevailing circumstances call for a downward adjustment in the prices of goods and services in order to promote competitiveness and ultimately for the recovery of the economy.
He said there was also there was also the problem of low productivity is attributable to a combination of poor work ethics and the use of antiquated plant and machinery within the domestic economy due to lack of capital or financial resources to replace the old equipment.
“This challenge would need to be partly addressed by amending the Labour Act in order to bring it in sync with regional and international best practice to foster productivity,” Mangudya said.
He added that the central bank is assisting in mobilising financial resources for the modernisation of equipment which is critical in addressing the challenge of low productivity.
The third challenge of lack of confidence, Mangudya said, “reflects the war of negative perception which increases country risk that has negative effects on liquidity and causes despair and despondency amongst many people within the country”.
Mangudya said government is addressing the problem of lack of confidence by improving the business climate to ensure that Zimbabwe is a good investment destination and to promote the ease of doing business in the country.
“The Reserve Bank is buttressing these government initiatives by engaging the diasporans through various outreach programmes to encourage the diasporans to invest in their country like what is happening throughout the world,” Mangudya said