INDUSTRY has warned a fresh tide of closures of exporting manufacturing companies is looming in Zimbabwe owing to stringent foreign currency retention measures introduced by government in February at a time the economy is struggling to stay afloat due to a plethora of problems.
By Melody Chikono
Officials in the manufacturing sector told the Zimbabwe Independent last week that government’s directive that the sector should liquidate 80% of export proceeds had dealt a hammer blow to exporters.
Following the announcement of this year’s Monetary Policy Statement (MPS) by Reserve Bank of Zimbabwe (RBZ) governor John Mangudya on February 20, exporting firms are required to utilise proceeds from their export receipts within 30 days, failure of which the hard currency would be converted into local RTGS dollars at the prevailing interbank market trading rate.
Industry players, however, say exporting is no longer viable because of the punitive measures.
Zimbabwe, entangled in a deepening economic crisis, is battling to mobilise hard currency required to support operations of the manufacturing sector and the economy at large. The country, saddled with a US$18,8 billion debt stock, has desperately been trying to arrange fresh lines of credit, but multilateral lenders have shunned Zimbabwe owing to arrears and country risk status.
Outgoing Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said there would be an emergency meeting with Finance minister Mthuli Ncube to discuss the issue, which he said was getting out of hand.
“The exporters feel their voices are not being heard and say they can’t work with this policy in place anymore.
They are not complaining about the 20% retention but about the 80% like you rightly stated. Its true we have submitted our papers both on the budget and the MPS, but remember government has to strike a balance between its concerns and that of the private sector which has upset the manufacturers because they feel the real issues that concern them have been left out and there is no roundtable to discuss the issue for the betterment of the economy,” Jabangwe said.
“What’s now worrying is that some of the major exporters have threated to stop production which is a threat to the economy. That is why we have requested the meeting through the Ministry of Industry so that they can bare their soul. We are hoping by the end of this week we will have the meeting. They feel their values are being eroded and cannot continue to work under such conditions.”
Large-scale exporters who spoke to the Independent said owing to the prevailing harsh business environment, opening offshore accounts to preserve hard currency earnings and winding down operations were the only remaining options.
Foreign investors say they are now considering investing in other countries where there are flexible policies.
Exporters have laid the blame on the authorities, saying they have not been consulting industry. They said government measures were choking exports, which are projected to drop by 40% this year, if urgent corrective measures are not taken.
However, as exporting firms continue reeling under the foreign currency crisis, government says export earnings surged by 54% to US$22,6 million in 2018, buoyed by the export incentive introduced by the central bank in 2016.
But exporters point out that exports have of late been taking a downward trajectory, owing to the harsh retention thresholds introduced by RBZ.