HomeBusiness DigestForeign banks troop to Zim forex auction

Foreign banks troop to Zim forex auction

SHAME MAKOSHORI
UNITED States-based multinational investment outfit JP Morgan was among global lenders that repatriated a combined US$30 million through the Reserve Bank of Zimbabwe (RBZ)’s forex auction system by the end of the first quarter, official data showed this week.

The top lender was ranked the world’s largest bank by market capitalisation at the end of 2021, presiding over US$3,831 trillion in assets.

JP Morgan holds sway on the global markets.

The decisions that it makes, including on investment destinations, have a bearing on how a string of international fund managers and individual investors behave.

In Zimbabwe, authorities say the fact that it has a significant presence on the capital markets demonstrates that they were being handled well.

In an interview with businessdigest, RBZ governor John Mangudya confirmed that investors were sending money back home through the big lenders.

He said repatriations mostly related to portfolio investment outflows by US investors on the Zimbabwe Stock Exchange (ZSE).

Corporate dividends and earnings from the ZSE are paid in Zimbabwean dollars.

Banks assigned to manage such funds on behalf of investors bid for United States dollars from the foreign currency auction system before wiring them back to foreign markets.

Exchange control data obtained by businessdigest revealed that JP Morgan had repatriated US$10,1 million, which represented 0,3% of funds so far disbursed to bidders by the RBZ.

The data showed that US$3 billion was allotted on the platform between June 2020 and March this year.

Portfolio investment outflows wired by New-York-domiciled CITIBank, the world’s largest custodian bank, were worth US$6,1 million, while US$7 million was sent out to US investors Bank of New York Mellon,  the world’s largest custodian bank and securities services company.

Boston-based State Street Bank was allotted and repatriated US$6,6 million to US investors, according to the RBZ list, which said the global lenders were among the top 100 beneficiaries of the foreign currency auction system.

The platform was established to ameliorate a gruelling foreign currency crisis in Zimbabwe.

The Southern African country has seen no respite since United States dollar stocks plummeted in 2016, forcing the RBZ to introduce bond notes, which have since been battered on a thriving black market.

“When the Americans invest here their money comes to the stock exchange,” Mangudya said.

“So those obligations (being paid) relate to investment portfolio outflows. JP Morgan is investing on the Zimbabwe Stock Exchange. It means the investment climate is good. They are in there with other investors and we are paying them. We love all investors.

“There are banks from other countries on that list. You may not recognise them because their brands are not popular but we are paying them,” he said.

The central bank chief spoke two weeks after a Confederation of Zimbabwe Industries (CZI) paper demanded the disbandment of Zimbabwe’s foreign currency auction system, saying it had failed to execute its price discovery role.

After briefly calming exchange rate volatilities when it was introduced, the foreign currency auction system has struggled to settle allotted funds, sparking off an industrial outcry by companies that have relied on its cheaper foreign currency to import critical requirements.

At one point in 2021, backlogs of up to US$200 million were outstanding on allotted funds.

The CZI said at the time business was slowly grounding to a halt because of lack of capital.

Topping the list of 100 beneficiaries was milling firm Blue Ribbon Foods, the recipient of US$31,7 million during the period, according to the central bank data.

National Foods Limited, the ZSE-listed milling operation, had accessed US$14,8 million, the 13th biggest beneficiary of the intervention, along with big brand manufacturers like chief executive officer Anthony Mandiwanza’s dairy products maker, Dairibord, as well as Pure Oil Industries, the firm that produces cooking oil.

Along with a few big firms, Pure Oil was said by the RBZ to be firing at full throttle as a result of its foreign currency interventions.

Other big forex beneficiaries included the aggressively expanding beverages maker, Varun, which represents Indian billionaire Ravi Jaipuria’s Zimbabwean interests.

Varun was the second biggest beneficiary of the platform’s interventions after tapping US$29,1 million during the review period.

Mangudya this week reiterated his position that the economy was recovering, downplaying signals of another catastrophe, which forced President Emmerson Mnangagwa to personally announce haste monetary policy changes last week on Saturday.

“Things are OK,” Mangudya told businessdigest.

“Companies are producing well and Bulawayo is no longer a ghost town. They are producing. In any case the economy is overheating,” he added.

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