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Overvalued Zimdollar worries industry

MTHANDAZO NYONI
THE Confederation of Zimbabwe Industries (CZI) is having sleepless nights over an overvalued Zimbabwean dollar (Zimdollar), which is now undermining the scope for maximising structural efficiency and the growth of the local export industry.

CZI president Kurai Matsheza in a speech read on his behalf at the launch of the 2021 manufacturing sector survey on Wednesday said the Zimbabwean dollar was overvalued.

“The policy of maintaining an overvalued Zimbabwean dollar imposes a big tax on the export industry undermining its growth and transparency,” he said.

“The policy also unwittingly subsidises imported industrial goods that then start competing unfairly for supermarket space with locally manufactured goods and accelerate deindustrialisation.

“Efficient price discovery must be allowed and an efficient market established, as without doing this the authorities will be chasing symptoms which continue to mutate as long as the arbitrage windows remain open,” Matsheza said.

He also raised concerns about the volatile exchange rate, adding that getting the price of foreign currency was a fundamental matter of Zimbabwe’s economic development interest.

“Correcting the exchange rate pricing is what will stabilise the economy and provide room to continue on the growth trajectory that we were experiencing in 2021,” Matsheza said.

“This would also create room for the authorities to address the structural issues for long-term sustained growth and stability.

“We are convinced that convergence of the rates brings stability as this was achieved at the beginning of the auction when a large part of the economy was indifferent to holding Zimbabwean dollar,” he added.

In the past two weeks, the volatile Zimbabwean dollar has suffered its worst drabbing on the parallel market, depreciating to US$1:$450, after ending 2021 at US$1:$280.

Facing headwinds ranging from a battered currency to steep surges in inflation, the government announced unprecedented radical monetary policy shifts on Saturday, banning bank lending and tightening the screws on stocks trading and supermarkets.

Despite the challenges, Zimbabwe’s industry was busy last year increasing its capacity utilisation by 25,6%, while millions were invested in expanding production capacity, according to the CZI survey report.

In 2020, capacity utilisation stood at 47%, from 36,4% the previous year.

According to the report,  local firms also realised a 5,5% increase in exports to US$404 million last year.

Presenting the survey results, CZI chief economist Cornelius Dube said the majority of firms registered an increase in output compared to 2020.

For instance, 56% of surveyed firms registered an increase, 26% registered a decrease, while 18% remained the same.

About 57% of the manufacturing sector firms registered an increase in sales with the drinks and tobacco subsector taking a lead.

Dube said 37,8% of the manufacturing sector undertook investments to increase their production capacity in the period under review.

As such, an additional capacity of 25,6% was created in the period under review due to the investments that were undertaken.

The total amount of investments that were carried out in 2021 to increase capacity by surveyed firms amounted to US$147,17 million. The country’s industrial capacity utilisation increased to 56,25% last year, despite the Covid-19 pandemic disrupting supply chains during the period.

Zimbabwean industry has been facing an array of challenges, with no solution in sight.

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