The Sunday News
Roberta Katunga, Senior Business Reporter
MANUFACTURERS are likely to face exchange losses as the country pushes for the increased usage of multi-currencies which has been necessitated by the shortage of the United States dollar.
Since 2009, when the country adopted the multi-currency system, the dollar has elbowed other currencies and has become the dominant currency in Zimbabwe but of late banks have been running out of the green back.
According to new regulations, companies are supposed to pay for imported goods in the import country’s currency and not in US dollars as the Reserve Bank of Zimbabwe moves to lessen dependence on the dollar and promote use of other currencies like the South African rand, Botswana pula, Chinese yuan and British pound.
However, captains of industry said the change in contract on currency by banks is likely to have an impact on manufacturers who import raw materials and spare parts.
In an interview, Confederation of Zimbabwe Industries (CZI) president Busisa Moyo (pictured) said although most foreign suppliers will convert at the prevailing US dollar exchange rate, the concern is the exchange gains and losses that companies will carry as the country still operates in dollars.
“If you buy raw materials for ZAR150 000 today it will cost $10 000 at the rate of US$1-ZAR15 but if the rand strengthens it will mean you now have to pay extra to your original amount to expunge the obligation and this becomes an exchange loss,” said Mr Moyo.
Commenting on concerns by some manufacturers who claim that importing in dollar was favourable as they could negotiate prices, Mr Moyo said the impact was small, although he agreed that companies in foreign countries prefer the US dollar as they are given incentives to earn or bring in the US dollar.
Zimbabwe National Chamber of Commerce Matabeleland chamber president Mr Crispen Mugova said for some manufacturers their goods were already in transit with others having already placed orders.
“A change in contract becomes an inconvenience to manufacturers in this case. In foreign countries, especially those with unstable currencies, when they invoice you using their local currencies they speculate and inflate costs,” said Mr Mugova.
He said the exchange loss and gains that companies are likely to face could result in price increases in the country as manufacturers try to balance out their losses. Mr Mugova said trading in the US dollar was more favourable.
However, Buy Zimbabwe economist Mr Kipson Gundani said although the US dollar was the international trading currency, it is important for companies to appreciate that this is not a competitive currency.
He said the RBZ was trying to re-promote the multi-currency regime which existed in 2009-10 where 45 percent of all transactions were in US$, 45 percent in rand and 10 percent in other currencies.
“At the moment 95 percent of all transactions are in the dollar, that is why the RBZ wants to reverse that so that other currencies come into play.
“The outcry by manufacturers is not sincere, trading is a process of negotiation so if foreign countries inflate prices, they have to look for an alternative source, this is a competitive world,” said Mr Gundani.
He said the depleting nostro accounts were expected to ease in the coming tobacco season and urged companies to be supportive of Government efforts in trying to ease cash shortages.
RBZ governor Dr John Mangudya has appealed to all sectors of the economy to fully embrace the basket of multiple currencies saying the central bank has put in place adequate facilities to ensure that business does not suffer unnecessary exchange losses.
Twitter: @robertakatunga
