Zimbabwe’s industries are in dire straits after the central bank failed to clear all outstanding foreign currency auction system allotments backlog by March, Business Times reports.
The Reserve Bank of Zimbabwe (RBZ) has been struggling to effectively release the forex allotted to companies, resulting in a backlog of close to US$100m.
The captains of the industry said the failure to clear the backlog calls for an overhaul of the auction system.
“The RBZ governor [John Mangudya] keeps on promising us that he will clear all outstanding allotments but he has failed to do so three times and counting. The clearance of the backlog has not happened and it will not happen,” Confederation of Zimbabwe Industries president Kurai Matsheza told Business Times.
“We still have some members whose allotments in January have not been cleared with some traced to 12 weeks back.”
The market needs US$320m per week and the auction is only supplying an average of US$40m weekly.
Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the auction system has failed but needs serious refinements.
“The auction system is not functioning properly as it has failed to help companies to access cheaper forex due to late settling of allotments.
“The governor gave some deadlines but without proper mechanisms that backlog will never be cleared,” Mugaga said.
He said the country should have good policies which are biased towards the supply side instead of going in circles.
“We have bigger problems than we thought as the auction backlog is only a small picture of the forex backlog that the industry is facing. We require more money than the banks can give us,” Mugaga said.
“They are many companies which need forex but are not able to participate in the auction system and they are part of the bigger problems that we are facing as an industry.
“We should come up with policies that are biased towards the supply side,” he said.
University of Zimbabwe economics lecturer Moses Chundu said the Dutch auction system is a “goblin” and must be removed.
“The system is sucking blood from the poor as it is not serving them, instead of eating into the little that they have. The authorities should agree that the system has failed,” Chundu said.
He said the prices are not reflective of the auction system as those that are getting the money on the auction are pegging at a black-market rate.
“Who is the auction system serving, in the past it used to help fuel companies?
“If the auction system was effective, we were going to have a blended rate with some bit of the official rate and the parallel market rate but in this case, the parallel market rate is the one which was used,” Chundu said.
He said the government should abolish auction dollarise as the country has a lot of the US$ due to the fact that forex deposits are going up, diaspora remittances have gone up and export receipts have almost doubled.
Mangudya said the export revenues that people are seeing are not theirs hence they should not bank on them.
He admitted that the backlog remains one of his biggest challenges but will use the banks’ willing buyer willing seller to discover the market rate.
“We hope that we will discover the market rate soon,” Chundu said.