Bond notes to help industry: Mangudya

RESERVE Bank of Zimbabwe (RBZ) governor, John Mangudya, yesterday said bond notes would be introduced at the end of this month, advising that the central bank would “not be careless” with the new currency.

Speaking at the unveiling of the Confederation of Zimbabwe Industries (CZI)’s Manufacturing Sector Survey 2016, Mangudya said the bond notes would help the faltering industry, whose capacity utilisation jumped to 47,4 percent  this year, from 34,3 percent last year.

“We need support from business. There is fear that we will print more. Where that scepticism is coming from, I don’t know,” Mangudya told captains of industry and commerce who gathered for the breakfast meeting in the capital for the survey results.

Mangudya said bond notes would certainly be in the market at the end of this month, as part of efforts to incentivise exporters.

He has previously indicated that bond notes would be used as a funding mechanism for the export incentive in order to preserve the United States dollars supporting the scheme, which will be bankrolled to the tune of US$200 million by the African Export and Import Bank.

The bond notes would be zero-coupon, tax-exempt debt instruments.

Exporters would receive the incentive in US dollars and the incentive would be credited to their US dollar accounts.

An exporter would then transact through the real-time gross settlement systems, make foreign payments for imports of goods and services and transact freely within the multi-currency exchange system.

The RBZ boss said the issuance of bond notes has a self-control mechanism in that when there are no exports, there would be no bond notes. The bond notes would be released gradually into the economy in sympathy with export receipts through normal banking channels up to a maximum ceiling of the facility (US$200 million). The ceiling would be attained when total exports are around US$6 billion.

The central bank governor welcomed the results of the CZI survey, saying: “These are very good results. The trend is good. We have an economic research desk at the central bank and your figures are talking to the figures that we have as well. But we need to do more. As government, we need to do a lot in terms of coming up with an investor friendly environment and export more.”

Government also hailed the improvement in capacity utilisation in the country’s manufacturing sector, saying this was a positive development, but admitted more needed to be done to help industries avoid collapse.

Industry and Commerce Minister, Mike Bimha, told guests at the launch of the survey that: “There is no doubt that there are still challenges, but we have been coming up with measures such as imports management. This survey is very important. We need research-based information to be able to make good decisions. This is good feedback for government. I know we are not there yet, but let’s do more to get where we want to go.”

An overflow of imports, estimated at about US$7 billion per annum, against exports of about US$3 billion, has been aggravating de-industrialisation in Zimbabwe and widening the current account deficit, which is projected to rise to US$2,8 billion this year from US$2,5 billion last year.

Government issued Statutory Instrument (SI) 64 of 2016 in June, banning the importation of 42 products into the country as part of measures meant to protect the domestic industry.

Products that have been removed from the general import licence under SI 64 include fertilisers, plastic pipes, wheel barrows, roofing frameworks, tinned fruits and vegetables, dairy products, furniture, coffee creamers and petroleum jellies.

Previously, government had gazetted a ban on the importation of batteries, candles, floor polish, tobacco twines, second-hand clothing, blankets, 23 pharmaceutical products, milk, potatoes, onions, biscuits, meat products and yeast.