Forex auction revs up industry

Source: Forex auction revs up industry | The Herald

Forex auction revs up industry
Dr Sekai Nzenza

Herald Reporter

Guaranteed allotments of foreign currency at a stable price in the auction system for the productive sectors and the accompanying confidence in the national currency that allows local bills to be paid in local currency have boosted businesses and made possible private-sector growth as desired in Government economic planning.

In a recent survey, manufacturing companies, including those in the fertiliser, pharmaceutical, milling, dairy, and cement sectors, said they had registered significant progress owing to the auction market, which has overally created renewed business confidence.

Many firms have given glowing reports about the stability on the currency market, which impacted positively on their business.

The Ministry of Industry and Commerce recently conducted a survey on how companies had benefited from the currency stability and received positive feedback from companies involved in the supply of fast moving consumer goods, metals and electricals, wood, timber and furniture and other subsectors.

With regards to the milling industry, Davipel representative Mr Davison Norupiri said the firm had managed to pay its legacy debts and imported raw materials because of the availability of foreign currency on the official system.

Chemplex, a firm that produces water treatment chemicals, told the Ministry of Industry and Commerce that the auction system had stabilised their prices and those suppliers who used to charge them in foreign currency were now accepting the local currency.

Bata Shoe Company and Sino Zimbabwe Cement, both Midlands-based, said the availability of foreign currency, through the auction system, had increased business confidence by making possible the development of medium and long-term plans on investments.

Gain wholesalers said the auction system had improved their stock levels, while Metro Peech indicated that the availability of legal forex brought genuine competition on the market, coupled with certainty.

Pharmaceutical firms like CAPS and Datlabs said they had boosted the production of drugs for both the local and export markets. Other companies like ZLG have responded to the Covid-19 pandemic and installed a new surgical mask production line.

Twine and Cordage has since increased its exports of tobacco twines, butcher twines, and shop twines, mutton cloth, shade netting and braided ropes to Canada, Malawi, Mozambique, South Africa, Tanzania, Uganda and Zambia.

In a statement on the survey, Industry and Commerce Minister Dr Sekai Nzenza said: “In general, almost all companies are happy with the auction system and the conditions and prioritisation of genuine manufacturers on the auction floor. The use of CD1 forms has done away with unscrupulous players who may want the forex for non-productive purposes.”

She said the success of the forex auction was attributable to the Second Republic led by President Mnangagwa’s political will to turnaround the economy, which has also seen the fruits of the successful implementation of Zimbabwe Industrial Development Programme (2019-2023).

“Overall, the manufacturing sector is on a strong rebound, anchored by a stabilising macroeconomic environment brought about by a stable exchange rate, supportive and predictable Government policies, political will and leadership, and synergy between Government and the private sector as evidenced by Government’s policy for a private sector led growth,” said Minister Nzenza.

The Ministry of Industry and Commerce is implementing the industrial programme, and is equally pushing for ramping up production and enhancing competitiveness, value addition and beneficiation of agricultural produce and minerals.

It is also developing and strengthening value chains; increasing job creation and export earnings, development of new enterprises; consumer protection; ease of doing business reforms and reducing the cost of doing business; and increasing investments.

Minister Nzenza said while industry ideally required US$100 million per month to import raw materials, they were buying more, an average of US$29 million per week, resulting in many positive stories coming out from the private sector.

The availability of foreign currency to the manufacturing sector has seen general price stability in the last five months.

Giving a synopsis of responses from individual companies, Minister Nzenza said Sable Chemicals imported gas from South Africa under a 30 000 tonne fertiliser supply agreement and over 9 000 tonnes of fertiliser have been produced to date.

“They have been allocated US$2,9 million between September and now,” she said. “This will enable them to produce 7 000 tonnes of ammonium nitrate during the two months from October and November 2020. They produced 2 700 tonnes of ammonium nitrate in October and in November they will be producing 4 300 tonnes.”

Dendairy in Kwekwe said in terms of foreign currency to import, the recently introduced foreign currency auction was working, the only challenge being the shortage of the local currency for buying the foreign exchange. Most businesses have noted that they need to watch costs to create the profits and cashflows required to fill their local currency accounts in time to buy their foreign currency at the auctions.

Jinan in Gweru said budgeting and planning was now feasible, with stability brought about by the auction system, while Sino Zimbabwe Cement Company said the auction system brought relief in terms of access to foreign currency. The firm said there was now confidence in the market and companies could import raw materials and spares with ease.

In the milling industry, Blue Ribbon Foods chief executive Mr Muze Kamal lauded the auction system for allowing them space to access foreign currency to fund import of their raw materials.

National Foods Limited implored the Government to continue with the system, since it resulted in the stabilisation of the exchange rate, as well as allowing companies access to affordable finance to fund import of crucial raw materials.

Willowton, a producer of cooking oil based in Mutare, said they had been receiving allocations every week for imports of raw materials and had doubled production volumes, while an official at Kefalos said they had been helped to catch up with their foreign obligations.

The auction system had also reduced the cost of accessing foreign currency, and they had consequently reduced their prices.

Mr Jimmy Psillos from Crystal said the system brought stability and production had increased.