THE Zimbabwe National Chamber of Commerce (ZNCC) has warned government against printing money to fund the ZW$18 billion Covid-19 Economic Recovery and Stimulus Package saying to do so will have a more devastating impact than the pandemic.
President Emmerson Mnangagwa announced the stimulus package to provide relief to distressed sectors of the economy as a result of the Covid-19 pandemic, which has wreaked havoc worldwide with more than four million people affected and over 300 000 fatalities worldwide. This prompted government to impose a national lockdown on March 30, which has since been extended indefinitely.
In its submission to the ministry of Industry and Commerce, titled High Level Summary of Submissions Regarding the Modalities of Industry Funding From The ZW$18 Billion Stimulus Package, the ZNCC warned government that funding the rescue package through printing of money will be more harmful to the economy than the impact of Covid-19.
“Business have indicated that Covid-19 weighed down on operations. It is our belief that the funds will be easily accessible with no need to resort to printing since the negative impact of printing money can be worse than the effect of Covid 19,” the ZNCC said in its submission.
“It is our hope that some of the millions of funds that have been extended to Zimbabwe from financiers such as Afreximbank, AfDB (expected to provide close to US$14 million) and other financial institutions would also be utilised to fund industry.”
The government has been in the habit of printing money, thereby stoking inflation. Since government reintroduced the Zimbabwe dollar, inflation has galloped to more than 670%, with some economic analysts projecting it will reach the 1 000% mark by the end of the year.
In 2008 government printed money resulting in hyperinflation and the demonetisation of the Zimbabwe dollar and the introduction of the multi-currency regime.
The ZNCC said there is need to capacitate the Industrial Development Corporation (IDC), so that funds for industry are channelled through it.
This, the ZNCC pointed out, will remove the unnecessary meticulous vetting made by banks. The ZNCC said channelling funds through the IDC will also be efficient and effective. It said it will be key in the transformation of the IDC into an institution that provides funds for industrial development.
The business body said the IDC should be modelled on the South African one which plays a key role in providing support for industry.The ZNCC told government that the funding should be used to support value chains cited in the Zimbabwe National Industrial Development Policy, which include fertilizers, pharmaceuticals, potato processing, dairy and packaging.
The value chain approach, the ZNCC said, will ensure consistent supply of quality inputs, improved productivity and cost effectiveness, as well as prevent workforce redundancy along the supply value chains.
The business membership organisation also advised the stimulus package should prioritise industries with export potential which include horticulture, tobacco processing, pharmaceuticals and manufacturing of basic chemicals. The ZNCC advised government that with ZW$500 million set aside to capitalise Silo food industries, private sector producers of basic commodities should be given such access to funding.
“Rather than focusing on basic commodities price controls, providing funding to the basic commodities value chain players will ensure that there is no disruption in the supply chain, hence there will be no pressure to increase prices due to shortages,” the ZNCC said.