Redollarisation unwise: CZI - Zimbabwe Situation

Redollarisation unwise: CZI

Source: Redollarisation unwise: CZI | Herald (Top Stories)

Africa Moyo Senior Business Reporter
CONFEDERATION of Zimbabwe Industries (CZI) president Sifelani Jabangwe, says re-dollarising the economy is counterproductive as it stifles growth and could halve the size of the economy.

Mr Jabangwe’s remarks come at a time self re-dollarisation appears to gather pace as more firms demand payments in foreign currency, principally the US dollar.

Giant beverages manufacturer, Delta Corporation, on Wednesday announced it will start charging its products in foreign currency today.

Delta said the move was designed to breathe life into its operations that have been choked by foreign currency shortages.

Government is expected to meet Delta’s top executives today to explore options that could see the company abandoning its decision.

Delta requires $2 million per month in foreign currency for it to keep equipment running and produce adequate lager beer and soft drinks for the nation.

But Mr Jabangwe told The Herald Business yesterday that re-dollarisation could to plunge the economy into regression.

“We see more companies wanting to sell in US dollars, but the issue is that we don’t need dollarisation as an economy,” said Mr Jabangwe.

“The economy will shrink by as much as 50 percent if we dollarise so for me it is not the right way to go.

“We have seen it with US dollars in the past that we won’t be competitive when using the US dollar.”

Market watchers say during the period 2009 to 2011, the economy stabilised, but did not grow significantly due to challenges posed by the use of US dollars.

Statistics from the Zimbabwe National Statistics Agency (ZimStat) show that the economy grew by 5,3 percent in 2009 after contracting 9,9 percent in 2008, which was characterised by stratospheric inflation.

Zimbabwe’s gross domestic product (GDP) annual growth rate increased to 11,4 percent in 2010,; 11,9 percent in 2011; and receded to 10,6 percent in 2012, before spectacularly falling to 4,5 percent in 2013; 3,9 percent in 2014; 1,5 percent in 2015; 0,6 percent in 2016 and 2,9 percent last year.

Capacity utilisation in the manufacturing sector, which was around 10 percent in 2009, rose to 57,2 percent in 2011, before crashing to 34,4 percent in 2015; 47,4 percent in 2016 and 45,1 percent last year.

Using the US dollar as a transaction currency has been frowned upon by industrialists and economists who say it makes products uncompetitive on the export market.

Industrialists contend that US dollars only helped the economy to arrest hyperinflation when they were introduced in 2009 but could not trigger grow.

Coal miner, Liberation Mining Zimbabwe’s managing director Victor Tskhovrebov told our sister paper The Sunday Mail Business recently that it was important for Harare to address the currency issue to reduce the cost of mining.

“As a sovereign country you need your own currency. The currency issue frightens investors. That is a big, big issue because the cost of mining in Zimbabwe is pretty high,” said Mr Tskhovrebov.

Economist Joseph Mverecha says re-dollarising is “decidedly the wrong turn for Zimbabwe”.

“The ramifications for the (local) economy are all too evident. There is less than minimum likelihood that Zimbabwe can sustain recovery and growth under a strong and strengthening US dollar currency.

“No amount of internal incentives are sufficient to compensate for an overvalued real exchange rate,” said Mr Mverecha.

Pharmacies are accused of stalking the blazing trail towards a  re-dollarisation trajectory when they started selling sold medical drugs in forex in October last year following fiscal and monetary policy pronouncement which among others, directed exporting companies to open foreign currency accounts.

However, when Government directed them to sell in bond notes and electronic money, pharmacies simply pegged the prices on the parallel market foreign exchange rate of between 300 percent and 400 percent.

Industry and Commerce Minister Nqobizitha Mangaliso Ndlovu said charging in foreign currency “cannot be allowed” as it “not only against the spirit of fairness, but it is also an illegal practice”.

“Government is very clear that this practice is unacceptable and has to stop forthwith and if not, the law will take its course.

COMMENTS

WORDPRESS: 10
  • comment-avatar
    Morty Smith 5 months ago

    A collection of “unwise” commentary from various ignorant people. Well done chaps, keep it up, you have not let me down yet.

  • comment-avatar
    Mukanya 5 months ago

    The dilemma of Zimbabwe is that of having two sets of ideological parallel economists who cannot separate demand from supply!!

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    zimbabz 5 months ago

    Correct me if I am wrong but Did we not already dollarise in 2008??? All our trading has been in USD for years. The bond note was only a surrogate to combat cash shortages… Bank accounts are in USD are they not?

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    Ray Mbonambi 5 months ago

    Dollarisation is the proper way to go. What’s the point of hanging on to imaginary or non-existent economic growth resulting from this bondarisation? Inflation is taking a toll as more bond notes not backed by a proper hard currency – the US$ are being printed.

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    Ray Mbonambi 5 months ago

    These fly by night economists will continue telling ZANU politicians what they want to hear. Untruths will not improve the economy! That’s all!

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    Mixed Race 5 months ago

    These are the guys who survive using this corrupt system to enrich themselves.The use of bond notes has created many loopholes directly linked into serious corruption in places like fuel deliveries.I have a suspicion that current fuel shortages are linked to well placed people.This is how the corruption in fuel works.Some fuel deliveries are allocated to garages who insist selling the product in USA dollars only.They buy the fuel in bond notes then sell it in USA dollars and then buy bond notes from black market,ie at about 1:3 rate and then buy more fuel in bond notes, thus increasing their volume three times fold before selling it in USA dollars.This is repeated many times making these crooks instant multimillionaires without real value-added efforts.No economy can survive with such looters draining the poor masses for the few elite individuals.We are doomed to total economical failure unless somebody calls this enough is enough and take decisive action.

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    Former farmer 5 months ago

    Our problems are from a lack of economy which is due to a lack of the agricultural base we rely on. Pre 2000 70% of our economy relied on agriculture. We produced excess and our horticulture was growing enough to surpass Kenya.
    We need to revist the land grab if we want to regain our economy, it is as simple as that. Had ED (at his much anticipated first inauguration) done just that our nation would be booming today and forex would not be a problem. Reality must prevail sooner rather than later.

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    Bhanditi 5 months ago

    This country is under economic and political lockdown by ZANU PF. This Zanu PF doesn’t want prosperous citizens. The economic data above shows the economy rebounded from 2009 – 2012. It started receding in 2012/13 due to elections which ZANU rigged and no growth has been witnessed since.

    The country has witnessed increased tobacco, diamonds, gold, platinum output but remains poorer than it was in 1979! ZANU iyi imhandu idzi.

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    Bhanditi 5 months ago

    CZI is becoming a funny organization. What kind of economics is that? You mean that the economy is better now than 2009-2011?

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    Rober 5 months ago

    Waiting now over 30 years for the REVOLUTION. Sooner or later (better late than never). Zimbabweans seem to have mote patience than any other country. But if you don’t have your revolution you can just keep talking…