Cash crisis hits companies

Source: Cash crisis hits companies – The Standard May 1, 2016

FOREIGN suppliers are cutting back on raw material delivery to Zimbabwe and in some cases taking legal action as local companies fail to pay for supplies due to the prevailing cash crisis in the country, Confederation of Zimbabwe Industries (CZI) president Busisa Moyo has said.

BY VICTORIA MTOMBA

In an interview with Standardbusiness Moyo said because of this, the manufacturing and commercial sectors were low on inventories.

“The [cash] crisis is likely to adversely affect output, leading to commodity shortages and an increase in prices of locally-produced goods. Real Time Gross Settlement (RTGS) within Zimbabwe is taking 48 hours but external Funds Transfer (EFT) is taking up to three weeks. Companies are spending a lot of time following up on payments. EFTs to foreign suppliers are now taking 21 to 30 days,” Moyo said.

The delay, he said, had seen local companies losing credibility in South Africa and beyond with suppliers cutting on deliveries and reducing credit limits.

Zimbabwe relies on imports as the country’s manufacturing sector is not producing much due to lack of working capital, high production costs, low capacity utilisation levels as well as obsolete equipment. Since 2009, Zimbabwe has imported products worth over $20 billion.

Moyo said the lobby group requested the Reserve Bank of Zimbabwe (RBZ) to prioritise raw material imports to drive the production of local products.

He warned that Zimbabwe was likely to revert to “a cash economy where small operations companies sell cash which will create further shortages”.

“Payments ‘agents’ will start selling cash at a premium to ‘facilitate’ for external payments,” Moyo said.

He said government should stop imports of non-essential products for six to 12 months as this was draining the liquidity from the system.

“The government should also prioritise raw materials that go into production and other essentials like drugs and fuel through the EFT system and remove duty on all raw materials to increase manufacturing activity,” he said.

Early this month, RBZ governor John Mangudya said the central bank was considering putting in place an import priority list meant to instil discipline among market players that included banks, consumers and businesses.

“This self-discipline is in the form of efficient utilisation of foreign currency for the purpose of increasing production,” he said.

“This entails that businesses, banks and RBZ should come up with an import priority list which discourages importation of trinkets, water and other products which are readily available locally or can be efficiently produced in Zimbabwe.”

He said such a priority list would favour the importation of raw materials, fuel, capital goods, intermediate goods and communications services, among other products which would result in a shift to increased local production.

Moyo said government should reduce value added tax on locally-manufactured products to 5% so as to reduce shelf prices and sway customers towards local products but also keeping a 15% VAT on imported products.

The country is battling a cash crisis with authorities struggling to provide solutions.

Queues at banks and automated teller machines have become a common feature as banks struggle to meet demand for cash. This has seen the introduction of limits on withdrawals.

COMMENTS

WORDPRESS: 2
  • comment-avatar

    Damn Zanoids as they continue to destroy the country

  • comment-avatar
    Raymond 6 years ago

    I am not an economist neither am I a brain surgeon. Simple logic dictates that if you continue importing with little or no exports, the cash used for importation will eventually run dry. That’s where Zimbabwe is at present. Solution, is simple. Rebuild you agriculture, mining, and manufacturing sectors.