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Prosper Ndlovu Bulawayo Bureau
THE ongoing cash shortages in the economy have forced several manufacturing companies to seek foreign currency from illegal dealers popularly known as “osiphatheleni” so as to procure raw materials.

This has added a cost burden on producers, industry experts say, which has a negative effect on the competitiveness of local companies, who are already constrained by a myriad of cost drivers.

This emerged during a National Economic Consultative Forum (NECF) dialogue on pricing in Bulawayo yesterday where industry and commerce executives urged monetary authorities to come up with measures to cushion the productive sector to foster economic growth.

Presenting a paper on pricing, Dr Nyasha Kaseke, a lecturer from the University of Zimbabwe’s Graduate School of Management, said the contribution of the manufacturing sector to Gross Domestic Product (GDP), one of the primary indicators used to gauge the health of a country’s economy, remains low with the sector projected to register less than two percent growth due to challenges that include foreign exchange shortage.

“Despite having a diversified manufacturing industry that plays a key role in the economic value chain, the sector suffers from a host of costs that affect competitiveness and pricing.

“The industry’s GDP contribution is down because of operational challenges that have reduced capacity utilisation to around 47 percent instead of the desired 60 or more percent,” said Dr Kaseke.

“The major factor to this is the liquidity crisis. Companies are now getting foreign currency from the streets at 20-25 percent premium, which is an additional cost to production.”

During the discussion participants said procuring of raw materials was now a nightmare as they have to queue for foreign currency allocation at the central bank or seek alternative avenues.

They said delays in payment for consignments has seen some suppliers demanding cash or increasing prices to cover delay inconveniences.

According to stakeholders who attended the meeting, alternative payments such as swiping/RTGS and mobile money, have also become a nightmare for businesses as they are charged a premium range of between 5-25 percent more for not having cash.

“For instance, several businesses are now putting “10 percent discount on US$ payments, 5-12 percent premium on bond notes payments, 10-25 percent on swipe/RTGS and 15-25 percent on mobile money,” said Dr Kaseke, adding: “all these costs are reflected on the end product pricing”.

The Reserve Bank of Zimbabwe has acknowledged the emergency of the parallel foreign exchange market that is capitalising on the cash shortage in the economy.

The introduction of bond notes last November appears to have worsened the situation with authorities acknowledging the surrogate currency is now being externalised due to its equal value to the greenback.

Package to recapitalise companies

In his contribution, economist Dr Gift Mugano said there was a need for Government to come up with an adequate package to recapitalise local firms to achieve a multiplier effect on the economy.

He also challenged the private sector to come up with effective strategic turnaround strategies that will attract financers and compel policy makers to review relevant enhancing legislation.

Bulawayo businessman, Mr Dumisani Sibanda, said turning around the industry should be buttressed by political will.

He, however, challenged the private sector to take the lead and be initiative in implementing required reforms instead of blaming Government for everything.

“When you (private sector) know the problem we cannot continue to follow the official way of doing things. For instance, as long as we continue to use the US$ we will continue to sink and we need to move away from the US$,” said Mr Sibanda.

“This is because each time the US$ strengthens other economies will devalue their currencies and we remain less competitive. The currency issue is a problem and we tend to want to change Government when we also should be speaking to ourselves.”