Oliver Kazunga Senior Business Reporter
THE Reserve Bank of Zimbabwe should abandon its foreign currency allocation framework and delegate the role to individual banks as this gives the impression of a distorted economy, the Zimbabwe National Chamber of Commerce (ZNCC) has said.
Due to persistent foreign currency shortages facing the economy, the RBZ came up with a foreign currency allocation framework guided by import priorities for the country. The move has, however, attracted criticism by some businesses who claim their operations are not adequately supported.
Speaking at the CEO Africa Roundtable meeting on financial market distortions and currency reform in Bulawayo on Friday, ZNCC Matabeleland region chairperson Mr Golden Muoni, said the panacea to foreign currency shortage lies in growing exports and fostering value addition.
“I don’t understand RBZ’s role on foreign currency allocation priority list. They don’t have any relationships with customers but they find themselves on the panel or a committee deciding who to give foreign currency, which the Deputy Minister (Terrence Mukupe) has already alluded to, that it breeds corruption,” he said.
“How do you then decide of a customer whom you don’t know . . . so the RBZ priority list on foreign currency allocation must be abandoned and the responsibility must be given to individual banks that have a direct relationship with their clients.”
Earlier Deputy Minister Mukupe, who also attended the meeting, said the foreign currency allocation system was prone to manipulation and corruption. For example, you are distributing $50 million of foreign currency and you have got a group of people that sits in a room and decide who’s getting what and who’s not getting what. You are creating an environment that’s fertile for corruption,” said Minister Mukupe.
“My whole feeling is that you can sugar-coat on these things and say the people who are doing that job are upright and upstanding people, but we have to move away from a situation where we tempt people. Let’s have proper systems in place, that’s why I am for the view that let the markets decide and not have individuals deciding.”
Mr Muoni further said it was imperative for the RBZ to concentrate on its role as the regulator and not interfere in the allocation of foreign currency under the priority list framework. Under the foreign currency priority list framework, Mr Muoni said the monetary authority had also not prioritised foreign currency allocation to small to medium enterprises (SMEs) despite their critical role and contribution to economic sustenance.
He said businesses were disturbed by headlines of millions of dollars allocated to big corporates for production purposes.
“What about those SMEs, do you know who they are and do you have money to allocate to SMEs,” asked Mr Muoni.
Experts have stressed the need to invest more in value addition and beneficiation of goods produced in Zimbabwe to broaden the export earning value and substitute imports to preserve the little foreign currency reserves.
Last month, the Pharmaceutical Society of Zimbabwe (PSZ) revealed that the pharmaceutical industry, which needs about $10 million foreign currency allocation per month to operate optimally, was receiving less than 10 percent of its monthly requirement from RBZ. The PSZ called on the apex bank to prioritise the pharmaceutical industry and improve foreign currency allocation to the sector as has been done to the fuel industry. Fuel and electricity are high priorities in terms of foreign currency allocations in Zimbabwe given their centrality to the business in general and Government’s industrialisation agenda. In May, RBZ said it had increased foreign currency allocations by about 50 percent to $85 million per month.
The Central Bank pointed out that this had been necessitated by challenges that were experienced by motorists and industrialists in accessing fuel in recent weeks. In addition, a recent increase in international prices of oil meant that more money was now required to buy fuel. The RBZ also prioritises allocating about $20 million to Zesa to enable power imports from South Africa and Mozambique as Zimbabwe was importing 300 megawatts to augment local generation.