Tawanda Musarurwa and Kudakwashe Mhundwa
Listed manufacturer Proplastics says it is now adopting an “aggressive exports strategy” in view of the announcement by the Government to end the multi-currency system.
Last week, the Ministry of Finance and Economic Development — through the promulgation of Statutory Instrument 142 of 2019 — banned the use of foreign currency in domestic transactions, and made the Zimbabwe dollar the sole legal currency for tender.
It effectively put paid the multi-currency system that was put in place in 2009.
Prior to the latest currency developments, firms under the banner of the Confederation of Zimbabwe Industries (CZI) have long called for the re-introduction of a local currency, arguing that the United States dollar, in particular, was driving up operating costs and making their products uncompetitive in regional and international markets.
In view of the latest development, Proplastics chief executive officer Kuda Chigiya told shareholders that, although it is too early to give a full assessment of the implications of SI-142 of 2019, the group was going to leverage on the new local currency to increase its exports.
“Going forward we are looking to take an aggressive exports strategy, now that we have a local currency.
“With the advent of the new local currency (Zimbabwe dollar) our cost structure can be much lower, and that will give competitive advantage when we are exporting into the region,” said Mr Chigiya.
“Our exports were sitting between 3 percent and 5 percent. With the introduction of the Zimbabwe dollar, we are looking to increase them beyond 10 percent of contribution to total revenue.”
Mr Chigiya said the local currency can be sustainable on the basis that the fundamentals are kept in check.
“If the fundamentals are correct and there is good approach to the fiscus behaviour, there is nothing that can stop this currency from being a functional currency, but what is lacking in the market as the moment is the confidence and the trust, domestically, regionally and internationally. I think if that confidence is established the currency can work going into the future,” he said.
The broader industry body has also put its weight behind the new currency.
“The introduction of a national currency implies that the country has now moved away from a multi-currency regime, and any form of pricing, which is based on the US dollar.
Consequently, an appropriate monetary policy with clearly specified milestones will need to be put in place to support the national currency and result in abolishing the multi-currency system,” said CZI in a statement released following the introduction of the local currency.
“The US dollar will then become a currency strictly only used for external transactions only. This is the long term objective of the liberalisation and currency reform agenda.”