eBusiness Weekly
From Tawanda Musarurwa in Victoria Falls
The issue of currency reforms should be left to the market and Government should consider taking the matter to a national referendum, delegates to the ongoing CEO Africa 2019 Roundtable heard here yesterday.
There were, however, some opposing views that the referendum route was not the best way to go given that currency reforms was a continuous process that was driven by “trust.”
Finance and Economic Development Minister Professor Mthuli Ncube, is on record saying that the Government is working on the introduction of a new local currency within the “next 12 to 18 months.”
The introduction of a new local currency would supersede the multicurrency regime (underpinned by the United States dollar), which came into play at the height of hyperinflation era in 2009.
But CEOs here have said the market will make the best decision on any currency reform.
Experienced financial and deal originator Kenias Mafukidze said: “Let’s ask the market what needs to be done. It’s a question of voices not being heard. My thinking is that we should ask the chairperson of the Committee on Budget and the Speaker of Parliament and as a Roundtable come up with a resolution for coming up a with a national referendum on the currency reform. Because we are not where these decisions are being made, it’s important for us to have a say.”
However, Angu Gold CEO David Farley, said a national referendum for currency reform is not an ideal way forward.
“Currency reform is an ongoing process. As a Brexitier myself, I would counsel against a referendum. In a functional economy, good money drives out bad money. It’s all about trust,” he said.
Talk over currency reforms have escalated in both Government and the private sector over the past few months as foreign currency shortages have placed constraints on economic performance.
According to economist Kipson Gundani, “foreign currency is still a problem with some companies waiting for a long period to receive allocation from the Reserve Bank of Zimbabwe.”
The country received about US$6,3 billion from exports the previous year through, foreign direct investment, remittances and lines of credit.
However, although the US$6,3 billion outshines earnings of many countries in the region, Zimbabwe continues to face a crippling foreign currency shortage.
The country’s authorities also secured international lines of credit with the Afreximbank, but these seem to be failing to provide the much-needed foreign currency to acquire raw materials and essential imports.
Notwithstanding the growing debate over currency reforms the RBZ said earlier this week that Zimbabwe will continue using the multicurreny system, at least in the near future.
The apex bank moved quickly to dispel widespread social media reports propagated by former Finance Minister Tendai Biti that it could possibly announce the introduction of a new currency before the end of this month.
Monetise the bond notes, RTGS balances
In an interview on the sidelines, CEO Africa Roundtable executive director Oswel Binha, outlined a number of critical issues that the authorities need to work on to improve the currency conundrum.
“Zimbabwe finds itself in this situation where it has over borrowed in the local market. We have Government expenditure affecting us, and that has been the biggest problem.
“We believe strongly that firstly, there is need to monetise the bond notes and RTGS balances. The only effective way to deal with them is to draw a line in the life of RTGS balances which used to be US dollars and these are balances of the big corporates, big money handlers in this country. So there is need to go back to them (the corporates),” explained Binha.
“Secondly let’s stop the (forex) allocative role of the RBZ, including surrender requirements. The banks should now be allowed to start allocating forex at a market-determined exchange rate. They have got to come up with a managed exchange rate by floating the exchange.”
