Uncategorized

RBZ decision to enhance rewards to exporters fantastic: Chanakira

09 Feb, 2018 - 07:02 0 Views
RBZ decision to enhance rewards to exporters fantastic: Chanakira Mr Chanakira

eBusiness Weekly

Kudzanai Sharara
The decision by the Reserve Bank of Zimbabwe to enhance rewards to exporters as well as give assurance of ease access to foreign currency is fantastic, banker and financial markets expert Dr Nigel Chanakira has said, but other analysts believe the central bank has no business in providing incentives directly to economic players.

Speaking on Capitalk FM, Dr Chanakira said enhancing rewards to exporters and reducing the cost of doing export business is fantastic “because we needed that for retention on the part of people who are actually generating exports.”

As part of his 2018 Monetary Policy Statement (MPS) presented on Wednesday this week RBZ governor Dr John Mangudya tweaked export incentives for horticulture, cotton, macadamia and gold producers to 10 percent while tobacco growers will get 12,5 percent.

“In recognition of the need to ensure continuous generation of foreign exchange, the foreign currency retention threshold for all services and products except gold, diamonds, platinum, chrome and tobacco remains at 100 percent of export receipts for exporters’ use in their business operations within an extended period of up to 14 days from the receipt of funds.

“The retention threshold for private owned diamond firms, platinum and chrome producers has been increased from 20 percent to 35 percent whilst that for gold, public owned diamond firms and tobacco remain as per current policy,” Dr Mangudya said.

Dr Chanakira agreed saying “enhancing rewards to exporters and reducing the cost of doing export business (is) fantastic because we needed that for retention on the part of people who are actually generating exports.”

While others have called for the scrapping of the incentives Dr Chanakira argued that: “The incentives remain necessary because we are under-performing in terms of our exports. We are consuming more imports than the economy can sustain so we need those incentives in place until we build up our reserves to a respectable position say a minimum of three months of import cover sitting at the central bank.”

“If you don’t incentivise people to export, they then produce for the local market which is overpriced anyway. So what we want to do is we need forex. To be an exporter is tough it’s not a walk in the park so (we need) to keep them incentivised so that we compete globally.”

Other analysts however differed with both Dr Mangudya and Dr Chanakira saying the RBZ should not be driving the issuance of incentives.

An MPS commentary by Trigrams Investments said by providing incentives, the RBZ was making itself a willing participant “and that is how money printing starts.”

“They should focus on capacitating the financial system to service the productive sectors ahead of consumption.

“Banks made a profit of $241,94 million collectively, meaning there is significant headroom to push charges down even further and that should be the policy. Banks should be forced to make money from lending.”

Trigrams said the loan to deposit ratio, where total loans are at $3,8 billion against total deposits of $8,48 billion across 19 institutions, is not a good ratio at all.

“Banks need to become more efficient with their deposits and lower transactional charges. This is what the RBZ should be focused on. Banks need to lend more and grow their customer’s productive bases. The RBZ or government will never be able to do this effectively, but banks can.

“Whilst export incentives seem to be getting positive results in terms of export receipts, the effect has been increased local balances on the RTGS system. It’s still not clear how the bond note facilities actually work, because those US$ are somewhere and could possibly be used more efficiently in other ways,” said Trigrams.

An economic governance officer with Zimbabwe Environmental Law Association (ZELA) Mukasiri Sibanda conquered saying export incentives with regards to the mining sector are harmful rather than helpful because they make mineral royalty income sterile including other tax revenue.

“Export taxes for platinum and lithium at 5 percent each are rendered ineffective as a tool to deter exportation of raw minerals because the export incentives paid outweighs export taxes.

Minerals are finite resources and should anchor domestic resource mobilisation efforts to fund social protection for the benefit of majority poor citizens,” said Sibanda.

Sibanda said the RBZ must scrap the export tax in the mining sector and focus on addressing foreign currency shortages in a holistic manner and not the current “short sighted approach.”

Share This:

Sponsored Links

Survey


We value your opinion! Take a moment to complete our survey

This will close in 20 seconds