ZiG is suffocating the enterprise – ZimEye

By Business Reporter – Zimbabwe’s business community is facing acute foreign exchange shortages in the formal market, threatening their ability to restock essential goods.

The Confederation of Zimbabwe Industries (CZI) confirmed the development and warned of imminent shortages of basic commodities if the issue was not addressed.

Zaire called on authorities to assist manufacturers in obtaining foreign exchange through the Willing Buyers Willing Sellers (WBWS) platform.

CZI CEO Sekai Kuvarika acknowledged that while there has been some stabilization in the market, companies are still finding it increasingly difficult to obtain the foreign exchange they need to maintain operations. She said:

“This is a serious problem. Manufacturers are struggling to access foreign exchange, which is vital to their operations. We are in ongoing dialogue with the monetary authorities to find a solution. Although there is some stability in the market, the lack of access to foreign exchange remains a major challenge, especially for the import of raw materials. As you know, Zimbabwe’s manufacturing industry is highly dependent on imports – more than 70% in most cases.”
Kuvarika added that the country’s largest business lobby group, CZI, had approached the Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu about the matter. She said:
“We met with the Governor to discuss the accumulation of Zimbabwean dollars (ZiG) due to limited access to foreign exchange for importing raw materials. From our discussions, it appears that the RBZ is considering the law of averages, suggesting that manufacturers may have significant local sales in US dollars, which may reduce their overall foreign exchange requirements.”

Economic analyst Rufaro Zengeni criticized the current WBWS platform and believes that it needs to be liberalized. He commented:
“The current system is inconsistent. If the central bank fixes the exchange rate and people are not allowed to raise their bids, it creates shortages. Despite the scarcity of foreign exchange, prices have not moved in the past three months. This discrepancy points to a fundamental problem with our price discovery mechanism.”
Economist Prosper Chitambara warned that a shortage of foreign exchange in the official market has led to a depreciation of the Zimbabwean dollar and rising inflation. He explained:
“It seems that there are not enough willing sellers of foreign exchange to meet the high demand from buyers. As a result, many businesses turn to the parallel foreign exchange market, causing the ZiG to depreciate. This is a clear example of a mismatch between demand and supply of foreign exchange in the formal market.”
Another economist, Gift Mugano, revealed that some businesses are only able to meet a small portion of their foreign exchange needs. He said:
“Business executives have told me they are struggling to get foreign exchange from banks, with some only able to get 5-10% of the foreign exchange they need despite guarantees from the Reserve Bank of Zimbabwe. This high demand for dollars has caused the exchange rate to soar, with the current rate ranging between 1 Zimbabwe pound to the dollar and 22.30 Zimbabwe pounds to the dollar.”

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