The impact of coronavirus on Zimbabwe and the inability to access critical external finance must lead the country into crafting practical steps needed to enhance local production, Buy Zimbabwe founding director Munyaradzi Hwengwere has said.
He said the situation in the country, where resources, foreign currency in particular, do not meet import needs, should see scarce foreign currency directed towards local productive sectors.
Mr Hwengere’s comments, come at a time the Reserve Bank of Zimbabwe has directed authorised dealers at banks and Bureaux de Change, to prioritise foreign currency to goods and services “not available locally”.
Under Exchange Control Circular No 5 of 2020, the RBZ introduced a priority list for foreign currency payments that shall apply from the 28th of April 2020 to ensure that foreign currency resources are substantially channelled to the productive sectors of the economy in light of the Covid-19 pandemic.
The productive sector as well as production of essential goods and services “not readily available in Zimbabwe” will get 70 percent of the available foreign currency under category one of the priority list.
Some of the goods and services that make up category one include payment of university and college fees, importation of raw materials, machinery, mining consumables, medical consumables, loan repayments, and of packaging material.
Imports of critical and strategic goods such as basic food stuffs, fuel, health and agro-chemicals also form part of category one.
The balance of the foreign currency available to make foreign payments, making up 30 percent of the total, will be channelled toward category two which is for other foreign payments such as disinvestment proceeds and dividend remittances.
The second category also include the importation of non-commercial vehicles and other consumer goods but with emphasis that they should not be “readily available in Zimbabwe”.
Mr Hwengwere said although the intention to prioritise imports for goods and services not readily available in the country, rather than the usual tendency to import even that which is found locally is noble, the problem is that action at both Government, company and individual level, has been missing over the years.
“The challenge with Zimbabwe is that our actions have always been the biggest let down. We have had a systematic problem from the dollarisation era where we have operated from a negative capital account.
“The amount of money we have spent importing could have built us so many companies the size of Zimplats, which at some point employed directly 5 000 and indirectly 25 000.”
He said through imports the country is exporting jobs.
Mr Hwengwere suggested that Zimbabwe could adopt models used in countries like South Africa where government tenders are given to South African owned companies.
“South Africa has a framework that rates the local content and also has structures and governance systems that prefer local players,” he said.
The same model is used in countries like France, UK and the United States.
“If we want to preserve foreign currency we need to rate products according to their local content.”
Companies such as Nestle Zimbabwe, according to Mr Hwengwere are already implementing the model with 80 percent of local content in their products.
There is need to put money in promoting local products which is critical for national development.
Our approach in promoting local should be holistic post Covid-19, he said.
Market watchers, however, questioned the central banks capacity to enforce the latest directive, which is also similar to the ones introduced before in 2016 and May 2019.
The directive also comes at a time the central bank does not have control of how foreign currency is traded in the country with attempt to introduce an interbank market having found few takers.
Bankers continue to openly defy directives and bypass the interbank system.
More than a week after the Reuters trading system went live, no trades had gone through the platform. The Reuters trading system has since been abandoned in favour of pegged exchange rate.
Questions that continue to linger in light of the latest developments is whether the market will obey this directive and whether the RBZ has the capacity to enforce it.