eBusiness Weekly
Michael Tome
Business Writer
Zimbabwe’s business lobby groups have claimed that the country’s current export earnings retention thresholds and the central bank’s 200 percent policy interest rate are impeding businesses’ ability to grow capacity and diversify the country’s exports by making finance costly.
The Reserve Bank of Zimbabwe, on July 1, 2022, raised interest rates to 200 percent from 80 percent as part of measures to discourage borrowing for speculative tendencies believed to have been part of market transgressions that hurt the domestic currency.
August 2022, saw Zimbabwe’s highest year-on-year inflation since February of 2021 at 285 percent, a figure that has since started to retreat, as September 2022 inflation eased to 280, 4 percent followed by 269 percent in October. Interventions by the Treasury and the RBZ have led to a modicum of stability in prices of basic goods and services in recent times and this has seen restrictions in some commodities price movement.
The policy measures have, however, been pinpointed as an impediment to local firms’ capacity growth, especially towards value addition as the country seeks to diversify its exports from raw to value-added.
This is coupled with the RBZ exchange control directive which provides for a range of retention thresholds between 20- 40 percent which the industry alludes is leaving them with limited foreign currency for other internal operations, especially capital expenditure projects.
Zimbabwe National Chamber of Commerce (ZNCC) president Mike Kamungeremu said the business community was alive to the existence of opportunities that were going to accrue from Africa Continental Free Trade Area’s (AfCFTA) 1,3 trillion market.
He said diversification and significant export growth were going to remain a pipedream if some of the obtaining challenges continue to go unchallenged as they inhibit the country’s export potential.
“The issue of retention is still affecting exporters and I feel that if we sort that out we will be able to diversify and do more to our country’s export numbers. Exporters and potential exporters right now are also crying because of the exorbitant interest rate, particularly those that had borrowed before, it is an issue that needs to be looked at so that it does not impede their capacity to grow and to diversify,” said Kamungeremu.
He also implored the Government to walk the talk in terms of the ease of doing business with a special focus on the tax regime.
“In general, there is a need to improve the ease of doing business, if the improvement is realised then we can grow capacity as a country such that we are able to provide more products and attack more markets.
“We have issues around the two and four percent tax that also need to be looked at as they also impede the capacity of our local businesses.”
RBZ director, Exchange Control, Farai Masendu, indicated that the interest rates were just an instrument to tame the runaway inflation but were subject to review when the inflation shrinks.
He also highlighted that the central bank was flexible, and would soon consider reviewing retention prerequisites to allow exporters to have more funding for their internal operations.
“We are experiencing a level of stability on account of the policy measures put in place by the Government particularly the 200 percent, as of now our inflation is going down month on month, year on year and that is good for our economy, that’s the stability we are talking of.
“But definitely the interest rate is going to be revised consistent with inflation developments and the positive thing is you can anticipate a downward reduction on account of declining inflation.
“On retentions, we need to allow exporters more retentions so that they are able to fund their activities, for new exporters the policy is clear you are not subjected to any retentions and we will continue to review those so that we allow exporters significant retention,” said Masendu.
Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza said there is a need to put effort into developing key infrastructure, particularly on the energy front to ensure that key enablers of the economy are in place to steer growth in capacity and export diversification.
“Currently we have issues to do with energy, unless we do something as an economy it is going to be difficult to really grow our economy. As you know since 1980 we have not brought significant power into the grid, yes there are 600 megawatts expected but still will not be able to take us forward in terms of significantly growing industry and our exports,” he said.
