Gono to extend lifeline to exporters


Central bank governor Gideon Gono is expected to give a new lifeline to exporters, most of whom had threatened to stop exports because they were no longer viable, when he reviews his monetary policy this week.

Most listed companies which released their results for December said exports were no longer viable because the exchange rate being realised on the auction market was too low to enable them to survive.

They said the auction was one-sided and was tantamount to subsiding importers because exporters had no say in the rate. Exporters had been left at the mercy of bidders.

“As long as the pricing of foreign currency is one-sided,” Murray and Roberts said, “exports will not be viable. A viable auction system is one that lends itself to supply and demand forces while allowing sellers to withdraw the currency if the price on offer is unsatisfactory.”

Bulawayo-based Zimplow which earned $4.8 billion from exports in the six months to December compared with $3.7 billion from domestic sales, said the effect of the foreign exchange auction system had been to halve its Zimbabwe dollar export revenue. It said its future was now uncertain since it had been forced to rely on exports to survive because of the declining local market.

Retail group, Tedco, said it had been forced to close down its Bulawayo Export Processing Zone (EPZ) factory because the current environment did not favour exports. The move had put 500 jobs at stake.

Analysts said threats by several companies to curtail exports showed the extent to which the parallel market had become entrenched. Last year, companies surrendered half of their proceeds to the central bank to be changed at the official rate while the other half was changed on the open market.

With a parallel market rate of $6 000 to the greenback, exporters ended up with a blend rate of $3 400.

EPZ companies, on the other hand, retained all their earnings meaning that they realised $6 000 to the greenback for their exports.

In his monetary policy statement on December 18, Gono abolished the full-retention scheme pitting all exporters into the same basket. All exporters were now required to surrender 25 percent of their proceeds at the official rate and the remainder at the auction rate.

An analysis of the auction system by Imara Capital indicated that for normal exporters to earn the blend rate of $3 400 that they would have earned last year, the auction rate had to be $4 267.

The rate had to shoot up to $7 733 for EPZ exporters to realise the $6 000 they had been getting.

When the auction opened on January 12, the Zimbabwe dollar began to firm reaching $3 500 to the greenback before sliding to $4 619.24 last Thursday.

Though this was way beyond the $4 267 normal exporters needed to realise similar earnings that they earned last year, market analysts said most of the listed companies had an EPZ status and were thus retaining all their foreign currency.

They also said costs had escalated during the first quarter and inflation was still high.

Demand for foreign currency is still exceeding supply by far. At last Thursday’s auction, for example, there were 581 bids totalling US$15.2 million while only US$8 million was on offer. A staggering 361 bids were rejected.

Anthony Lopes Pinto of Imara Capital said because the auction system was controlled it was more of a “forex allocation system rather than an auction”.

Gono is likely to introduce measures that will entice exporters and individuals in the diaspora to remit more forex into the market.

Tobacco, which was one of the country’s biggest foreign currency earners, is only expected to earn, at most, US$150 million this year. This is just enough for four-months’ fuel imports.


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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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