- March 1, 2019
- Posted in LOCAL
The Reserve Bank of Zimbabwe will allow exporters to keep part of their export proceeds before compulsory conversion to local currency for periods longer than the prescribed 30 days in exceptional circumstances where such need arises to avoid choking companies’ operations, Business Weekly can reveal.
This comes after central bank governor John Mangudya, indicated in the 2019 Monetary Policy Statement last week that exporters would be allowed to retain a prescribed percentage of their export proceeds in hard currency for only 30 days, after which the unused funds will be released onto the market at a prevailing exchange rate.
Mangudya floated the US dollar exchange rate against the RTGS dollar and other currencies within the multi-currency basket through the introduction of interbank market.
The interbank opened at 1:2,5, lower than average 1:3,5 on the parallel market thanks to the combination of official and parallel dollars..
Non retained earnings converted
The balance, which cannot be retained at all, is immediately converted to RTGS dollars at the prevailing exchange rate upon receipt to improve liquidity.
The new retention thresholds have already taken effect and an exchange control directive has been issued.
“Where there are exceptions, they (exporters) are given that exchange control authority/ approval.
“Just like CD1 forms, we say people (exporters) must acquit in 90 days, but others don’t submit within that period because of certain challenges. The exporters know that there is a law (providing for that).”
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said while the retention thresholds are commendable, the 30-day period was too short.
“We understand the need for the 30-day window but we believe the ideal thing is to have a window of 90 days to 180 days,” said Jabangwe.
“It will give comfort to the depositor (exporter) that I will not be forced into expenditure.
Hospitality Association of Zimbabwe (HAZ) president Innocent Manyera concurred with Jabangwe.
“Indeed, the wheel should be given time to turn. With the time period given, we might be faced with panic buying and unplanned expenditure might also end up affecting other cost line items.
“Cash flows are not that liquid. We need to spare for different expenditures without panic and captive expenditure,” Manyera said.
New measures a departure from the past
Mangudya said the latest policy position was in fact an improvement, given that before October 2018, companies could only retain their export proceeds for 14 days.
Economist Persistence Gwanyanya echoed Mangudya’s sentiments, saying the 30-day retention window is “just for regulation purposes, otherwise for genuine requests…extensions have always been granted.”
“What is important now is for banks to work closely with their clients to understand their cash flows as well as foreign currency requirements so that the seemingly shorter retention window doesn’t work against generators of foreign currency.
“But of course we need to get feedback from the market pertaining to this measure and if need be, it can be revised in a manner that balances the need to encourage increased foreign currency generation and its accessibility by the market,” Gwanyanya said.
He added that the move was necessary for the success of the interbank foreign exchange market.
Recently, the RBZ has come under fire from exporters who claim that the apex bank raided private accounts of exporters and used their funds.
Mangudya has fiercely denied the allegations.
Some exporters, including RioZim Limited, have gone to the point of filing litigation against the central bank over alleged denied access to export proceeds.
Early this month, RioZim, a diversified miner listed on the Zimbabwe Stock Exchange which extracts gold at three mines in Kadoma, Chegutu and Masvingo, shut down operations for the second time in four months over delays in payments of the forex it was entitled to retain.
It has since resumed operations.