Zimbabwe: RBZ Capacitates Industry With U.S.$70m

14 FEBRUARY 2022

The Herald (Harare)

By Farirai Machivenyika

The Reserve Bank of Zimbabwe (RBZ)in January allocated approximately US$70 million to companies through the foreign currency auction system, with 60 percent of the funds channelled towards importation of raw materials to boost local production.

The foreign currency auction resumed for the year mid-January.

In a statement yesterday, RBZ Governor Dr John Mangudya said 576 beneficiaries were allocated US$58 301 775 under the main foreign exchange auction while 1 022 entities were allocated US$11 340 273 under the SMEs foreign exchange auction.

"The bulk of the funds allotted at the auctions during the month (68 percent) went towards payment for raw materials (US$28 688 860) and machinery and equipment (US$18846 575), with the remaining 32 percent of the total allotments going towards payment for consumables (US$6 436 011), services (US$5 823 657), retail and distribution (US$4 554 772), pharmaceuticals (US$3 776 634) and packaging (US$1 465 287)," he said.

The RBZ has disbursed US$2 666 022 861 since the auction began in 2020, in a development that has contributed towards stabilising inflation and ensuring increased local production of goods.

However, there have been challenges pertaining to disbursements of the allotted funds.

Yesterday, Confederation of Zimbabwe Industries chief executive officer, Ms Sekai Kuvarika, said it was imperative that money be disbursed timely to ensure companies continue to operate unhindered.

"The desirable situation is where the auction gets up-to-date with payments," she said.

"As things stand, it is not (up-to-date). We have companies with bids from as far back as November 2021 still not paid.

"It is important that the amount availed for bidding considers retiring this backlog so the market can run as a proper Dutch auction that is making available amounts known and auctioning only that amount and settling the bids in two days as was the case when the auction started."

Last month, the RBZ met industry players where they resolved to develop strategies to enhance the attractiveness of the local currency and strengthen its demand in the context of the multicurrency system currently in place.

In addition, the RBZ encouraged everyone to exhibit good leadership and exercise restraint on the volatility of the foreign exchange rate while relevant authorities were urged to monitor use of funds obtained through the auction and punish those who submit fake documents.

Other resolutions include continued efforts by the RBZ to refine the foreign exchange auction system and to timely fund auction allotments in line with the auction rules.

The bank was also urged to continue fighting inflation through restrictive monetary policy and building foreign exchange reserves as a way of augmenting the defence of the value of the local currency.