Planning for the future has become a nightmare for businesses and economic agents are surrounded by an uncertain and unpredictable future due to the Government’s financing model for ongoing programmes and developmental projects.
After the Presidential address on the 7th of May 2022, the Chamber confirms government non-alignment and inconsistence of the policies as an economic crisis root cause as opposed to sponsored economic saboteurs as purported by the government.
In their official statement, ZNCC said, “The conclusion from the Government that negative economic sentiments, not fundamentals are driving the economy is partially incorrect. The fundamentals such as money supply and foreign exchange management are misaligned and those are actually driving negative sentiments not blaming the adverse expectations.”
The chamber confirms that the Restoration of Lost Value on Bank Deposits as a measure promised by the government will not be enough to gain back the trust that has been lost and the credibility of the Government’s policies.
On the issue of Clearance of Foreign Auction Backlog ZNCC said, “The forex auction system currently in place is mainly serving as a foreign currency allocation mechanism through the priority list which is depriving other market players’ access to the price discovery platform. In the current setup, facilitating the participation of the majority of businesses on the auction is expected to enhance ownership and buy-in from all economic agents.”
The chamber acknowledges that the exchange control current regulations are viewed as misaligned and there is a need for high-level engagements to reach common ground among all stakeholders. What the business community is concerned about is not the quantum of the rate of exchange, but stability in the exchange rate, ZNCC said.
Fast-paced de-dollarization is not ideal given the prevailing volatile exchange situation and wayward inflation rate on the other hand. ZNCC therefore, commend the Government’s stance to continue with the dual currency system, which they added in their communique.
“There is a complete loss of faith in local currency, and economic agents are desperately getting rid of their Zimbabwean dollar the very moment they earn it. We reiterate the continued enhancement of the confidence-building measures for the local currency,” ZNCC added in response to The Collection of Revenue in Foreign Currency as cited in the announcement by Mnangagwa.
On the issue of exchange rates, the chamber said that there are two options to consider, either liberalize the main auction or adopt the interbank market completely as we graduate towards a willing-buyer willing-seller model.
In response to the Quarterly Reserve Money Growth now at 0% from 5% per quarter, the chamber feels that the Government has left no room at all for even slight growth in reserve money supply, thus a huge statement with regards to controlling money supply growth.
ZNCC acknowledges that the global practice is to focus on reserve money which the Bank has total control of but, the Zimbabwean situation requires a broader approach. The policy announcement by the Central Government rather than the Reserve Bank of Zimbabwe is a clear indication of the lack of central bank independence.
Individual households and firms are now forced to transact mainly in local currency because the 4% is a huge add-up to the cost of doing business, eating up into savings and profits. This symbolizes a fast-paced de-dollarization taking place. Any move towards full-scale de-dollarization is ill-timed, ZNCC added
The punitive tax regime in Zimbabwe is the major cause of the high level of informality in the economy.
Against the Zimbabwe is open for business mantra, ZNCC confirms that the Foreign Currency Withdrawal Levy policy measure clearly signifies that the Government is currently seized with revenue collection as opposed to creating an enabling environment for business to bloom.
On the Suspension of Lending by Banks clause, ZNCC questioned if this is an effective measure to restore market confidence, preserve value and ensure macroeconomic stability? Surely, this is not an ideal measure to control the growth in the broad money supply. There are other measures such as moral suasion that can be arranged between the RBZ and commercial banks, they added.
ZNCC confirms that The Government has suspended banking but banks remain intact, legitimizing a parallel banking system with usurious interest rates and no investor would be attracted to such an economy where lending can be suspended overnight. This is a step back in the “Zimbabwe is open for business” mantra.
Conclusively, ZNCC said that there are quite a number of quality measures that need to be done to move this economy forward are well-documented and are known within the public domain yet the Government is choosing to ignore such genuine advice.
In conclusion, the establishment of a social contract and adherence to it between the policymakers and all interested stakeholders need not be emphasized, ZNCC added.