Business / Economy
Former US ambassador warned about Bulawayo's de-industrialisation in 2002
26 Aug 2011 at 06:08hrs | Views
FORMER United States ambassador Joseph Sullivan warned about Bulawayo's de-industrialisation as early as 2002.
In a cable released by WikiLeaks on Wednesday, Ambassador Sullivan said a catalyst for the rush to the exits by companies was the 2003 budget which compelled exporters to surrender half their export earnings to the Reserve Bank, ostensibly for official exchange but in practice as an indirect tax.
To spend the remaining half of their earnings, firms had to convince the Reserve Bank that purchases were for "priority" items.
A diplomatic cable sent to the US State Department soon after visiting Bulawayo in December 2002, Ambassador Sullivan said the government's management of foreign exchange in- and outflows "will make-or-break companies, industries or even the economy."
He added: "The forex-starved GOZ [government of Zimbabwe] is not letting an apparel company import bicycles or maize meal for workers, or coffee and cotton producers buy herbicides and pesticides, hardly the stuff of frivolous extravagance.
"Some white and Asian-owned businesses fear the GOZ will only approve forex expenses of black-owned firms, turning Foreign Currency Accounts into a vehicle for indigenisation of the economy. Whether true or not, the GOZ will surely run exporters out of businesses by refusing them access to even half their earnings."
The US officials visited three unnamed companies which were exporting to the United States.
"The impression we return with is not encouraging," the ambassador said. "The three apparel producers we met with are moving, respectively, to South Africa, the black market and despair."
The head of Bulawayo's Zimbabwe Investment Centre, who is not named, is said to have told the American diplomats that he gets "so few inquiries from foreign investors that he has trouble justifying his office's existence".
"The local Confederation of Industries president said many companies are considering shutting their doors beyond the Christmas break while they wait (read: pray) for more workable policies. His own cement company lacks foreign exchange to keep its expensive Caterpillar machines running. Since the cement firm does not export, it has no Foreign Currency Account. Meanwhile, the 2003 budget makes it illegal to buy foreign currency at parallel rates from bureaux de change."
In a cable released by WikiLeaks on Wednesday, Ambassador Sullivan said a catalyst for the rush to the exits by companies was the 2003 budget which compelled exporters to surrender half their export earnings to the Reserve Bank, ostensibly for official exchange but in practice as an indirect tax.
To spend the remaining half of their earnings, firms had to convince the Reserve Bank that purchases were for "priority" items.
A diplomatic cable sent to the US State Department soon after visiting Bulawayo in December 2002, Ambassador Sullivan said the government's management of foreign exchange in- and outflows "will make-or-break companies, industries or even the economy."
He added: "The forex-starved GOZ [government of Zimbabwe] is not letting an apparel company import bicycles or maize meal for workers, or coffee and cotton producers buy herbicides and pesticides, hardly the stuff of frivolous extravagance.
"Some white and Asian-owned businesses fear the GOZ will only approve forex expenses of black-owned firms, turning Foreign Currency Accounts into a vehicle for indigenisation of the economy. Whether true or not, the GOZ will surely run exporters out of businesses by refusing them access to even half their earnings."
The US officials visited three unnamed companies which were exporting to the United States.
"The impression we return with is not encouraging," the ambassador said. "The three apparel producers we met with are moving, respectively, to South Africa, the black market and despair."
The head of Bulawayo's Zimbabwe Investment Centre, who is not named, is said to have told the American diplomats that he gets "so few inquiries from foreign investors that he has trouble justifying his office's existence".
"The local Confederation of Industries president said many companies are considering shutting their doors beyond the Christmas break while they wait (read: pray) for more workable policies. His own cement company lacks foreign exchange to keep its expensive Caterpillar machines running. Since the cement firm does not export, it has no Foreign Currency Account. Meanwhile, the 2003 budget makes it illegal to buy foreign currency at parallel rates from bureaux de change."
Source - newzim
