Temporary forex relief for companies

COMPANIES facing imminent closure due to lack of foreign currency got temporary respite after government issued letters of credit allowing large corporates to procure raw materials, Confederation of Zimbabwe Industries (CZI) has said.

CZI president Sifelani Jabangwe told NewsDay yesterday that after a meeting with Industry minister Mangaliso Ndlovu and central bank governor John Mangudya government agreed to offer letters of credit until March to allow large corporates in food manufacturing to import raw materials.

Last week, the largest industry organisation sent an SOS requesting response from government in 10 days bemoaning that several companies were on the verge of collapse with some considering disinvesting from Zimbabwe.

The sector alone is battling a foreign payment backlog of $500 million according to CZI.

The southern African country is facing acute forex shortages hampering the procurement of critical raw materials, drugs and fuel, among others.

"We met with government and large corporates especially those that are in food processing were offered letters of credits which they can use between now and March. These letters will allow these companies to import raw materials and pay at a later date. To some extent, we can say the problem is addressed, but that does not address it 100%,"Jabangwe said.

The issuance of letters of credit (a letter issued by a bank to another bank especially one in a different country to serve as a guarantee for payments made to a specified person under specified conditions) to March is premised on the country's big forex earner, tobacco, which will be selling by then.