'$5 compensation for Zimdollar accounts a howler,' says CZI boss

The move by the Reserve Bank of Zimbabwe to demonetise the Zimbabwe dollar balances by alloting genuine account holders $5 per account is a faux pas, Confederation of Zimbabwe Industries (CZI) president Charles Msipa has said.

In presenting his Monetary Policy Statement on Wednesday, RBZ governor Dr John Mangudya said the central bank would use $20 million for the demonetisation of Z$ balances by mid-year.

"All genuine or normal bank accounts, other than loan accounts, as at 31 December 2008 would be paid an equal flat amount of $5 per account," he said, explaining that the move was one of bringing "finality" to the long-drawn-out issue.

But Msipa has told BH24 that the modest $5 payments will not bring back the public's confidence in the local financial services sector, rather the governor should have paid out the amounts that were in the respective accounts.

"The demonetisation of the Zimbabwean dollars has been long overdue and CZI welcomes the governor's initiative.

"However, giving account holders a flat amount of $5 will likely have no impact on confidence levels. We would recommend payment based on the amount in the account," he said.

Market analysts say it would not be impossible for the central bank to pay according to what was in the accounts as the banks should have all the records of the Z$ accounts still intact.

Demonetisation is the process in which a particular currency or valuable mineral is degraded as a legal tender.

Turnaround strategies for the manufacturing sector.

The CZI president was, however, say-so about a number of the critical measures that were pronounced in the Monetary Policy Statement aimed at enhancing the competitiveness of the productive sector, especially with regards to the shake-up in the financing models of the local banking sector.

"Rehabilitation of the manufacturing sector strongly came out of the governor's statement. In particular, the Reserve Bank will assist in mobilising resources for expanding and restructuring the Distressed Industries and Marginalised Areas Fund (DiMAF) to cater for the medium finance requirements of the manufacturing sector as well as identifying specific cases that need resuscitation through financial restructuring and/or financial engineering in collaboration with local banks and ZAMCO," said Msipa.

One of the key issues that has negatively affected the performance of the manufacturing sector has been the low level of exports.

Zimbabwe's external sector position remains precarious, with both the trade and current account balances being projected to remain largely negative in the medium term due to rising imports against a backdrop of low export receipts.

The CZI boss said the export enhancing measures will help increase export invoices.

"We thank the RBZ for reducing the turnaround time of export documentation processing as well as calling for other government departments to do so. "Realising that some export proceeds may be unrecoverable, the governor extended the amnesty on non-recoverable export receipts to 31 March 2015," he said.