SA firms to lose out on Zimbabwe US$ earnings

SOUTH African companies are set to lose out on their US dollar earnings from Zimbabwe after the country's central bank said it will authorise payment of foreign suppliers in their own currencies only.

Last week the country's biggest grocery retailer OK Zimbabwe told a results briefing that it will no longer pay its South African suppliers in dollars but in rand.

CEO Willard Zireva said while the retailer procured goods mainly in US dollars in its 2016 financial year, this "is changing now under new settlements arrangement and the main currency for procurements will be ZAR going forward".

Last month the Reserve Bank of Zimbabwe said it is now encouraging payment for various imports of goods and services to be made "using the currency of origin of imports for those currencies under the multi-currency system".

With around 60 percent of Zimbabwe's imports coming from South Africa, the move will have a significant impact on the dollar earnings of most South African companies with a huge market in Zimbabwe.

In the first quarter of 2016 to March 31, Zimbabwe imported 36 percent of its $1.328bn import bill from South Africa. Eskom has also been exporting 300MW of electricity to Zimbabwe, with the dollar earnings being the major attraction.

Zimbabwe has been experiencing serious dollar shortages in the last couple of months. Meanwhile, the Bankers Association of Zimbabwe (BAZ) has urged the country's authorities to adopt the ZAR as the major transacting currency.

Presenting their view to Parliament earlier on Monday last week, BAZ president and MBCA Bank managing director Charity Jinya called on the country to use the South African unit as the major transacting currency, as this would reduce the concentration risk associated with heavy reliance on dollar transactions.