Industry raps Mthuli Ncube's half-hearted currency reforms

INDUSTRY has rapped Finance and Economic Development minister Mthuli Ncube over his "half-hearted approach" to the currency reforms, saying the continued use of the United States dollar in the market was undermining confidence in the local unit.

In June, government made the real-time gross settlement (RTGS) and bonds notes as well as coins the sole legal tender through statutory instrument (SI) 142 of 2019, ending a decade of dollarisation.

Ncube has, however, been inconsistent on whether the country would have a fiat currency or would continue using RTGS and bond notes as a currency.

He has also not been clear on when exactly the local currency would be introduced, further creating confusion on the market.

He recently wrote in the Financial Times, saying the country would have its fiat currency later in the year.

"As the former chief economist at the African Development Bank, I have witnessed the results of currency volatility across many contexts. I have seen what works — and the reverse. And that is why, in June of this year, the government made the RTGS — a quasi-currency that will act as a bridge to the introduction of a sovereign currency later this year — the sole legal tender in Zimbabwe," Ncube wrote.

"The Zimbabwe dollar, comprising RTGS and bond notes, is now the designated sole legal tender in Zimbabwe — pending the rollout of a fiat currency later in the year. Initially, the government introduced it alongside the other currencies, with the intention of it becoming the main currency of exchange in place of the dollar, which would primarily be used as a reserve of value."

Confederation of Zimbabwe Industries president Henry Ruzvidzo said the half-hearted approach to mono-currency system was undermining confidence.

"Prospects for industry to year-end will depend on a number of important factors, which include foreign currency availability, electricity supply and general macro-economic stability. The macro environment has been highly volatile for most of the year and does not auger well for business performance," Ruzvidzo said.

"A functional market for foreign currency requires liquidity and transparency. The continued half-hearted approach to the mono-currency system is undermining confidence in the local currency. The active support of the market by the monetary authorities is also important for stability."

Zimbabwe National Chamber of Commerce Matabeleland Chapter president Golden Muoni said the interbank market, which was introduced to curb a booming parallel market for foreign currency and to make forex available, was yet to gain traction.

"We haven't seen much of the performance in the interbank market," he said.

Muoni said banks were still struggling with cash, a situation that was making their operations difficult.

"There is no change in the economy in terms of performance. We are yet to see whether civil servants salary increment would stimulate demand. Companies are producing, but the demand is very low. Currently, industry in Bulawayo is floating around 30 to 35% capacity," he said.

Muoni called upon political leaders to sit down and dialogue over the country's economic situation.

"Some of the challenges could be solved in no time if our politicians could sit down and dialogue," he said.