Production not Bond Notes, the only solution to Zim’s economic woes
Zimbabwe is importing more than it is exporting, creating what is known as trade deficit, and taking economic sense into the equation in any given economy, it is understood that imports drain forex.
As the cash crisis deepens in the country, the government is soon to introduce bond notes as a way to improve liquidity into the economy, and arrest capital flight, amid fears that this could be the reintroduction of the dreaded local currency. Others are of the premonition that bringing bond notes may lead to inflation, as they fear that the government might print more than that can be supported by the 200 million loan facility.
Officially opening the ZimTrade Exporters’ Conference 2016 at a local hotel in Harare yesterday, Director Enterprise Development in the Ministry of Industry and Commerce, Florence Makambe said Zimbabwe’s exports have been subdued and fell short to spur economic growth, and the resultant perennial trade deficits since 2009 is reflected by the high and unsustainable imports absorption.
She said this is coming on the back of weakened export competitiveness of local products due to high production costs, limited production capacity and supply chain challenges has led to the high importation of finished goods.
“As a result of these challenges, the government has adopted a blend of policies aimed to give relief and level the playing field to the manufacturing sector,” she said.
She added that these measures are temporary and to meant stimulate domestic production which she acknowledged as being inevitable for the growth of the economy.
While contributing to the discussion at the same event Kumbirai Katsande, who was chairing the discussion panel highlighted the need to promote exports.
He said in some cases South Africa can import and value adds before exporting, and he mockingly added that goods are then labelled “Proudly made in South Africa, and proudly consumed in Harare.”
Confederation of Zimbabwe Industries (CZI)’s Membership and Marketing Manager, Kuda Matare noted in the Business Intelligence Report June 2016, that the country’s borders are porous and that it is so easy to bring products into Zimbabwe and take out the money as well, but the same cannot be said on the ease to export from Zimbabwe.
CZI is on record warning the authorities about the dangers of trade deficits, it has also told government, international financiers, and development partners that the huge amounts of imports into Zimbabwe are a channel for suspected money laundering.
The industries body has also called on the government to remove export restrictions so that production and earnings for the country can be boosted. CZI commends the government’s export incentives introduced through the Reserve Bank of Zimbabwe recently, but says export restrictions such as export permits requirements is working against this noble export promotion gesture.
Meanwhile, according to the RBZ, the bond notes set to be introduced next month are only meant to promote exports. Under this facility exporters will receive 5 percent paid in bond notes on exports receipts. Asked on the logic behind putting the 200 million in bond notes and not just injecting the money into the economy in US dollars as it is, RBZ governor John Mangudya in his address about cash crisis early this year said this was done to cushion the facility from abuse through externalisation or capital flight.
This bond notes question has given the government headaches as it tries to clear people’s fears, whose announcement early this year brought unintended consequences, panic and traumatic memories of the Zimbabwe dollar era. Launching the Zimbabwe National Competitiveness Report last week, Vice President Emmerson Mnangagwa pleaded with Zimbabweans to trust government intentions in bringing the bond notes on board.