DAIRIBORD Holdings Limited chief executive officer Mr Antony Mandiwanza has waded into the debate over the re-introduction of a local currency, saying using the US dollar to produce pushes up operating costs.
Further, Mr Mandiwanzira said in an environment of shortages of foreign currency, Zimbabwe becomes exposed to an influx of foreign products as producers seek to cream the country off the hard currency.
His comments come at a time when Finance and Economic Development Minister Professor Mthuli Ncube, has indicated that Zimbabwe would be introducing a local currency in the next 12 to 18 months.
Prof Ncube argues using US dollars makes the local products “uncompetitive”, while the hard currency also promotes “distortionary pricing”.
And Mr Mandiwanza says Zimbabwe has lost considerable market share to foreign products, particularly from South Africa, as manufacturers can bring their goods even at “a 25 percent discount”, but remaining lowly priced compared to locally produced goods.
He adds that when the goods are sold, the manufacturers get double profit from the goods and the conversion of money from US dollars to the South African rand.
“. . . so it’s an issue to do with currency, and the role of the currency in stimulating economic reform.
“If you have hard currency in an environment that is surrounded by soft currencies, you invariably have got very serious competitive issues arising,” said the Zimbabwe Stock Exchange-listed firm’s boss while addressing members of the Parliamentary Portfolio Committee on Industry and Commerce during a tour of the milk processer’s plant last week.
“And those competitive issues will hurt your ability to value add and export. But rather, they will be an attraction to bring products into your own domain.
“The role of a hard currency in a soft currency ought to be interrogated and understood.
“I don’t want to get into that subject but I am quite comfortable to respond if you so wish because I think it is a key conundrum that ought to be addressed as we go forward.”
Mr Mandiwanza said he was not pushing the country into adopting a “haphazard, emotional decision” to re-introduce the local currency or adopting a “softer one” without putting in place key fundamentals.
Key fundamentals before local currency is introduced
“So it would be foolish for anyone to bring another currency by whatever description, without having addressed those fundamental issues which protect your currency.
“One of them, of primary importance is production, production, production.
“The economy must produce but not only production, but also value addition of products, so that you are able to defend your local market,” said Mr Mandiwanza.
He added that Zimbabwe needed to participate significantly in the regional market before re-introducing a new currency.
The central bank also needs to have foreign currency reserves to “more than protect your currency”, while Government should also “restructure spending” so that the difference between expenditure and revenue is narrowed.
The move will allow the private sector to use the resources conserved, to grow their businesses.
Mr Mandiwanza also believes Zimbabwe should be part of the broader international community, before adopting a new currency.
Confederation of Zimbabwe Industries (CZI) president Mr Sifelani Jabangwe recently urged the country to “adopt a softer currency” to reduce production costs.
Last week, Prof Ncube told The Sunday Mail Business on the margins of his presentation to students of the Defence Course Intake 7 of 2018, at the Zimbabwe National Defence College in Mazowe that a local currency was the way to go.
But he insisted that there was no obsession with dates as to when the currency would be re-introduced.
Prof Ncube said there was need to ensure “our track record on fiscal discipline is established and we are establishing that quite fast, which is good, we are making progress”.
Government is determined to deal with the “twin deficits” — fiscal and current account deficits — which have exposed the economy to vagaries such as inflation, indebtedness, arrears and foreign currency shortages.
“Also, we want to make sure that we have the right micro-institutions in terms of a monetary policy committee, which will work within the central bank structure to stabilise currency and make sure that we can do the right inflation targeting.
“Also, we want to make sure that we have the right levels of (foreign currency) reserves, but more importantly that we have the right lines of credit and so forth.
“So we are working on all those and we are making good progress,” he said.