Zimbabwe forex auction system brings market stability

Confederation of Zimbabwe Industries president Henry Ruzvidzo
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THE Reserve Bank of Zimbabwe (RBZ) foreign currency auction trading system introduced in June has brought sanity and stability in the business sector, but more should be done to make it sustainable, industry players have said.

In a bid to arrest the runaway parallel market and restore confidence in the market, the central bank eight weeks ago, introduced the foreign currency auction trading system.

To date, a total of US$121,98 million, excluding small to medium enterprises (SMEs), has been allocated to industry.

The first US dollar weekly auction held on June 23 brought the Zimbabwe dollar to the United State dollar exchange rate to 57:1 from the hitherto official rate of 25:1.

At the last auction last Thursday, the Zimbabwe dollar’s value fell by 2.6% to $82.56:$1.

Industry officials who spoke to Standardbusiness last week said the system had brought sanity and stability in the business sector.

“It has been useful. Remember, prior to the introduction of the foreign currency trading system, we had an untenable situation whereby industry was struggling to access forex.

“But now, a number of players in the industry have been able to access forex through the system,” Confederation of Zimbabwe Industries president Henry Ruzvidzo, said.

Ruzvidzo said efforts should now be directed to making the whole system sustainable.

Association for Business in Zimbabwe CEO Victor Nyoni said since the introduction of the system, there had been some improvements in the supply and distribution of forex.

“Some of our members have been able to access forex through that system,” he said.

“We are happy as an industry that we are accessing foreign currency.

“We are only worried about the sustainability of the system.”

Nyoni said they were in the dark concerning the source of the forex.

“We don’t know the source of the forex whether it comes from the exporters or it’s a government facility,” he said.

“If it comes from exporters, the better, but if it’s a government facility it will be difficult to sustain because what happens if that facility dries up”

Zimbabwe National Chamber of Commerce Matabeleland chapter president Golden Muoni weighed in, saying: “Generally, the auction system brought sanity and stability in the business sector.

“We are now able to plan but we are not sure for how long it’s going to be stable like that.”

“As long as businesses get the forex to pay their suppliers, buy raw materials and equipment among others it’s okay. Before the introduction of the system it was very difficult to plan,” Muoni added.

Going forward, Muoni said “we now need a very stable system which is going to allow for businesses to focus for five to 10 years because business is about planning and focusing.”

To cater for the needs of SMEs who, previously, could not raise the US$50 000 minimum bid required at the main auction, the apex bank introduced another auction system which is running concurrently with the weekly foreign exchange trading system.

To date, SMEs have been allocated a total of US$1,25 million. – The Standard