THE Reserve Bank of Zimbabwe has granted the National Railways of Zimbabwe permission to charge in foreign currency for goods exported under the Cost, Insurance and Freight (CIF) conditions.
According to State media, NRZ board chairman Advocate Martin Dinha said the approval by the Central Bank for the rail entity to charge in foreign currency for goods exported under CIF conditions would go a long way in enabling the parastatal to repair its equipment and infrastructure.
“The authority to charge exporting customers in foreign currency is a welcome and progressive development for the organisation. With this approval NRZ can now approach its various exporting customers to inform and familiarise them with this new development. While NRZ has traditionally been collecting foreign currency from customers who are into export business, the foreign currency generated from this source has not been enough to requirements, though it assisted the organisation in repairing its rolling stock and infrastructure,” he said.
Adv Dinha said charging in foreign currency would also enable NRZ to improve its coffers to capacitate its business as well as procure essential spare parts.
“The intervention by the Central Bank is critical for NRZ considering that foreign currency has been essential in funding the organisation in hiring wagons and locomotives from the region to address resource and capacity gaps, hire inter-change, as well as procuring spares and accessories for wagons, locomotives and infrastructure maintenance. And at this juncture, the need for foreign currency for the organisation has become huge and urgent especially to hire locomotives and wagons for the movement of imported grains, to alleviate drought-induced shortfalls, among communities in Zimbabwe,” he said.
The approval for NRZ to charge in foreign currency came after the rail entity’s appeal to the Central Bank and the Ministry of Finance and Economic Development last year. NRZ submitted an appeal to RBZ seeking permission to be allowed to charge all exporters for railage in foreign currency. In its response to NRZ dated 31 December 2019, the Central Bank agreed in principle for the company to charge railage collection under the CIF basis.
“Please kindly note that in terms of the current Exchange Control administrative arrangements, where a transporter has shipped goods under the Cost, Insurance and Freight (CIF) basis; the respective transport or railage portion may be received by the transporter in foreign currency. Under the circumstances highlighted, National Railways of Zimbabwe may receive such portion of railage charges in foreign currency. Kindly, therefore, submit a specific application through your Authorised Dealers to have the necessary Exchange Control administrative structure for this arrangement to be operationalised”, read the RBZ response.
However, the move to allow NRZ to charge in foreign currency has been viewed by captains of industry as likely to compromise players in various sectors of the economy. Confederation of Zimbabwe Industries vice-president Mr Joseph Gunda said allowing NRZ to charge in foreign currency was unfair since businesses are only allowed to trade in local currency on the local market.
“The challenge we have is that, if NRZ is allowed to charge in foreign currency, it means we have to get the foreign currency ourselves. It seems there is now a contradiction here, so are we now saying companies are trading in foreign currency?” he exclaimed.
Mr Gunda said it was important to note that the manufacturing sector imports most of its raw materials using foreign currency, which is scarce in the country and ought to be put in good use to enhance productivity.
“We are now being forced to compromise the amount of foreign currency we get. Instead of us buying raw material we are now forced to use that money to pay current expenditure like working capital. I don’t see that benefiting the economy. If you allow NRZ to charge in foreign currency we might as well allow everybody because it compromises others. It means industry is being squeezed because with the foreign currency we get through the interbank market to buy raw material, we are being forced to pay NRZ,” he said.
Mr Gunda said there was a need for wider consultation to be done before allowing NRZ to charge in foreign currency.
Association for Business in Zimbabwe (Abuz) chief executive officer Mr Victor Nyoni said industry has noted with concern the use of foreign currency in transacting by certain sections of the economy.
“As the industry we have been complaining that some sections of our economy are dollarising and our attitude is that anything that comes from authorities particularly the Government, that gives a sort of an impression that foreign currency is the right currency to deal in, it gives the impetus to the whole economy that people should shun our local currency,” he said.