CONFEDERATION of Zimbabwe Industries (CZI) president Sifelani Jabangwe, says re-dollarising the economy is counterproductive as it stifles growth and could halve the size of the economy.
Mr Jabangwe’s remarks come at a time self re-dollarisation appears to gather pace as more firms demand payments in foreign currency, principally the US dollar.
Giant beverages manufacturer, Delta Corporation, on Wednesday announced it will start charging its products in foreign currency today.
Delta said the move was designed to breathe life into its operations that have been choked by foreign currency shortages.
Government is expected to meet Delta’s top executives today to explore options that could see the company abandoning its decision.
Delta requires $2 million per month in foreign currency for it to keep equipment running and produce adequate lager beer and soft drinks for the nation.
But Mr Jabangwe told The Herald Business yesterday that re-dollarisation could to plunge the economy into regression.
“We see more companies wanting to sell in US dollars, but the issue is that we don’t need dollarisation as an economy,” said Mr Jabangwe.
“The economy will shrink by as much as 50 percent if we dollarise so for me it is not the right way to go.
“We have seen it with US dollars in the past that we won’t be competitive when using the US dollar.”
Market watchers say during the period 2009 to 2011, the economy stabilised, but did not grow significantly due to challenges posed by the use of US dollars.
Statistics from the Zimbabwe National Statistics Agency (ZimStat) show that the economy grew by 5,3 percent in 2009 after contracting 9,9 percent in 2008, which was characterised by stratospheric inflation.
Zimbabwe’s gross domestic product (GDP) annual growth rate increased to 11,4 percent in 2010,; 11,9 percent in 2011; and receded to 10,6 percent in 2012, before spectacularly falling to 4,5 percent in 2013; 3,9 percent in 2014; 1,5 percent in 2015; 0,6 percent in 2016 and 2,9 percent last year.
Capacity utilisation in the manufacturing sector, which was around 10 percent in 2009, rose to 57,2 percent in 2011, before crashing to 34,4 percent in 2015; 47,4 percent in 2016 and 45,1 percent last year.
Using the US dollar as a transaction currency has been frowned upon by industrialists and economists who say it makes products uncompetitive on the export market.
Industrialists contend that US dollars only helped the economy to arrest hyperinflation when they were introduced in 2009 but could not trigger grow.
Coal miner, Liberation Mining Zimbabwe’s managing director Victor Tskhovrebov told our sister paper The Sunday Mail Business recently that it was important for Harare to address the currency issue to reduce the cost of mining.
“As a sovereign country you need your own currency. The currency issue frightens investors. That is a big, big issue because the cost of mining in Zimbabwe is pretty high,” said Mr Tskhovrebov.
Economist Joseph Mverecha says re-dollarising is “decidedly the wrong turn for Zimbabwe”.
“The ramifications for the (local) economy are all too evident. There is less than minimum likelihood that Zimbabwe can sustain recovery and growth under a strong and strengthening US dollar currency.
“No amount of internal incentives are sufficient to compensate for an overvalued real exchange rate,” said Mr Mverecha.
Pharmacies are accused of stalking the blazing trail towards a re-dollarisation trajectory when they started selling sold medical drugs in forex in October last year following fiscal and monetary policy pronouncement which among others, directed exporting companies to open foreign currency accounts.
However, when Government directed them to sell in bond notes and electronic money, pharmacies simply pegged the prices on the parallel market foreign exchange rate of between 300 percent and 400 percent.
Industry and Commerce Minister Nqobizitha Mangaliso Ndlovu said charging in foreign currency “cannot be allowed” as it “not only against the spirit of fairness, but it is also an illegal practice”.
“Government is very clear that this practice is unacceptable and has to stop forthwith and if not, the law will take its course.