I’m increasingly becoming disenchanted with this Zim economy and particularly the genuineness of some of the key players to actually ensure things work.
At the heart of our problems is the foreign currency management system, and the February MPS seemed like a giant step towards solving this problem permanently. Yet here we are two short months later, and the parallel market monster seems to be getting even bigger!
The long and short of the current situation is we now have an official interbank market rate of RTGS3.2 to the USD, and a parallel market rate of RTGS4.8 to the USD. Strangely, it seems no-one is getting money from the official system, and everyone is being forced to resort to the parallel market. I say “strangely” because now even those who previously were getting currency at 1:1 now seem not to be getting anything at all through formal channels, as reflected by their pricing using parallel market rates. So this begs the question: “Where is all the currency that was previously going to these people now going?”
Based on the behaviour by industry and commerce, they aren’t getting it, and I know certainly our SMEs are getting zilch, even when they have invoices and are meeting all requirements. Yet the parallel market now seems to be resurging, and resurging with a vengeance. Adding to the mystery is the fact that no information whatsoever is coming out, especially from the Reserve Bank, of who is getting allocated what on the official/formal interbank market, and what the volumes are that are being traded on the formal market. This was something they committed to do, and yet now there is a “strange” silence from this quarter.
We know that exporters get 20% of their export earnings liquidated on arrival at the interbank rate. And whatever remains after 30 days should also be liquidated likewise. We know the country earns US$6 billion in foreign currency every year, meaning there is plus/minus US$500 million coming through every month, which should be getting onto the interbank market one way or another. Such volumes surely would extinguish the bulk of foreign currency requirements, leaving very little need for the parallel market. Yet no such volumes are being indicated.
So while the politicians are pointing their fingers at industrialists and the phantom “saboteurs”, I am looking at the Reserve Bank and wondering what they know and are not telling us? Because even if only the 20% mandatory liquidation was going through the interbank market, that would be US$100 million per month. Surely the parallel market would be significantly dented if such an amount was flowing through formal channels?
So here’s my theory: the money coming in through formal channels is the exact same money that is being diverted into the parallel market, and there are some fat-cats – definitely within the banks, but perhaps even within the official system – that are benefiting from the differential between the official 3.2 and the parallel market’s 4.8 . And that’s the reason why the parallel market is not being dented, but actually getting stronger! This of course is pure speculation but I wish this country had investigative journalists out there who could get to the bottom of what is really happening. This “so near and yet so far” situation is extremely frustrating and needs to be clipped asap.
Accountant by training, Entrepreneur by experience and Christian by faith, Farai is passionate about SME development in particular, and national economic growth in general. He is currently involved in several ‘Doing Business’ reform processes, adjudicates several business awards and helps small and medium enterprises in Zimbabwe to grow their businesses.