Rbz delays in releasing forex leaves industry on the brink, forcing forays into black market

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Local companies are teetering on the brink as they are incurring interest and bank charges following the delays in the settlement of foreign currency allotted at the Reserve Bank of Zimbabwe (RBZ) auction system, Business Times can report.

Industrialists said this week the delays have brought more harm to the industry as the players are getting less money they have applied for due to higher interest rates and bank charges.

Companies are now forced to source for foreign currency from the parallel market, where premiums are higher.

Industrialist Sifelani Jabangwe said the settlement delays have hampered production as it has brought more costs to the manufacturer.

“The official rate stands at ZWL$88 but in actual fact we are buying the dollar at over ZWL$ 120 as the bank charges and interest rates incurred from the bids settlement are destroying us,” he said.

“The delays have also cost us a great deal of money as we have suffered supply glitches and a rise in US$ costs in the past months. Various goods and commodities have increased prices in US dollars so the time value of money is key here.”

Well-placed sources told Business Times that the auction rate was now the same as the parallel market after factoring the costs arising from the delays in settling allotted forex.

“The interest charges incurred on delayed auction backlogs and other bank charges add 10% to the official rate meaning the actual rate is closer to US$1:ZWL$98.55 for the 25-30% of the forex accessed through the auction, letters of credit and interbank system,” a source said.

“Since companies get 30% of their forex through the official channels and 70% on the parallel market it gives a blend rate of 140 [30% of 98=29+70% of 160=112. This gives a blend rate of ZWL$140. This is the effective exchange rate for cooking oil based on the foregoing.”

Last week, RBZ said it would clear backlogs and promised to settle bids within two weeks. RBZ said all allotments under the SME auction are up to date and the remaining backlog, “which is also attributable to malpractices by certain entities that were sponsoring multiple bids under the auction system, is substantially in respect of foreign exchange allotments to secondary users of foreign exchange under the main auction”.

Mangudya said there was indiscipline with the bank introducing special exchange rate-linked corporate open market operations bills as it tightens money supply in the wake of a rise in annual inflation.

Industrialists say they are now paying the price for the settlement delays.

The cooking oil industry requires US$480m per annum with US$280m for the bulk raw material for edible oil processing and US$200m is required for additives, packing materials and spares.

But currently, the industry is accessing between US$120m and US$130m through the formal foreign currency system which is 25-30% of requirements at official rates, the balance is through runners and third parties who supply raw materials at 160-170 at present for chemicals, additives, packaging and spare parts.

Five Iarge cooking oil players which are Surface Wilmar, Willowton, Pure Oils, United Refineries and Raha get US$10m per month but the amount is just 25% of the monthly requirement of US$40m per month.

The impact of the delay has also hit social media with HashTeam Pachedu taking the matter on Twitter on Friday.

“Factoring in interest on auction delays and bank charges, the actual cost incurred is not US$1: ZWL$87, but US$1: ZWL$120-140.

“Sadly, the cost of soya beans recently went up to ZWL$70,000 per tonne from ZWL$48,000 and the manufacturer’s price to wholesalers is ZWL$460 per 2 litre bottle, who add a mark-up for retailers who then resale it to us at ZWL$600 factoring in the high forex volatility. The end result is that the consumers suffer,” reads the tweet.

The Oil Expressers Association of Zimbabwe president Busisa Moyo told Business Times that he could not be drawn into Twitter debates.

“I just saw it but when we have such problems we can engage the Reserve Bank of Zimbabwe governor John Mangudya for such issues,” Moyo said.

Moyo said: “Cooking oil producers are selling ZWL$450-ZW$$480 to supermarkets and wholesalers, which is a US$ cost of US$3.30-3.45 not the US$7quoted on social media.

“If cooking oil was being sold at full parallel market rates it would be ZWL$100 higher at ZWL$550-ZWL$580. Exchange rate distortions will need to be cleared as soon as possible to prevent the distortions in prices.”

Various industrialists said the auction delays have brought more harm to the industry as the players are getting less money they have applied due to higher interest rates and bank charges.

Analysts posited that Zimbabwean banks have survived this far due to bank charges, interest rates and fees and the delay by the RBZ has further compounded the costs for manufacturers.

—BT