ZNCC Disapproves RBZ Auction Exchange System

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By Alois Vinga

THE Zimbabwe National Chamber of Commerce (ZNCC) says Reserve Bank of Zimbabwe (RBZ’s) official exchange of US1: $85 is superficial and has been outpaced by the parallel market rates.

The parallel market rates are hovering around $130: US$1.

However, Zimbabwe Stock Exchange (ZSE) listed companies are still maintaining their operations based on the Reserve Bank of Zimbabwe (RBZ) foreign currency auction exchange rate, a move the ZNCC said was insincere to business growth.

The RBZ foreign currency exchange rate system was introduced in June last year to control the black market.

“This scenario is evidence of the superficial nature of the auction rate, and business has been calling for the adoption of a market-determined exchange rate,” the ZNCC said in a recent report.

The business grouping instead called for banks to oversee foreign currency auction system as they have “better visibility and interaction with clients”.

However, in their annual financial performance reports, companies listed on ZSE auction system have contradicted the ZNCC’s position.

Presenting its financial performance recently for the half year ended March 31, 2021, agro-industrial giant, CFI Holdings chairperson, Itai Pasi hailed the exchange rate for facilitating price discovery and efficiency in the allocation of foreign currency.

“This has resulted in the stabilisation of the local currency exchange rate as well as a reduction in the inflation rate since August 2020 and coupled with the introduction of the US$ as a mode of payment, further reinforced stability and assisted the business in sourcing various merchandise efficiently,” he said.

Pasi added the RBZ exchange system had eased inflationary pressures among other positive developments.

ZB Financial Holdings chairperson, Pamela Chiromo recently also credited the “stable” RBZ exchange rate for easing economic headwinds.

“The introduction of the foreign exchange auction system in June 2020 brought a modicum of stability in the exchange rate, which curtailed the, hitherto, rapid expansion in the general price level.  According to the Confederation of Zimbabwe Industries, industry capacity utilisation is reported to have improved at 47% as at year end, compared to 36.4% in 2019,” she said.

GetBucks chief executive George Nheweyembwa in a trading update for the five months up to May 31 2020 said the local currency’s stability had been maintained since the inception of the RBZ foreign currency auction.

He hailed the conservative monetary framework being pursued by the central bank as a positive step.

National Tyre Services chairperson, Rutenhero Moyo also hailed the auction platform.

“Measures taken by the RBZ on 23 June 2020, which included introduction of a foreign currency auction system, were critical in stabilising the economy from the ravages of inflation and high foreign exchange rates during the second half of the year,” he said.