The above logic holds water even in business – where the economy becomes the ‘water’ and companies the ‘fish.’ However, revelations made by the Secretary for Finance and Economic Development, Mr George Guvamatanga, on 27 May 2019, when he appeared before the Parliamentary Portfolio Committee on Budget and Finance, paints a disturbing picture were the ‘fish’ is instrumental in draining the pond.
Guvamatanga told the legislators that Government believes that the country is generating enough hard currency, but prevailing shortages are a result of inefficient allocation and failure by some exporters to remit export proceeds within the prescribed period of 90 days. Yes, you heard right. The country is earning enough foreign currency to meet its requirements of critical imports such as fuel, medicines, electricity and industrial production.
Going into detail, Mr Guvamatanga explained that for the period 2018, the total export shipments where US$4.3 billion and by end of December 2018, the country had received US$3.8 billion as export receipts, which means US$500 million of export receipts was outstanding. Exports are given 90 days after shipment to bring in the export proceeds, so one would have expected that between the period December 2018 up to end of March, at least US$500 million should come into the market from shipments done in 2018.
As if to add salt to an injury, the Secretary for Finance and Economic Development added that for the period January 2019 to May 2019 the total shipment of exports were US$1.4 billion which again, within a 90-day period, the country actually expected to have received this money, only to receive US$1 billion. This means that there is an outstanding amount of US$400 million.
Mr Guvamatanga said the economy at the moment has about US$800 million sitting in various exporters’ nostro Foreign Currency accounts (FCAs), that is before one adds the above mentioned US$500 million and US$400 million, bringing the total to US$1.7 billion that should be available in this economy to purchase pharmaceuticals, electricity and pay for fuel and any other requirement.
Mr Guvamatanga, however, acknowledged that while some exporters were not remitting the funds for speculative reasons, some export proceeds were being held outside the country to finance external purchases for capital projects of exporting firms.
It can be argued here that failure by some exporters to remit export proceeds has created artificial foreign currency shortages on the local market, which has in turn fueled the skyrocketing of parallel market rates. The market distortions have seen wanton price increases by retailers who are pricing their products in line with foreign exchange rate dynamics on the parallel market, which are driving the pricing madness that has rocked the country since October 2018. The incessant price increases, which have not been matched by adjustments in incomes, have continued to pile pressure on inflation, which hit a post dollarisation record of 75.8 percent in April from 5.39 percent in September 2018.
The long and short of it is that business is killing the goose that lays the golden egg – the economy. Business’s behavior defies logic, which therefore buttresses Vice President Constantino Chiwenga’s position that the country is under a financial terrorist attacks.
