Government, whose responsibility is to protect the consumer and ensure stability, will “take all measures necessary”, including painful ones if need be, to ensure price stability, the President has said.
Business, he added, was seemingly squandering Government’s
goodwill, privileges and incentives to profiteer and, in some instances,
illicitly transfer funds “beyond our borders for stashing”.
Writing in his weekly column for The Sunday Mail, the
President said the authorities were aware that some businesses were
disconnecting point-of-sale gadgets, discouraging sales in local currency,
abusing the foreign currency auction system and channelling goods to the
informal market through a shadowy network of agents.
There was no way the exchange rate could be unstable given
the increased inflows from record foreign currency receipts and the pervasive
use of the United States dollar in local transactions, he said.
The trend has continued in the January-March period this
year, as foreign currency receipts have grown by more than 20 percent compared
to the same period last year, with cumulative earnings likely to rise to a
record US$12 billion this year.
“The more than US$11 billion foreign exchange earned last
year is the highest ever done by this economy, and is certainly far higher than
in most economies in Sub-Saharan Africa, outside South Africa. Sadly, this has
not translated into a stable exchange rate,” President Mnangagwa said.
“Government has pursued prudent fiscal and monetary policy
to guarantee macroeconomic stability. Since the advent of the Second Republic,
Government budget has run on a cash basis, thus avoiding un-budgeted overruns.
This has never been so before, including under the
much-vaunted Government of National Unity, GNU. Because of
this fiscal discipline, often pursued even at the expense of social delivery,
space has since been created for businesses to grow in a stable environment
where disequilibria are minimised. Indeed, this has been the case until now.”
He said it was curious that despite 80 percent of
transactions being in foreign currency, with business allowed to retain most
it, demand for foreign currency on the foreign currency auction – which has
allocated US$4 billion since it was launched on June 23, 2020 – has risen, yet
production in the sector has remained the same.
“Fourth and most exasperatingly, when 20 percent of our
transactions were conducted in foreign currency, and 80 percent in local
currency, the demand for foreign exchange at the auction averaged US$20 million
weekly,” he said.
“Today, when we find ourselves in 80-20 percent reverse
transaction equation in favour of foreign currency, the demand for foreign
exchange at the same auction, and by the same Business now directly selling
more wares in United States dollars, has risen to US$30 million a week! How
does one explain such a paradox?”
The President reminded business that all the concessions
that were being extended by Government were a privilege that was being abused
and could be easily withdrawn.
In most jurisdictions, he said, the common practice was for
business to liquidate all its foreign currency earnings in the local currency.
He, however, indicated that Government will do everything
in its power to protect the consumer and ensure stability both “in the market
and inside the country”.
“Above all, short-circuiting set rules and cutting corners
in business attract very stiff sanction. Those who break our exchange control
rules, or who money launder, will only have themselves to blame. No one in
business should doubt my Government’s resolve to correct blatant market
failures, and to counteract and foil sinister moves to destabilise our
economy,” he said.
“Government’s responsibility is to protect the consumer,
and to ensure stability in the market and inside the country. We will take all
measures necessary to ensure there is stability, including painful ones should
that ever become necessary.”
The President also said he was disappointed that at a time
when business should be joining hands with Government to in support the ongoing
drive to clear the country’s arrears and resolve its debt, some elements in the
sector had decided to engage in activities that were destabilising the economy.
This comes as a high-level Government committee set up to monitor
and investigate the recent spate of price hikes is finalising its work and
expects to submit its recommendations this week before they are considered by
Cabinet for implementation.
The committee, led by the Ministry of Industry and
Commerce, is investigating developments that prompted businesses to increase
prices of goods and services.
It is also looking into reported stockouts of basic
commodities in some retail outlets.
Industry and Commerce Permanent Secretary Dr Mavis Sibanda
told The Sunday Mail that the committee was literally working around the clock
to enable it to present its findings this week.
“I have instructed the committee to work 24-hour shifts,
including over the weekend, because we want to get the findings soon,” she
said.
“The report will be submitted to Cabinet but the
investigations are still work in progress.
“They haven’t finished yet and I am hoping to get the final
document soon so that we can look at it and submit it to Cabinet.”
Dr Sibanda said the committee was looking at a broad range
of issues, including unjustified price hikes, unfair business practices and why
some businesses are refusing to transact in the local currency.
“There is really a lot of work to be done,” she added.
“The committee also includes people from the National
Competitiveness Commission, Competitions and Tariffs Commission and the
Ministry of Industry, so that we look at things from a broader point of view. Sunday
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