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Local manufacturers are grappling with severe power cuts lasting over 18 hours daily, forcing them to rely on expensive diesel generators, which significantly increases production costs.
Zimbabwe requires about 1,700 megawatts (MW) of electricity during peak hours, but the state-owned power utility, ZESA, was generating just over 800 MW on Wednesday, October 30.
The Confederation of Zimbabwe Industry (CZI), the country’s largest business lobby group, described the situation as dire. Said the CZI:
<blockquote>
Industry members have reported going for between 12-18 hours without electricity and report that power is being restored between 11 pm and 7 am in the majority of cases.
The absence of a load schedule that is strictly adhered to has exacerbated the effect of the power cuts as affected companies cannot plan employee deployment resulting in redundant working staff for periods when power is unavailable.
The other consequence of unscheduled power cuts is that machinery requires a systemized shutdown process in order to ensure raw materials are fully utilized and the machinery itself is properly shut down.
Sudden power outages result in loss of raw materials and equipment damage.
</blockquote>
Some machinery requires process heating, which involves applying heat during industrial operations. This heating can take 3 to 5 hours before production starts.
Consequently, if electricity is available for 8 hours, effective production time is limited to just 3 to 5 hours. The CZI said:
<blockquote>
However, the electricity bill will reflect usage of 8 hours against actual production of only 3-5 hours. In sectors that heavily rely on electricity such as the plastics and cement industry this can mean failing to achieve the economies of scale necessary to cover production costs.
This situation is particularly severe for companies that do not have dedicated power lines which are normally found in the small to medium sectors.
Companies have sought to mitigate the effects of power outages through the installation of solar energy and battery storage for use at night.
However, this is often very expensive and requires significant funding that many firms struggle to secure.
</blockquote>
Christopher Mugaga, CEO of the Zimbabwe National Chamber of Commerce (ZNCC), told <a href="https://businesstimes.co.zw/power-crisis-deepens-3/">Business Times</a> that power outages will significantly affect the country’s economic performance in 2024.
He said the ongoing rolling blackouts could reduce the Gross Domestic Product (GDP) by 0.6 percentage points.
Mugaga operating generators is costly, which companies are using for 14 to 18 hours daily.
This situation not only deters investments but also leads to substantial losses in foreign direct investment (FDI), estimated between $120 million and $150 million annually due to power shortages.
Oswell Binha, chairman of the CEO Africa Roundtable, said power outages can last 18 hours or more, and in some cases, the power quality is so poor that businesses cannot operate even when electricity is available.
He described the situation as critical, with many companies relying on costly generators. This dilemma forces businesses to choose between raising prices or facing severe shortages in stores.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Pindula News

Manufacturers in Zimbabwe are suffering because of long power cuts, lasting over 18 hours every day. This means they have to use expensive diesel generators, making production more costly. The lack of a proper schedule for power cuts is causing problems for companies who can't plan their work properly. Some companies are trying to use solar energy as a solution, but it's very expensive. The power cuts may harm the country's economy and lead to a loss of foreign investments. Overall, the situation is critical for many businesses in Zimbabwe.

Manufacturers Struggle Under Burden of Daily 18-Hour Power Cuts

Business executives and captains of industry in Zimbabwe are facing a challenging 2024. The country’s persistent electricity shortages, coupled with rising costs, have raised concerns.
As the Zambezi River Authority (ZRA) reduces water allocation to ZESA and ZESCO for power generation at Kariba Dam due to the water crisis, the situation is expected to worsen.
Hwange Power Station is now the primary source of power, but technical glitches occasionally result in total outages.
To mitigate the impact, some companies may resort to staff rationalisation, reduced production, and price adjustments.
Speaking to <a href="https://www.businessweekly.co.zw/alarm-over-potential-rise-in-energy-costs/">Business Weekly</a>, Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza, lamented that electricity costs have constantly been increasing while at the same time supply remains depressed. He said:
<blockquote>
Some companies will switch to more expensive alternative sources of power, so again, it is an increase in cost.
When that happens, combined with the real cost of electricity that has aggressively gone up, it just makes the cost of producing more expensive, and those costs will be transferred to the goods and services that are being sold.
It is not good for us as producers but also not good for consumers; this will just make the cost go up.
</blockquote>
Victor Bhoroma, an economist, said without addressing power generation, the Zimbabwean economy will not achieve consistent growth. He said:
<blockquote>
Businesses will have to invest more in alternative power, which adds another layer to the cost of doing business and increases consumer prices.
A lot of productive time will be lost, which entails operating below optimum capacity and retrenching labour.
</blockquote>
Another economist, Eddie Cross, said the situation is very serious and will affect businesses across the nation. Said Cross:
<blockquote>
Many firms are running generators, and others are installing solar power panels and batteries.
But where people cannot respond, they will have to cut costs and raise prices.
</blockquote>
To mitigate the impact of shortages, the government aims to commission small hydro and solar power stations.
These initiatives are expected to add approximately 90 MW in 2024 through Independent Power Producers (IPPs).
By 2025, an additional 296 MW is anticipated to come online, primarily from solar, hydro, and coal projects.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Industry Leaders Brace For Soaring Costs Amid Power Shortages

Captains of industry are in talks with the Government to reconsider the sugar tax currently pegged at US$0.001/gram, which has resulted in a sharp rise in beverage prices.
Speaking to <a href="https://businesstimes.co.zw/industry-govt-in-talks-over-sugar-tax/">Business Times</a>, Confederation of Zimbabwe Industries (CZI) president, Kurai Matsheza confirmed the ongoing engagements. He said:
<blockquote>
We are engaging the authorities. Yes we understand the validity of these taxes, but the increase of prices is extreme.
So we are engaging with the Government so that we can see ways in which prices can accommodate everyone at large.
There is an added tax on sugar which is US$0.001per gram and due to that tax producers of sugary products to cater for it, prices have to go up and you have seen prices of products like Mazoe Orange Crush and Beverages products they have gone up as a way of covering the US$0.001/gram tax which was put in place.
This will only mean that manufacturers of beverage products will lose market share, their volumes will go down because the consumers will not afford to purchase for the products and this will even force them to produce very few products hence a downturn in business.
</blockquote>
Zimbabwe National Chambers of Commerce (ZNCC), Mike Kamungeremu, said there is nothing they can do except factor the new sugar tax into the pricing of products. He said:
<blockquote>
Government is trying to raise revenue at the same time in some cases they are trying to discourage consumption of the same products, where you then say prices are going to come down, but prices are not going to come down regarding those items except if the tax is reduced or removed.
But as it stands because the tax has already been introduced it means those prices will now stay where they are and what we then anticipate to see is probably a reduction in their consumption or probably workers getting more so that they can afford them, but the truth of the matter is that the tax has been introduced and the prices have already gone up so it is a reality that we have to live with.
</blockquote>
An economic analyst Victor Bhoroma warned that the sugar tax will make Zimbabwean products less competitive on foreign markets. He said:
<blockquote>
The sugar tax has several ramifications on food and beverages in the country. Sadly, a noble cause to raise tax revenues has a direct bearing on the cost of production, cost of produce, final prices and food consumption patterns.”
It is inevitable, that the majority of already poor Zimbabweans will no longer afford their homegrown renowned brand.
It speaks to the impact of taxation and monetary regulations on the competitiveness of local products. We are pricing ourselves out of a few export markets we were left with.
</blockquote>
Economist Vince Musewe said the sugar tax is a misinformed policy that ignores the social impact. Said Musewe:
<blockquote>
This sugar tax is a mere means to collect more taxes and not about health. We will see reduced demand for affected products and cheaper imports which works against the imperative to industrialise while stifling local companies that are producing drinks. For me it’s a misinformed policy that ignores social impact.
</blockquote>
Earlier this month, Finance, Economic Development, and Investment Promotion, lowered the sugar tax from US$0.002 to US$0.001 per gramme of sugar.
Ncube had announced the 0.002 cents per gramme in the 2024 national budget statement in November 2023.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Industry Engages Govt Over Sugar Tax

Captains of industry and business executives are set to meet the outgoing Reserve Bank of Zimbabwe (RBZ) governor, John Panonetsa Mangudya to discuss several issues among them the foreign currency auction system and the exchange rate, and how they are impacting the economy and price stability.
Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza told <a href="https://businesstimes.co.zw/authorities-in-crisis-meeting/">Business Times</a> that the meeting is expected to take place next week, and thereafter meet the Treasury. He said:
<blockquote>
If all goes well, we are meeting Governor Dr Mangudya next week over the current pricing conundrum, the refinement of the Dutch foreign currency auction system and exchange rate and the continuous increase in goods prices among other issues.
We are hoping that the frank discussions will bring solutions to our current challenges.
We will continue engaging with the authorities to find long-lasting solutions.
</blockquote>
Matsheza also said the official rate’s 10% margin should be scrapped as it has proved detrimental to industry. He said:
<blockquote>
The issue of 10% is affecting all companies across the country hence we shall also give a plea to Dr Mangudya over its removal.
Even if they may completely remove it, we need a solution to this quagmire as businesses continue to struggle with working capital due to exchange losses due to the widening gap between official and parallel market exchange rates.
</blockquote>
Another business leader who spoke on the condition of anonymity told Business Times also confirmed the planned meeting. Said the business leader:
<blockquote>
We will meet the Governor next week and we expect a long-term solution on the exchange rate and auction system to stabilise the exchange rate and prices.
Our next stop will be the  Treasury where we need a relook at taxation issues taking a toll on the businesses.
</blockquote>
The Zimbabwe National Chamber of Commerce president Mike Kamungeremu said they expect authorities to move away from the blame game. He said:
<blockquote>
We are always engaging with both the central bank and Treasury to find long-lasting solutions but we expect a huge change in the upcoming engagements as they are key in turning around the fortunes of the economy. We need results rather than the blame game.
</blockquote>
The Government has previously accused businesses of profiteering. On its part, the business has raised concern over a tough operating economic environment characterised by power cuts, heavy taxation and a volatile exchange rate, among other issues.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

RBZ, Industry And Business Set For Crisis Meeting

Business executives and captains of industry are bracing for a tougher 2024 which may force companies to slash jobs, putting thousands of workers out of work to contain rising costs.
Some of the challenges facing industry are power outages, a liquidity crisis, currency volatility, and shortages of foreign currency.
Speaking to <a href="https://businesstimes.co.zw/brace-for-a-tougher-2024/">Business Times</a>, the president of the Zimbabwe National Chamber of Commerce (ZNCC), Mike Kamungeremu warned that 2024 will be tougher than 2023 due to El Nino, which will adversely affect farming, load shedding, and depressed commodity prices on the international market. He said:
<blockquote>
The year 2024 will be tough. I think even the government themselves have predicted a reduced growth rate compared to 2023 so already that confirms that the year will be a bit tougher than the previous one.
Added to that we have also been told about the drought induced by El Nino that will be coming in 2024 and that drought will affect our agricultural sector and the ripple effect will be felt across the entire economy.
The other effect of the reduced rainfall which has been predicted to be normal to below normal will affect electricity generation capacity at Kariba Dam.
What that means is that the power challenges that we have been facing are also likely to continue in 2024 and that will also affect industry.
Then over and above this commodity prices for our minerals on the international market have been depressed and that is also spilling into 2024 and that will also affect the revenue we are going to receive from the minerals and naturally if the revenue is reduced then we would also face problems because of the requirements that we have as a country which needs to be met.
</blockquote>
Kamungeremu urged fellow businesspeople to implement risk mitigation strategies. He said:
<blockquote>
So apart from recent monetary policy changes, there are other factors which I have highlighted which will then make the year difficult.
We appeal to fellow business people to put in place risk-mitigating measures for example when it comes to power issues, and power challenges they need to invest in alternative energy so that business can continue even in times of power cuts, it is important.
Then with regards to government policy as ZNCC we will continue engaging for the improvement of the same so that the environment is better for our business people in Zimbabwe.
</blockquote>
Kurai Matsheza, president of the Confederation of Zimbabwe Industries (CZI), said the new taxes implemented on 01 January by the Treasury will increase the cost of doing business because they will push prices up. Said Matsheza:
<blockquote>
The new measures which are toll fees, fuel levy, and VAT increase from the 2024 budget have meant price increases and hence increased cost of doing business…
Water allocation at Kariba was cut from 22.5 BCM to 8 BCM. This means generation from Kariba will be significantly low and hence load shedding will persist affecting capacity utilization.
This has so many unintended consequences such as a decline in sales, increased informalization as traders opt for importing and an increased working capital cycle.
</blockquote>
He also stated that businesses will continue to experience challenges as a result of the government’s inability to resolve the currency problem.
Meanwhile, earlier this week, the Minister of Finance, Economic Development, and Investment Promotion, Mthuli Ncube reversed a directive that prevented manufacturers from selling to retailers.
He said retailers can now purchase from manufacturers as long as they have obtained a valid Tax Clearance Certificate, and are VAT registered.
Ncube also reviewed the sugar tax on beverages to US$0.001 per gramme from US$0.02 per gramme.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Business Executives, Captains Of Industry Warn Of A Tougher 2024

Captains of industry and economists say businesses will struggle to recover from the recent Zimbabwe dollar plunge amid revelations that they suffered significant losses.
The local unit depreciated by 273% between May and June 2023.
Speaking to <a href="https://businesstimes.co.zw/zim-dollar-plunge-losses-hit-industry/">Business Times</a>, the Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza, said:
<blockquote>
The businesses in Zimbabwe will need a miracle to recover from the unprecedented losses they suffered heavily during the past two months as most firms are either in debt or operating below capacity which emanated from the loss of value of the local currency.
Companies are still struggling to stock up, hence they will need time to recover if the current stability continues.
</blockquote>
In its latest report, CZI said despite the current stability, companies won’t be able to achieve set targets. It said:
<blockquote>
Economies can hardly survive hyperinflation. Although it (the exchange rate) seems to be under control, the damage has already been done on the annual inflation front, as all the set targets are no longer achievable.
</blockquote>
Economist Gift Mugano told Business Times that the Government should abandon short-term financing to deal with inflation. Said Mugano:
<blockquote>
As long as the government maintains short-term financing, it will certainly backfire in terms of inflation point of view and exchange rate spiral point of view as at one point the authorities will pay contractors and they will come back to the parallel market looking for the greenback.
</blockquote>
Another economist who spoke to the publication on condition of anonymity said:
<blockquote>
The plunge has left businesses on the brink as the balance sheets were eroded by inflation and it will take years to recover, only if stability continues.
</blockquote>
The Zimbabwe dollar has been on the recovery path on the official foreign currency exchange market and has firmed to $4 505 from above $6 000 a few weeks ago.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Industry To "Take Years To Recover" From Zimbabwe Dollar Plunge

Economists say the Reserve Bank of Zimbabwe’s Financial Intelligence Unit (FIU) is forcing businesses to enforce “price controls” which is in turn fuelling US dollar inflation.
This comes as the Government has been battling exchange rate volatility and a sharp rise in the prices of goods and services in the past months.
In its latest report, the Confederation of Zimbabwe Industries (CZI) said the enforcement of price controls by FIU is inflationary. Reads the report:
<blockquote>
The FIU has been harshly enforcing compliance with the prescribed principle of “formal exchange rate plus a 10% margin”.
The enforcement of price controls through the exchange rate by the FIU is actually also inflationary as it causes an increase in United States dollar prices at a time when the American dollar has a higher weight in the blending.
In short, the United States dollar inflation is a compliance-driven inflation as formal businesses tried to hedge against an unrealistic official exchange rate that they were being forced to use.
</blockquote>
Economist Gift Mugano told <a href="https://businesstimes.co.zw/fiu-hounds-firms/">Business Times</a> that if the FIU enforces price controls, it will destroy businesses. He said:
<blockquote>
The local firms peg their prices at the prevailing parallel market rate causing the Zimbabwe dollar to be on the high side as the businesses forward price to survive.
If the FIU comes to enforce the indexation of the United States dollar companies would struggle.
</blockquote>
However, Finance and Economic Development Deputy Minister Clemence Chiduwa said businesses should comply or perish. He said:
<blockquote>
Those who continue to index their prices using the parallel market rates will put themselves out of business as consumers have choices so the United States dollar inflation is for the short term and what is critical is for business to adjust.
The reality is that stability is going to be sustained, we are not going to let go and stability is not transitory. It’s now time for business to start to be ethical.
They can hold on to their current position and see what is going to happen. It is going to be sustainable. They are allowed to take their position but they will lose out in US$ terms as the local currency appreciates.
</blockquote>
CZI chief economist Cornelius Dube told Business Times that the Zimbabwe dollar pricing is correlated with the movement of the parallel exchange rate hence the prices will follow that pattern.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

"Price Controls" Driving US Dollar Inflation - Economists

There is a serious shortage of the Zimbabwe dollar in the economy which captains of industry and economists say will reduce production capacity and affect aggregate demand.
The liquidity squeeze follows recent fiscal and monetary policy measures to suck out liquidity in the market to stabilise the exchange rate and prices.
The Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza told <a href="https://businesstimes.co.zw/zim-dollar-shortage-hits-market/">Business Times</a> that the liquidity crunch has reduced production capacity and aggregate demand. He said:
<blockquote>
There is a liquidity challenge in the economy and what the liquidity challenge does is depresses aggregate demand as there is no traffic in the shops and at the industries.
We are happy that things have stabilised but with this squeeze, we are failing to make payments for other services because there is no ZWL$ in the market and this has reduced our production capacity.
What it means is less cash in the markets, less product off-take so it means production will go down because companies can’t produce stock as they have no funds.
We, however, hope that this would be temporary and not a long-term solution so that business goes back to normal.
</blockquote>
The Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu said in the past two weeks there has been an increase in US dollar sales but the Zimbabwe dollar sales have significantly decreased.
Economist Gift Mugano said the government has stopped pumping money into the market resulting in a shortage of the local currency.
He added that this confirms the long-held belief that government is the biggest driver of inflation.
Due to the liquidity crunch, the Zimbabwe dollar significantly recovered this week and was trading at ZWL$5 739 to the USD at the Reserve Bank of Zimbabwe (RBZ) Wholesale Foreign Exchange Auction on Thursday, 29 June.
On Tuesday, the local currency firmed against the United States Dollar to ZWL$6 326, from ZWL$6 926 on 20 June.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Captains Of Industry, Shops Bemoan Zimbabwe Dollar Shortage

Basic grocery items such as cooking oil, soap, fresh milk and sugar, among others, have disappeared from shelves in formal shops but are readily available on the informal market (tuckshops and streets).
Manufacturers are reportedly supplying goods to informal traders who pay in foreign currency as businesses shun the Zimbabwe dollar whose value has plummetted over the past few weeks.
The Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu said re-dollarisation is posing a threat to the existence of formal trade. <a href="https://businesstimes.co.zw/basic-goods-disappear-from-shelves/">Business Times</a> quoted Mutashu as saying:
<blockquote>
Goods are vanishing from shelves into grey markets where they are priced in US dollars only and there is a general inability to replace stocks in the market.
Supply chains have re-dollarised posing a threat to the existence of formal trade faced with the evaporation of market share easily surrendered to the informal trade while some suppliers and manufacturers are directing basic goods through “runners” to the informal trade selling exclusively in US$ and not obligated to apply the legislated exchange rate when pricing goods.
</blockquote>
Mutashu said manufacturers have come up with strict trade terms that most retailers cannot meet.
Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza said basic goods shortages were not a supplier’s problem. Said Matsheza:
<blockquote>
We are supplying both informal traders and formal traders regardless of the currency but one is supplied upon meeting the trading terms of the suppliers.
Some shops are failing to meet these trading terms which is why some are facing restocking challenges.
</blockquote>
Recently Richards Group director Archie Dongo said suppliers are demanding forex payments for their products.
Dongo added that where the Zimbabwe dollar is accepted, retailers and wholesalers tend to be subjected to forward rating thereby making Zimbabwe-dollar invoiced products to be uncompetitive.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Basic Grocery Items Disappear From Shop Shelves

Captains of industry say the deteriorating economic situation and the rapid depreciation of the Zimbabwe dollar is attributable to the creation of “hot money”.
“Hot money” is a form of short-term investing in which investors move their money between financial markets to take advantage of interest rate fluctuations. It is “hot” because it tends not to stay in one market very long.
Market analysts are of the view that large payments to public contractors and suppliers to the Government are some of the sources of the excess liquidity that is shaking the Zimbabwe dollar.
The local currency has fallen to $1 888/US$1 on the official interbank market and more than $3000/US$1 on the parallel market.
Kurai Matsheza, who is the president of Zimbabwe’s largest industrial lobby group, the Confederation of Zimbabwe Industries (CZI), believes that “hot money” is being created in the economy. He was recently quoted by <a href="https://www.businessweekly.co.zw/someone-is-creating-hot-money-industry/">Business Weekly</a> as saying:
<blockquote>
Our suspicion is that it (volatility) can only come from one source; there is (too much Zimbabwe dollar) money chasing the US dollar. As businesses, we do not create money.
So, who is creating this money? We do not know, but we are engaging the authorities to say guys, let’s identify the cause.
But it can only be one way; people have money that is creating this run on the exchange rate.
Some projections are saying we are going to hit US$13 billion this year. So, on the (forex) generation side, there seems not to be a problem.
So, somebody is creating money that is chasing the US dollars.
We are creating hot money nobody wants to hold that Zimbabwe dollar (for long).
As soon as someone gets the (Zimbabwe dollar) money, they want to (quickly) pass it on.
</blockquote>
However, the Ministry of Finance and Economic Development insists it has not printed money since 2017. Said Treasury Secretary George Guvamatanga:
<blockquote>
I will categorically state that since I came into this office, I have never printed money.
Since I came into this office, I have never borrowed even a dollar from the Reserve Bank.
Despite the fact that within the Finance Act, we put a provision that (Treasury) can borrow up to 5 percent of my total budget, but I had an opportunity last year to borrow.
I was in a tight situation and needed temporary accommodation for 24 hours from the Reserve Bank.
My team here refused me to borrow, and that’s how disciplined we have been, so when I pay contractors, that is why we monitor M3 and Reserve Money…, there is no money printing.
What simply happens is that what increases is the velocity of money. The velocity when I have the money here at Treasury, and the velocity when in your account… it is different.
</blockquote>
The velocity of money is a measurement of the rate at which money is exchanged in an economy.
It is the number of times that money moves from one entity to another, or how much a unit of currency is used in a given period of time. Added Guvamatanga:
<blockquote>
As long as I pay from revenue generated from taxes and I am not borrowing from the Reserve Bank of Zimbabwe that should never be an issue at all, because that does not increase the money supply.
</blockquote>
More: <a href="https://zero.pindula.co.zw/">Pindula News</a>

Currency Volatility Attributable To Creation Of "Hot Money" - Captains Of Industry

The Confederation of Zimbabwe Industries (CZI) has proposed a temporary restriction on what shoppers can buy in formal shops which are struggling to restock fast enough due to panic buying.
Formal retailers, which sell products in Zimbabwe dollars, are struggling to restock their shelves as manufacturers demand US dollar cash payments.
As a result, CZI has proposed that cooking oil purchases should be limited to two bottles per customer, and there must be a cap on the imports of basic grocery items.
Formal businesses are forced to use the official rate, which overvalues the Zimbabwe dollar, and as a result, they are losing out to informal traders, who use sell in foreign currency.
In its proposals to the Government this week, CZI said:
<blockquote>
Limit importation of basic commodities to households on for domestic use (prescribed monthly quantities)…
The informal sector sells products mainly in the US dollar, and some of the shops are totally rejecting the local currency.
They buy commodities from manufacturers at the official rate and sell very cheaply in USD.
Shrinking formal consumers are making a run-on stock (priced in Zimbabwe dollars) in formal shops, taking advantage of the exchange rate disparities and formal shops are failing to restock.
Manufacturers are demanding cash upfront which also affects restocking.
</blockquote>
The Government recently suspended duty on basic grocery items saying this was necessary to counter price increases.
However, critics argue the measure will only hurt the local industry and drain the economy of foreign currency.
CZI said, instead, the Government should produce subsidised goods through Silo Foods, the manufacturing arm of the Grain Marketing Board as well as provide food stamps to vulnerable households.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Manufacturers Propose Temporary Restriction On What Shoppers Can Buy

Confederation of Zimbabwe (CZI) president Kurai Matsheza has said the recent suspension of import duty and import value-added tax (VAT) on 11 basic groceries by the Government will have a negative impact on the economy.
On Thursday, Finance and Economic Development Minister Mthuli Ncube announced several measures to stabilise the exchange rate and prices.
Among other things, Ncube scrapped import duty and import value-added tax (VAT) on selected products.
On Friday, Finance and Economic Development permanent secretary George Guvamatanga directed Zimbabwe Revenue Authority (ZIMRA) commissioner-general Regina Chinamasa to suspend import duty and import VAT on maize meal, rice, milk, flour, salt, cooking oil, sugar, petroleum jelly, toothpaste, bath soap and washing powder.
Speaking to <a href="https://www.newsday.co.zw/local-news/article/200011563/industry-frets-over-suspension-of-import-duty">NewsDay</a> on Sunday, Matsheza said the move choke local manufacturers and was also tantamount to exporting jobs. He said:
<blockquote>
The lifting of duties on the 11 products has more negatives than positives on the economy.
This measure means as a country we’re outsourcing the production of those products, hence exporting jobs.
While the intention is to protect the general consumer from the price increase, the general consumer will not be importing, it’s small businesses and big to some extent who will be importing and then retailing in US dollars.
This deepens dollarisation as basic goods will only be available in USD [supposedly at ‘low’ prices].
</blockquote>
The announcement came after shops hiked prices of basic food items in response to the rapid weakening of the Zimbabwe dollar against other currencies.
The removal of import duty on products can result in lower prices for consumers and improved access to goods.
However, removing import duty may also have some negative effects such as loss of government revenue, adverse effects on domestic industries, and dependency on foreign producers.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Captains Of Industry Say Suspension Of Duty Will Export Jobs And Choke Small Businesses

Economic commentators have condemned the measures announced by Finance and Economic Development Minister Mthuli Ncube last week to stablise the exchange rate and prices of goods and services.
Some of the measures included the removal of duty on 11 selected basic grocery items, allowing businesses to keep 100% of their locally generated forex revenue, and a pledge to fine-tune the foreign exchange auction system so that it operates on a pure Dutch auction basis.
Speaking to <a href="https://www.newsday.co.zw/thestandard/business/article/200011510/it-will-not-work-industry-tells-ncube">Standardbusiness</a>, economic analyst Vince Musewe said Ncube’s measures are reactive and will not work. He said:
<blockquote>
An economy cannot be managed in a reactive mode from crisis to crisis, but sadly that is what is happening.
There is no debate that Zimbabweans prefer the US dollar and those with US dollars will continue to demand a premium.
Despite the country generating US$12 billion per annum, the appetite for the US$ dollar will never be satisfied and it is clear the informal sector does not react to economic policy measures but operates to maximise profits.
This has resulted in a supermarket economy where everyone is selling some imported trinkets to make a living and importing basic goods kills local industry.
The scenario has not changed where the rate goes up inflation goes up and the rate goes up creating a vicious cycle.
It is time to realise that the dollarisation of incomes is the only sensible thing to do to cushion citizens.
Salaries and wages must now be in US dollars and companies must freely charge in US dollars.
The economy has rejected the Zimbabwe dollar; nobody wants it.
</blockquote>
Confederation of Zimbabwe Industries (CZI) chief executive officer Sekai Kuvarika said:
<blockquote>
I think we need to give the stabilisation measures a chance before we destabilise the manufacturing sector by flooding the market with cheap imports.
You also have to remember that these imports are coming from environments that are not the same as we are.
</blockquote>
She said there was no shortage of basic commodities in the country.
Another economic analyst Stevenson Dhlamini said:
<blockquote>
It’s difficult to conclude whether they are effective or non-effective, but it’s showing that they are appreciating that we are in a crisis.
There is a clause where the minister says he will increase the interest rates to curb inflation in the short term.
My belief is that the interest rates and the parallel market have to continue to chase each other.
The more you increase interest rates the parallel market simply increases its premiums to compensate for the higher interest rates.
So the question can be: is the interest targeting the best or the most effective response at this stage or rather we should be addressing the sources of money supply growth?
</blockquote>
Meanwhile, Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya said that the measures will support the issuance of gold coins and tokens by the central bank.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

It Will Not Work, Economists Tell Mthuli Ncube

Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza says another electricity tariff increase could trigger a rise in prices.
This comes as manufacturers, who were seeking the Government’s intervention on umbrella US$ billing, were told to embrace it and expect a cost-reflective tariff by the Minister of Energy and Power Development, Zhemu Soda.
Speaking to <a href="https://businesstimes.co.zw/more-pain-for-zim-industry/">Business Times</a>, Matsheza said the development will trigger price increases, as the businesses will pass on the cost to consumers to survive. He said:
<blockquote>
We engaged the Energy and Power Development minister [Soda Zhemu] over the blanket US$ billing and his response was the billing was justified and the current power tariff was not cost-reflective despite an increase to around US$0.12 per kWh from US$0.09/ kWh.
</blockquote>
Last month, captains of industry and ZESA held a meeting on power billing in USD but the meeting proved fruitless after the power utility rejected local companies’ proposals.
Manufacturers wanted the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a unit of ZESA Holdings, to have the US$ bills to be matched to the proportion of forex sales but the power utility rejected the proposal and insisted on a blanket bill.
Matsheza said the tariff for exporters was way above the regional average of US11.7c/ kWh. He said:
<blockquote>
ZETDC told us the billing in US$ for exporting companies and those who are generating US$ through local sales should pay 100% in forex.
We raised an issue to say these blanket groupings may not be ideal. Whilst we understand the need to raise US$, why didn’t they look at the individual customer and say to what extent do you generate US$ sales and bill accordingly?
</blockquote>
Captains of industry are arguing that if one is an exporter and exports at an extent of 50% that is what must be billed.
However, according to CZI, Zhemu said the sub-economic tariff had left ZESA in a crisis.
More: <a href="https://www.pindula.co.zw/">Pindula News</a>

Electricity Tariff Increase Could Trigger Price Hikes - CZI

ZESA Holdings has refused to budge on its position on power billing in US dollars despite calls by captains of industry for more flexibility.
Officials from ZESA Holdings’ subsidiary, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), and captains of industry met a fortnight ago over the issue but the meeting ended in a deadlock after the power utility rejected proposals that were made by industry.
The captains of industry had proposed to have the US dollar bills matched to the proportion of forex sales and this was rejected by ZETDC.
Speaking to <a href="https://businesstimes.co.zw/deadlock-in-power-tariff-talks/">Business Times</a>, Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza the new tariff announced by ZESA is unsustainable.
ZESA announced power tariffs of US12.21c/kWh for all exporters with other forex earners paying US10.63c/kWh.
Matsheza said that they are now seeking the intervention of Energy and Power Development Minister, Zhemu Soda. He said:
<blockquote>
The business community carried out discussions with ZETDC but no agreement was reached hence we have now requested a meeting with the Energy Minister himself.
So far we haven’t gotten a response on his availability but we wanted to discuss the blanket US$ billing, electricity availability, how the power situation can be addressed, and the bill on forex generation capacity.
</blockquote>
Previously, most customers paid in Zimbabwe dollars, under a stepped billing system where users paid tariffs in line with the amount of electricity used.
Only a few exporters or partial exporters, including miners, paid for electricity in forex. Said Matsheza:
<blockquote>
ZETDC told us the billing in US$ for exporting companies and those who are generating US$ through local sales should pay 100% in forex.
We raised an issue to say these blanket groupings may not be ideal.
Whilst we understand the need to raise US$, why didn’t they look at the individual customer and say to what extent do you generate US$ sales and bill accordingly?
</blockquote>
Zimbabwe is facing acute electricity shortages that have resulted in blackouts lasting 18 hours a day for millions of citizens.
The power cuts are being caused by low water levels that have reduced generation from a hydropower plant on Lake Kariba as well as frequent breakdowns at the Hwange Thermal Power Station.
More: <a href="https://www.newsday.co.zw/local-news/article/200009522/ed-demands-re-run-in-violence-hotspots">Pindula News</a>

Deadlock In ZESA, Captains Of Industry Power Tariff Talks

Captains of industry say the successful synchronisation of Hwange Thermal Power Station’s Unit 7 with a generation capacity of 300 megawatts (MW) with the national grid will not meaningfully end the current electricity challenges bedeviling the economy.
Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza on Wednesday told <a href="https://businesstimes.co.zw/hwange-deal-wont-rid-zim-of-power-crisis/">Business Times</a> that the hope is that the new unit will operate at full capacity consistently. Said Matsheza:
<blockquote>
We hope that it will be on the grid on a sustainable basis and hopefully, it will operate at the capacity of 300MW and if that stands a test of time, this will assist industry and other sectors of the economy though it will not eliminate the power challenges completely.
</blockquote>
Zimbabwe National Chamber of Commerce president Mike Kamungeremu said the development is welcome. He said:
<blockquote>
We hope that Unit 8 will come soon and that will be commendable. We hope that may result in load shedding hours reduced as right now it is not sustainable for businesses to run for hours as the cost is too huge resulting in some firms closing.
All the same, we are happy with the development, though we need more power.
</blockquote>
<h2>Hwange Unit 7</h2>
Unit 7 was successfully synchronised with the national grid and started feeding electricity on Monday, 20 March.
The synchronisation sought to establish if the electricity being generated from Unit 7 would flow into the national grid.
The Zimbabwe Power Company (ZPC) said that power from Unit 7 will be progressively fed into the grid until it reaches 300MW.
ZPC said it expects the second 300MW thermal unit (unit 8) to start generating power in October.
<h2>Depressed Power Generation</h2>
According to power generation statistics, ZESA ‘s five power stations in Kariba, Hwange, Bulawayo, Munyati and Harare on Wednesday collectively produced 361MW against a national demand of 1 800MW.
Hwange Thermal Power Station has the capacity to generate 1 220MW, while Kariba South Hydroelectric Power Plant has the capacity to generate 1 050MW.
On Friday, 24 March, Hwange was generating 530MW, Kariba, 350MW, and Munyati, 18MW to give a total of 898MW. Harare and Bulawayo were not generating anything.
<h2>ZESA Loadshedding, Debts</h2>
To cover for the shortfall, ZESA is load-shedding consumers as well as importing from South Africa, Mozambique and Zambia.
A <a href="https://www.263chat.com/zambia-to-switch-off-zim-over-power-supply-debt/">recent report</a> claimed that Zambia’s power utility ZESCO Limited was set to disconnect supply to Zimbabwe on 14 March over non-payment of US$10.7 million debt for the month of February and March.
ZETDC commercial service director Gift Ndhlovu was recently quoted as saying the overall debt to regional suppliers has increased to over US$100.
More: <a href="https://zero.pindula.co.zw/">Pindula News</a>

Hwange Unit 7 Will Not End Zimbabwe's Power Crisis

The Confederation of Zimbabwe Industries (CZI) wants ZESA Holdings’ US dollar electricity billing to be matched to the proportion of foreign currency sales because businesses have different mixes of local currency and forex earnings.
The Herald reported that the Zimbabwe Electricity Transmission and Distribution Company (ZETDC), a subsidiary of ZESA Holdings, announced a new US dollar power tariff of US12.21c/kWh for all exporters.
ZETDC will charge US10.63c/kWh for other foreign currency earners.
Previously, most customers paid in Zimbabwe dollars, under a stepped billing system which entailed that users paid tariffs in line with the amount of electricity used.
Only a few exporters/partial exporters, including miners, paid for electricity in forex.
CZI says ZETDC’s tariff for exporters was way above the regional average of US11.7c/kWh, as per data from the Southern African Power Pool (SAPP).
It also said companies were being levied different power tariffs for different times of off-peak consumption, which resulted in an effective tariff rate of US13,4c/kWh. CZI said:
<blockquote>
Additionally, the computation of the MD (Maximum Demand) charge of US$5.71 per unit kilowatt, which most industrial users incur adds to the cost of production.
</blockquote>
According to CZI, ZETDC indicated that the new tariff regime would be backdated to 1 October 2022 for Maximum Demand (MD) customers and 14 October 2022 for the rest of the consumers.
For CZI, 100 per cent USD billing is unfair for businesses that were non-exporters as ZETDC does not consider foreign currency sales and export levels, among other considerations. It said:
<blockquote>
It is key that ZETDC bills be matched to local versus forex sales rations as the Zimbabwean dollar is legal tender and refusing to accept it from customers is illegal under SI 127 and other regulations.
Similarly, the auction rate should be used as the reference point in terms of conversion to local currency in bill payment as is the case with product pricing.
</blockquote>
CZI argued that the settlement of electricity bills in foreign currency should take into account foreign currency retention levels for exporters and local deposits. It said:
<blockquote>
Currently, consumers must find supplementary foreign currency to settle bills in foreign currency.
The current level of retained forex is acting as indirect taxes on businesses due to the misalignment between the formal and the widely quoted market exchange rates used to source supplies.
</blockquote>
More: <a href="https://zero.pindula.co.zw/">Pindula News</a>

Industry Says USD Electricity Billing Should Be Matched To Forex Earnings

Captains of industry and commerce have urged the Reserve Bank of Zimbabwe (RBZ) to lower its bank policy interest rates downwards to between 80 and 100 per cent from 200 per cent.
They say this will enable businesses to have access to affordable financing.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Christopher Mugaga said companies are now being forced to borrow in United States dollars due to high-interest rates, which he said threatens their viability. Said Mugaga:
<blockquote>
In the upcoming monetary policy statement, we expect interest rates to be reviewed downwards to margins between 80 and 100 percent this is because as private sector we understand that the rate of inflation is still a threat to the overall macro-economic stability, but having it come down to those levels will at least give us a breathing space.
Right now, most of the companies are borrowing in US dollars and it’s not sustainable at all.
</blockquote>
RBZ governor John Mangudya is expected to present this year’s monetary policy statement next month.
In its third quarter of 2022 business and economic intelligence report, the Confederation of Zimbabwe Industries (CZI) said:
<blockquote>
… an interest rate of 200 percent compounded monthly effectively eliminated ZWL$ borrowing, as businesses could not afford such high borrowing costs.
While speculative borrowing was reduced (which also helped contain the growth of money supply), the policy virtually eliminated borrowing in local currency as a way of finance and reduced industry expansion prospects.
</blockquote>
Persistence Gwanyanya, a member of the RBZ Monetary Policy Committee said:
<blockquote>
Certainly, the forthcoming monetary policy will be presented before the end of next month but a date has not been set as yet.
One of the expectations from industry and commerce is the downward review of interest rates from the current levels.
In December, as the MPC we postponed the review of the interest rates on account that there should be sustained currency and inflation stability, if sustained stability is there by the time the monetary policy statement is presented, the interest rates will be reviewed downwards.
</blockquote>
| <a href="https://www.herald.co.zw/industry-wants-interest-rates-reduced/">The Herald</a>

Captains Of Industry Expect RBZ To Reduce Interest Rates

The Confederation of Zimbabwe Industries (CZI) has said the current liquidity squeeze in the market has accelerated dollarisation as most transactions are now being done in United States dollars.
The Reserve Bank of Zimbabwe (RBZ) took measures to suck out liquidity in the market to curb inflation but that has caused a serious liquidity crunch in the economy, pushing banks and businesses to turn to the US dollar.
In its latest position paper, CZI said the country is moving closer to full dollarisation. It said:
<blockquote>
Foreign currency accounts (FCA) as a percentage of transferable deposits increased to 63% in July 2022 from 47% in January 2022.
This clearly shows that the US$ is becoming more dominant and Zimbabwe is moving closer and closer to full dollarisation.
</blockquote>
Economist Gift Mugano told Business Times that tight liquidity is pushing the local economy towards dollarisation, but added that the country has no capacity to fully dollarise. Mugano said:
<blockquote>
You are aware that before the increase of rates to 200% dollarisation was already in motion. With the central bank putting the interest rate at that level, you can only return the money if you are a thief, not a bona fide business person.
When we say we have dollarised we are saying we have a significant percentage that is being traded and we are not saying we have eliminated ZWL$.
The fact that we have not reached 100% dollarisation and the fact that we still face tight liquidity and subdued demand means that we don’t have the capacity as a country to fully dollarise.
We should see the demand increasing in US$ but when I talk to businesses they tell me that there is no upward increase in demand for sales in US$. The shares in US$ sales have increased but volumes of sales are not moving.
In as much as the US$ has the advantage of storing value and is the best currency for every economic agent but it has liquidity challenges on its own.
We are now in 2022 and our economy has grown to a US$20bn economy and things are now different from 2009 when our economy was very small.
</blockquote>
Mugano said despite being an attractive currency, the US dollar has its liquidity challenges, therefore there is a need to “save” the Zimbabwe dollar,
He said the local currency can be saved through increasing productivity in all sectors of the economy. | <a href="https://businesstimes.co.zw/zim-moves-closer-to-dollarisation/">Business Times</a>

Zimbabwe Moves Closer To Dollarisation - CZI

The Confederation of Zimbabwe Industries (CZI) says it is engaging the Government to find solutions to the current electricity crisis which threatens industrial productivity.
Domestic and industrial consumers are now going for long hours without electricity outside the normal load-shedding periods.
Last week, the Zambezi River Authority (ZRA), which manages the Kariba Dam on behalf of Zimbabwe and Zambia, ordered the Zimbabwe Power Company (ZPC), a subsidiary of ZESA Holdings, from generating electricity at Kariba Dam until at least January next year due to low water levels.
CZI president Kurai Matsheza said local industry was caught “flat-footed,” by the move by ZRA to order the cessation of power generation at Kariba South Power Station. He said:
<blockquote>
It’s a situation we are engaging the authorities on, just to find a common way of coming out of this situation, but unfortunately, there are no quick answers, so we just have to keep negotiating.
We also encourage the Government to speed up whatever accommodation we can have with the Zambian authorities, for example, to be allowed to use their portion of the water in the Zambezi to continue running on our side, or alternatively, they can sell to us the electricity they would have generated.
</blockquote>
The Minister of Energy and Power Development, Zhemu Soda, is expected to give a detailed statement on the issue of Zimbabwe’s energy and power supply soon, a Cabinet spokesperson said on Tuesday.
Meanwhile, a new unit at the Hwange Power Station was successfully turned on for the first time last week, raising hopes that the power challenges will soon be alleviated.
The unit is expected to start supplying 300 megawatts to the national grid before the end of this year. | <a href="https://newziana.co.zw/2022/11/30/local-industry-engaging-govt-on-power-challenges/">New Ziana</a>

Captains Of Industry Engaging Govt On Power Challenges

Captains of industry have warned that the upcoming 2023 general elections and the summer cropping season may rekindle runaway inflation if the government abandons its tight policy stance.
In its submission to the 2023 National Budget, the Confederation of Zimbabwe Industries (CZI) warned that funding the agricultural season and elections has the potential to create excess liquidity which can feed the growth of money supply which will upset markets. CZI said:
<blockquote>
The current agriculture season, for example, will require the government to support farmers through the various schemes in existence.
There is potential for the creation of excess liquidity which can feed the growth of money supply if payments are not carefully calibrated.
The ability to crowd in the private sector as well as the general ability to fund agriculture in a non-inflationary manner will determine the inflation trajectory in the coming months.
The upcoming 2023 harmonised elections also have the potential to be a source of money supply growth unless elections are funded from the budget and payments are also carefully calibrated so as not to upset the market.
</blockquote>
Economist Gift Mugano said the government may be tempted to indulge in unrestrained printing of money in order to retain power. He said:
<blockquote>
We are getting into an election period, naturally, the government tends to become weaker as far as these principles of value for money are concerned.
For how long should they keep the liquidity tight as the people who have the tenders for everything in the country are the main sponsors of the campaigns hence they will be given time to make money to support the ruling party’s events.
</blockquote>
Zimbabwe’s annual consumer price inflation eased for the second straight month to 268.8% in October of 2022, from 280.4% in September.
Economic commentators have attributed the fall in the rate of inflation to tight monetary measures implemented by the government and monetary authorities. | <a href="https://businesstimes.co.zw/elections-cast-pall-on-stability/">Business Times</a>

Elections Threaten Stability Of Markets - Economists

The Zimbabwe National Chamber of Commerce (ZNCC) has urged the Finance and Economic Development Ministry to adjust the cigarette tax regime.
This comes amid indications that the country is losing US$248 million annually to illicit cigarette deals owing to a mixed taxing regime that benefits cartels at the expense of industry players.
Finance Minister Mthuli Ncube recently increased excise duty on cigarettes to 25% + US$5/1000 from 20% + US$5/1000 cigarettes saying it was a regional benchmark and the move will curb illicit flows.
In its latest report, the Zimbabwe National Chamber of Commerce (ZNCC) implored Treasury to do away with the ad valorem rate of 25% and remain with the specific rate. It said:
<blockquote>
We request that the Ministry of Finance and Economic Development remove the ad valorem rate of 25% and remain with the specific rate of US$16 per mile of cigarettes.
The ad valorem component is subject to manipulation and is a huge cost as production increases.
The estimated fiscal benefit from this proposed move is US$248m per annum based on the current production rate and the prospects of future production once it is removed.
We also strongly urge the Ministry of Finance and Economic Development to put in place a predictable cigarette excise duty regime.
</blockquote>
The Confederation of Zimbabwe Industries (CZI) also called for the removal of the current mixed excise duty on cigarettes. CZI said:
<blockquote>
CZI recommends that there is a need to migrate from the current mixed excise duty regime for tobacco to a specific excise duty regime, which brings certainty to investors while also maintaining revenue inflows for the government as well as eradicating illicit cigarette markets.
The current ad valorem excise duty is prone to manipulation by cigarette companies through falsification of ex-factory prices or controlling sales transactions with third parties so that the ex-factory price is lowered to reduce the excise amount.
</blockquote>
Meanwhile, ZNCC has called on the government to provide tax relief to the sector as the wider economy recovers from the COVID-19 pandemic. | <a href="https://businesstimes.co.zw/zim-loses-us248m-to-illicit-cigarette-deals/">Business Times</a>

Zimbabwe Loses US$248 Million To Illicit Cigarette Deals

Captains of industry have warned that rolling power cuts will have a negative impact on Zimbabwe’s economic growth.
Finance and Economic Development Minister, Mthuli Ncube, revised the projected economic growth this year from 5.5% to 4.6% due to various factors that include foreign currency challenges, liquidity crunch, runaway inflation and exchange rate volatility.
Speaking to <a href="https://businesstimes.co.zw/power-crunch-threatens-economic-growth/">Business Times</a> this week, Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza warned that the 4.6% growth rate may not be attainable due to constant load shedding. He said:
<blockquote>
Rolling power cuts are the biggest threat to the 4.6% gross domestic product [GDP] projections as businesses have significantly cut operation hours and this is going to impact the industry’s capacity utilisation.
We are at the peak period where there is huge demand and we are not producing enough.
With rolling power cuts expected to continue into November, the damage could have been done to limit the economy to reach its projected growth as machinery depends on power to continue operating.
</blockquote>
The Zimbabwe National Chamber of Commerce (ZNCC) president Mike Kamungeremu concurred. He said:
<blockquote>
If a solution is not found soon the GDP growth projections are likely not going to be met as subdued growth means reduced output thereby affecting the overall economic performance.
Production is disrupted and there is a likelihood of serious implications to our projected growth.
</blockquote>
Some companies have reportedly cut their production capacity by 30% due to the prolonged power cuts.
Zimbabwe’s electricity shortages have been attributed to ageing power plants but ZESA Holdings’ power distribution subsidiary, ZETDC, recently said strong winds are to blame for power cuts as they are affecting electricity transmission infrastructure.

Load Shedding Threatens Economic Growth

Industry has rejected ZESA’s proposal to increase electricity tariffs in United States dollars from the current US$0.0981 per kWh to US$0.1221 per kilowatt hour (kWh) to ensure adequate supplies.
Last week, ZESA held a crisis meeting with industry representative bodies including the Confederation of Zimbabwe Industries (CZI), the Zimbabwe National Chamber of Commerce (ZNCC) and the Chamber of Mines of Zimbabwe where the proposal was tabled.
However, the captains of industry stated that they do not have the capacity to pay increased power tariffs as they depend on the Reserve Bank of Zimbabwe’s foreign currency system to access forex.
Speaking to <a href="https://businesstimes.co.zw/industry-rejects-zesa-tariff-hike/">Business Times</a>, CZI president Kurai Matsheza the association’s members are struggling with forex shortages, high cost of production and liquidity crunch. He said:
<blockquote>
Industry does not have the capacity to pay such a tariff. As you know we have predominantly participated in the forex auction system to access forex hence a US$0.12 tariff is very difficult for the members.
</blockquote>
ZNCC president, Mike Kamungeremu, also argued that the majority of their members have no capacity to pay high electricity tariffs. He said:
<blockquote>
Most of the members are struggling to meet ZESA’s demands and this will take a knock on most companies.
Only big corporations have agreed to pay such huge amounts.
The situation is very tough for manufacturers.
</blockquote>
Zimbabwe has been struggling with power shortages for several years now but the situation became more precarious over the past few weeks due to low generation capacity at ZESA’s ageing power plants.

Industry Rejects Proposed ZESA Electricity Tariff Hike

Economic commentator, Persistence Gwanyanya, who is also a member of the Reserve Bank of Zimbabwe (RBZ) Monetary Policy Committee (MPC) said the full liberalisation of the foreign exchange market will be difficult because the foreign currency is concentrated in the hands of a few.
Gwanyanya made the remarks while speaking to The Sunday Mail on Saturday partly in response to a proposal by the Confederation of Zimbabwe Industries (CZI) to scrap the foreign exchange auction system and fully liberalise the forex market.
In its paper released on 22 April 2022, the CZI proposed what it termed “a true liberalisation of the foreign exchange market where banks act as match-makers linking buyers and sellers of foreign currency”.
But Gwanyanya argued that the companies that accounted for 85 per cent of the US$9.7 billion foreign currency receipts that were injected into the economy in 2021 are also sitting on Zimbabwe dollar balances, hence they have no incentive to sell forex. He said:
<blockquote>
The challenge with our economy is that foreign currency is concentrated in the hands of a few.
Note, for example, that of the US$9.7 billion foreign currency receipts that were injected into the economy last year, US$6 billion was from exports.
And, of those exports, around 85 per cent are accounted for by a few commodities such as gold, diamond, platinum and chrome.
Hence full liberalisation cannot be an effective price-discovery system.
Why would companies like Mimosa or Zimplats, for instance, sell forex when they are also sitting on Zimbabwe dollar balances?
</blockquote>
In a statement released on Saturday, 23 April, in response to the CZI paper, RBZ Governor John Mangudya said that the foreign currency auction system will remain in place. Said Mangudya:
<blockquote>
The foreign exchange auction system remains in place and will not be suspended as doing so will cause shortages of goods in the market and abet inflation.
All foreign exchange accounts are safe and the bank has no reason or appetite to raid the accounts.
</blockquote>
This comes after parallel market rates rose to levels of around $350 to the United States dollar last week, while the official exchange rate was at $155.
<h4>More: <a href="https://www.sundaymail.co.zw/forex-auction-system-to-stay-rbz">The Sunday Mail</a></h4>

"Full Liberalisation Of Foreign Exchange Market Difficult"

The Reserve Bank of Zimbabwe (RBZ) has dismissed concerns raised by the Confederation of Zimbabwe Industries (CZI) in a paper issued by the organisation on Friday.
Among other things, CZI called for the suspension of the foreign exchange auction system and also accused the RBZ of raiding foreign currency accounts.
However, in a statement on Saturday evening, the RBZ dismissed the allegations as unfounded and urged the public to disregard the CZI’s claims.
Pindula News is publishing the statement issued by RBZ governor John Mangudya dismissing allegations made by CZI below:
<blockquote>
<h2>RESPONSE TO CZI PAPER ON CURRENCY SITUATION</h2>
On 22 April 2002, the Confederation of Zimbabwe Industries (CZI) issued a paper that it styled as an urgent engagement paper on the currency situation in the country.
In that paper, CZI called for, inter alia, the suspension of the foreign exchange auction system and alleged that a mono-currency system was in place and also made unfounded references to “raiding” of foreign currency accounts and a bank run.
The Reserve Bank of Zimbabwe (the Bank) wishes to draw the public’s attention to the fact that the contents of the CZI paper are a response to rumours and not based on facts on the ground.
The contents of the said CZI paper and the impressions depicted therein are unfortunate and uncalled for as they have the potential to destabilise the financial markets and the economic stability of the country.
For clarity and avoidance of doubt, the Bank advises the public that:
<ul>
<li>Government and the Bank are committed to an orderly de-dollarisation process and hence it is false that a mono-currency system is now in place.</li>
<li>The foreign exchange auction system remains in place and will not be suspended as doing so will cause shortages of goods in the market and abet inflation.</li>
<li>All foreign exchange accounts are safe and the Bank has no reason or appetite to “raid” the accounts as alleged in the CZI paper.</li>
</ul>
</blockquote>
<blockquote>
The Bank has also noted with serious concern that CZI has published the paper without engaging it to establish the veracity of the rumours that motivated the paper.
Consequently, CZI has created a negative impression that has the effect of stocking market confusion and inflation.
The Bank is always at the disposal of stakeholders, including CZI, for discussion and dialogue with a view to fostering the interests of industry and the economy and avoiding causing market instability.
The Bank, therefore, advises that the contents of the CZI paper in question should be disregarded.
</blockquote>
<h4>More: <a href="https://news.pindula.co.zw/">Pindula News</a></h4>

RBZ Has No Appetite To Raid Foreign Currency Accounts - Mangudya

The Zimbabwe Congress of Trade Unions (ZCTU) has lashed out at the Confederation of Zimbabwe Industries (CZI) for calling for the suspension of Statutory Instrument 127 of 2021.
ZCTU said CZI is not a victim of a bad policy and its call for the suspension of the SI is motivated by greed as it has been colluding with the government to exploit workers and consumers.
In a statement, the workers’ representative body called for social dialogue, saying business should not be allowed to dictate what must happen. ZCTU said:
<blockquote>The call by [the Confederation of Zimbabwe Industries] for immediate suspension of SI 127 without a clear call for an equitable economic policy aimed at addressing the mismatch between RTGS salaries and prices pegged in USD black market rates is irresponsible and motivated by greed.
While it is true that SI 127 has caused serious troubles in the market, these are just symptoms of deeper economic inequalities obtaining in the country.
Businesses and government have been colluding to exploit workers and now is the time to correct this.
We reiterate our position that businesses are not victims but accomplices in exploiting workers and consumers. Therefore businesses must not be allowed to dictate what must happen
We need a new social contract that is a product of inclusive social dialogue.</blockquote>
The government last week gazetted SI 127 of 2021 which compels business to peg prices of goods and services in line with the official exchange rate.
The new regulations penalise those found on the wrong side of the law including businesses refusing to transact in the local dollar.
Meanwhile, <a href="https://news.pindula.co.zw/2021/06/02/industry-wants-new-forex-rules-suspended/" rel="noopener" target="_blank">CZI has called for the suspension of SI 127 of 2021</a> to allow for dialogue between government and business.

Industry's Call For Suspension Of New Forex Rules Motivated By Greed - ZCTU

Business leaders have expressed optimism on the Zimbabwean economy which they said was now in much better shape than it was a few years ago.
They attribute the positive trajectory to a cocktail of measures that were introduced by the minister of Finance and Economic Development, Professor Mthuli Ncube, and to good rains which are expected to boost agricultural production.
The Zimbabwean economy has for the past two decades been on a downward trend with analysts blaming poor policies by the <a href="https://news.pindula.co.zw/2021/02/07/watch-ed-has-done-a-better-job-than-mugabe-the-economy-grew-rapidly-last-year-eddie-cross/">Robert Mugabe administration</a>, economic sanctions on the country, corruption, and climate change.
Jimmy Psillos, an executive at the Confederation of Zimbabwe Industries and general manager of Harare-based manufacturer Crystal Candy told Bloomberg that Zimbabwe’s economy was changing its direction. He said:
<blockquote>If you look back where we were this time last year and where we are now, it’s really day and night. The economy is in much much better shape than it was.</blockquote>
During an online briefing in Harare on February, 23, Ralph Watungwa, president of the Bankers Association of Zimbabwe and chief executive officer of London-based lender Standard Chartered Plc’s Zimbabwean unit said Zimbabwe was having a very good agricultural season because of the rains.
He added that the Southern African country has had “a fantastic last eight months and a lot of stability.”
The government says improved harvests mean grain won’t have to be imported this year, saving the country as much as $40 million a month and arresting a major drain on the country’s scarce foreign reserves.
The price of gold, platinum, copper, and other minerals produced in the country have also risen since March last year, further bolstering its finances.
The November budget projected that gross domestic product will expand 7.4% this year, a rebound from a 4.1% contraction in 2020 that was attributed to the onset of the coronavirus, and a second successive year of drought.
Lloyd Mlotshwa, head of research at Harare-based brokerage firm IH Securities, credits Ncube with driving through several bold decisions, including scrapping unsustainable subsidies and devaluing the local currency.
Despite the optimism, a real turnaround in Zimbabwe could take years, if not decades, given the depths to which it has sunk.
More: <a href="https://www.bnnbloomberg.ca/business-leaders-sound-unfamiliar-note-in-zimbabwe-optimism-1.1569857">Bloomberg</a>

Zimbabwean Economy In Much Better Shape -Magnates

Industrialists have blamed price increases of basic goods seen over the past few weeks on the general increase in rates and fees since October last year.
Confederation of Zimbabwe Industries (CZI) president Henry Ruzvidzo said the fact that council rates, tollgates fees, electricity tariffs, and fuel prices have all been going up means consumers will naturally see general price increases. He said:
<blockquote>This is as a result of a number of things. What happens is that a number of things (rates and fee increases) happen over a period time and that builds towards price increases, for example, the price of fuel has just gone up, but it is only an isolated factor, but companies build the price increase into their product prices.
What consumers eventually see are general price increases. For instance, we had price increases for electricity twice in October and November (last year); council rates went up, ZINARA rates went up, and electricity tariffs were adjusted (once) again.
I am not saying this everything that caused the price increases, but these factors contributed to the price increases.
The exchange rate from the auction has been stable, but the parallel market rate, where some manufacturers get forex, has been going up, that also contributes.</blockquote>
The Zimbabwe National Road Administration (ZINARA), the Zimbabwe Energy Regulatory Authority 8ZERA) as well as the Zimbabwe Electricity Transmission and Distribution (ZETDC) all hiked fees and rates recently and this usually has a knock-on effect on the prices of basic goods.
More: <a href="https://www.herald.co.zw/rates-fees-cited-for-basic-goods-price-hike/" rel="noopener" target="_blank">The Herald</a>

ZINARA, ZERA, ZETDC Blamed for Basic Goods Price Hike

While speaking at an online conference on the role of taxation to economic development during the pandemic attended by economists, economist and member of the RBZ’s Monetary Policy Committee (MPC) Eddie Cross said the government could encourage the informal sector to regularise their operations by giving them tax incentives, The Sunday Mail reports.
Said the former MDC stalwart:
<blockquote>The transactional tax will still bring in more revenue than the two tax heads combined. We need an environment that enables the informal sector to thrive and formalise their businesses. Right now they do not want to formalise because they do not want to pay taxes.</blockquote>
At the same conference, CZI’s Denford Mutashu echoed Cross’ sentiments and asked for some tax holidays from the government and said:
<blockquote>Take, for example, City of Harare recently increased shop licensing fees and this goes down to the ordinary consumer, yet there isn’t much to show for it in terms of service delivery.While there are increases in the taxes, let us see what is being done with what is collected.
We expect some tax holidays although Government needs to play a balancing act to ensure adequate revenue to fund projects. There are some bottlenecks that should be removed. For instance, if you charge USD you should pay taxes in USD, but there is no mechanism to capture that effectively at the moment.</blockquote>
The government recently announced that the taxable income bracket moved from $2000 to $5000.
More: <a href="https://www.sundaymail.co.zw/further-tax-incentives-could-stoke-demand">The Sunday Mail </a>

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