12-06-18 by Spotlight Zimbabwe

New foreign currency crisis hits Zimbabwe

JAMES THOMPSON

Some major companies from various sectors in Zimbabwe have started winding up operations in their loss-making divisions as foreign currency dries up.

This week Sakunda Logistics – a subsidiary of Sakunda Holdings, which controls a majority stake in fuel procurement and supply – told its workers that the environment they were operating under was “unfavourable”.

The group’s finance and human resource director Sandra Mpunga said in an internal memo, which has since gone viral, that the logistics department of Sakunda Holdings would cease at the end of the year. This will leave close to a thousand people jobless.

“I regret to notify you all that Sakunda Logistics will be permanently closing down as we have suffered irrecoverable losses over the past four years. We are sorry to notify you that your jobs with Sakunda Logistics terminate in one month on December 31 2018.

“We express our deepest gratitude to all of you for your dedicated service at Sakunda Logistics. We wish you the best in all your future endeavours,” reads the memo.

Only Sakunda Energy and Sakunda Trading will remain operational.

Giant agri-food processing company National Foods also announced that it would shut down its operations in the wheat mills division because of acute foreign currency shortages.

“Due to delays in repatriating payments to our foreign wheat suppliers, our wheat suppliers have today instructed National Foods to cease the draw down of wheat stocks. National Foods will mill out the wheat in process and we anticipate both our mills in Harare and Bulawayo [to close] on Wednesday December 5,” the company said.

Many businesses have since resorted to charging their goods and services in foreign currency to stay afloat. Those that still charge in the local surrogate currency, bond notes, hike prices as exchange rates fluctuate on the black market.

“For local beers I take bond notes because I pay suppliers with it. However, for imported spirits, beers and whiskies my charges are strictly in rands or American dollars. In that way I can restock and it makes sense because I pay duty for imports in foreign currency as demanded by the Zimbabwe Revenue Authority,” said a nightclub owner in Harare.

The country’s largest mobile money platform, Ecocash, has also created a US dollar wallet that is separated from bond note balances.

“The introduction of the EcoCash FCA wallet allows our customers and all foreign-exchange earners the convenience to ring-fence their funds in a digital FCA wallet while guaranteeing that they can transact or cash out the funds in the currency they cashed in, or transferred into the wallet,” said Econet subsidiary Cassava Smartech’s chief executive officer Eddie Chibi.

But still, government insists that there is parity between the bond note and the American dollar. As such, fuel dealers that get suppliers subsidised by the government are forced to charge in bond notes, making Zimbabwe the destination for the cheapest fuel in the region.

Faced with a shortage and a gap to make a fortune, some dealers reportedly smuggle fuel to Mozambique where they sell in rands and the Mozambican metical, which is more stable than the bond notes.

Fully aware of this, President Emmerson Mnangagwa said: “We are now crafting a law that ensures that all products purchased from outside the country using foreign currency from Treasury should not be charged in foreign currency.” He was speaking at the 2018 annual chiefs conference in Kadoma on Monday December 3.

Meanwhile, the doctors strike entered the second day with most major referral hospitals on a go-slow, only attending to critical patients. Out-patient wards were closed.

Some of the doctors, along with other civil servants, demand that the government pay salaries in foreign currency. However, a government minister told a state weekly that paying in foreign currencies was a pipe dream.

“At the moment the situations remains. Salaries are paid through RTGS and I am not sure if the situation will change,” said primary and secondary education minister Paul Mavima.

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  • One of the most notable things about tyrants is they are as cocky as hell! Of all the people, President Mnangagwa should have known the serious economic mess Zimbabwe was in when he took over from Mugabe last year. After all he was a senior member of the regime for the entire 37 years of Mugabe’s corrupt and tyrannical rule. Still he never doubted for even one second that he would have the country back on track in no time.

    Indeed, within weeks of taking over Mnangagwa was already talking of “Zimbabwe is open for business!” Whatever Mugabe had done to close Zimbabwe for business he had undone all of it, his sheer presence said it all! He was cocksure his call was going to be answered by a flood on new investors.

    Mnangagwa also promised to hold free, fair and credible elections but when he was asked why he was not implementing the reforms he dismissed the request with the usual I-know-best arrogance. He was naive enough to believe would rig the elections and get away with it. How cocky is that!

    After a year in the top job, the reality on the ground is Zimbabwe’s economic meltdown is worse than it was before taking over and is set to get even worse. Tyrants are cocky and stubborn but reality has its own way of getting to them; Zimbabwe’s economic meltdown is real and, like it or not, the penny has dropped in Mnangagwa’s head, he is a failure.

    Mnangagwa must step down, sadly that is the one reality that will have to be beaten into his thick head! It took a loaded gun to force Mugabe to step down, it looks like it will take similar dramatic action to get Mnangagwa to accept he has failed!