Shift To Rand Only Solution For Zim

Shift To Rand Only Solution For Zim
Published: 2016 June 09 00:20:59 (2632 Views)

A shift towards the rand is inevitable as dollars imported to facilitate transacting do not stay within the country, FBC Holdings chairman Herbert Nkala said at the launch of the 2016 CASE Handbook.

“The multi-currency system is certainly the only way forward, but we need to be honest here. We know that the money we import to facilitate transacting does not stay here, and in the months ahead, we need something that people will have confidence in.My view is that while the rand is certainly not ideal as South Africa has its own issues, we import most things from Mzansi — we just need to be realistic and embrace the rand. The alternative is not attractive.”

Nkala noted that dollars were getting scarcer and scarcer as certain individuals continued to externalise notes.

“We all know who the culprits are. Almost certainly the easiest way forward is to move increasingly to the rand. It does not have the desire of the US dollar, but at least there is relative confidence in the unit.

“The quicker this happens in this country — dual pricing and the like, the softer landing we are going to have in the months ahead.”

Nkala said it did not matter how many dollars are imported, the problem will remain because of the attractiveness in the region of Zimbabwe’s usage of dollars.

“In Zambia and Mozambique they sell fuel for 70c, so you can just come over the border with your chigubu, nearly double your money, and go home with dollars.”

Nkala questioned why the country continued to import large denomination bills and then drew laughter from the crowd when he asked if anyone had tried using a $100 or $50 bill in the US.

“They will treat you very suspiciously if you bring a large bill like that. After all, the biggest denomination in South Africa is $15 equivalent, Mozambique is $16, Zambia is $9 while Malawi is $1,50 — chete!”

Nkala noted that he had spoken at the 2015 function about unrealistic expectations when it came to wages, yet only last week workers in the retail sector had been awarded a pay increase after the National Employment Council managed to register an award.

“I am not against people earning more, but I do not think that the 14 percent increase will be matched with a 14 percent increase in productivity.

“Ultimately this will just result in redundancies and higher prices for consumers in an environment where we should be seeing prices fall as a result of significantly weak regional currencies.”

Following his address, Mr Nkala presented Art Corporation with the 2015 Company of the Year award.

CASE publisher Jonathan Waters said the winner had recorded the best share price performance on the ZSE in 2015, rising 233,3 percent, and had gained an additional 40 percent since January 1.

He noted that Art had entered dollarisation with antiquated import-substitution machinery and had spent a large sum of money retooling the most capital-intensive part of the business — Mutare Board and Paper Mills.

The recapitalisation failed and Art became heavily indebted to the banks. Together with its new South Korean shareholder, the executive decided to focus on the light manufacturing operations that could deliver the fastest turnaround and generate cash — batteries and Eversharp pens.

While Art managed only last week to post an interim after tax profit of $892 000 compared with a loss of $114 000 in prior year, Waters noted that the group continued to suffer from an almost extortionate average cost of borrowing.

The CASE Handbook profiles over 120 listed companies in Botswana, Malawi, Zambia, and Zimbabwe, providing financial results and prospects in the year ahead. It also includes a 5-year trading summary, highlighting the year just past.

- Herald

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