RBZ must keep tight lid on forex auction system
FOR a while the Reserve Bank of Zimbabwe (RBZ) has been “availing” United States dollars to businesses at a capped auction rate.
This means RBZ funds are the cheapest as they are availabled at around $88 versus $190 on the parallel market. Naturally, everyone wants a slice of that cake, so people have been funding their Zimdollar accounts to bid for the cheap money, but alas, RBZ does not have enough foreign currency to meet the auction obligations.
As a result, the RBZ owes a lot of businesses US dollars in unfulfilled auction obligations. Out of frustration, the businesses, which are sitting on a lot of Zimdollar balances, are using a two-pronged approach by seeking some of their US dollar requirements on the streets.
The net effect is wild exchange rate increases. In fact, some businesses are getting cheap US dollars from the auction system and selling them at a premium. RBZ is not policing the usage of the funds for intended purposes.
US dollars are given to various businesses. Some with known suppliers, for example Delta Beverages, concentrates can only come from Cinco in Swaziland and nowhere else. Juice comes from a few suppliers like Letaba. Likewise, Preforms closure labels come from known suppliers that meet Coke standards. It must ring alarm bells to RBZ if there is a sudden deviation from this. Most big companies use credible suppliers and have a three-quote policy. The RBZ team must have a database of such suppliers and be able to raise alarm when the preferred supplier is more expensive than other known players. Remember the shelf companies will naturally be more expensive than traditional suppliers.
So to win, the RBZ must:
- Free up the auction rate such that it becomes a market-determined auction, lest speculators take over the auction system.
- RBZ must improve the enforcement of the paper trail audit to determine if businesses which are getting US dollars from the auction floor are using them for intended purposes.
- By whatever means necessary, RBZ must seek to improve forex inflows and simple laws of supply and demand must apply. –Ndebele
Govt must be serious about devolution
DEVOLUTION means transferring power and authority from central government to lower tiers of government, especially local authorities and provincial councils.
The government, despite having said it is implementing devolution, is unwilling to transfer administrative and fiscal powers to local authorities. The Ministers of State for Provincial Affairs are in place, but that is not enough. The provincial development co-ordinators are in office to co-ordinate government ministries at the provincial and metropolitan council levels. The Constitution envisages the establishment of provincial and metropolitan councils with the provincial council chairpersons likely to assume the powers that are being exercised by the Provincial Affairs ministers.
Ideally, under a devolved system, the provincial and metropolitan councils should have overall control…