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Zim economy hits crisis point

She also noted that the fact that the Zimbabwe Revenue Authority (Zimra) charges VAT in forex adds another layer of complexity.

ZIMBABWE'S multi-currency system, where some sales are in United States dollars and others in local currency, is posing significant supply chain management challenges for companies, economists said this week.

This comes after Simbisa Brands wrote to its suppliers seeking a modification to payment terms.

The letter states: “Given the trading environment where we are receiving less than 50% of our sales in United States dollars, we find ourselves unable to settle our suppliers exclusively in US dollars on the current terms. We are therefore writing this letter to request a change in payment terms effective immediately.”

“The new terms will be as follows: Simbisa to settle 50% of the before VAT (value added tax) invoice amount in USD and the balance to be converted and settled in ZiG. VAT thereon will be settled 100% in USD in line with Zimra requirements. Other terms remain the same as agreed, supplier to continue invoicing in USD 100%.”

The multi-currency system was implemented in 2009.

Since 2009, the majority of transactions have been conducted in foreign currencies.

Recently, Zimbabwe has also introduced a new gold-backed currency called Zimbabwe Gold (ZiG), which co-circulates with other international currencies.

Economist Chenaimoyo, Mutambasere said suppliers now demanded payments in greenbacks due to the volatility of ZiG.

“Businesses in Zimbabwe, including Simbisa Brands, are navigating complex challenges due to the dual currency system,” she said.

“The partial payment of sales in US dollars creates significant complications in managing supply chains,” Mutambasere told the Independent.

“Many suppliers now demand payment in USD due to the volatility of the ZiG, especially considering the fact that international suppliers and certain key inputs can only be sourced with foreign currency. This has put immense pressure on businesses to maintain adequate United States dollar reserves.”

She said businesses were finding it challenging to rely on ZiG transactions due to insufficient foreign currency liquidity in banks.

“The country is facing exacerbated liquidity challenges. ZiG was intended to stabilise the local currency by providing a mechanism for guaranteed settlements, but inadequate foreign currency liquidity in the banking platforms has made it difficult for businesses to rely on ZiG transactions.

“As a result, many businesses, including Simbisa, are increasingly forced to negotiate payment terms in USD to avoid the risks associated with the local currency,” she added.

She also noted that the fact that the Zimbabwe Revenue Authority (Zimra) charges VAT in forex adds another layer of complexity.

Another economist Prosper Chitambara said: “Given the destruction that we were witnessing on the foreign exchange markets, it actually makes sense for people to pay for services or even for goods using ZiG. But of course that then affects a lot of businesses that are not able to have their foreign exchange requirements fully satisfied on the interbank market.

“So, because of the distortions, it actually makes sense for a person to change his USD on the black market into ZiG then go into a formal retail outlet and buy commodities,” he said.

“I think this letter by Simbisa shows they are also feeling the impact. They are not able to fully mobilise foreign exchange through the interbank market. They are just trying to make sure that at least 50% of their payment will be in USD,” Chitambara said.

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