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Forex auction spurs industrial development

Zim draws down $1,1bn from Afreximbank facilities

Forex auction spurs industrial development

THE Reserve Bank of Zimbabwe (RBZ) says 69,3 percent of the US$1,545 billion alloted since the introduction of the Foreign Exchange Auction System in June 2020 to June this year has spurred industrial development.

RBZ Governor, Dr John Mangudya, said funding of foreign exchange requirements from the auction system has also been a critical factor in the growth of the Small to Medium Enterprises (SMEs) sector.

“The bank is encouraged by the fact that the bulk (69,3 percent) of the funds allotted through the
Foreign Exchange Auction System were towards procurement of raw materials (US$639,2 million), machinery and equipment (US$281,2 million) and consumables (US$150 million), he said in a statement. “During the period under review, a total of US$1,4 billion was alloted under the Main Auction where 1 545 beneficiaries have benefited. A total of 2 443 beneficiaries have also been alloted US$138 million under the SMEs auction.

“These allotments have been critical in spurring industrial development and the sustainable growth of the economy. Funding of foreign exchange requirements from the Foreign Exchange Auction System has also been a key factor in the growth of the SME sector.”

A schedule showing the total foreign exchange payments by source for the period January 2020 to December 2020 amounts to US$4,8 billion broken down as foreign currency accounts (US$3,7 billion), interbank market (US$443,9 million) and the Foreign Exchange Auction System (US$627,3 million).

Dr Mangudya said the schedule showing the total foreign exchange payments by source for the period January to June 2021 amounts to US$2,8 billion broken down as foreign currency accounts (US$ 1,7 billion), interbank market (US$201,5 million) and the Foreign Exchange Auction System (US$917,8 million).

The monetary authorities introduced the weekly Foreign Exchange Auction System largely to improve access to foreign currency by the productive sectors of the economy to import critical raw materials as well as stabilising the exchange rate. The weekly auction system, which replaced the fixed exchange rate of US$1: ZWL$25, has brought stability to the financial market.

As of last week, the Zimbabwe dollar traded at 85,50 against the US dollar while in the prior week the local dollar traded at 85,42 against the greenback.

Meanwhile, the Central Bank has announced that 21 more companies have been found abusing the foreign currency auction system, bringing the total to 39, and of these, 27 have been assessed civil penalties while 12 others have been issued with written warnings for aiding or abetting the flouting of exchange control regulations.

Those assessed civil penalties are barred from the auctions until they pay, and could be permanently blacklisted from the auctions if their breach of regulations.

The RBZ has been coming hard on companies abusing the funds obtained from the foreign currency auction system, and on June 15, the Central Bank named and shamed 18 companies that were fingered in the abuse.

The companies that have been fined so far, were penalised in accordance with Statutory Instrument 127 of 2021.

The initial group facing the penalties are National Foods (Pvt) Ltd, Georgia Petroleum (Pvt) Ltd, Tettola Investments (Pvt) Ltd, Africa Steel (Pvt) Ltd, Westvillle Investments (Pvt) Ltd (T/A Omni Africa), Flicknik Enterprises (Pvt) Ltd, Duo Valley Commodity Brokers, Faircclot Investments, GlenuLas Trading, Natural Stone Export Company, Nuvert Trading, Phirebrook Investments, Classic Energy, Clorex Energy, Explochem, Mutare Mart & Exchange, Souzrce Fuels, and Kimya Investments.

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