Zimbabwe is now desperate to contain further economic fallout from the new monetary measures announced a week ago.
- The Reserve Bank of Zimbabwe has backtracked on its blanket directive to stop banks’ lending activities
- Zimbabwe is now desperate to contain further economic fallout from the new monetary measure.
- Bankers and company executives had warned that the move would impact on operations and viability of producers across the economy.
The Reserve Bank of Zimbabwe has backtracked on its blanket
directive to stop banks’ lending activities after Tongaat Hulett’s Zimbabwe
units and other companies stopped credit sales and advances to
suppliers.
The move to stop lending by banks has jilted Zimbabwe’s economy. Zimbabwe Stock Exchange-listed companies such as Dairiboard Holdings stopped payment of dividends
declared recently while agro-processing companies wrote to suppliers that they
were suspending advance payments.Zimbabwe is now desperate to contain further economic fallout from the
new monetary measures announced a week ago. Bankers and company executives had warned that the
move would impact on operations and viability of producers across the economy.The Reserve Bank of Zimbabwe (RBZ) said on Thursday night that the
suspension of lending did not apply to marketable commodities. This is in
contrast to its communication earlier this week directing the suspension.”Suspension of lending facilities does not apply to marketable
commodities such as tobacco, cotton, sugar, maize, etc. All banks have been
advised accordingly,” the RBZ said in its statement.The backtracking followed a string of company letters to suppliers suspending
advance payments and credit advances as the impact of Zimbabwe’s new monetary
measures, aimed at containing the exchange rate implosion and spiking
inflation, spread across the economy.
James Bowmaker, the chief operating officer for Tongaat Hulett’s
Zimbabwe business, said: “We normally fund the advances from
loan proceeds that we access from the banks. Following the recent suspension of
lending by banks, we find ourselves unable to continue offering advances.”
In his letter to sugar cane farmers, Bowmaker
added that as a result of this, it was regrettable that millers working with
the company had been advised “of the immediate suspension of advance payments” until
further notice.
Other agro companies such as Fivet, a livestock
health and feedstock supplier, had also suspended advance sales. Surrey,
another agriculture processing company, had even asked farmers to stop
supplying livestock to its abattoirs.
Hotelier Cresta Hospitality has also announced
a “change of credit terms” saying it is “no longer in a position to offer
credit terms for all Zimbabwe dollar business transactions” with immediate
effect.
“This has been necessitated by the operating environment
where we are not able to access credit facilities and credit terms from
financial institutions and suppliers to enable us to extend credit to our
customers,” said Mxolisi Ndlovu, group financial controller for Cresta Hotels.
Shareholders in ZSE-listed
companies had also been impacted by the suspension of lending by banks. This
came as companies are now seeking to preserve cash in light of an expected
credit crunch on the local banks in anticipation of a lengthy ban on lending by
banks.
Banks in Zimbabwe are under the regulatory spotlight
as authorities suspect them of using their holdings to purchase foreign
currency from the parallel market, thereby inflaming the exchange rate. The International Monetary Fund has urged Zimbabwean authorities to work towards convergence of the exchange
rate regime as the current mismatches have deepened arbitrage opportunities.
The Financial Intelligence Unit asked banks
to forward to it all suspense and other internal accounts for audit by the end
of today to “facilitate” an audit process. This is based on the suspicion that “some banks may be using suspense and other internal accounts for purchasing
foreign currency” on the parallel market.
