Home » Industry » CZI Warns Govt Against Indiscriminate Use of Treasury Bills

THE Confederation of Zimbabwe Industries has warned Government against “indiscriminate” use of Treasury Bills to fund recurrent expenditure as this could crowd out the private sector from the limited liquidity available in the market. Appearing before Parliament’s Portfolio Committee on Budget and Finance, CZI president Mr Charles Msipa said although industry welcomed the clearing of foreign currency account balances through TBs by the Reserve Bank of Zimbabwe, the federation was concerned that excessive use of the instruments could force the private sector out.

“There is so much capital available in the country so, typically, if the Government gets into a deficit and gets into a habit of relying on that liquidity to finance the deficit it means that there is less money available to the other players in the productive sector for lending,” said Mr Msipa.

Between March and April the RBZ issued TBs worth more than $103 million towards clearing FCA and tobacco retention balances.

“We welcome the resolution of outstanding FCA balances. It is confidence building measure.

“But the more Government relies on using TBs to cover some of its recurrent expenditure, I don’t think they are planning to do that, but if that becomes the trend it may have the effect of crowding out the productive sectors,” said Mr Msipa.

He said although Government has not yet used TBs to finance recurrent expenditure as it is looking to raise funds for infrastructure development from pension funds, the CZI was sounding out “sounding a note of concern”.

Mr Msipa told the portfolio committee that industry was facing severe challenges that included de-industrialisation, infrastructure deficit and lack of competitiveness arising from a weakening South African rand. South Africa is Zimbabwe’s highest single trading partner.

The CZI president said the SA rand had lost more than 40 percent of its value in the last two years which has made locally produced goods more expensive than those produced in SA.

“In the last 18 months the SA rand has devalued by more than 40 percent against the United States dollar and this has made local industries companies 40 percent less competitive than SA producers just because of the exchange rate movement,” said Mr Msipa.

On infrastructure deficit Mr Msipa said the cost of capital was too high meaning that most businesses were using old equipment which often breaks down. The disruptions due to the breakdowns and power outages affected productivity.

MPs highlighted that industry should reconsider its pricing of goods and services, which has forced consumers to import cheaper products.

“Many industries are still in the hyper inflation mentality. The pricing of goods and services and the pricing of money in the financial services sector is self destructive.

“Those are the issues that we urge the CZI to discuss,” said committee chairperson Mr David Chapfika.

The CZI said its members were concerned at the inaction of the Zimbabwe Revenue Authority on imported products which do not originate from the free trading area in southern Africa.

Products which originate from the free trade area attract less import duty than those which originate outside the zone.

“Some of our members have frustrations with Zimra because of non action on products originating from Brazil and China and not from the free trade area. Such goods should be paying common tariffs for goods coming into the country.

“We have some companies in SA that facilitate to ensure these goods do not pay duty.

“The administration of the Certificate of Origin is extremely weak. We have a problem with that.

“We believe that 70-80 percent of Certificates of Origin are not valid because there is inadequate controls for the systems under which they are issued,” said president of the Mashonaland Chamber of Industry Mr Sifelani Jabangwe.

Source : The Herald