The Confederation of Zimbabwe Industries (CZI) stated that the statement released last week that criminalising businesses and foreign currency traders was the wrong move. Zimbabwean companies have been resorting to US dollars to perform transactions. The government has since promised to descend upon them and those trading foreign currency on the black market.

CZI stated that this move will give rise to even more problems as it is risky to shut down informal foreign exchange trading when there isn’t a viable formal market to trade.

How About The RBZ Foreign Currency Exchange Auction?

The Foreign Currency Exchange Auction was put in place to minimise the impact of foreign exchange rates on businesses. The auction system was deemed effective when companies such as Zimplats managed to save a staggering US$5.5 million as a result of using this system.

The problem that exists is that some of the beneficiary companies where said to be abusing the system. The Reserve Bank of Zimbabwe revealed a list of companies that were said to be abusing this system, thereby making it seem ineffective.

As it stands, the Forex Auction is now being considered ineffective. One of the major reasons is that it is taking up to 15 weeks to allocate foreign exchange, instead of the intended 2 days. Imagine,15 whole weeks! What business will be able to wait that long?

Zimbabwean Currency On The Verge Of Collapse

As reported by zimrates.com, the Zimbabwean currency is currently trading at 88 per U.S. dollar on the official market as of Oct. 11 from 2.5 a dollar in February 2019. It is trading significantly weaker, at around 170 to the dollar, on the black market.

The CZI stated that well thought out policy measures must be implemented by the relevant authorities before attempting to shut down the black market. This move will bring back confidence into the currency markets and stabilise the economy.

We wonder what financial analysts like Eddie Cross have to say about this considering the report stating that the nation’s economy was finally on a sturdy foundation.

The post Zimbabwean Currency On The Verge of Collapse appeared first on Provoker Magazine.

Some businesses were able to minimise losses by up to $5.5 million since they began using the foreign exchange system. However, other business are said to have been abusing this system. Such businesses have been exposed by the RBZ and will be facing the necessary penalties.

View the official RBZ statement pertaining to this matter below:

When it began,the foreign exchange system was criticised heavily. Some of the criticism came following the release of the companies that were benefiting from it. Alex Magaisa was one of the people to have criticised the list.

What are your thoughts?

Let us know in the comment section below.

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To prove the effectiveness of this system, Zimplats managed to use it to reduce foreign exchange losses by a staggering $5.5 million. However, not every company can participate in this Auction as there is a high bidding minimum such that other companies might find difficult to meet.

Below is the list of 100 organizations that have been benefiting from the auction.

The post Wondering who is benefiting from the RBZ Forex Auction? Here’s a list. appeared first on Provoker Magazine.

Before we dive into how they were able to do that, we’ll take a look at who Zimplats is as an organization for those who don’t know. In short, Zimplats is the leading mining company in Zimbabwe specializing in platinum group metals such as platinum, palladium, rhodium, iridium, ruthenium and osmium. With this background in mind, its safe to presume that vast amounts of funds had to be exchanged from the local currency to foreign currency in order to continue with effortless operations.

Given the unpredictable fluctuations of the exchange rate from the local to foreign currency, Zimplats, much like other institutions had to deal with major losses that arouse from currency exchange alone. In the case of Zimplats, a staggering US$5.6 million foreign currency exchange loss was recorded in the half year period ending December 2019. However, during the same period in 2020 they were able to reduce those losses to US$0.1 million. So how were they able to save an astounding US$5.5 million regardless of foreign exchange rate fluctuations remaining uncertain?

On June 2020, the RBZ foreign exchange auction system replaced the interbank market. These weekly foreign exchange auctions were put in place with the aim of,

“improv[ing] transparency and efficiency in trading of forex in Zimbabwe”

said RBZ Governor, Dr John Mangudya.

Dr Mangudya described the system saying

“that auction system will operate on the Reuters Forex Trading platform, a real-time electronic trading system.”

Since its establishment in June 2020 , the auction continues to be held every week on a Tuesday. Zimplats spoke in regards to this saying,

“The group recorded net foreign currency exchange losses of US$0,1 million compared to US$5.6 million in the same period last year owing to the rate movements of the Zimbabwean dollar observed on the foreign currency auction system that was introduced in June 2020 by the Reserve Bank of Zimbabwe.”

Many corporates that participate in the auctions, such as OK Zimbabwe and Telecel have praised this system as it has been able to calm exchange rate volatilities and ease the liquidity crisis.

What is your opinion on the Foreign Exchange Auction that was introduced? How has it impacted your organization?

We would love to hear your thoughts in the comment section below.

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