Mnangagwa making Zimbabwe riskier and bad for investment’ – Mahere
The opposition Citizens Coalition for Change (CCC) has warned that Zimbabwe is becoming “riskier, bad for investment, deathly uncertain and volatile with low returns” following President Emmerson Mnangagwa’s “illegal decree” of banning banks from lending local currency or foreign currency.
Mnangagwa last Saturday announced a raft of measures including suspending banks from lending local currency or foreign currency, to government and the private sector, including corporates, other legal entities and individuals in an effort to arrest the skyrocketing inflation in Zimbabwe.
Lawyers and economic activists have since warned that the President’s decision was going to have a catastrophic impact on the economy which is already struggling.
The domestic currency which is officially quoted at 173 against the U.S. dollar. The Zim dollar has, however, continued to slide on the black market, where it is trading between 350 and 450 to the greenback.
Addressing journalists in Harare, CCC spokesperson Fadzayi Mahere warned that Mnangagwa’s measures were going to harm investment prospects.
“Zimbabwe is now riskier, bad for investment-deathly uncertain and volatile with low returns,” Mahere said.
“Zimbabwe National Chamber of Commerce has already warned that the measures will give rise to a parallel banking system with usurious interest rates. No investor would be attracted to an economy where lending can be suspended overnight . Businesses rely on borrowing for short term financing and operational needs.
“Lending is required to import raw materials, pay salaries, working capital requirements and machinery. It is therefore clear that the suspension of lending will adversely affect the solvency of companies, who, without notice, will have to shrink their working capital base.”
Mahere further said: “The measures thus have obvious catastrophic consequences- for some it will mean they will not be able to make a simple electronic transfer of money until they have extinguished their overdraft facilities.”
The opposition party said the measure would also negatively impact productivity and capacity utilization.
“No economy can survive without access to working capital. Analysts have warned that there is a strong likelihood that an underground lending economy will emerge driven by greed and sympathy.
“There is a window for banks to approach the RBZ for considerations on what they term as a ‘case by case’ basis to vary these measures for selected corporates potential for abuse and uneven application of the policy. Such an approach is arbitrary and can lend itself to corruption,” she said.