Foreign exchange rate disparities in Zimbabwe are causing havoc for Simbisa Brands Limited, a firm already under investigation for currency manipulation.
Independent Non-Executive Chairman at Simbisa Addington Chinake says the pricing mechanism and allocation of foreign exchange on the foreign exchange auction remain deficient as evidenced by the significantly divergent, multiple exchange rates in the economy which create opportunities for arbitrage
between the different markets and platforms.
“The Board would like to urge the government to address the deficiencies in the foreign exchange auction and allow for efficient price discovery and distribution of foreign currency in the economy,” Chinake said.
Simbisa CEO Basil Dionisio added and said, “Continued foreign exchange shortages and multiple exchange rates being used in the economy created further operating challenges through the distortionary impact on suppliers’ and service providers’ pricing mechanisms and the effect on consumer disposable incomes and spending habits.”
Simbisa went under investigation after a Zvishavane man posted a receipt on social media showing that the food outlet was using a US$1: ZW$200 rate against the official US$: ZW$86 prevailing at the time.
The receipt showed that it cost US$1 for one Russian and Chips or ZW$200 for the same in local currency.
RBZ using its Twitter handle said, “The Financial Intelligence Unit (FIU) is investigating allegations of currency manipulation and pegging of the ZW$ at 200 to 1 USD circulating on social media. Perpetrators shall be brought to book.”
A gap exists between the official rate of US$1: ZWL93 and the parallel market which trades the United States Dollar at US1: ZWL180. This puts the Simbisa rate above the parallel market rate.
Confederation of Zimbabwe Industries (CZI) president Kurai Matsheza urged Zimbabwean authorities to ensure that RBZ’s Auction System is managed as it is supposed to be.
The auction system has been facing a backlog in the allotment of funds causing lateness in the purchasing of raw materials for Zimbabwean industries.
“As CZI we reiterate that a true Dutch auction would perform the function of price discovery and pave way for a more liberal exchange rate regime,” says Matsheza.
