‘ESAP fails to address forex issues’

The Herald, 1 December 1994 

WHILE the Economic Structural Adjustment Programme has had some positive benefits for the Zimbabwean businesses, it has not addressed the problem of foreign currency earnings.

Chairman of the Central African Textile Manufacturers’ Association Mr Ray Woolley said last week that the view held by many that there was now plenty of foreign currency in the country was wrong.

He said the availability of foreign currency from the banks did not mean enough of it was being generated.

“I would say that it is more likely that we have borrowed it or that the donors have been good boys and girls and accepted structural adjustment,” Mr Woolley said.

There was nothing in place in the productive sector to ensure that more foreign currency was earned through exporting. Export support had fallen away, while at the same time competing goods from neighbouring countries were entering the market.

Mr Woolley said the clothing and textile industry had been adversely hit by the falling away of export incentives.

After modernising their equipment at the onset of ESAP on the belief that the export incentives were to remain in place, members of the industry were taken aback as they were exposed to unfair competition.

This was resulting in the clothing and textile companies laying off workers as their jobs could not be preserved in production for the export market, he said.

“In my opinion, the loss of jobs in production, plus the loss of exports will have far reaching implications for Zimbabwe. I cannot see us getting out of our spiral of increasing poverty for the masses of our people.

“Zimbabwe will need hand-outs of foreign currency and aid forever, because it is losing its ability to pay its way,” Mr Woolley said.

During debate, one participant said it was incorrect to say the country was not earning foreign currency.

To this, Mr Woolley replied: “The question is whether we are earning enough foreign currency. Figures for foreign currency earnings have been going up in the last two years, but now they are going down, when our requirements are going up.”

An immediate solution to the problem was to reintroduce export incentives.

LESSONS FOR TODAY

• Zimbabwe has been in a foreign currency conundrum since time immemorial. Despite the various economic reforms, the situation remains dire.
• The bulk of the foreign currency earnings should be from the productive sector, which currently is not performing well. Since ESAP, more companies have been closed, and joblessness has reached its peak.
• Government must put in place strong measures that will ensure that the mono-currency system it recently introduced stays so that the productive sector can start to rebuild its foreign currency reserves.
• Government must also not allow itself to be bullied into abandoning the de-dollarisation policy, otherwise, the spiral will not be broken.

The fallacy that Zimbabwe is awash with foreign currency must be done away with. If the foreign exchange was readily available and in excess, the productive sector would be thriving, and the country would not be facing economic                                   challenges.