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Roberta Katunga, Senior Business Reporter
THE plummeting of the South African rand against major currencies has been received by local manufacturers with mixed fortunes.
According to experts the free-fall of the rand has affected exports to South Africa, Zimbabwe’s biggest trading partner while the prevailing situation has been advantageous to importers of raw materials and equipment as local companies import their products cheaply upon converting the firmer US dollar into rand.
As of Friday the US Dollar to South African rand South African exchange rate stood at $1 to R15,18.
Zimbabwe National Chamber of Commerce Matabeleland chapter vice-president Mr Crispen Mugova said most companies that traded in South Africa had running contracts in rand and are invoiced using the rand but their incurred expenses are in US dollars.
“When South African businesses pay after 30 days, companies don’t get the same value, which they used to buy raw materials. Besides raw materials, our wages and production costs are in US dollars thus the profit margins are reduced,” said Mr Mugova.
He said different sectors of the economy were affected by the depreciation of the rand as manufacturers ponder continuous sliding of the South African currency.
Mr Mugova also said the devaluing of the rand meant that local exports would become more expensive in South Africa thereby leading to a decrease in demand of Zimbabwean products.
Analysts noted that Zimbabwean products were already less competitive in South Africa because of various factors including high production costs incurred as a result of using outdated machinery and high labour costs as well as continuous power outages.
“The depreciation of the rand therefore makes our situation direr. We hope with the introduction of the new South African Finance Minister Pravin Gordhan, things will stabilise,” said Mr Mugova.
However, Engineering Council of Zimbabwe chief executive officer Engineer Ben Rafemoyo said on face value, the weak rand had presented an advantage for the engineering and manufacturing sector when purchasing equipment from South Africa coming from a dollarised economy like Zimbabwe.
Although he could not shed more light on the issue as he said economists were still to conduct a proper analysis to see how local goods faired on the export market, Eng Rafemoyo said more could be bought in a rand market with the US dollar.
“In the engineering sector there are not many products being produced locally, there are a few manufacturing companies in engineering. Our economists have not done the analysis for us to have a holistic and comprehensive picture of the whole situation,” he said.
The weak rand has not only affected the manufacturing sector but has hit hard other sectors of the economy like tourism.
According to statistics from the Zimbabwe Tourism Authority, South Africa tourist arrivals in Zimbabwe have declined sharply over the past few years as the rand continued to slide from 1,5 million visitors in 2006 to about 600 000 in 2014; a situation that has spurred the tourism sector to mull reintroducing rand rates to make the destination more affordable to South African travellers who have always been the country’s largest source market.
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