Golden Sibanda Senior Business Reporter
FINANCE and Economic Development Minister Mthuli Ncube says foreign currency exchange rates on the parallel market are being driven by speculative traders who want to make huge profits and not people seeking to hedge against the rising inflation.
Zimbabwe’s annual inflation hit 97,8 percent in May on the back of the continuing increase in prices, which continued to be indexed to the ever increasing parallel market exchange rates, especially the US dollar and the South African rand.
The Treasury chief also rapped private sector companies for not adjusting earnings for their employees relative to their earnings yet a good number of the organisations were constantly reporting super profits from charging very steep prices.
He made the remarks in an interview to explain the rationale behind Government’s decision to outlaw the multi-currency system through Statutory Instrument 142 of 2010, gazetted yesterday, which makes the local currency, Zimbabwean dollar, the only legal tender in the country.
Minister Mthuli said the latest abolishment of the multi-currency was an attempt by Government to resolve the problem where prices are indicated in US dollars yet the majority of people earn local currency (RTGS dollars), which has since been renamed Zimbabwe dollars.
“That is profiteering (indexing prices to US dollar parallel market rates). These people are traders, actually they are not even hedging, they are traders and the moment they get the US dollars, they get them out.
“So, they are traders, they are not even hedging because when you hedge, you hedge for real, they are traders who are trading on the parallel market and we are going to raise interest rates (to discourage speculative borrowing),” the minister said.
Minister Mthuli said introduction of a local currency will bring to disposal of Government a full range of monetary policy instruments to discourage speculative borrowing and also defend the value of local currency.
The Treasury chief bemoaned speculative and profiteering tendencies where even the prices of products that are produced locally using locally produced raw materials were being indexed to the prevailing parallel market exchange rates of the foreign currencies.
“What are we doing (in instances) all the domestic market raw materials are here and you are paying your workers in RTGS. You know what? These companies that are profiteering with earnings growth of 70-80 percent, are they increasing wages for their workers? They are not.”
Minister Mthuli questioned why the private sector, despite reporting huge profits, were not adjusting the salaries of their employees.
He said Government was working on improving earnings for its workers and, likewise, the private sector should also have a duty to look after its workers.
“They have a responsibility to their employees. Why are they not looking at their employees and paying them properly. Why are the employees not marching in the streets to say pay us properly,” he said.
On its part, Minister Mthuli said Government would adjust salaries for civil servants, which may be done as early as next month, and was in the process of finalising the finer details of that.