Government Scheme to Access Forex Blocks Small Business

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By Ignatius Banda
BULAWAYO, Jan 27
(IPS) - The ZANU-PF government's efforts to gain access to foreign exchange (also known as forex) by imposing an expensive licensing system on Zimbabwean enterprises, enforced with the threat of prosecution, is undermining one of the last remaining means of survival in the collapsing country.According to criteria set by Zimbabwe's Reserve Bank last year for the foreign exchange licensed warehouses and retail shops (FOLIWARS) project, businesses intending to sell in foreign currency must deposit 20,000 U.S. dollars with the bank for them to be issued with a licence.Bank governor Gideon Gono called the FOLIWARS an 18-month experiment. But concerns are being raised that the project is forcing many small enterprises out of the market at a time when local industries have virtually shut down because of an inability to generate foreign currency reserves previously earned through exports.''No one wants to use the Zimbabwean dollar and for us without licences, this year is going to be particularly tough as our currency has become useless,'' said an exasperated Tadiwa Furusa, a 32-year-old small businessperson, in an interview with IPS. ''We cannot keep accepting a currency which has been pushed out by rampant inflation.''Local economist Gilbert Psvarai said FOLIWARS is part of government efforts to obtain foreign currency to finance its programmes after ZANU PF policies destroyed agriculture, previously the country's major foreign exchange earner, and industry.''The central bank came up with this project as part of obvious attempts to get foreign currency from both business and the consumers,'' Psvarai told IPS. ''But it is obvious this thing was not well thought out as both business and the general public are bearing the brunt of pricing in forex,'' he added.However, companies with ties to ZANU PF are believed to have easy access to foreign currency. They were largely the first ones to be granted FOLIWARS licences, enabling them to make super profits at a time when other business concerns are struggling to raise the licence fee.For Furusa the year 2009 has not arrived with glad tidings.The beginning of a new year is usually an opportunity for businesspeople to make projections for the approaching year. It is a time when they set goals about opening new branches and increasing staff, in the process creating employment school leavers. This is especially important in developing countries where formal employment opportunities are limited.But Furusa finds himself contemplating leaving the country as his business is facing increasing difficulties. Zimbabwe's economic crisis shows no signs of letting up, given the protracted deadlock between the country's main political parties that have failed to form a government almost a year after elections.Furusa is a university graduate who has been forced to abandon his profession as an environmental scientist to sell hardware and run a grinding mill. Despite the hardships that characterised 2008, he was set for ''greater things'' in 2009.However, regulations set by the country's central bank have shattered his dreams.''In early 2008, before the legalisation of shops using foreign currency, we were able to sell in the local currency and managed to stay in business,'' explained Furusa.''Now that the local (Zimbabwean) dollar has become useless we want to sell in foreign currency but we face arrest from the authorities. It is difficult because we cannot afford the demands put in place by the central bank for one to be licensed to sell in foreign currency.''Zimbabwe's world record recession enters its 10th year and, despite ostensible efforts by government to promote small-and-medium enterprises (SMEs), industry officials say banks no longer issue loans to any businesses as the local currency loses value as soon as it leaves the bank.''Sourcing foreign currency from the parallel market has meant small businesses struggle to finance themselves as the local dollar has rapidly lost value against major currencies,'' according to Thomson Hazvinei of the Affirmative Action Group (AAG), a grouping that champions the interests of indigenous business people.''Banks cannot loan foreign currency and we know banks are not getting any deposits of the local currency from the people. It is a wonder that some businesses are surviving right now,'' Hazvinei told IPS.Local economists, commerce and industry officials agree that the unofficial ''dollarisation'' of the Zimbabwean economy has pushed the local currency out of use as legal tender in a country where the World Bank says the economy has shrunk by more than 70 percent since the year 2000.The inability of small businesses to operate and to create employment has increased poverty levels, complained Hazvinei.Said Furusa, ''it is our intention to create jobs but conditions being set for us by the authorities are making this impossible and that is the reason why some of us want to quit''.Judith Hadebe is a cross-border trader who has had brushes with the law for selling her wares in foreign currency. ''We have to deal with the police who insist that we sell in the local dollar, but that is threatening our operations,'' said Hadebe. ''This is despite the fact that our customers are willing to buy in foreign currency.''Simba Phiri of the Bulawayo Traders Associations says they are being forced out of business as they are failing to raise the USD20,000 demanded by the central bank for them to be licensed to sell in foreign currency."By continuing to sell in the local dollar, we risk closure as the local currency is no longer considered legal tender by both customers and suppliers," Phiri said.Early this month the Zimbabwe National Chamber of Commerce, an organisation representing businesspeople, called on the government to review FOLIWARS as it was prejudicing small businesses as they cannot afford the licence fees. (END/2009)