Investment firms hail efforts to drive ZiG demand

Tapiwanashe Mangwiro

Senior Business Reporter

Asset management and stock trading firms have applauded the move to bolster demand for the new currency, Zimbabwe Gold (ZiG), saying the policy measures present a good starting point for the currency’s wider use.

In their 2024 monetary statement policy analyses FBC Securities and Zimnat said Reserve Bank of Zimbabwe (RBZ) governor Dr John Mushayavanhu was moving in the right direction by creating demand for the local currency.

Zimnat said; “To increase demand for the local currency, the Government will make it mandatory for companies to settle at least 50 percent of their tax obligations on Quarterly Payment Dates (QPDs) in ZiG.

“This is a step in the right direction, as statutory payments are essential for creating and increasing demand for the local currency, especially from the private sector.”

Similarly, FBC Securities said such a measure would deflate inflationary pressures and increase demand for the local currency.

“The demand for local currency to pay taxes could impact the exchange rate, especially if a significant portion of tax payments are made in local currency. This can lead to limited exchange rate volatility.

“Companies that earn revenue in foreign currencies, however, may face increased currency exchange risk when converting their earnings for tax obligations and fluctuations thereof will likely increase their taxation burden,” the securities trading firm said.

On the introduction of the new currency itself, the two firms said it was a much-needed shift as the economy had become too hot due to inflationary pressures.

Zimnat commented on the issue saying that the introduction of ZiG is a welcome development as the country needs a vibrant and stable local currency to support its economic growth aspirations.

“Local economists also agree that a stable local currency is crucial for enhancing export competitiveness and rebuilding foreign currency reserves, which act as an important economic shock-absorber,” the asset management firm added.

On the other hand, FBC Securities believes the domestic economy has been characterised by high inflation, as well as exchange rate and currency instability, and has been moving towards full dollarisation, as the US dollar has continued to dominate the weaker Zimbabwe dollar, with over 80 percent of market transactions currently conducted in US dollars.

The securities firm said, “Against this background, a stable and solid new currency may usher in certainty, predictability, limited inflationary pressures, and exchange rate stability.

“The introduction of the new currency, ZiG, provides an opportunity to reform and modernise our financial system, potentially increasing transparency and limiting the downside risks which have been prevalent during the last few years.”

However, concerns over the lack of sufficient awareness, education, and training on the new currency for businesses and households, which could affect ZiG’s acceptability in the market were raised.

Mr Misheck Makamure a chartered accountant added to the concerns saying, “There are also uncertainties regarding the conversion of Zimbabwe Dollar loans and fixed income investments that were contracted at higher interest rates due to hyperinflation, given the prescribed lower bank policy rate.”

RBZ was urged to get on an extensive drive to promote the new currency and demystify most of the misconceptions being peddled to the ordinary person in the street to reduce resistance to the ZiG currency.