By Ndafadza Madanha
RESERVE Bank of Zimbabwe (RBZ) deputy governor Kupikile Mlambo says attempts to formalize the informal sector are likely to be unsuccessful.
Mlambo’s sentiments come at a time when government is engaged in concerted effort to formalize the informal sector to enhance revenue generation.
“You cannot formalize the informal sector because they are there for a reason but you can create linkages with the formal sector,” said Mlambo while addressing a Confederation of Zimbabwe Retailers Indaba.
He said as part of the efforts to draw the informal sector into the mainstream economy the RBZ was working on provision of micro point of sale machines that can service up to 10 small enterprises.
Turning to the liquidity crunch Mlambo said it was a foreign currency shortage whose roots lay in the 1965 importation substitution program pursued by the colonial government.
“The shortage of cash is a shortage of foreign exchange it has a historical context that begins in the 1960s. Then authorities decided to industrialize by replacing imports, while it worked it did not generate sufficient foreign currency to bring in essential raw materials”.
Mlambo conceded that upon adopting the multi-currency inadequate measures were put in place to monitor the use of foreign currency.
“Unfortunately in 2009 we did not put sufficient measures to monitor the use of foreign currency and money left the country under the pretext of free funds but we have now closed that loophole”.
According to figures from the RBZ, Zimbabweans hold close to US$1 billion in foreign accounts.
Mlambo reiterated the central bank’s position that it would not adopt the South African rand as the anchor currency.
“Our problems are of a structural nature and whatever currency we adopt is foreign currency, the point CZI miss is that we don’t have enough foreign currency and that is our problem since the 1960s we need to export more. Secondly we are uncompetitive on the regional markets as our cost structures are high,” said Mlambo.
He said the current foreign currency shortages can only be addressed through incentivizing productive sectors of the economy that have capacity to export.
Some of the sectors that have received support from the central bank include the mining and horticulture sectors.