Manufacturers snub black market as formal forex access improves
Local manufacturers have sharply reduced their reliance on Zimbabwe’s parallel market, with only 3 percent of their foreign currency needs met through informal channels in 2023—down from 15 percent the previous year.
The findings, published in the 2024 Manufacturing Sector Survey by the Confederation of Zimbabwe Industries (CZI), highlight a growing pivot towards formal foreign exchange sources, driven largely by regulatory changes and improved availability of funds.
“The formal market is working better now”
According to the CZI, a key factor behind the shift was the refinement of the willing-buyer, willing-seller (WBWS) exchange system, which was updated by the Reserve Bank of Zimbabwe (RBZ) in April 2024.
RBZ Governor Dr John Mushayavanhu told The Sunday Mail Business:
“The foreign exchange market under the WBWS arrangement is working well.
The Reserve Bank refined the system to make it more market-determined, enhance price discovery, and ensure increased foreign currency is allocated through the interbank market.”
Manufacturers, who for years turned to the black market due to delays and shortages on the formal market, have slowly regained confidence in official channels. According to the RBZ, this is due to a combination of reforms and targeted interventions aimed at stabilising the local currency, ZiG, introduced in April 2024.
“The Reserve Bank has been able to satisfy all the pipeline demand to ensure continued stability,” Dr Mushayavanhu said.
“Importantly, the ZiG-US dollar exchange rate has shown relative stability, evidenced by a collapse in the parallel market premium to levels around 20 percent.”
This marks a notable decline from previous years when premiums often exceeded 100 percent, making informal forex purchases extremely costly for businesses.
$240 million injected into formal forex system
To support the ZiG and the broader market, the RBZ reportedly injected a total of US$240 million into the interbank system in 2024—US$50 million at launch and another US$190 million to clear foreign currency backlogs.
Dr Mushayavanhu added:
“The Reserve Bank is able to strategically intervene in the foreign exchange market to smooth any intermittent volatility or temporary market demand and supply mismatches.”
While these interventions have helped ease pressure, monetary authorities have also refrained from aggressive policy changes in recent months. Interest rates and statutory reserve ratios were left unchanged to encourage stability.
Analysts note, however, that success is likely due to a combination of factors—not just central bank action.
Walter Mandeya, an economic analyst with Trigrams Investments, said:
“While the WBWS improvements are a factor, the increased self-sufficiency in foreign currency generation should also be considered.
A lot of companies are now earning their own forex and don’t need to rely as much on either the formal or parallel markets.”
Mandeya also noted that access to the WBWS platform still requires sufficient ZiG liquidity, which may be limited in some cases.
“The RBZ is running a tight monetary regime. ZiG is not freely available in the economy. So, to demand forex at the WBWS, you must have the matching amount of ZiG.”
ZiG adoption rises, but long-term confidence still uncertain
The RBZ claims the ZiG is gaining wider acceptance, with a reported 91 percent usage rate across key sectors such as retail, fuel and utilities by June 2024.
Revised foreign currency guidelines released in May 2024 sought to eliminate confusion by confirming that the WBWS exchange rate is now the sole official rate, a move welcomed by some business leaders.
“The clarification will improve efficiency and stability in the market,” said Dr Mushayavanhu.
“We are committed to working through any challenges to ensure 100 percent of bona fide foreign payments are catered for.”
However, questions remain over whether current conditions are sustainable, especially if foreign reserves or export earnings fall short in the coming months. Manufacturers have warned in the past that any reversal of gains could push them back towards informal channels.
Still, for now, the shift towards formal forex markets is being viewed as a positive step by many in the industrial sector.
“If these trends hold, they could support growth and stability,” said one manufacturing executive, speaking on condition of anonymity.
“But it will depend on consistency. Businesses need predictability above all.”
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The post ‘We no longer need the black market’: Why Zimbabwean Manufacturers Are Now Turning Away From Parallel Forex Dealers appeared first on iHarare News.
