Retired Gen Constantino Chiwenga in Harare, Zimbabwe. Picture: REUTERS/SIPHIWE SIBEKO
Retired Gen Constantino Chiwenga in Harare, Zimbabwe. Picture: REUTERS/SIPHIWE SIBEKO

Zimbabwe's vice-president, retired Gen Constantino Chiwenga, on Wednesday issued a chilling warning to  businesses to stop increasing prices and sourcing foreign currency from the black market.

Chiwenga, who headed the ousting of former president Robert Mugabe in 2017, accused businesses of  “financial terrorism” and threatened them with unspecified action.

The vice-president is well known for using heavy-handed tactics. In 2018 he issued a directive to fire all nurses in the country who  had gone on strike demanding higher wages. The move plunged Zimbabwe’s ailing health sector into crisis before it was reversed by President Emmerson Mnangagwa.

Earlier on Wednesday the Confederation of Zimbabwe Industries (CZI), the country’s largest manufacturers body, warned that industries were suffering amid worsening economic conditions.

Addressing a round-table meeting at the Zimbabwe International Trade Fair in Bulawayo, a visibly angry Chiwenga diverted from his prepared speech to issue the stern warning.

“Those who have been doing this (increasing prices), if you want hard gloves we will do it,” he said.

The prices of all basic goods have more than doubled over the past few weeks as foreign currency shortages continue to bite. 

“The parallel (black) market continues to overshadow the economy because there are people feeding it. The recent and continuing spate of price hikes can't be explained by objective push factors but are driven by speculation from the parallel market,” he said.

“What kind of an economics is that … let’s behave in a way that will see us building the country we all want. [We] will have to take stern measures because we can’t carry on like this as a country. I'm issuing a stern warning to those engaged in activities that undermine the economic growth of the country.”

His comments heightened tension between the government and business over foreign currency shortages that have forced companies to source US dollars on the black market.

The government wants companies to buy hard currency on the interbank market.

In February, Zimbabwe’s authorities introduced the interbank exchange rate to allow for trading of foreign currency on the formal market. But the move, which was hailed as a step in the right direction, has failed.

Millions of Zimbabweans who live abroad send hard currencies  back to their relatives, who turn to the black market as a better option for foreign exchange. It sells the local currency at 1:5 to the US dollar, while the official rate is 1:3.

CZI president Sifelani Jabangwe told the trade fair meeting that there was inadequate foreign currency on the interbank exchange “as there are very few sellers and a very big number of buyers”.

Jabangwe said industries  would  perform worse than in 2018  because of  high inflation, reduced aggregate demand, low agricultural production and the foreign currency crunch.

“In 2019, the manufacturing sector is under threat given what we have been getting from our members. The members are very pessimistic about market conditions. All key variables are performing worse than last year,” he said.

Most of Zimbabwe’s industries need large quantities of foreign currency to restock and purchase raw materials.

Finance minister Mthuli Ncube told the same meeting that Zimbabwe’s inability to qualify for international loans from global creditors continued to be an albatross around its neck.

“We have lost about 80 credit lines as a result of not paying our debts and arrears. We need to clear our arrears,” he said.

Ncube said Zimbabwe would continue to seek a financial package from SA, Botswana and other countries.

“We are looking at companies that are exporting to SA in the first place because it is easier to structure so that they can service their loan through escrow accounts.

“We already have a list of companies that will benefit from this facility.”