A cooking oil shortage is looming in the country following revelations that the sector’s producers are failing to secure key raw materials from foreign countries due to the situation with banks’ nostro accounts. A nostro account is a bank account held in a foreign country by a domestic bank mainly to facilitate settlement of exchange and trade transactions. However because of declining exports particularly from October last year, local banks nostro accounts have been depleted, a situation which has caused delays in settling foreign payments and cash shortages in Zimbabwe as banks also use the same account balances to import cash.
Generally nostros are supported by export proceeds, diaspora remittances, foreign direct investment and offshore credit lines.
However banks have seen increased pressure on nostro accounts because of the widespread importation of goods into the country against declining export revenue and other inflows base. While imports in the country have been consistently high, they have been pushed further by the El-Nino-induced drought and electricity and this has placed a huge demand on foreign currency.
According to Zimstat, in the three months to March, the country imported wheat worth $21, 85 million, maize worth $51,16 million while electricity worth $47,63 million was also imported.
Oil Expressers Association of Zimbabwe president Sylvester Mangani told the Herald Business that producers in the cooking oil sector are facing challenges in importing raw materials due to the depletion of the nostro balances, which has seen a delay in the settling of foreign invoices.
“We are in a tight situation and we actually don’t know our position come the end of the month. This is not only about the cooking oil manufacturing sector but it is about the industry as a whole. Banks at the moment are struggling to make foreign payments. This has made it difficult for us to secure raw materials out of the country considering that we get crude (soya) oil from countries like Argentina and South Africa,” said Mr Mangani who is also the chief executive at Surface Investments.
In the first quarter of the year, crude soya bean oil imports amounted to $24,9 million.
Confederation of Zimbabwe Industries president Busisa Moyo who is also CEO at United Refineries said foreign suppliers in the cooking oil sector were now reluctant to sell to the country because of the delays faced by banks in settling invoices.
“We are facing challenges in paying foreign suppliers due to the fact that banks cannot make foreign payments at the moment. Foreign suppliers have been reluctant to supply to us and we are trying to negotiate with them but they are getting worried with the situation.
“As I am talking to you right now I am in South Africa negotiating with some of our creditors so that we secure more lines of credit and ensure that our suppliers continue to supply us while the situation gets back to normal.
“The Reserve Bank of Zimbabwe Governor Dr John Mangudya assured us that the Central Bank is working towards normalising the situation but generally it is in a delicate state,” said Mr Moyo.
Dr Mangudya recently said the central bank was working on a priority list of importation with the business community which will ensure that the country brings in products and services which are critical.
“We are not going to control imports but rather we are working on a priority list. However the bigger picture to get past the problem is that we ‘make and buy’ Zimbabwe.
RBZ is also working on a nostro-stabilisation fund worth about $200 million with the Africa Export and Import Bank while tobacco inflows will offer some relief to the situation.
However analysts expect foreign payments to remain a challenge for the greater part of the year as banks work towards replenishing their nostro accounts.