Forex Crunch Hurting Telecommunications Sector

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The impact of telecommunications companies not being allocated enough foreign currency has far reaching implications on Zimbabwe’s already ailing economy. Just like other sectors, the telecommunications sector has not been spared and his has forced the companies to review their tariffs upwards as a result of rising operating costs,system upgrades and new equipment.

Despite all of this, the economy burns brightly for those with access to hard currency (forex).

Early this month telecommunications companies were invited to appear before the Parliamentary Portfolio Committee on Information Communication Technology where they submitted their reports and responded to questions pertaining to their submissions and the sector at large. The submissions revealed a very sorry state as they showed that companies are struggling due to foreign currency shortages.

The telecommunications sector in Zimbabwe is in the midst of a decade of strong growth and investment, driven by a technology explosion and strong demographics.A large percentage of the necessary daily operational requirements of these companies are imported therefore there is need for further capital injection in the form of forex which is in short supply currently.

As the current political crisis and its economic consequences dominate all discussions of Zimbabwe’s connectivity markets, the Reserve Bank has been on record saying it has put measures to ensure foreign currency availability is prioritized to the ICT sector.

Speaking during the Parliamentary Portfolio Committee on ICT,Reserve Bank Govenor John Mangudya gave the central bank’s position with regards to forex allocation.

“Following the 20th February 2019,Monetary Policy Statement,all foreign currency requirements by the various sectors of the economy are handled by the authorized dealers through the interbank exchange market.As such the ICT sector players approach their respective bankers who handles their foreign currency requirements.”

“The Bank has made sure that the ICT sector is designated as high priority in accessing foreign exchange from the market. Even in the past, the ICT sector has largely been supported in the constrained foreign currency environment. It should also be noted that the ICT sector is a net importer.” he said.

However, the central bank has not fully supported the sector in terms of foreign currency allocations  which has resulted in recent network challenges.

Telecommunications regulator, the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz), has been on record saying it is engaging the central bank to prioritise the telecommunications sector in foreign currency allocation.

“Our networks have been facing upgrade challenges and service support partners are owed a lot of money, they want to be paid,” said Potraz Director General Dr Gift Machengete speaking to journalists during a sector performance briefing.

“Potraz has been engaging the RBZ to prioritise the sector on foreign currency allocations and we will continue to do so,” he said.

The companies sang the same hymn when it came to the issue of foreign currency shortage which has adversely affected their operations in a huge way and failure to address this problem is obviously not the best thing for the country. They will have to continuously adjust their tariffs for them to realise profit and remain in business.

TelOne Managing Director Mrs Chipo Mtasa spoke on how operating in a landlocked country is capital intensive.

“We are just under half a million per month US$441 00 to be specific just transit fees alone”

“Another foreign currency obligation that we need our loan obligations to China-Afreximbank.” she said.

The capital intensive nature of Zimbabwe’s telecommunications sector presents a myriad of business challenges as there is a global technological change that has seen the emergence of multiple digital platforms that aim to enhance business and life in general.The growth of the telecoms industry comes with many demands ranging from infrastructure,system upgrades,internet landing costs and equipment.

Powertel Managing Director Engineer Samuel Maminimini stressed how the company was under pressure to improve quality of service  and procure components as and when they are required to service their network.

“We have not been receiving as much forex as we would require for maintenance of our capital intense network.It is a fact that foreign currency is an issue in such an industry.”he said.

The next chapter of telecommunications will be defined by exploding data demand,massive infrastructure development  in the form of modern  base stations . Resultantly, a huge market  potential will be captured by operators who, by making innovative and sustainable investments in the core business of connectivity, will become intelligent network operators. This will require a much more fractional and targeted approach.

The sector has become the economic engine as well as an enabler of social,educational, technological and medical progress worldwide. Consequently, the 2nd Republic has strategically positioned telecommunication networks as a key paradigm for the development  as the country moves towards a digital economy by 2030.

This industry is not only strategic, but an important contributor to job creation, GDP and the efficient running of businesses worldwide. Given the economic crisis currently prevailing in the country, it is important to understand that the industry is a high-revenue industry that makes a substantial and growing contribution to the country’s economy.

The sector exerts a positive and symbolic impact on economic growth. There is now widespread recognition that telecommunications is no longer simply a convenient public service, but a tremendously valuable economic resource, and an increasingly important infrastructure for economic growth and development. The widening spread is hurting businesses that need dollars a situation  that has seriously adverse impact on business.

A good telecommunications system widens markets, creates better information flow and lowers transaction costs.

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