Government is pushing ahead with measures to screen government contracts but is facing resistance from government and suppliers, Finance Minister Mthuli Ncube said Monday.
A memo by Treasury to Parliament turning down payment for laptops trended on social media at the weekend. Ncube says that was just one of several payments that his office has had to reject under measures he announced in August.
Some suppliers have been invoicing government using higher exchange rates, because they expect the Zimbabwe dollar to continue weakening. This has seen government overpaying in Zimdollars for goods and services.
“We have seen supply contracts clearly determined by forward parallel exchange rates, some as high as 2000 to the Zimdollar,” Ncube told reporters.
“A 2kg pack of chicken was claimed to be worth US$30 when market prices is a maximum US$6 for the same. We have seen a bag of cement being priced at an equivalent of USD18 per bag on some construction projects.”
But the government has not stopped all payments to contractors, only suspending inflated contracts, Ncube says. Over the past six weeks, the government has paid out a total of Z$184 billion to contractors.
“As expected there’s been resistance from various quarters, including accounting officers and suppliers,” Ncube complained.
George Guvamatanga, the Treasury secretary, says some suppliers that had already charged at inflated prices, using what they had predicted to be the future exchange rate, have since offered “credit notes” to government to make up for the difference.
“They are coming to us to say, ‘we are sorry, here is a credit note’. Those suppliers will always be looked at differently when the audit is done. Those who will be discovered by the audit, we will seek legal advice,” Guvamatanga said.
A new IT system now being installed will also help make the tender process more transparent by making it automated
With taxes for the period due next week, many large companies are offering to pay their taxes in US dollars. But government wants them to liquidate USD or “whatever they’re holding” to pay taxes in Zimdollars, Guvamatanga says.
“We are refusing taxes in USD from certain players, who have come to us offering payments in US dollars saying they do not have Zimdollars.”
Ncube admits his measures may strangle growth, but he says it’s necessary to slow down inflation.
“What we will have is good growth, without a lot of froth,” he said.
The row over government contracts have revealed the loopholes brought by Government’s failure to end exchange rate volatility.
Contractors often use a higher exchange rate to make up for currency devaluation and late payments by Treasury. Government however allows suppliers only a margin of not more than 10% on the exchange rate. Guvamatanga says government pays out in 21-30 days of receiving an invoice, but is working to shorten the period.