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Zim telcos to increase tariffs as local currency faces collapse

By , Zimbabwe correspondent
Zimbabwe , 01 Jun 2022

Zimbabwe telecommunications services companies are set to increase their tariffs, following approval by the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) as the country’s local currency is under intense pressure to be sustained.

The country has been hit with unprecedented price increases as a result of, among other reasons, supply chain bottle-necks and disruptions, global fuel hikes emanating from the Russia-Ukraine war. 

Zimbabwe’s inflation was at 94% in April.

Despite the Zimbabwe government digging in its heels on preserving the domestic Zimdollar, prominent economists like Gift Mugano and Anthony Hawkins have predicted the local currency’s imminent collapse they claim by June.

Mugano said, “The telecommunication sector is capital intensive and requires technological upgrades continuously - so it’s unsustainable for the sector to rely on the free-falling local currency. The industry will be rolling out 5G mobile service which demands foreign currency.”

Hawkins said consumers and businesses were rejecting the domestic currency and opting for the US dollar to protect against what he said were “predatory policies being pursued by the government.”

He added that the local currency constituted only 10% of the money in circulation monthly and while the return of dollarisation “would be painful for the country” holding on to the domestic currency would be worse.

Zimbabwe mobile network service providers are already struggling to secure forex needed for the network upgrades, paying software and license fees, and procuring fuel to power base stations using generators in the absence of power.

According to the telecommunications industry, most services and products were pegged in the domestic currency which is trading above $400/US$1 on the alternative market compared to the auction rate of US258/US$1.

A total of US$1,2-billion was invested in the Q4 of 2021, showing a 23,9% decline from US$1,6-billion recorded in the third quarter of 2021, according to a Potraz report.

The capital expenditure by mobile operators was mainly on national switching, national transmission as well as hardware and software.

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