Blocked funds may ruin foreign flights into Zim

28 Sep, 2018 - 00:09 0 Views
Blocked funds may ruin  foreign flights into Zim

eBusiness Weekly

Kudzanai Sharara and Golden Sibanda
Zimbabwe risks reversing gains it had registered towards destination accessibility, through its Open Skies policy, as it emerged this week some foreign airlines were contemplating cancelling flights over blocked funds from revenue earned in the country, now amounting to a cumulative $132 million, an official has said.

Alexandru Stancu head of account management, South East Africa International Air Transport Association (IATA) told a Tourism Business Council of Zimbabwe (TBCZ) conference in Victoria Falls this week that foreign airlines had been crippled by the inability to repatriate their funds from Zimbabwe.

Foreign airline funds blocked
“The airlines are crippled by the inability to repatriate their funds outside the country and continue their normal operations. Blocked Funds balance at the end of August was $132 million, with no allocations no execution of the commitments earlier made by the Reserve Bank of Zimbabwe,” Stancu said.

Airlines typically price and sell tickets in the currency of the country in which they are being sold. Then they need to convert those local currency revenues into their main operating currencies before they can be repatriated.

Due to a drop in oil and other commodity prices, and a general slowdown in the global economy, some governments around the world, especially Zimbabwe, are experiencing a reduction in foreign exchange inflows and availability.

This means that in certain markets foreign airlines are unable to secure adequate foreign exchange they require in order to convert their local currency revenues, and thus their funds become ‘blocked’ overseas.

Airlines may cancel flights
Stancu implored the Zimbabwean Government to take urgent steps to help airlines repatriate the blocked funds saying this was critical given its potential negative impact on economic development of the country.

“This impediment pushes many airlines to consider withdrawing their operations from Zimbabwe. This negatively affects the country in both the short and long term,” Stancu said. “I take this opportunity to remind the Government that we urgently need their assistance to unblock the current airline funds,” he added.

Just over eight foreign airlines fly into Zimbabwe these days, including South African Airways (SAA), Kenya Airways, Ethiopian Airways, Rwanda Air, FastJet, Air Namibia, KLM, Emirates and British Airways, operated by Comair.

Previously, Air France, Qantas, Lufthansa, Bulgarian Airlines, British Airways and others airlines flew to Zimbabwe.

At its peak in 1999, Zimbabwe had 42 foreign airlines flying into the country, including eight cargo planes. At the moment, just over 20 foreign airlines are flying into the country following adoption by Government of an “Open Skies” policy.

Stancu said understanding the powerful role that aviation had played around the world so far, the question was ‘what can be done to make it even more potent in driving development and prosperity, especially in Zimbabwe?

Stancu said other than creation of a solid financial environment four themes come to mind to leverage aviation:  Safety, Alignment with global standards, Creating a solid financial environment and focus on competitiveness.

According to International Civil Aviation Organisation (ICAO) aviation provides a vital engine of the global economy.

Aviation a key to economic development
ICAO says the aviation industry flies a third of world trade by value. It transports over half of international tourists. It supports nearly 63 million jobs and $2,7 trillion in global Gross Domestic Product and is integral to the proper functioning of other economic sectors like oil and gas, agriculture and tourism.

Aviation is also a connector of nations, families and business. In short, air transport has the potential to deliver significant social and economic benefits to a wide range of consumers and stakeholders, ICAO says.

“We hope that with the new Government we will see positive traction on this matter and the issue will be rapidly solved once and for all with no future accumulation of airlines’ money,” Stancu told the delegates.

Government, through the Civil Aviation Authority of Zimbabwe, and the tourism industry has been on a spirited campaign to lure airlines into Zimbabwe following the flight of carriers in the period 2000 to 2010.

Destination accessibility from all corners of the world has become more critical than ever following President Mnangagwa’s rise to power in November last year, and subsequent victory in the July 30 harmonised elections.

Since the advent of the new dispensation, President Mnangagwa has been unequivocal on his assertion that Zimbabwe is Open for Business and that engaging and re-engaging new friends and former foes, respectively, will be a key pillar of his new policy to leverage foreign investment in order to rebuild the country economy.

Accessibility of Zimbabwe by foreign airlines is more critical given the country’s State air carrier, Air Zimbabwe, is currently facing serious operational challenges due to a huge debt overhang of around $300 million, gross mismanagement and lack of confidence which has forced passengers to turn to other airlines.

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