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New stringent currency measures desperate and authoritarian — Biti

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FORMER Finance minister Tendai Biti says President Emmerson Mnangagwa’s new stringent currency measures through a decree are “a desperate and fascist bid to control the market”. 

“It’s an authoritarian attempt to control the market through law and order instruments,” Biti said.

“Mnangagwa is abusing office and power by amending an Act of Parliament through a statutory instrument, while giving too much power to the minister (Finance minister Mthuli Ncube) who can vary the statutory instrument arbitrarily or through parliament for their own political ends.  You cannot command an economy and the markets.”

Mnangagwa yesterday issued new stringent currency measures through a decree in a move which will be a nightmare for businesses and customers – breaches carry harsh fines – buying and selling goods and services without rigid exchange rate compliance.

Through Presidential Powers (Temporary Measures) (Financial Laws Amendment) Regulations, 2021, Statutory Instrument 127 of 2021, Mnangagwa decreed that anyone found using hard currency obtained from the foreign currency auction for a discount or premium, as well as arbitrage would be severely punished.

The measures were made in terms of section 2 of the Presidential Powers (Temporary Measures) Act [Chapter 10:20].

This means buying and selling goods and services above the official exchange is now illegal.
So exchange rates transactions above US$1: ZW$84 are now unlawful.

The average alternative market exchange rate is currently US$1: ZW$100, although depending on the method of payment and transaction the rate sometimes surges above that. Giving customers discounts for paying in forex is also now illegal.

In other words, charging more in Zimbabwean dollars to force customers to pay in forex is unlawful. Refusing to accept Zimbabwean dollar payments is also illegal, just as issuing a local currency receipt for goods and services paid in forex.

“A natural or legal person shall be guilty of a civil infringement if he or she sells, displays or offers goods or services for sale at an exchange rate above the ruling exchange rate, or imposes (for the predominant purpose of encouraging payment in a foreign currency) a premium on Zimbabwe dollar payments or allows a discount on foreign currency payments,” the statutory instrument says.

There are several other new specific civil infringements.

“A natural or legal person shall be guilty of a civil infringement if he or she, without exchange control authority, uses the foreign currency obtained directly or indirectly from a foreign exchange auction or an authorised dealer for a purpose other than that specified in the application to partake in the auction or in the application for foreign currency,” it says.

Diverting foreign currency obtained from the auction to other uses is outlawed. 

Charging exclusively in forex or rejecting the Zimbabwean dollar is banned. 

“A natural or legal person shall be guilty of a civil infringement if he or she, being a seller of goods or services not authorised by law to charge for them exclusively in foreign currency, refuses to allow any buyer thereof to tender payment for them in Zimbabwe dollars at the ruling exchange rate,” it says. 

Misrepresenting information on applications to access forex is also a crime. 

“An authorised dealer shall be guilty of a civil infringement if he or she submits to the Reserve Bank an application for foreign currency or exchange control authority, or a return or any other document in connection therewith, without exercising reasonable due diligence to verify the correctness of the information in or accompanying the application, return or document, with the result that the application, return or document contains information that the authorised dealer knows or ought to have known to be false in any material respect.”

The statutory instrument adds: “A natural or legal person shall be guilty of a civil infringement if he or she, being a seller of goods or services, issues to a buyer thereof a receipt in Zimbabwe dollars for payment received in foreign currency, or records sales other than in the currency in which the sale was conducted.”

Offenders will pay heavy fines, including a fixed penalty of ZW$1 million or an amount equivalent to the value of the foreign currency obtained — whichever would be the greater amount — for violating these foreign exchange regulations and auction rules.

A foreign exchange auction is a system in which the central bank regularly sells a given amount of forex through a bidding process and buys hard currency in the intervening periods at the previous auction-determined rate. It is used for setting alternative exchange rate regimes that can be adopted to manage a liquidity crisis and restore a cushion of international reserves.

The Reserve Bank of Zimbabwe replaced the interbank market with weekly foreign exchange auctions from 23 June 2020 to determine the dollar exchange rate with those in industry and commerce cautiously optimistic that the platform will enhance transparency and efficient distribution of foreign exchange.

The Tuesday auctions sell foreign currency retained by exporters which must either be used or sold within 30 days at the discretion of the exporter or be subject to compulsory sale after 30 days. 

The auction system operates on the Reuters Forex Trading platform, a real-time electronic trading system. The weekly auctions are designed to improve equitable access and transparency in forex allocation. Penalties for offences can go up to ZW$5 million. —STAFF WRITER

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