RBZ undertakes to repay forex it looted

HARARE – The Reserve Bank of Zimbabwe has undertaken to repay, with interest, all corporates and individuals who lost money in their Foreign Currency Accounts that were raided by the central bank at the height of the country’s economic collapse and hyperinflationary period.

Reserve Bank governor Gideon Gono

The central bank said while it had no definite period within which the payments would be made, everyone who lost money would get it back.

This emerged during an appeal by the bank in the Supreme Court yesterday against a High Court ruling that the bank pay Trojan Mine US$1 million it took from its account held by BancABC.

In another case the RBZ, as well as officials from Standard Chartered Bank (StanChart) stand accused of misappropriating an estimated $500, 000 from the Zimbabwe Aids Network (ZAN).

In 2008, StanChart was forced to transfer the ZAN donor funded cash to the RBZ, after it ‘centralised’ all foreign currency accounts in 2007.

This was part of efforts to stem the imminent collapse of the economy, which had suffered from years of economic misuse and bad policies by the then ZANU PF led government.

The ‘centralised’ order saw authorised dealers of forex being forced to hand over their clients’ money to the RBZ, which resulted in more than a billion dollars worth of foreign cash being seized.

RBZ lawyer Advocate Linos Mazonde told the Supreme Court that the directive to financial institutions to surrender all money held in forex accounts was done in terms of the law.

“The RBZ will pay back the money at 12 percent per annum,” he said.

“It might be in days, months, but the money will be returned to the banks and not to individuals. At the time of the directive, depositors still needed authority from the central bank to withdraw the money.”

Adv Mazonde was responding to a question by Justice Elizabeth Gwaunza on when the repayments would be done.

Although the actual figure the RBZ owes to corporates and individuals is not known, it is saddled with debts of more than US$1 billion and has admitted to raiding private bank accounts to help fund Government’s operations.

Other judges who heard the case were Justice Bharat Patel and Justice Ann Mary Gowora. Last month, the Supreme Court ordered Standard Chartered Bank to pay back money it transferred to RBZ which belonged to Chinese firm, China Shougang International.

The appropriation of the funds followed a monetary policy statement issued by the RBZ in October 2007 centralising all foreign currency accounts.

In yesterday’s court hearing, the central bank argued that it should not be litigated, citing the immunity that was extended to it in terms of the RBZ Act. Adv Mazonde said the central bank was not negligent when it used the money.

Lawyer for Trojan Mine, Advocate Lewis Uriri submitted that the RBZ should not be allowed to get away with the excuse of immunity because that was never an issue during the High Court hearing which ordered it to repay the money.

He said it was not permissible for a party to raise issues that were not raised during the first hearing when the matter was at the appeal hearing stage as what the central bank sought to do by raising immunity.

Adv Uriri said even if it was to be accepted that the RBZ enjoyed immunity, that would not save it because there was no good faith when it made the directive and it acted negligently by expropriating depositors’ money.

He said while the bank was empowered to direct banks to transfer foreign currency, it was not entitled to use it as what it eventually did. “There is nothing in the monetary policy statement that authorised the RBZ to use the money,” he said.

“It just said money should be brought to a central point. That did not suggest that depositors would lose their money. That is why we are saying certain jurisdictional facts should exist for it to enjoy the immunity.”

Adv Uriri said there was wrongful breach of contract by the central bank, a view that formed the basis upon which the High Court dismissed its case.

“The question of immunity cannot, therefore, succeed,” he said.

“Once there is a finding of wrongfulness and absence of good faith, resort cannot then be made to immunity.”

Justice Patel asked how a judgment against the central bank would be enforced in light of the fact that there was a law which said its property could not be attached.

Adv Uriri said what was important was to secure a judgment ordering the RBZ to reimburse the money and issues of how to enforce that judgment could be pursued later. Justice Gwaunza said the court would reserve judgment in the matter.