By Tendai Chabvuta
On 24 June 2019, the Government of Zimbabwe gazetted Statutory Instrument 142 of 2019 which basically outlawed the use of foreign currency when transacting locally.
The Finance Minister, Mthuli Ncube has frothed and kicked that there is nothing new and untoward because this arrangement is contained in the IMF TSP which Zimbabwe agreed to and also that he has been listening to “rural people”, civil servants and his “HIS Excellency”.
These hallucinations are fair and fine and cannot be argued with. Well … what is the point of chasing the wind? What is important to note for the majority of Zimbabweans is that nothing much has changed. Whatever happened on 24 June is the same old predatory tactics of the ZANU PF regime to rob, steal, cheat and grab whatever they can before their “train smashes”.
This SI142/2019 is merely a reenactment of the raiding of forex accounts for Zimbabwean NGOs and other corporates that held foreign currency in 2008.
There are several measures that certainly do not make sense for example; limiting how much corporates can withdraw in forex, the forcible withdrawal of Zimbabwe dollars by those individuals holding foreign currency unless they can prove they need the forex and the fluid nature of transactions for those who will be receiving remittances from outside the country.
Below is a short discussion on how the Government of Zimbabwe is robbing forex holders unashamedly and with such brazen lawlessness.
Interbank Exchange rate – but at whose value?
The government of Zimbabwe wants to argue that the interbank exchange rate is a reasonable and agreed rate with industry players etc. but this is not necessarily the case. The fundamental question is understanding how the RBZ is arriving at this rate.
How strong or weak our currency is determined by a range of factors. For a government that is not trusted by almost half of the population, it becomes difficult to believe their pegging of the Zim $ against the US $ at whatever rate they announce.
This is where the first problem with this SI 142/2019 starts from. Those who hold foreign currency want value for their money and the government designated rate does not seem to be giving them that value. So why would anyone in their right mind trade their foreign currency and get half its worth?
It’s a known fact that the Zimbabwean government is cash strapped and is always on the hunt for foreign currency. The pegging of the Zim$ at the interbank rate gives them unfettered and an unfair advantage to cream off as it were on citizens’ hard-earned foreign currency.
The Government of Zimbabwe buys it for half the price and then they can always offload it at higher premiums whenever they want. The government does not produce anything, it is not earning enough through taxes to get enough foreign currency for their expensive habits (private jest, per diems, hotels, shopping, cars, fuel etc.). Clearly it makes sense for them to lock people in this ring. Daylight robbery!
The government of Zimbabwe can scream all it wants that its fighting off speculative behavior by corporates and other unscrupulous individuals to manage the exchange rate. But, hold on! The government is a big player and is contributing to this. The moment they build trust, end corruption, and stop meddling in the economy, the speculation will stop.
What about those Zimbabweans earning foreign currency
On 26 June, social media was abuzz with a lot of Zimbabweans who work for international organizations and local NGOs earning their salaries in foreign currency noting that their local banks were not allowing them to withdraw their salaries and balances in US $.
To the uninitiated, there should be no problem with this kind of arrangement. One earns their salary denominated in US$ but because Zimbabwe is a sovereign country with rules in place, people must be able to use the local currency. This is not the problem. In any other country, the practice is the same – locals need to change their forex into local money before they can use it. Infact, it is very rare to find shops that would accept US$.
The challenge however, is that with a weak economy and where the parallel market rate and the official interbank exchange rate seem not to be talking the same language, people would ordinarily go to where they get the best value for their money.
The robbery that I allude to, comes in the sense that the government of Zimbabwe knows exactly that a salary of USD$1 000 dollars is worth as much as ZWD$12, 000 on the so-called parallel market and this matches the real cost of living in Zimbabwe. However, the government wants to force people to accept that the value of USD$1, 000 according to them is worth only half of what’s being paid on the black market and that is ZWD$6, 300.
The government of Zimbabwe in 2008, woke up and conveniently told people that their USD balances were now called ZWD. This time in 2019 they are choosing to “rob” them in a different manner but basically achieving the same result – Daylight robbery of those who earn salaries in foreign currency.
There are stories that banks have been asking for proof for the need to spend foreign currency for those Zimbabweans holding USD accounts. Some have been paid only half of their salaries and the rest has been paid in local ZWD$.
The story that is not told by the Zimbabwe Government is that the cost of living in Zimbabwe has not changed and prices remain high and pegged at the so called “black market rate”. The government and the banks win as they walk away richer after having paid less 50% for the real worth of the USD$.
Damned if you do damned if you don’t situation
Back in the day, Zimbabweans earning USD would buy bus tickets to Tanzania, South Africa etc. and argue that they needed the foreign currency to go buy whatever they wanted from outside. It is not clear if the Government and banks will accept such arguments now.
There are genuine cases of people with children who are studying abroad, those who need medication from neighboring countries and even overseas. It Is not clear how all this will be handled.
Even if one wanted to try such, how much tenacity would one need to be driving or flying to neighboring countries just to justify the need for the foreign currency so that they do not get fleeced by the interbank exchange rate imposed by the government – extreme sports in Zimbabwe really to get one’s earnings for exactly what they are worth.
What about remittances from outside the country?
One of the matters that seem not to be adequately addressed by the SI 142/2019 and other regulations from the RBZ is that of remittances. The government seems to want to play a cat and mouse game where they rob and pounce on peoples money without shame.
The SI and other regulations that have since come out from the Reserve Bank of Zimbabwe suggest that people who receive money from outside through Western Union, Moneygram, Mukuru etc. are free to receive “cash”, deposit in their FCA accounts or they can sell to the bureau d change and get ZWD$. The last option is the Government of Zimbabwe’s preferred method.
Ordinarily there would be no problem with such an arrangement,however, the argument goes back again to the issue of the value of the money. There is no logical explanation why any Zimbabwean working in South Africa, the UK or Australia would want to send money worth e.g. 1 000ZAR and by the time it gets to Zimbabwe it becomes ZAR500. It’s ridiculous, pure thuggery and doesn’t make sense. All the same, this is the kind of robbery that I mentioned earlier.
Predatory policy making
The government of Zimbabwe is in dire straits and needs foreign currency desperately. With sanctions, choking unemployment and low industrialization there is now way they will make enough money to sustain their largesse.
The “last man standing” are the forex earners and those who get remittances from abroad. To have gone and changed the dollar signs from USD into ZWD would have been too brazen. So Mthuli Ncube and crew decided to legislate this daylight robbery. It seems clever, but it is almost – not clever at all because we can see right through it.
What happens now to those who earn foreign currency?
Those who earn foreign currency cannot possibly tell their employers to withhold their salaries. The same cannot also avoid/evade these regulations and thus the government now has them in its pockets. The banks and government are now guaranteed of cheap foreign currency, which they will not have to sweat for. People cannot possibly leave their jobs either. Zimbabwe is tough.
But for how long, this will be endured, I really don’t know. All I know is that when faced with a miserable workforce, these same companies, international organizations and NGOs will devise ways and the money will very soon dry up and the Zimbabwe government will not touch even a cent of it.
What about remittances?
The government of Zimbabwe thinks it has people in its pockets and the huge diaspora will sit and watch while their hard-earned money is stolen through the interbank exchange rate and Statutory instruments. The Government must be joking.
Very soon, the remittances will drop, people will find other ways of getting the same money to Zimbabwe through those who hold the useless Zimbabwe money but who have Foreign Currency Accounts outside the country. The robbery will not continue for long.
Let’s see who wins this one?
The next few weeks will be interesting for the monetary authorities in Zimbabwe. There will be a few casualties of course. Those Zimbabweans earning in foreign currency, those who receive remittances from abroad and those companies that have to import goods and inputs in forex but forced to sell in worthless Zimbabwe Dollars.
People want to talk about patriotism – but what patriotism does one talk about with a Government that ROBS it’s own people day and night with such impunity?
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