Nevanji Munyaradzi Chiondegwa
The internet has been awash with debates over the new pronounced law which was passed recently as a statutory instrument.
The law, has turned twimbos as they are known, into overnight currency and economics experts.
Those who are against the government, the regular guys, are frothing from the mouth, mourning those who are supposedly bereaved.
I will try and break down the law and what it means to the best of ability, I will borrow from other incisive minds as I do so.
Lawyer and business consultant Jacqueline Sande tries to break down SI127/21 into its simplest form.
Says Ms Sande, “SI 127/21 provides for penalties for businesses and persons which acquire foreign currency directly or indirectly from the Foreign exchange Auction to use that foreign currency for anything other than the purpose for which it was acquired.”
Among other issues; the SI makes it a punishable offence for a business or person to refuse payment in Zimbabwean dollar at the rate prevailing at the Foreign Currency Auction or insists on payment in USD exclusively without the express consent of the law.
Discounting for payment n USD terms has also become illegal as is issuing a receipt in terms of a currency other than the one paid for by the individual.
Let us give a bit of background. There was a period of uncertainty with exchange rates running haywire.
Business people were going into the streets to obtain foreign currency. There were accusations and counter accusations between Government and private sector as to who was fuelling the black market.
Ecocash Agent Lines were even banned due to the accusations of them becoming platforms on which phantom money was created.
Captains of industry then asked government for an auction system and conceded and implemented the system.
It is business persons (the private sector) who are bidding for foreign currency at the rates which put the rate at the current official ZWL to USD of slightly below 1:85.
The money they bid for is to be directed for business purposes, that is, purchase raw materials, purchase machinery, purchase goods for retail in some cases.
When they bid for it, they state what they are bidding it for and should direct it to that and that alone. The foreign currency is to be used for the agreed purpose and nothing else.
That is part of what the SI is demanding.
For them then to go to their businesses and apply the parallel market rate when asking for payment for their goods and services is what is being termed criminal.
If they believe that the actual rate for the USD to the Zimbabwean dollar is at either 120 to 130, let them simply bid at that rate.
There is no excuse or reason for someone who obtains foreign currency from the Auction system to charge at a rate over and above the official rate.
They have no excuse for charging at black market or parallel market rates. That can only be due to a need to sabotage and profiteer.
The issue here are not the small guys who operate tuck shops but big corporates.
Tuck shops buy from the big corporates, their impact is irrelevant. Once the corporates fall in line, every other small business will do the same.
On the other side, the intention of the policy position sounds good and is necessary, however, the religious challenge is, as with all other previous similar promulgations, there is a feeling that the policy has been imposed on the stakeholders.
Instead, the policy maker should consider consulting its strategic implementing and cooperating partners (business) prior to promulgation of such strategic policies.
History and statistics reflect that naturally, policies that are imposed on stakeholders have greater prospects of failure than in cases where moral suasion would have been employed.
In essence, there is greater chance of good polices failing in circumstances where the social contract is not as strong.
In the current case of SI 127/2021, the policy may actually unintentionally reverse the mild economic gains of the preceding initiatives largely because of lack of stakeholder support or buy-in.
As a possible way out, the policy maker should accelerate remedial processes which should include, among other measures; engagement with key stakeholders (business) and explaining the policy initiative to the people in ordinary, through deliberate special media efforts so as to remove panic and secure the requisite stakeholder buy-in.
All this is not to say the SI is not noble, on the contrary, it is very noble and if one looks at amount allotted at the Auction System since inception there should by now effects of such a huge injection by the consumer.
The fact that we have not yet felt it and are paying black market rates justifies the Central Bank and Treasury bringing such a legislation
A total of USD1.1 billion has been allotted so far on the main auction and USD82million on the SME auction.
This is enough to generate recognizable economic activity on both large and SME sectors. This is not the case and any monetary authority issuing such large figures is forgiven for asking where the money is going.
The “lack of stakeholder support/buy-in and confidence being the major victim here, what may immediately follow is harm than good;” should be the jerking factor for the information handlers at Government and Ministry of Finance and Economic Development to ensure the policy is explained in the best possible and simplest way.
So far we have witnessed on social networks a lot ‘chibhubhubhu’ where reactionary explanations are being thrown around as facts.
The mistake lies not in those who react but rather in those who issue the SIs especially those of an Economic of Financial Nature.
It is a clearly understood issue that there is a lack of Financial or Economic literacy among many of our people.
The RBZ Chief Dr John Mangundya is aware of this and the Minister of Finance and Economic Development Professor Mthuli Ncube by now should be aware of this.
Now take into consideration that SIs are written in legal and technical language, then they become even more complex for many.
What should be done in the first place are promotional activities like those that are held prior to introduction of bank notes to give people a clear picture of what awaits them.
The economy is sensitive to policy changes and announcements therefore any move intended to solve a problem or address an issue should be carefully communicated.
It is high time the New Dispensation was given benefit of the doubt. They precisely came with policies some may question, some of them may make things seem to be worse at first, but ultimately result in great spin-offs.
They make their after decisions after serious consideration of many issues including the negative impact
Those of us who have been watching activities and closely follow Economic issues have already realised that with the Special Drawing Rights from the IMF coming coming soon, the obvious intent of this statutory instrument is to first eliminate arbitrages and align the prices in shops to the official exchange rate.
The foreign currency from the SDRs will be injected into the Economy and then eventually eliminating the need for anyone to pay in USD not via a law at all, but through common sense.
Recent Comments