HARARE – On 27 May 2021, the government of Zimbabwe published in the official gazette, Statutory Instrument (S.I) 127 of 2021 carrying a raft of measures meant to force businesses to accept the Zimbabwe dollar and to eliminate the pegging of prices using exchange rates outside the one determined by the Central Bank.
Under the new order, it is now illegal to refuse to take ZW$ payments at the official exchange rate – charging goods only in foreign currency; sell goods at an exchange rate above the official exchange rate; give customers a discount for paying in forex; issue a ZW$ receipt for goods paid for in forex; misuse funds obtained from the forex auction market.
Refusing to accept ZW$ payments
According to the new measures, any person or business that refuses to accept the local currency as payment for goods or services at the ruling exchange rate (RBZ Rate) shall be liable to pay a fixed penalty of the amount of ZW$50,000 or an amount equivalent to the value of the foreign currency charged for the goods or services in question (whichever is the greater amount).
Use of foreign currency auction market funds
“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 the application for foreign currency.”
In an event of breaching this order, a fixed penalty of the amount of ZW$1 million or an amount equivalent to the value of the foreign currency obtained (whichever is the greater amount) will be paid.
Falsifying information relating to forex applications
“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.”
In the event of none-compliance, a defaulter will be liable to pay a fixed penalty amounting to ZW$5 million.
Charging goods above the official exchange rate
Individuals and businesses will be guilty of infringement if they sell, 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 offence will attract a fixed penalty of ZW$50,000 or an amount equivalent to the value of the foreign currency charged for the goods or services in question.
Issuing ZW$ for payments made in forex
It is now illegal for businesses to issue to a buyer 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.
This will attract a fixed penalty of ZW$50,000.
The new measures will likely upset the market and cause serious shocks that will result in shortages of goods and services. Businesses have become accustomed to pegging prices in line with the parallel market rates currently in the region of 1:135. As such, the new rule that if a product is priced in US dollars, the consumer can pay for it in local currency at the ruling exchange rate of about 1:84, will likely cause serious shortages as businesses hold on to their products if they cannot get better value.
In my view, the new order lacks acceptance by the government that the Zimbabwe dollar has failed to attract market confidence. Its value cannot be determined by Diocletian Decree. Forcing the market to accept ZW$ will not miraculously see it gain value, instead, it risks driving the economy into further turmoil. The solution, I believe is to simply allow free market forces of supply and demand to dictate the exchange rates as well as the prices of goods and services without any coercive decrees in the form of statutory instruments.
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