- The companies have been reportedly found in violation of S.I 127
- Specific details of offences not given
- Firms however facing fines of anything between ZW$1 million and ZW$5 million
Harare – Zimbabwe’s largest food manufacturer, National Foods along with 17 other companies is facing penalties for allegedly abusing the foreign currency auction system which is against the recently enacted and controversial Statutory Instrument 127 (S.I 127)
The other companies awaiting the apex bank’s corrective rod are Georgia Petroleum, Tettola Investments, Africa Steel, Westville Investments, Flicknik Enterprises, Duo Valley Commodity Brokers, Faircclot Investments, GlenuLas Trading, Natural Stone Export Company, Nuvert Trading, Phirebrook Investments, Classic Energy, Clorex Energy, Explochem, Mutare Mart and Exchange, Souzcre Fuels and Kimya Investments
In a press statement, the Reserve Bank of Zimbabwe (RBZ) said that the decision to penalise the 18 companies came after investigations conducted by the Financial Intelligence Unit (FIU) revealed that the entities were in violation of S.I 127.
Specifics and details were not given in regard to the offences committed by the firms but S.I 127 details offences they could have committed and the punishment that can be expected.
In regard to the auction, the legislation says, “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.”
Breaching this order attracts a fixed penalty of ZW$1 million or the equivalent to the value of the foreign currency obtained from the auction.
Furthermore, it was decreed that “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.
On top of this, if an entity gets foreign currency from the auction it is obliged to sell its goods and/or services at the official exchange rate while selling at anything more will be deemed illegal.
National Foods and all other firms could be liable for any of these and we wait to see what sort of punitive measures will be imposed to reprimand them.
The Confederation of Zimbabwe Industries (CZI) has been calling for the reversal of the Statutory instrument, saying it is detrimental to the very economic goals the country has been trying to achieve which include the control inflation, eradication of the use of the black and informal markets, bringing back stability to the foreign currency markets, and prevention of the abuse of funds obtained from the RBZ foreign currency auction.
Instead, they say, the new regulations will only work to reduce foreign currency liquidity in formal channels as it will be more expensive to buy goods and services in the formal markets thus consumers will opt to go change their forex on the parallel market where the rate is bound to be higher than the official.
“Companies have been relying on local US dollar sales to generate the bulk of foreign currency used to sustain operations. Use of the Auction rate would result in consumers converting their US dollars to ZWL on the parallel market prior to purchasing, a practice already rampant outside the major retail chains such as Pick n Pay, OK and Bon Marche. This will deprive companies of what has become their main source of foreign currency,” CZI lamented.
Equity Axis News