Monday 24 June was just a week ago but surely doesn’t feel like it. So much has happened since the Zimbabweans woke up to the shock announcement that the multi-currency system was no more and the Zimbabwean dollar was back. There’s been a lot of confusion, much of it avoidable, over the new system that is in place and it’s working. Let’s look at some of the more contentious areas that have been brought up since Statutory Instrument 142 of 2019 was introduced.
The legality of foreign currency
This was probably the first issue that popped up and it was heavily affected by misinformation with many believing the possession of foreign currency had also been outlawed. It was however confirmed that possession of foreign currency is not a crime.
Another area that sparked wild concerns was that of diaspora remittances being forcibly converted into Zimbabwean dollars. Concerns which were not unfounded as during the multicurrency era foreign currency cash was difficult to come by. The reserve bank directive made it clear that diaspora remittances could be received in hard cash and deposited into Foreign Currency Accounts.
Perhaps the most controversial of them all was the position on withdrawals from foreign currency accounts. I must admit this one is still tricky. My interpretation of the position on this one based on the RBZ directive was that withdrawals were allowed however it was up to the bank to determine whether or not your reason for withdrawing was considered a priority. The experience that many received was a failure to withdraw from their FCAs. Understandably people thought their FCAs were being raided and would want to secure their cash while banks would want to avoid a massive withdrawal run.
The Zimbabwe Tourism Authority had to release a follow-up statement asserting that the foreign currency regulations did not affect tourists, entirely. The statement advised that tourists could still pay in foreign currency and were encouraged to do so via electronic means. Tourists were allowed to sell their currency for local cash and would be given special priority to buy back foreign currency when they intend to leave through a whole lot of conditions needed to be met.
While those of us with a thing for comedy had joked that banning the use of foreign currencies was the government’s response to civil servants who wanted foreign currency salaries there was a real fear that paying of salaries in foreign currencies was to be outlawed. After the initial panic, the position was cleared up and those paying salaries in foreign currency would be allowed to continue to do so.
This one has been the highlight that has got all the tongues wagging. The movement of rates on both parallel and interbank markets have been quite interesting and also causing a lot of confusion. The parallel market rates having risen to highs of 13.5 to the US dollar eased considerably to around 8.5 to 9 for electronic money. Some have transacted as low as 6 for cash if the chatter is to be believed. Some of this is understandably spurred by the need to transact in Zimbabwean (Bond) dollars so rates may vary wildly.
Meanwhile, the interbank market took liberty after the relaxation of administrative limits and we have seen considerable price surges from around 6 to levels as high as 8. The information has not been made abundantly clear but these rates seem to be available only to those selling foreign currency and in electronic form. So while there’s been a rate increment it is still not accessible to all.
A court challenge has been made suing President Emmerson Mnangagwa and challenging the end of the multicurrency era. FreeZim Congress leader, Joseph Makamba Busha, on Friday, filed an urgent High Court application against President Emmerson Mnangagwa seeking a recent reversal of government decision to re-introduce the Zimbabwean dollar. The multicurrency era was brought in by an act of parliament and there are questions as to whether statutory instruments should override acts of parliament. It’s easy to see why the government chose the SI route if you’ve been paying attention. According to them, the foreign currency rates are a function of the greed of a few speculators and as such, they needed to move decisively and with stealth to borrow the words of Finance Minister Mthuli Ncube. An act of parliament would’ve been dragged through debate and ascension before coming into effect. None the less there is n existing court challenge and we will see how far it goes.
Prices have by and large not responded favourably to the rate movement. It’s been a long-held belief that prices were determined by the exchange rate. We’ve spoken about this many times before. So with rates taking a tumble some expected prices to also respond immediately. And while many had explained the lack of price change away with saying current stocks were acquired with expensive foreign currency at the time it doesn’t paint a true picture as many prices jumped.
Two factors may be at play here. The first is self-evident, the current drop in rates is believed to be a short term move that will adjust in the long run. As such it is unwise to follow a temporary downward shock. The second factor may come from a reluctance to hold Zimbabwean dollars and a preference to keep stock. Pricing it high while still having it on the shelf means no law has been broken while still holding on to stock. The former seems to be applied largely to perishable goods while the latter seems to be the case with non-perishables. Mahommed Mussa wholesalers was one case that swiftly reduced prices and this is likely because they have access to the interbank market rates.
“Your prices have not gone down”
Finally, while notable members of the Presidential Advisory Council including Shingi Munyeza, Trevor Ncube and Busisa Moyo celebrated the reduction in prices at Mussa wholesalers Zimbabweans we’re quick to point out that none of their enterprises had moved to reduce their own prices. The question is fair as they too should reduce prices if they believe all they are telling us.