Pursuant to threats it made earlier on Friday the Reserve Bank moved to freeze the accounts of a little known entity China Nanchang under the pretext that they are responsible for injecting millions of dollars into the parallel market. This came after the entity was identified by the Financial Intelligence Unit. In the communique, the RBZ also took aim at the Ecocash platform once again as a proponent of the parallel market.
The RBZ has put paid to what many believed were more empty threats. Of course, they have taken action before, the freezing of some high profile business accounts which included Sakunda and Croco Motors made headlines in 2019. China Nanchang, however, is a little known entity. They were linked by the Herald to a deal sealed last year to provide the Harare City Council with solar-powered buses which have not materialised.
The RBZ has promised more action as they further investigate other accounts and emphasised the focus on the Ecocash platform. The same questions still beg answers though. Why has no definitive action been taken? After Sakunda, Croco Motors and others had their accounts frozen on a similar basis little else happened. Reports emerged that the accounts had been unfrozen almost a day later. The RBZ refuted the claims and it seems the story died down from there.
Time and time again the RBZ has shown an inability to deal with the situation which in all fairness is of their own making. We cannot attest to China Nanchang’s intentions but it is a known fact that honest businesses which have genuine needs for foreign currency are being failed by the interbank market as are citizens. Perhaps not the easiest but certainly the best way of bringing a halt to the parallel market is freeing the interbank market and removing arbitrage opportunities.
With the government, itself confused about the foreign currency situation in the country as Zimra has asked companies trading in foreign currency, which was outlawed, to remit taxes in foreign currency. The RBZ intended to move swiftly to combat the exchange rate which had gathered momentum and started pushing beyond the 25 mark to the US dollar. Coincidentally the RBZ injected a further $400 million banknotes and coins in the system to ease shortages.
It now remains anyone guess how long the government and its arms will fight this fight. The departure from the multi-currency era has proved immature and the reintroduction of the Zimbabwean dollar has not brought forward the desired results. With this renewed threat parallel market activity is likely to be low in the next few days and we may see false stability on the market.