The government recently enacted SI 127 of 2021 which has since caused quite a stir. In the SI it was made clear that any entity abusing foreign currency accessed from the auction would be in trouble. “One will be guilty, 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 in the application for foreign currency.” This attracts a fine of ZWL$1 million or more; well, some entities have been found wanting.
Update On Compliance With Statutory Instrument 127 Of 2021
Today the 15 of June 2021, the Reserve Bank of Zimbabwe (RBZ) issued a press statement. The press statement reads as follows:
“The Reserve Bank of Zimbabwe (the Bank) wishes to advise members of the public that over the past two weeks it has engaged a number of business associations and entities to discuss the modalities of compliance with Statutory Instrument 127 of 2021 (SI 127). The Bank would like to express its appreciation to the business community for the valuable feedback during the engagements which have culminated in business’ clearer understanding of the essence of SI 127.
The Bank has a duty of care to ensure that the significant progress that the economy made since the introduction of the foreign exchange auction system in June 2020 continues on an unabated positive trajectory whilst at the same time protecting consumers and fostering compliance to engender fair play in the economy. It is against these noble objectives that SI 127 was put in place to provide for penalties against errant entities that were at the forefront of abusing the foreign exchange auction system to the detriment of the stability of the economy.
Accordingly, after investigations by the Financial Intelligence Unit and the Bank’s Exchange Control Division, the entities listed hereunder which were abusing the foreign exchange auction system shall be dealt with in accordance with SI 127.
Going forward and in line with the recommendations from the business community on the need to continue to enhance stability in the economy, the Bank’s efforts to foster compliance in terms of SI 127 shall be limited to outliers that wantonly abuse the foreign exchange auction system, exchange rate manipulation and non-compliance with anti-money laundering rules and regulations. The Bank’s focus on these key areas, coupled with business’ reality check, self-discipline, self-monitoring and peer review, will sustain inflation and exchange rate stability that are necessary for the economy to continue to rebound.”
Entities Facing Penalties For Abusing The Foreign Exchange Auction System
- National Foods (Pvt) Ltd
- Georgia Petroleum (Pvt) Ltd
- Tettola Investments (Pvt) Ltd
- Africa Steel (Pvt) Ltd
- Westville Investments (Pvt) Ltd
- Flicknick Enterprises (Pvt) Ltd
- Duo Valley Commodity Brokers
- Faircclot Investments
- GlenuLas Trading
- Natural Stone Export Company
- Nuvert Trading
- Phirebrook Investments
- Classic Energy
- Clorex Energy
- Mutare Mart & Exchange
- Souzrce Fuels
- Kimya Investments
Let Us Talk A Bit…
Most people have remarked that those are not all the abusers. Well, I do not know enough to make a judgement on that but anything is indeed possible. Others have also cited that the press statement is insinuating something debatable. “…entities that were at the forefront of abusing the foreign exchange auction system to the detriment of the stability of the economy.” Some people are saying it seems as if those 18 entities are now being used as scapegoats. As in, disruptions to economic stability are now being hinged on them. However, there are more and pertinent variables, other than this, that are jeopardising economic stability.
Just looking at that list you immediately notice something strange. Most of the listed entities are unfamiliar; chances are you have never heard of them. The only common name is National Foods (Pvt) Ltd. Out of curiosity I decided to look up every entity on that list. What I found out was interesting and leaves you with so many questions.
13 of those 18 entities literally have no online presence. I am talking of having no website, no social media accounts, and not even any pictures of their premises. That makes you wonder whether or not these are real entities or they are shelf companies. So many unanswered questions! There have been several rumoured accounts of individuals who access foreign currency on the auction. Could it be they use shady entities to do so? What are your thoughts on this?
I also recall that Duo Valley Commodity Brokers was one of the EcoCash or One Wallet agents whose accounts were frozen for suspected foreign currency dealing in 2020. How they were made eligible for accessing foreign currency on the auction is baffling given that history.
So I would like to hear your thoughts on how things have been for you in light of SI 127. How have you been personally affected and what would you recommend as the best way forward? As for the named abusers, we will wait to see whether or not they do pay the fines.