In what can only be described as a bizarre twist of events, the exchange rate for the Zimbabwean dollar after a spectacular tumble quickly regained most of its lost value. This was after a move by the Reserve Bank of Zimbabwe to freeze accounts belonging to people rumoured to be fuelling the parallel market currency. Amongst them were Sakunda, which according to what were believed to be rumours had recently been given ZW$6 billion in order to procure agricultural inputs for government and Croco motors which it was also alleged was provided with money to procure government vehicles. The move marks a considerable win against the parallel market after the Reserve Bank had seemingly conceded defeat. However, the unfolding of events should leave Zimbabweans with many more questions than answers at this point.
We observed as the exchange rate shot up dramatically in the second half of the last week. Monday the 16 of September the Zimbabwean dollar traded at 16 and 13.8 on the parallel markets and interbank respectively. By Friday the 20th, those rates had reached 21 and 14.43 on the two markets. Clearly there was something happening on the parallel market, but what?
As the streets are always awash with a conspiracy theory or two it becomes extremely difficult to discern fact from fiction. When rates started an uptick the previous week the Reserve Bank informed us that it was due to the end of tobacco marketing season and farmers were likely buying up the currency. When the uptick hastened rumours circulated of Sakunda being provided with ZW$6 billion to buy inputs and they were responsible for the sudden increased demand for US Dollars.
Reserve Bank swoops in
The Reserve Bank swooped in and gave banks a directive to freeze all accounts linked to Sakunda Holdings, Access Finance, Croco Motors and Spartan Securities as they had been identified as conduits for money laundering and were ultimately involved in availing the liquidity to the parallel market. According to the Standard, this decision was made on Wednesday the 18th of September. The announcement fully became public knowledge Thursday the 19th of September. Over the weekend rates started to back down to levels of around 16. However, weekends usually represent a low trade period and that is why we tend to exclude them from our charts. The first few days of this week will indicate where we are going.
While the Reserve Bank and Government have been quick to tout this move as tactical masterclass they have left the public with questions. Since the culprits are known, why not prosecute them? Is the 10-year jail term only for those who trade forex in the street and not those who put them there? Why such a complex procurement arrangement that is open to manipulation? Did we really have to wait until rates and therefore prices went up before freezing these accounts?