Statutory Instrument 127 of 2021 also known as the Presidential Powers (Temporary Measures) (Financial Laws Amendment) Regulations, 2021 was gazetted on Friday 28 May 2021 by the Government of Zimbabwe detailing civil penalties for all economic agents that ride roughshod over the Banking and Use Promotion Act (24:24) as well as the Foreign Exchange Act (22:05).
According to SI 127 of 2021, businesses that access foreign currency on the RBZ Foreign Exchange Auction System and then proceed to peg prices using parallel market rates may face a maximum fine of ZW$50,000.
Any business that puts a premium on goods and services in local currency to induce consumers to pay using foreign currency will face a penalty of ZW$50,000.
The Reserve Bank of Zimbabwe, released the following points to note on SI 127 of 2021:
1. The purpose of the S.I is to ensure that those obtaining foreign exchange from the auction system do not use parallel market rates.
2. The use of parallel exchange rates of above 100, for example, on funds obtained from the auction at ZW$85 to US$1 is not good for the economy and consumers. It is these anomalies or arbitrage opportunities that the S.I is designed to deal with.
3. The S.I is not designed to harm business but to provide a level playing field for business and to protect consumers.
4. The use of foreign currency for the payment of goods and services is still allowed as per S.I 85 of 2020.
5. Businesses have been given 2 weeks to regularise their systems so that they can comply with the SI on the receipting of goods and services in either foreign currency or local currency. The S.I is an essential means of enforcing compliance which is necessary for continued stability.
Reactions by Zimbabweans
He said dealing with those abusing the foreign currency system was long overdue, but the government should have consulted widely before announcing the policy. Matushu said the SI had resulted in huge price increases in the region of between 50% and 100%. He said:
"The SI, which was released in the market like a bomb recently, is a case of the so-called cat thrown among the pigeons. It has had the impact of shocking the market and destabilising the market as business woke up to its reality to their day-to-day business. As business, there is a huge worry that it seems too close uncomfortably to price controlling."
The Zimbabwe Coalition on Debt and Development (Zimcodd) said SI 127 of 2021 would disadvantage the informal sector. Zimcodd said:
"The new regulations will further disadvantage the vulnerable and marginalised informal players who do not have access to cheap foreign currency, yet they need to restock their shops or purchase raw materials"
The Zimbabwe Congress of Trade Unions however said calls by the Confederation of Zimbabwe Industries (CZI) for the suspension of Statutory Instrument 127 of 2021 was motivated by greed.
In a statement, ZCTU said:
The call by [the Confederation of Zimbabwe Industries] for immediate suspension of SI 127 without a clear call for an equitable economic policy aimed at addressing the mismatch between RTGS salaries and prices pegged in USD black market rates is irresponsible and motivated by greed.
While it is true that SI 127 has caused serious troubles in the market, these are just symptoms of deeper economic inequalities obtaining in the country.
Businesses and government have been colluding to exploit workers and now is the time to correct this.
We reiterate our position that businesses are not victims but accomplices in exploiting workers and consumers. Therefore businesses must not be allowed to dictate what must happen
We need a new social contract that is a product of inclusive social dialogue.
SI 127 of 2021 PDF Download
You can download Statutory Instrument (SI) 127 of 2021 in full HERE
On 2 June 2021, the Zimbabwe Lawyers for Human Rights (ZLHR) announced that Obey Shava had approached the courts seeking an order declaring SI 127 of 2021 as unconstitutional and for it to be set aside.
List of Defaulters
On 15 June 2021, the Reserve Bank of Zimbabwe published the first list of companies that were facing penalties for abusing the foreign currency exchange auction. The statement by the Reserve Bank of Zimbabwe read:
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 for 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’s 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.
Forex Auction: Zimbabwe Dollar Sheds Value Against USD Forex Auction Results: Rate Remains Fixed At Just Under ZWL$85 – 1 June DRC Ambassador Listed As Top Beneficiary Of RBZ Foreign Currency Auction RBZ Forex Auction: Zimbabwe Dollar Weaken Further Against USD – 18 May PDF: RBZ List Of Forex Auction System Beneficiaries RBZ Forex Auction: Zimbabwe Dollar Drops Against USD – 5 May Accordingly, after investigations by the Financial Intelligence Unit and the Bank’s Exchange Control Division, the entities listed hereunder which were abusing the foreign exchange auction system shall be dealt with in accordance with SI 127.
Going forward and in line with the recommendations from the business community on the need to continue to enhance stability in the economy, the Bank’s efforts to foster compliance in terms of SI 127 shall be limited to outliers that wantonly abuse the foreign exchange auction system, exchange rate manipulation and non-compliance with anti-money laundering rules and regulations. The Bank’s focus on these key areas, coupled with business’s reality check, self-discipline, self-monitoring and peer-review, will sustain inflation and exchange rate stability that are necessary for the economy to continue to rebound.
ENTITIES FACING PENALTIES FOR ABUSING THE FOREIGN EXCHANGE AUCTION SYSTEM
1. National Foods (Pvt) Ltd
2. Georgia Petroleum (Pvt) Ltd Company
3. Tettola Investments (Pvt) Ltd
4. Africa Steel (Pvt) Ltd
5. Westvillle Investments (Pvt) Ltd
6. Flicknik Enterprises (Pvt) Ltd
7. Duo Valley Commodity Brokers
8. Faircclot Investments
9. GlenuLas Trading
10. Natural Stone Export
11. Nuvert Trading
12. Phirebrook Investments
13. Classic Energy (T/A Omni Africa)
14. Clorex Energy
16. Mutare Mart & Exchange
17. Souzrce Fuels
18. Kimya Investments
- Harmony Agere, US$ remains legal tender: Mangudya, The Sunday Mail, Published: May 30, 2021, Retrieved: May 31, 2021
- By Zvikomborero Sibanda, The Return of Price Controls: SI127 of 2021, Equity Axis, Published: May 28, 2021, Retrieved: May 31, 2021
- RBZ: Some Points To Note On SI 127 Of 2021 On Forex, Pindula News, Published: May 30, 2021, Retrieved: May 31, 2021
- Moses Matenga, ‘New forex rules a time bomb’, NewsDay, Published: May 31, 2021, Retrieved: May 31, 2021
- Lovemore, Industry’s Call For Suspension Of New Forex Rules Motivated By Greed – ZCTU, Pindula News, Published: June 2, 2021, Retrieved: June 3, 2021
- ZHLR, Twitter, Published: June 2, 2021, Retrieved: June 2, 2021
- Reserve Bank of Zimbabwe, Twitter, Published: June 15, 2021, Retrieved: June 15, 2021