Why Zimbabwe is cracking down on black market pricing





Zimbabwe had to crack down on the pricing of goods using the black market rates because prices were now being determined in corporate offices and not on the shelves, Deputy Finance Minister Clemence Chiduwa told Parliament yesterday.

Responding to questions on the recently gazetted regulations that say businesses must use the foreign currency auction rate for pricing, Chiduwa said there was nothing new about the regulations.  They were simply there to enforce compliance.

“There is nothing new with regards to SI 127 but the issues that the Statutory Instrument is trying to address is the issue…of compliance.,” Chiduwa said.

“Under the Exchange Control Act, we were basically looking at illicit trade in foreign currency and the banking promotion where we are saying businesses, corporates and individuals should make use of the banking system.

“What we are imposing now because if you check the system that was there, we were dealing with moral suasion but what is there now is; we are imposing civil and administrative penalties.  In terms of enforcement, if you have gone through the S.I, there are what are referred to as designated authorities.”

Chiduwa said: “Yesterday, we moved around town, checking shops to see which are compliant.  I can tell you that we came up with a long list of corporates that were not compliant.  Starting today, we actually issued a lot of tickets and penalties.

“In terms of compliance, do not worry about that one. We are handling the issue so well. The other issue which is being raised to say the S.I. 127 is going to result in rampant increases in prices both in ZD and foreign currency, I think this is just a transitory issue.

“If you check in terms of the proportion of formal business to informal businesses, 60% of our businesses are informal, which means that our people have got choices to make.

“We have seen that the black market prices – the pricing regime models have gone to offices. They are no more on the shelves. It is the corporates that are making the pricing models in their offices using black market prices and transferring them to the shelves, but this again we are managing it. I am sure because of competition, a lot of them are going to comply.”

Zimbabwe’s industry has called for the regulations to be suspended arguing that they will reverse the recovery programme that Zimbabwe has embarked on, a point also raised by independent legislator Temba Mliswa who said if the regulations were brought to Parliament they would be rejected.

Chiduwa, however, said there would be no policy reversal.

“We have seen a lot of compliance but what I can assure you is there is nothing new with regards to S.I. 127. It used to be there and what is only new is compliance mechanisms and the call that is coming in to say there be a suspension of S.I. 127, there is no policy reversal that is going to be done, because what is on the ground is what has been existing except that we are now giving administrative and civil penalties,” he said.

Full Q & A

HON. T. MOYO:  Thank you Madam Speaker Ma’am.  My question is directed to the Hon. Minister of Finance and Economic Development.  I want to know Government policy regarding Statutory Instrument 127, which I understand was passed to bring about sanity and discipline on the market.  What is Government going to do to enforce the provisions of that Statutory Instrument so that there is compliance?  What I am afraid of is that economic saboteurs, some of them might respond otherwise and prices would increase.  To ensure that there is discipline, what enforcement measures are there in place? Thank you.

THE DEPUTY MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. CHIDUWA):  Thank you so much Madam Speaker Ma’am.  I would want to thank the Hon. Member for the question.  I will respond to the question by probably giving a background to why we had the financial laws amendment regulations, which is the Statutory Instrument 127.  SI 127 was gazetted under Presidential powers.  What the Statutory Instrument is seeking to do is to address the inherent gaps that we had with the Exchange Control Act, 22:05 and the Bank Use Act, 24:24.  So, what we were basically saying there is, there is nothing new with regards to SI 127 but the issues that the Statutory Instrument is trying to address is the issue that you raised, the issue of compliance.

Under the Exchange Control Act, we were basically looking at illicit trade in foreign currency and the banking promotion where we are saying businesses, corporates and individuals should make use of the banking system.  What we are imposing now because if you check the system that was there, we were dealing with moral suasion but what is there now is; we are imposing civil and administrative penalties.  In terms of enforcement, if you have gone through the S.I, there are what are referred to as designated authorities.

It is the duty of the RBZ Governor to designate authorities that shall do the compliance enforcement.  Here, we are looking at RBZ, Financial Intelligence Unit and ZIMRA but in terms of any such designated authority, the power lies with the RBZ Governor.  What we have done for compliance purpose, I would give you an example of what we have done since yesterday.  Yesterday, we moved around town, checking shops to see which are compliant.  I can tell you that we came up with a long list of corporates that were not compliant.  Starting today, we actually issued a lot of tickets and penalties. In terms of compliance, do not worry about that one. We are handling the issue so well. The other issue which is being raised to say the S.I. 127 is going to result in rampant increases in prices both in ZD and foreign currency, I think this is just a transitory issue. If you check in terms of the proportion of formal business to informal businesses, 60% of our businesses are informal, which means that our people have got choices to make.

We have seen that the black market prices – the pricing regime models have gone to offices. They are no more on the shelves. It is the corporates that are making the pricing models in their offices using black market prices and transferring them to the shelves, but this again we are managing it. I am sure because of competition, a lot of them are going to comply.

We have seen a lot of compliance but what I can assure you is there is nothing new with regards to S.I. 127. It used to be there and what is only new is compliance mechanisms and the call that is coming in to say there be a suspension of S.I. 127, there is no policy reversal that is going to be done, because what is on the ground is what has been existing except that we are now giving administrative and civil penalties. Thank you.

HON. PETER MOYO: Madam Speaker Ma’am, may the Hon. Minister shed light on the monetary value of the tickets that were issued yesterday as to how much was collected? Is the Ministry or the RBZ getting support from the Confederation of Zimbabwe Industry?

THE TEMPORARY SPEAKER (HON. MAVETERA): Hon. Moyo, you now have two questions which are not related – can you please ask one point of clarity which is specific to what exactly.

HON. PETER MOYO: Thank you Madam Speaker. May I ask the Hon. Minister to explain to the House on the extent of success in giving penalty to those people who are mischievous, businesses which are undisciplined, how much was collected yesterday? Thank you.

THE TEMPORARY SPEAKER (HON. MAVETERA): If you are going to say how much was collected I am a bit worried about that question. Maybe you wanted to know the value.

HON. PETER MOYO: Let me clarify Madam Speaker. May I know the value of the penalty for arbitrage? Thank you.

HON. CHIDUWA: Thank you so much for the question. We have quite a range of penalties, depending on the offence. I can give the first one where a corporate goes to the auction floor and obtains foreign currency and use it for any other use which was not intended at the time of application. The penalty for that is at least Z$1 million or the equivalent of the foreign currency that was obtained from the auction floor. In terms of not accepting both the ZS and the foreign currency, the penalty is Z$50 000 or the value of the product that was sold but we will take whichever is higher. There are quite a number of penalties that are there and so, if you can be able to get the S.I., you will see that there are so many fines; I think they are more than ten and I am not sure which is which, and the money is in RTGs but there is the element of whichever is higher.

HON. A. NDEBELE: Madam Speaker, if you may allow me to request that the Minister brings a statement because I see it is really a pregnant S.I. to explain the mischief that the S.I. seeks to arrest so that we will have enough time to seek clarification. If you may allow us to request for that. Thank you.

THE TEMPORARY SPEAKER (HON. MAVETERA): Order Hon. Ndebele. That is in order Hon. Ndebele for the Ministerial Statement from the Ministry of Finance. However, we are still waiting also for the S.I. to be coming through to the House according to the procedure so that at least we can be able to approve it as Parliament. So, let us wait for that Ministerial Statement from the Minister of Finance.

HON. T. MLISWA: On a point of clarity Madam Speaker. I heard you saying the parliamentary procedure which is important. So you are talking about the Parliamentary Legal Committee must now look at it immediately. It must sit tomorrow and reject it. We have the power in this House to reject it. May you then direct the Parliamentary Legal Committee to sit as soon as possible tomorrow, interrogate it and hopefully to be rejected. Parliament has teeth and we must show the nation that we have teeth to protect the people. That is an ambush way of going about things, a mafia approach to economics which we will not allow. So may the Parliamentary Legal Committee through its functions look at it? Thank you.

Source: The Insider