Who is behind forex dealers?

NO matter how well-meaning and determined, the Reserve Bank of Zimbabwe (RBZ) could be towards uprooting rampant delinquency in the economy, the effort may count for nothing if other institutions are inflaming the situation through their inaction.

Hardly a month passes without the central bank naming and shaming some of the culprits. That hall of shame could just be a tip of the iceberg. In the event that the captain of the ship behaves like Edward Smith of the Titanic, the whole economy could go down.

When Vice-President Constantino Chiwenga, at the just-ended Zimbabwe International Trade Fair and more recently at the Harare Agricultural Show, threatened to deal with those who are brewing chaos in the markets he could have been firing warning shots before pulling the trigger because the State knows who the real culprits are.

The offenders, who are driving parallel market rates, are largely big companies, including local and foreign contractors, who are working on infrastructural projects around the country, petroleum firms, fast-moving consumer goods firms, and retailers, among others. It has also been said and not denied that big businesses are double-dipping by using their surrogates to buy foreign currency on the auction but still charge their products at parallel market prices that would make the devil himself pity Zimbabwe’s poor who buy from the shops at extortionate prices.

The involvement of big business explains the government’s hesitancy to close in fast on them for fear of frightening capital markets. However, after that warning from Chiwenga, it may not be long before the authorities take their gloves off because allowing the chaos to continue would be career limiting, especially for the political elite who have a lot to lose.

While the public expects the central bank to single-handedly clean up the mess, the inconvenient truth is that the monetary authorities can only do so much. From a legal standpoint, the RBZ operates in terms of the Reserve Bank Act (Chapter 22:15), whose scope confines the institution to the maintenance of price stability, formulation and execution of monetary policy and fostering a stable financial system using financial instruments at its disposal.

Apart from the Reserve Bank Act, the apex bank also administers the Banking Act (Chapter 24:20) and a slew of statutory instruments.

These statutes do not give the bank sweeping powers to extend itself beyond certain boundaries nor the carte blanche to turn itself into a big brother with authority to interfere with other State institutions.

We all know that the bank’s autonomy was surrendered to the Treasury during the unity government (2009– 13) when the then Finance minister Tendai Biti’s obsession with clipping ex-RBZ governor Gideon Gono’s wings, led to regrettable amendments that compromised its independence.

Be that as it may, the bank does not operate in a vacuum. It is part of an ecosystem with other economic agents and regulatory authorities which must be seen to be playing their part as well in fostering economic stability.

One shudders to think about the economic and political ramifications that could arise in view of the scale and pace at which indiscipline and greed is causing economic instability or whether the State organs that are complicity in this through either their deafening silence or non-intervention understand what is at stake.

In the energy sector, RBZ has been allocating foreign currency to petroleum companies on the understanding that they would supply part of their fuel in Zimbabwe dollars, yet none of them has done so. Throughout the country, petrol and diesel is being sold in United States dollars.

The question that then arises is: Where are the officials and inspectors from the Zimbabwe Energy Regulatory Authority (Zera)? It may as well be that faced with the deep-pocketed oligopolies operating in this sector and the godfathers behind them, the poorly paid Zera inspectors and officials could have joined the bandwagon instead of risking their jobs by trying to fight the system.

But while the big shots in the fuel sector are on a feeding frenzy, the truth is that the fuel which was brought into the country at the official exchange rate for purposes of enabling the struggling ordinary citizens, who are being paid in local currency, to access the product at affordable prices, is being sold in foreign currencies.

These daily takings are then exchanged for Zimbabwe dollars at parallel market rates to enable the gluttonous oligopolies to queue for more foreign currency allocations at the auction, and the cycle carries on.

As this will be happening, prices will be shooting through the roof due to the passon effect, creating an unstable environment which sinks the majority of the population into abject poverty.

Not so long ago, Cabinet threatened to take stern action against the culprits, but it was all hot air, so it seems.

This week, Cabinet released another statement to the effect that a technology-based fuel management system which was developed by the Harare Institute of Technology, with support from Zera, would be implemented throughout the country to curtail the rampant malpractices in the fuel sector, which are negatively impacting the wider economy.

If anyone believes that the same people who are presiding over this chaos in the fuel sector would embrace this technology which deprives them of easy money for their back pockets, then you can believe anything.

Perhaps the starting point would be for the central bank to publish the full list of petroleum companies allocated foreign currency for the purpose of importing fuel to be sold in local currency and the pump stations at which motorists could fuel in Zimbabwe dollars.

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