Forex turmoil: Govt threatens crackdown on businesses

GOVERNMENT has threatened to suspend operating licences for business entities manipulating the official foreign currency rate, thus fuelling the high parallel market exchange rate. In a statement yesterday, Finance minister Mthuli Ncube said government would introduce a raft of measures to intensify its clampdown on money-laundering and other financial crimes by naming and shaming offenders.

He said the Zimbabwe Revenue Authority (Zimra) was conducting impromptu audits of corporates to quantify potential tax liabilities from illegal foreign currency deals.

“Government, through various agencies, is presently seized with instituting various measures to curb illegal trade in foreign currency and its associated twin evil, that of parallel market benchmarking or indexation of process of goods and services at parallel market exchange rates,” Ncube said.

“The recent resurgence of these practices, which have been identified as significant contributors to price instability in the economy and are imposing significant downside risk to macro-economic stability and the erosion of domestic and international competitiveness, is, therefore, a cause for serious concern.”

In May this year, government promulgated Statutory Instrument (SI) 127 of 2021, banning computation of prices using parallel market rates, stipulating penalties of up to $50 million against offenders.

The SI also introduced fines for businesses that access foreign currency on the RBZ forex auction flow, and yet dabble in parallel market activities.

Banks could be punished for failing to disclose delinquency among their customers.

Last week, the Reserve Bank of Zimbabwe (RBZ) named and shamed 30 individuals alleged to be abusing mobile phone services and social media to facilitate forex transactions.

Another 47 offenders were added to the list this week.

Several company managers have also appeared in court on allegations of abusing foreign currency.

Ncube said Zimra would probe to see if companies were complying with the location tax introduced during the 2021 fiscal year, while regulatory bodies would work on a framework to impose appropriate financial and professional sanctions on members of the accounting fraternity implicated in illegal dealings.

Yesterday, the central bank reacted to social media claims that Simbisa Brands was manipulating the official foreign currency exchange rate, adding investigations were underway.

The RBZ official exchange rate yesterday stood at US$1:$88,55, but on Monday, there was discontent among the public following revelations that Simbisa Brands was using a US$1:$200 exchange rate.

Another social media leak yesterday revealed police conducted public auctions of their vehicles nationwide using unofficial rates of US$1:$166.

Bidders were asked to pay $500 000 or US$3 000 for vehicles sold at JEFFM Auction by the police.

Economist Christopher Mugaga said if the US dollar foreign exchange rate surpassed US$1:$200; it would cause the local currency to be rejected at shops.

Mugaga urged the central bank to put in place favourable policies to contain the situation.

He said investigations on individual companies were ineffective, adding that companies were commodifying the cash they get from the auction rate.

“We need an auction floor which respects the market forces and not specified companies. By allocating foreign currency to selected companies, RBZ is specifying demand and supply of goods and services when there are many companies that operate in the same industries,” Mugaga said.