Thanks to a raft of measures introduced a few weeks ago by the RBZ and its stakeholders the country is going through another relatively stable currency period with the black market rates not having moved in a couple of weeks. It seems however the RBZ, feeling the pressure from the Joint Operations Command (JOC), is not satisfied with this and wants more. They are reportedly in the process of creating an anti-currency manipulation task force to go after “currency manipulators.”

The task force will try to fix the fact that the RBZ’s Financial Intelligence Unit doesn’t have arresting powers and will comprise of various government agencies such as:

  • The RBZ’s Financial Intellitence Unit (FIU) members
  • Zimbabwe Anti-Corruption Commision (ZACC)
  • National Prosecuting Authority (NPA) to be roped in during issuing of warrants and prosecution
  • Zimbabwe Revenue Authority (ZIMRA)
  • and of course the Zimbabwe Republic Police (ZRP) which will make the arrests.

Plans to set up a taskforce team are at an advanced stage and the idea is to make sure no one is compromised.  Remember FIU has no arresting or prosecuting powers. In the past there have been cases which failed to take off as some law enforcement units were compromised

A government official is qouted by the RBZ as saying.

This comes in the aftermath of the Vice President who recently issued a public warning against economic saboteurs whom he accused of causing currency instability. His concerns were echoed by the JOC which labelled spiralling inflation and the unstable rate a security risk.

The taskforce will go after foreign currency manipulators although it’s not clear exactly what this means. One hint is the fact that the government is always complaining about companies who benefit from the foreign currency auction and yet they quote the prices of their goods using the black market rate of 240 ZWL:1 USD instead of the official rate of 127.4 ZWL.

Last year the government tried to fix this anomaly by passing Statutory Instrument 127 of 2021 but the law came with fundamental flaws that caused most businesses to rebel. It sought to force everyone including those businesses that did not partake on the auction to use the official rate when converting between ZWL and USD prices. This forced businesses to make one of two choices:

  • Charge steep ZWL prices with ZWL prices being the base and then use the official rate to convert to USD whenever there is a rare customer willing to pay using USD. This is what big supermarkets like OK finally settled on. It means they get to stay on the right side of the law but it meant less direct foreign currency coming in from customers. The reality was most of such businesses would still go to the black market in the dead of night, far away from prying eyes and change that ZWL for USD at black market rates in order to get the USD to pay manufacturers.
  • Small businesses simply scoffed at the law and openly charged USD prices based on black market rates. They then convert using black market rates to ZWL prices. Most of these businesses are already violating the law in any number of ways including refusing ZWL notes, not paying their taxes to ZIMRA in foreign currency etc and so they figure whats one more law to break.

The task force will presumably wage wars on such businesses but that would be the de facto equivalent of setting price controls and the past has shown that such battles can have catastrophic and unintended consequences on the economy. Most businesses that will be caught in this dragnet will probably defy laws they deem uneconomic, curtail operations or shut down. The result will be the opposite of what the government wants.

The will to fight the big fish

One other important factor that will determine what the new task force will achieve is how much political appetite it will have to go after the big fish. Again history is not on the task force’s side here. A lot of government officials dabble in business and on several occasions businesses linked to higher-ups have been found using black market rates too. The fish rots from the head, they say. Will the task force go after the head? Probably not. This will limit what it can achieve, unfortunately.

Then there is also another conveniently ignored fact. Money supply. It wouldn’t be possible to “manipulate” the Zimbabwean dollar without one key ingredient-the wanton printing of the Zimbabwean dollar. Time and time again we have seen beneficiaries of government contracts flush with RTGS going to the black market to buy USD at any cost. Often such buying sprees coincide with periods of rate spikes that upend our innocent lives.