Late last night the RBZ scrambled to issue clarification on the new law which has caused shockwaves in Zimbabwe’s economy. Their main message was that the law was not meant to harm businesses. Rather, they said, the law as aimed at “level the playing field” whatever they mean about that. The truth though is that the new statutory instrument will harm businesses and consumers.
In fact, this is already happening. A lot of shops started refusing to accept USD because they didn’t have systems that could generate USD receipts. Others were also forced to hike their USD prices and scrap USD discounts. This will mean that such businesses will no longer be able to get the foreign currency they need in order to continue operating. The RBZ auction, good as it is, only caters to large formal businesses. The Zimbabwean economy is mostly driven by informal businesses. These have been shunned by the authorities many times and have had to make their own luck. They often do not meet the strict criteria required to partake in the RBZ’s auctions.
Regulating what’s not yours
While the RBZ claims that the law is going to level the playing field, some clauses of the statutory instrument, actually rock the boat. In particular, there are clauses that seek to force all businesses to use the official rate regardless of how they obtained their foreign currency. As already pointed out, the RBZ has strict rules one must comply with before they can be allowed to source foreign currency on the auction. Businesses that do not meet the criteria often have to source their own foreign currency. Sometimes bids by formal businesses are rejected as they do not meet the “prioritisation criteria” set by the bank.
Rather than buy foreign currency at the black market businesses decided to be creative. They would offer discounts when one paid using foreign currency. This would lure in customers who would give the businesses much needed foreign currency. This means the business gets foreign currency without breaking the law. Informal businesses often use these black market to source their foreign currency and therefore calculate their prices using those rates.
All this seems reasonable and fair. Which begs the question, why would the RBZ want to regulate how businesses use foreign currency even in cases where they did not supply the foreign currency? That’s the contentious clause that’s causing chaos. The central bank wants businesses to sell at a loss i.e. sell in USD at prices below what they obtained the foreign currency at. Naturally that would break these businesses and if that doesn’t sound like harm then I don’t know what is.
Amend the law
The Statutory Instrument must be amended to only cover foreign currency supplied by the RBZ and leave those using free funds and informal businesses alone. Either that or they should start selling foreign currency at the official rate to these businesses too. Without qualification.