Everyone has been busy saying how the Zimbabwean dollar which is otherwise known as the RTGS dollar has one foot in the grave. Turns out that memo hasn’t reached the authorities who are doubling down and trying to save it. One government measure that sparked the demise was the law that requires everyone importing a car (usually second hand) to pay duty exclusively in (foreign currency) US dollars. Well, the government is walking that back. You can now pay up to 50% import duty in Zimbabwean dollars.
All duties and taxes on the importation of designated motor vehicles are now payable in Zimbabwe dollars again up to a limit of 50% of duties and taxes payable.Measures introduced by Finance Minister Mthuli Ncube
To those wondering what a designated vehicle is reference here is made to Statutory Instrument 252A of 2018 which came into effect on 23 November 2018. This is the controversial law that made it mandatory for importers of cars, among other things, to pay duty in foreign currency. It defines designated vehicles thus:
Motor vehicles in the form of Sedans, Sport Utility Vehicles (SUV’s), Station Wagons, Double Cabs, King/Club/ Extended Cabs and Hatchbacks but excluding Pick-ups, Panel Vans, Lorries and Mechanical Horses (gonyethi) and vehicles imported under the physical disability suspensionSI 252A of 2018
It is important to note that while motor vehicles specifically ex-Japs are the ones that got people talking, SI 252A of 2018 actually covers a lot of other goods including sugar, chocolate and cheese. All these items have to pay duty in foreign currency. Critics pointed to this law as an example of unfair government regulation. The government wanted everyone else to accept Zimbabwean dollars while they created special provisions for themselves that allowed them to demand foreign currency.
Others blame this law as one of the reasons why the Zimbabwean dollar has been doomed from the beginning. When SI 252A was introduced back in 2018 it was a couple of weeks after the government had ordered banks to separate between real USD and RTGS accounts. This led to the ZWL shedding value against the USD. SI 252A of 2018 solidified that position. When accounts were separated the rate was around 1.5 ZWL per 1 USD and moved to around 2 ZWL to 1 USD. By the time SI 252A of 2018 was introduced the rate had gone to over 2.5 ZWL per 1 USD. During all this time the government adamantly said the rate should remain 1 ZWL as to 1 USD.
Too little too late?
One thing that has hurt Zimbabwe’s economy is inconsistency in terms of policies from Finance Minister Ncube and his counterpart in the RBZ. Sometimes laws are rushed with little forethought and consultation and SI 252A of 2018 is just one of many including Statutory Instruments that banned and reintroduced the multicurrency system. The new measures are the latest reversal of many such ill-thought measures but will it be enough?
Currency the rate is now hovering around the $250 ZWL mark a far cry from the 2.5 ZWL at the time when the measure was introduced. It’s unlikely this will reverse the rate by much but it will at least, in the short term lead to a slow down in the decline of the ZWL all things being equal. Unfortunately, things are never equal, one big reason for the slide in the rate is that the Zimbabwean government is “printing” money to fund infrastructural projects. Tender winners, when they get paid, rush to the black market to try and get USD. If the “printing” doesn’t stop this measure alone will not arrest the slide.