Sometime last year the government of Zimbabwe passed the much controversial Statutory Instrument 127 of 2021. The law forced businesses to use the so-called official rate when doing conversations between the Zimbabwean dollar (ZWL) and USD. It was a law the government struggled to enforce mainly because most businesses did not get their foreign currency from the auction and it made little sense for them to use such a rate. Now the government has repealed that law and replaced it with another law. Statutory Instrument 118 A of 2022 has pretty much the same draconian measures as were in SI 127 of 2021. The only difference is that the willing buyer willing seller rate is now the official rate.
A natural or legal person [company etc] shall be guilty of a civil infringement if he or she, being a seller of goods or services, offers such goods or servies at an exchange rate above ten per centum the prevailing interbank rate published by the Reserve Bank of ZimbabweThe teeth part of the new statutory instrument
Now there are some penalties for those who break this law.
- If you violate the provisions of the law, your bank account might be frozen
- You will pay a penalty of $20 million ZWL or the equivalent of the forex values of the goods whichever is greater. There, you see our crafty government at work securing their bag. They know that one day soon $20 million ZWL will be nothing and have added a little clause that will make them get more money even in such as a case. They have zero faith in their currency but want everyone else to use it for obvious reasons. They get to make money out of thin air by typing zeroes and using a non-market rate.
The informal sector will probably ignore this law
We have been saying this countless times. Laws like these if followed to the letter by businesses that do not get their foreign currency at the said rates would simply result in said businesses going out of business. This is why they habitually ignore the laws and instead use market rates. This will not be different, the informal sector will continue to illegally use the black market rate.
What about the threatened stiff civil penalties of $20 million ZWL? Well, no one really takes these serious, thanks to so many silly draconian laws like these only the biggest formal businesses will be in the cross hairs. The “tuckshops” in Harare’s downtown will continue to do as they please without fear. The police and FIU will be so busy enforcing other such dumb laws to care for or trouble them. In any case, experience shows that those tasked with enforcement will happily take bribes to look the other way.
This law will change absolutely nothing.