This afternoon the RBZ unleashed several measures meant to counter the surging black market rates. After a period of relative calm in the past few months where the rate crept up slowly, there has been a sudden spurt in recent weeks. Currently, some street dealers are reportedly asking for as much as 180 ZWL per 1 USD. Some shops such as Simbisa owned Bakers Inn outlets were accused of using a rate of $200 ZWL per 1 USD. So what are the measures? What do they mean for your business? What do they mean to you as a consumer/buyer?
Let’s look at each one of the provisions:
- The first and second measure measures say the Zimbabwe Revenue Authority (ZIMRA) will be carrying out suprise audits of corporate activities mean to identifying potential taxable income arising out of a business’s illegal foreign currency trading. You are supposed to pay taxes on all taxable income/profit that you make as a business. This is nothing new to be honest. I fail to see how this will curb illegal foreign currency trading. Besides this will swamp ZIMRA with more duties when they are aleady struggling to carry out their ordinary duties.
- The third and fourth measures involves the FIU going around doing audits and applying money laundering laws to those suspected of black market activities. Again this is what they have been doing all along so I don’t see how that’s a new measure.
- The fourth measure involves the “enhancement” of the FIU and other law enforcement agencies when it comes to going after those suspected of dealing on the forex llack market. It’s not clear what this means but it goes to the heart of why the FIU and law enfrorcement have failed to clamp down on the black market. They have so many targets and so little resources. Almost everyone is participating on the black market and the FIU is simply swamped with cases. Most culprits are not even on their radar.
- The fift measure involves roping in accounting bodies. This is going to be a tough ask. Accounting is all about showing a true and fair value of the business as well as aiding management with relevant decision making data. That involves presenting management and stakeholders with the unvarnished truth and not just stuff the government wants. The government and these bodies are at odds over this integrity issue. While the government insists on the usage of official rates these are hardly useful in the accounting world where true costs are favoured over whatever the official rate of the day is. Again forcing accountants to use the official rate will probably have little effect on actual black market activities. In fact, most accountants I know have become quite adept at presenting “fake” law complying accounts to the outside world while still providing management with the “real” accounts for decision making purposes. They will probably continue to do this when confronted by the Public Accountant’s and Auditors Board order to do so.
- Businesses that violate the law are threatened with suspension of licences. This will have more bite if you are a large business. Small businesses will probably be unfazed.
- The final measure involves inviting members of the public to report businesses that are using parellel rates to the FIU. Again the problem is not that members of the public haven’t been making reports it’s just that there are too many cases for the FIU because just about every business is involved in black market activities.
Will these measures work?
Maybe they will but the truth is despite the rephrasings and reinstatement there is nothing really new or something we haven’t heard before in these new measures that the RBZ introduced. The only measure that goes to the heart of the FIU’s modest successes in curbing black market activities is that one that seems to implicitly acknowledge that the FIU lacks the capacity to go after black market dealers because they are simply too many.
Everyone is buying or selling their forex on the black market these days. That includes small businesses, pharmacies, schools, civil servants, informal business owners etc. Even government contractors have been fingered. The FIU cannot go after everyone and have to prioritise and that means going after the big players. With these big cases, they will be up against Politically Exposed Persons who will probably easily fend of the FIU’s attempts to stop them.