The authors of chaos, the RBZ says otherwise but SI 127 will harm businesses

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Mthuli Ncube

Imagine this, you are sitting in your house minding your own business when the police knock at your door. You know how the police knock-aggressively. You get to the door open it and the police budge in. They are here on official business. They are not happy about how you have been eating your food and spending your money.

From now on they say. You are only supposed to eat during official breakfast, lunch and supper times that the government in its esteemed wisdom has set aside. Never mind you don’t work for the government, they didn’t pay you, they did not buy the food for you and will not cook your food. They never even consulted you when they came up with these bizarre set hours. They will not cook for you either nor do they care that the set hours do not work for you.

Authors of chaos

Despite protestations to the contrary, this is essentially what the government is doing. While they say Statutory Instrument 127 of 2021 is not meant to harm businesses, their intentions here matter little. A reasonable person and certainly a reasonable government official and expert should have been able to foresee the harm such a draconian law would do.

The biggest fault with the law is how it seems to be the latest ambush legislation from the government. They take perverse pleasure in lobbying these shock policy grenades with little forewarning and consultation. The consultation part is especially important. In their arrogance, our government treats everyone like feeble children who are to be dictated to. This includes important stakeholders like businesses.

I may not be privy to the process that saw this law being passed but the reaction and chaos we are now seeing strongly suggest businesses were not consulted. If they had, OK supermarkets wouldn’t have been forced to refuse to accept USD at their tills because their system is not properly configured. They would have configured their system in anticipation of these changes.

In various establishments, I observed shop attendants run like madmen tearing down USD stickers as they feared facing steep fines. Angry customers jeered at hapless till operators who didn’t know that prices had been changed by management and prices in the POS systems were no longer the same as those shown on shelves. Chaos and confusion have been the order of the day. This harms the standing of businesses as customers wrongly think it’s their fault.

The government needs to stop being so haughty and listen to stakeholders before passing legislation. Laws as far-reaching as these need to be debated in parliament instead of being crafted in secret, in the dead of night and lobbied like grenades at the unsuspecting public. The siege mentality that goes into these laws must stop.

Regulating what’s not yours

Now back to our bizarre example of the police telling you how and when to eat. This is what the government is doing when it tries to force informal businesses and businesses that use free funds to use their official rate. The auction has shunned and never catered to informal businesses. These have been left to fend for themselves never mind the fact that they are the engine of the Zimbabwean economy.

About 70% of the people in Zimbabwe rely on the informal sector for employment and yet the Finance Minister, the RBZ and the government, in general, have not done much to aid this very important sector. There are only three instances when they mention the informal sector:

  • When they are cooking up more ways to tax the sector during budgets.
  • When they are banning some popular business activity in the informal sector. For example banning kombis, again without feedback from the public or other stakeholders, or banning ex-Japs and telling people to buy local cars that are priced well beyond their reach.
  • When they don’t want to acknowledge Zimbabwe’s high unemployment rate they point out that people who are not formally employed are in the informal sector where they are making a living. They even shamelessly try to take credit for the successes of this sector. Never mind that the sector continues to thrive in spite of rather than because of them and their policies.

Despite all these hardships and the lack of support businesses in the informal sector have grown and weathered such various shock and awe tactics including Statutory Instrument 212 of 2019 which was again unleashed with the same lack of forethought.

One way businesses have been going around being excluded from the foreign currency auction was to offer USD discounts. This would encourage more people to pay using USD allowing these informal businesses to restock, import what they need to import and pay for things like fuel which is sold almost exclusively in USD, pay for duty in forex, get tested for COVID-19 during trips and pay for passports. All these things need foreign currency.

The alternative would be to go to the black market and violate the law. Discounts are the only legal way businesses can obtain foreign currency. At least that was the case before the latest law. To compete with other individuals like the wider public who cannot also partake at the RBZ auction table businesses had to offer these discounts.

Why would you buy cooking oil for US$5 when you can “burn” the money and buy it for US$3.50. Faced with this problem informal businesses and those not participating in the auction simply matched these rates by selling cooking oil at US$3.50 or even US$3.30 or less.

Now the RBZ is budging in and demanding that businesses stop doing this. They have to use the “official rate” when they are doing their computations. While the RBZ is justified to regulate what rate those who benefit from their auction can use, it makes little sense to dictate that everyone else should use their rate. It makes little business sense and if it’s allowed to persist it will result in businesses not benefiting from their auction, and they are a lot of them, selling goods at a loss and shutting down.

Of course, that will not happen. The informal sector is tired of these laws and stopped paying heed to them a long time ago. People already illegally selling second-hand clothing bales at Mbare Musika and Mupedzanhamo are already violating the law in many ways. They will just add this one to their rap sheets. They cannot afford to shut down as that will mean starvation and certain death. Most are already suffering because the government never really provided much-needed assistance during all the lock-downs they announced.

Two things will happen

First people will simply stop buying in shops using USD, they will first go to their neighbourhood blackmarket foreign currency dealer. There they will sell their USD at the market rate and then go to their supermarket and pay using RTGS. In the short term that will depress black market rates due to an influx of supply.

Businesses will no longer be getting all the foreign currency they need through sales, rather than starve and die they will emulate the government. In the dead of night, they will buy that foreign currency at even more steeper rates than before. This means that the government’s new law will achieve the opposite, the rate, will in the long run, go further up compared to what it is right now.

It’s all because of government overreach, why would the government want to regulate foreign currency that is not theirs? They should have confined their draconian laws to the foreign currency auction. This law in its current form does more harm than good.

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  1. Pablo

    The author of this article has some cojones

    1. Sonny Hope

      He does have some serious cojones.

      I’m guessing that he’s writing from outside Zimbabwe

      Because, mmmm….that’s some Hopewell level rocks in his pants

  2. True

    Barge in = 1. To abruptly or rudely interrupt or intrude on someone or something without warning. My bedroom is a private place, you can’t just barge in like that! John thought he’d found the door to the restroom, but he accidentally barged into the board meeting instead.

  3. Citizen

    Guys, you need tonnes of data to validate your thoughts and projections. Whilst at a simplistic level all that makes sense, real data is essential.

    How much FX is trading at the interbank? and the Bureaus (small or big, the data is still key)
    For FMCG, are most of the products imported or locally produced? and how do the locally produced goods compare in terms of cost to the consumer? – this is important as the dynamics of wholesale and retail will affect the black market for these goods.
    How much in FX is fuelling the black market (Diaspora funds, illicit trades etc) in comparison to the auction and other formal channels?

    Team remabhero, hairpieces, cellphones, Chinese-made consumables, and such like; how formal are their operations and how much a push/pull influence do they have on the FX pool in comparison to manufactures, fuel, and other FX guzzling industries?

    if these and other questions can be analysed the projections will make more concrete sense.

  4. Anonymous

    Time for `Ncube’ to head back to London (if he is not already a prohibited immigrant?)and practice what he was taught about economics. No doubt a lot of his diatribe is forced on him by his political masters, but whatever and whoever he blames for the disaster about to unfold……he’s the mug who has to “carry the can”for that final straw.

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