We didn’t get a new price control or exchange rate Statutory Instrument (SI) but the Ministry of Finance delivered a strongly worded circular about how it is going to tackle the black market foreign currency issue in Zimbabwe.
Before I go into what the title says, I have to start with the glaring problem with the establishment. They have dodged the real problem for almost two decades. If you can’t provide a safe place for people to put money or where they can access funds consistently, then don’t expect a queue at your door.
Zimbabwe’s foreign currency issues and the black market stem from deep systemic failures of the financial authorities to create a conducive transacting and value preservation environment. What has followed has been a rule by decree style of policymaking with little consideration for the entities and individuals who are paying tax after tax.
Moreover, the RBZ’s own forex auction has been “meh” to say the least… The central bank is still contending with a backlog of unfulfilled allocations. It’s easy to assume that the coffers are not overflowing and we are seeing one bandaid being placed over another with the disbursement of months old bids.
As I mentioned in an article earlier today, the thing that RBZ, the Ministry of Finance and the cabal of economists employed by the government should be doing is building trust above all else. But it seems as though what should be common sense, is not among all as we have seen this afternoon. Maybe it’s because there is a lot of work involved in actually repairing faith than there is to contrive a new way of further protracting the economic situation in the guise of “doing something”.
Action for action sake is a fool’s errand. Rarely would you ever go to the doctor and get an unsatisfactory or lazy description of your condition. You expect them to, at the very least, use the methods and means they studied (and go above and beyond as per the Hippocratic oath) to arrive at a proper diagnosis. If only the financial authorities could start diagnosing the actual disease and not papering over the cracks.
Minister Mthuli’s measures…
I honestly don’t think there was a business operator who batted an eye when they saw the Minister’s communique. I am sure they started adapting in anticipation of the auditors. This brings me to why I actually set out to write this.
If the government is indeed hell-bent on this course of action then it should start with the entities that handle, generate or oversee the biggest sums. The action should be proportional, not random and more worryingly not aimed merely at informal and smaller businesses as a way for the financial authorities can get their pound of flesh.
We all saw the names of the people the RBZ accused of “engaging in currency manipulation”. I wonder when the figures for the transactions they were dealing with will be released. If they are in the thousands I would honestly be surprised because the real “big fish” are far too smart or connected to be found out.
Those who are really in the thick of it make a concerted effort not to be easily identified. This is true both for the forex dealers and businesses that are moving money on the black market.
The Simbisa exchange rate story that broke this morning should be a starting point for this new inquisition. Players who account for the most USD transactions should be the first to meet the Ministry of Finance’s new test.
No under the table dealings and any findings should be made public
Not all companies are equal, this is a fact of life that we have to contend with. This reality means that if a small-medium firm is caught the RBZ and Ministry of Finance will shout it out from the highest peaks to the lowest valleys.
However, companies higher up on the totem pole will get some sort of immunity. If it’s not a slap on the wrist, the findings will be buried in some archive somewhere (that’s if they are recorded at all). You should listen to the last podcast we had with Eddie Cross if you haven’t already.
In saying all of this I should stress that I am not levying blame or suspicion to any of the high rollers. All I am saying is that they are moving the most money therefore they should be entities of interest.
The government itself should not be immune
Of course, we can’t forget the biggest employer in the country the Government of Zimbabwe. No other collection of individuals has more say or power when it comes to the movement of money within our borders. Therefore we should see government parastatals, tender winners and everyone in between get the same treatment. Who knows what black market deals may be uncovered even those unbeknownst to the higher-ups.
No one should be absolved from this new offensive because if not then it is a monumental waste of taxpayer dollars and time that should have been dedicated to starting a dialogue with local businesses.
You should also read
- A new price control/exchange rate SI would be a huge mistake
- The RBZ’s auction system takes up to 10 weeks to process payments
- RBZ to tighten money supply. What does that mean and how are they trying to achieve it?
- Government needs to fix its forex auction
- The RBZ needs to scrap weekly and monthly limits for mobile money too