Lawyer took govt to court over use of auction rate and SI 127. It went as you would expect.

Leonard Sengere Avatar
High Court of Zimbabwe, Judicial Service Commission (JSC) tender

Do you remember the whole SI 127 mess? We just don’t talk about it anymore because we have accepted our fate, hate it or love it, S1 127 is here to stay. One lawyer apparently did not get the memo and went to face the dragon for us simple folk. He wanted to rid us of this draconian law once and for all. So, how did he fare?

He didn’t even get to fight the darn thing but we’ll get to that.

What is SI 127 by the way?

The main provisions of Statutory Instrument 127 are to:

  • prohibit businesses from selling goods and services or quoting them at an exchange rate above the ruling auction market rate
  • or from issuing buyers with a Zimbabwean Dollar receipt for payment received in foreign currency
  • prohibit businesses from giving buyers a discount for paying in foreign currency
  • set out penalties for businesses that refuse to accept payment in the Zimbabwean Dollar at the ruling auction market rate

When this SI 127 was announced in May 2021, even our primary school kids predicted it would harm the public who were supposed to be relieved by it. It didn’t take long to see its disastrous effects. Cost of living in June 2021 shot up by 13.4% from the pre-SI 127 levels. It hurt because we saw it coming

Businesses and their customers cried out to the government to suspend the ill-advised instrument. The RBZ came out and said they had heard us and would limit their efforts to force compliance to those that abuse the foreign exchange auction system, manipulate the exchange rate or fail to comply with anti-money laundering rules and regulations. 

I think it’s safe to say that this compromise of theirs did not yield the results any of us wanted. 

Enter Mr Shava, attorney at law

Our dear lawyer, Mr Shava, saw the carnage left in SI 127’s wake and decided to take action, legal action. Our neighbourhood friend and all around good guy Shava went to the High Court of Zimbabwe to challenge the legality/constitutionality of SI 127

He especially wanted to invalidate civil penalties imposed on businesses and individuals refusing to accept local currency at the ruling auction market rate.

He argued that SI 127 essentially worked as a price control mechanism and so could lead to shortages in the formal market. Yep, we lived through this, you would find some basic goods missing in some supermarket shelves and yet plentiful in car boots just outside their doors. So I’d agree with him there, SI 127 could/did/does lead to shortages in the formal market.

Naturally, Mr Shava asked the courts to declare SI 127 unconstitutional. How did that go?

Get out of here!

That’s essentially what the High Court screamed at him. Justice David Mangota ruled that our friend Shava had no legal footing to bring such a case to court. Therefore the High Court declined to hear whatever case he had. There would be no arguing the matter. It was, as the celebratory Herald put it, a stillbirth.

Mr Shava in turn argued that he was acting in the public interest and so had legal footing to do so. Seeing as we, the public, have been negatively affected by SI 127, I’m inclined to agree that he was acting in the public interest.  

The court was having none of it. They argued that traders, bankers and forex traders are the ones with a direct and substantial interest in the matter and so should be the ones to mount the challenge. The court says those people are not among the underpriviledged in society as they are socially and economically able to mount their own challenge.

Justice Mangota proceeded to roast our would-be saviour. Mangota used his bible knowledge to burn Shava,

“The applicant is like a voice which is crying in the wilderness.”

It appears the judge was not a fan of Mr Shava’s case. More insults were dished out,

“He is, as it were, crying more than the bereaved.”

Ouch. What a burn. However, I think I can assure our Justice Mangota that Shava is not crying more than us, the real bereaved. See, that’s where I have a problem with Mangota’s ruling, I feel he gave the case an insincere look.

Who/what is the public?

Shava said he was acting in the public’s interest. He argued that SI 127 could lead to shortages of goods in the formal market. This would affect all Zimbabweans, especially the already vulnerable. 

So, in my non-lawyer view, the case was to be argued with the general public as the real plaintiff. Maybe the term ‘public’ means something different in High Court circles because I did not take ‘acting in the public interest’ to mean ‘acting on behalf of bankers, traders and forex dealers.’ 

That was a bait and switch in my view. Justice Mangota obviously knew this in my opinion. Shava highlighted the provisions of SI 127 which include penalties for businesses that refuse to accept Zimdollar at the prevailing auction rate. However, the point was that these measures ultimately lead to shortages of goods in the formal market. Even as they led to the spike in prices we saw.

So to say Shava was attempting to represent bankers when he mentioned the penalties is disingenuous in my humble opinion. 

Who can bring such a case to court?

Even if we accepted the judge’s assertion that only bankers, traders and forex dealers could bring the case to court, we find that in a way, they too are underpriviledged. Therefore they cannot mount the challenge themselves.

Let us not kid ourselves. No business person would want to paint a large target on their back by taking the government to court over the constitutionality of penalties for using the parallel market rate to price their goods. It feels like one certain way to attract a Zimra audit and extra attention by the FIU and other such bodies. This might not be the case, but it would be unwise to test that.

So, we can accept that Shava meant bankers and traders when he said ‘public.’ However, we still find that even by that definition of ‘public,’ Shava still needed to mount a challenge in the underprivileged public’s interest.

SI 127 and criminal charges

Shava must have pointed to the penalties discussed and how they are unconstitutional. The judge said those penalties were imposed by RBZ officials and not by a court. Furthermore, there was no criminal charge when they are imposed and so there wasn’t proof beyond reasonable doubt that the constitution had been violated. 

I can’t argue as to the merits of this argument. All I come out with from his statement is that there is no criminal charge for the practice of using the parallel market to price goods. So what exactly happens if one is found to be ignoring the auction rate when pricing? I’m not sure.

You will remember that businesses lamented the lack of clarity when it came to SI 127 and its enforcement. That vagueness remains.

Shava’s case was doomed from the start

Shava was represented by Zimbabwe Lawyers for Human Rights’ Bhatasara and their case was dead before it even left the womb for one major reason – the respondents they listed. They listed President Mnangagwa, Minister Mthuli Ncube and Attorney-General Advocate Prince Machaya as respondents.

Not to say justice was denied. But truth to be told, that was never going to fly. If there was a way for such a legal challenge to have different respondents, I feel like it would have had a better chance. Still a minute chance, but a greater one nonetheless. 

That’s that but just know that if you want to mount your own legal challenge, it’s going to be easier later this year. The justice system is adopting technology and you’ll be able to file your own papers from your smartphone from May 2022.

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