Government of Zimbabwe has Failed to Restore Sanity in the Financial Sector: The Case of ‘Illegal’ Money Changers is More Revealing

The Anti-Corruption Trust of Southern Africa (ACT-SA) is gravely concerned that the mushrooming of ‘illegal’ money changers country-wide which is deemed as illegal by the government itself, yet they operate publicly and with impunity is a cause for great concern. Regardless of being a threat to national security, the exchange of foreign currency on the black market continues and is allegedly fuelled by Politically exposed Persons (PePs) and some formal institutions.

Thus the never-ending quagmires in the financial sector, speak volumes about the Government of the Republic of Zimbabwe’s failure and/or lack of capacity to revive the economy.

After having observed that instead of the so-called, ‘illegal’ money changers being removed from the streets and seeing more and more people given foreign currency by banks and bureau de changes, the Anti-Corruption Trust of Southern Africa (ACT-SA) commissioned an investigation to find out the following:

  • The source of foreign currency for the business and travelers traveling out of Zimbabwe;
  • Whether the respective businesses are aware of the illegal nature of transacting on the black-market;
  • Why illegal money changers are not being arrested if what they are doing is illegal;
  • Why the black market is becoming more popular as the source of foreign currency as compared to banks and bureau de changes; and
  • What recommendations help to restore sanity in the financial sector.

Findings

The research made the following findings:

  • One hundred percent (100%) of all businesses and travelers consulted buy foreign currency from the black market;
  • One hundred percent (100%) of all businesses and travelers consulted confessed that they are aware that buying foreign currency from the black market is illegal. That said, they have no choice since their banks do not give foreign currency;
  • On the underlying reasons why there are few or no arrests targeting illegal money changers, a number of reasons were given. A significant majority (60%) pointed out that illegal money changers are politically connected and hence are not being arrested. Twenty percent (20%) indicated that there are no arrests because of the fact that there is no law outlawing the changing money on the streets. Another 20% blame the law enforcement agents for inaction or giving a blind eye to these illegal activities.
  • The black market is said to be more popular as compared to formal banks and bureau de changes because the foreign currency is not only in abundance but there is no paperwork involved and questions asked. Furthermore, businesses and individuals have no choice since banks have no foreign currency.

The study also confirmed that the government of Zimbabwe’s policies are partly responsible for the flourishing black market because of the following:

  • It has failed and/or neglected to make foreign currency available in local banks;
  • Poor policies, especially the policy that made it difficult for businesses to operate Nostro Accounts without restraints;
  • Whilst the government could be blaming others for supplying foreign currency to the black market, it has also been accused of supplying huge amounts to artisanal miners. However, more of the artisanal miners do not have Nostro accounts, which means that they transact on the black market.

Recommendations

In keeping with the above, the businesses and individuals consulted made the following recommendations:

  • The law enforcement agents must be allowed to operate without fear, favour and interference from PePs;
  • Relevant authorities should strengthen laws dealing with illegal money changers;
  • Local banks should give foreign currency to entities and individuals who needs it for business out of the country;

In keeping with the above, the following are specific recommendations to some authorities:

Recommendations to law and policy makers

  • There is urgent need for a policy and legal framework to deal with the problem of illegal money changers in Zimbabwe;

Recommendations to law enforcement agents

  • The law enforcement agents should coordinate efforts to curb illegal activities in the financial sector. There is need for cooperation of all security agents such as ZACC, ZRP, and FIU among others
  • Training law enforcement agents to ensure that they keep pace with the ever changing tactics used by criminals and their syndicates;
  • The law enforcement agents should not give a blind eye to the illicit activities in the financial sector;

Tertiary Institutions (Colleges and Universities)

  • Revise curricula in order to produce a cadre of professional financial investigators and experts who are able to adequately keep pace with the ever-changing environment

Download full report here (311KB PDF)

Source: Anti-Corruption Trust of Southern Africa (ACT-Southern Africa)