An analysis of Statutory Instrument 127 of 2021 from a social and economic justice perspective
On the 27th of May 2021, the government of Zimbabwe published Statutory Instrument 127 of 2021 (SI 127 of 2021) which sets out the offences (referred to as civil infringements) and penalties associated with the infringement of the Exchange Control Act[Chapter 22:05]. The SI comes against the background of runaway parallel market foreign exchange rates of around US$1: ZW$120 against the average weighted official exchange rate of US$1: ZW$ 84.7259as at 26 May 2021. Below is a summary of some of the foreign exchange offences set out in the instrument;
- Sell of goods at an exchange rate above the stipulated official exchange rate. It is now illegal for businesses to sell, display or offer goods and services at an exchange rate above the official exchange rate. Offering discounts for payments in foreign currency to encourage payments in foreign currency is prohibited. This means that no businesses is allowed to sell goods or services at a parallel market rate price.
- Selling goods and services exclusively in USD. Service providers are prohibited to sell goods and services exclusively in foreign currency unless authorised by law. This means that there are certain authorised businesses who are allowed to exclusively sell goods and services in foreign currency and the rest are compelled to accept all payments in Zimbabwean Dollar only.
- Issuance of receipts in Zimbabwean Dollar for payments made in foreign currency. Business operators are now prohibited to issue receipts in Zimbabwean Dollar for goods or services purchased in foreign currency. Therefore, if a product or service has been purchased in foreign currency, the service provider should issue a receipt in the currency a purchase was made.
- Banks liable for lack of due diligence. SI 127 of 2021 provides that financial institutions are liable for the mistakes or incorrectness of information submitted by their customers during an application for foreign currency. In the event that the information is misrepresented or incorrect, the bank will be liable to pay a fixed penalty of the amount of ZW$ 5 million.
- The government of Zimbabwe should come up with a flexible official foreign exchange rate that speaks to the market realities.
- There is need for the government to consider pegging civil penalty charges depending on the size of business which would have infringed the provisions of SI 127 of 2021 rather than providing a blanket penalty charge of ZW$50,000 which might not be deterrent enough for unscrupulous big businesses.
- There is an urgent need for the government of Zimbabwe to restore public confidence in the monetary policy regime to deal with speculation by both businesses and the general public.
- The government should come up with mechanisms to weed out corruption in application of foreign currency processes for businesses which seek authorisation for exclusive trading in foreign currency.
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