Zimbabwe Reserve Bank Governor, John Mangudya

THE tough monetary and policing measures taken by authorities over the past few weeks in a bid to rein in the harmful foreign currency parallel market appear to be bearing fruit.

Surveys at the weekend showed that black market rates have eased off to as low as $130 to the American dollar in some cases, from ill-boding highs of up to $220 to the much-coveted greenback two weeks ago.

At the same time, the once ubiquitous money changers on the streets of many urban areas in the country have mostly vanished, with the few remaining ones conducting their dwindling business from the safety of their homes for fear of being arrested by law enforcement agents.

A once thriving Harare currency dealer readily admitted yesterday that business had become “extremely tough” in recent weeks, adding that he was now having to try other things to “put food on the table” for his family.

“We are burning on both ends. On the one hand authorities want us dead and on the other the few clients that are still buying currency don’t want to pay enough, which means that one can easily end up losing money.

“At one time we could conduct our business without fear of being jailed, and could get premiums of up to $220 to the US dollar. Now, if you get $140 you rejoice,” the despondent money changer said.

Speaking to the Daily News yesterday, the governor of the Reserve Bank of Zimbabwe (RBZ), John Mangudya, attributed the slump in illegal forex trades to “laudable compliance” by business, as well as effective monitoring and surveillance of malpractices by the central bank’s Financial Intelligence Unit (FIU) and the police.

“We are definitely going to continue with the engagement process with business, as well as monitoring and surveillance activities to ensure that the economy remains stable in the best interest of consumers, business and investors.

“Business needs consumers and consumers need business. So, there is need for business to practice self discipline and self restraint.

“We have cleared a substantial amount of the auction backlog which is now concentrated at a few banks,” Mangudya said.

“The Reserve Bank is committed to its primary mandate of achieving price and financial system stability.

“This is critical to preserve the value of our local currency and to ensure that the public is not shortchanged by indisciplined entities as we move towards the festive season,” he added.

After more than a year of holding steady against the US dollar, the local unit had recently slid to up to $220 to the coveted greenback on the parallel market — despite the Zimbabwe dollar trading at about $93 to the US$ on the formal foreign exchange auction system.

This comes after President Emmerson Mnangagwa recently issued a stern warning to illegal foreign currency dealers, whose arbitrage behaviour had driven up the Zimbabwe dollar rate resulting in price hikes. 

Speaking in Harare last week, ahead of his party’s politburo meeting, Mnangagwa said the government was currently crafting ways to curtail the parallel market.

“The issue of the exchange rate will be addressed and those found on the wrong side of the law will be dealt with severely,” he thundered.

Speaking at the Zimbabwe Agricultural Show (ZAS) in Harare recently, Vice President Constantino Chiwenga also warned that authorities would deal ruthlessly with all forex violations.

“Whilst government is very pleased with the continued increase in production and productivity across most sectors of our economy, I would like to urge all businesses to be responsible and disciplined in their operations.

“They should not be hoodwinked by some malcontents that are operating in the parallel foreign exchange market where foreign exchange arbitrage has become their lucrative business at the expense of the stability of the economy.

“Government will not tolerate this misbehaviour of currency manipulation by these malcontents. The relevant arms of government shall continue to deal decisively with them for the betterment of our people.

“By December, we will have dealt with all money changers and currency manipulators … There will be no mercy ladies and gentlemen,” the no-nonsense VP added.

On his part, Finance minister Mthuli Ncube has threatened to unleash the Zimbabwe Revenue Authority (Zimra) and to also withdraw the trading licences of businesses which continue to price their goods and services using parallel foreign currency rates.

He said the involvement of Zimra was part of the government’s efforts to protect “genuine businesses and ordinary people” from unscrupulous people whose conduct was threatening the relative economic stability that was being enjoyed in the country.

“The initiatives by the central bank have full government support and my ministry will further strengthen the efforts by…letting the Zimra carry out impromptu audits of corporate activities, with a view of quantifying potential tax liabilities arising out of illegal foreign currency trading.

“Zimra will also be carrying out compliance audits with respect to compliance with the Location Tax introduced during the 2021 fiscal year.

“The FIU will continue to closely monitor and analyse financial transactions to identify, expose and take action against perpetrators of money laundering and other financial crime,” Ncube said.

And desperate to maintain the country’s relative economic stability of the past year, government and business have escalated their collaboration to stop things getting off the rails completely in the wake of the recent market shocks.

This has resulted in a number of critical consultations between the government and private sector leaders over the past few weeks, to try and remedy the situation.

Among these high-profile meetings was one that was held in Harare involving the RBZ, the Ministry of Finance and Economic Development, the Ministry of Industry and Commerce, and captains of industry and commerce.

Speaking after the engagement, Mangudya said the gathered parties had “unanimously agreed” that measures needed to be taken immediately to contain the movement of the parallel exchange rates.

“It was noted that the recent volatility in the parallel exchange rates was due to behavioural factors. In order to address these negative behavioural traits, it was agreed that a holistic and collaborative approach was required,” he said.

In that regard, the government, the RBZ and the business community had made firm pledges and commitments to mitigate the situation.

Among other things, the RBZ undertook to continue tightening money supply under its conservative monetary targeting framework, to ensure that this would not be a source of exchange rate destabilisation.

It also pledged to further streamline the foreign exchange auction system to ensure that it would continue to play its price discovery role in the foreign exchange market, while also dealing with the funding backlog of foreign exchange allotments.

Further, the RBZ would accelerate the implementation of special attractive money market instruments, including exchange rate linked ones, as an alternative investment avenue for local currency to the holding of US dollars.

The Bankers Association of Zimbabwe (BAZ) committed to ensuring that all bids submitted to the foreign exchange auction were authentic and refraining from facilitating parallel market transactions — while also enhancing the reporting of suspicious transactions.

On their part, the manufacturing and retail sectors also undertook to ensure responsible pricing, while also noting the need to adhere to all foreign exchange rules. – Daily News