As expected, most of the formal sector took the new legal instrument empowering the Reserve Bank of Zimbabwe to impose penalties on traders abusing foreign currency obtained through the weekly foreign currency auctions in their stride as they were already compliant with previous directives and tax laws and did not have to make any changes to pricing.
The new statutory instrument basically converts the previous policy directives into law to allow action against those refusing to co-operate.
Under Statutory Instrument 127 of 2021, gazetted under Presidential Powers (Temporary Measures) (Financial Laws Amendment) Regulations, penalties are now imposed for issuing of local currency receipt for a foreign currency purchase, pricing goods and services above the ruling exchange rate, pricing of goods and services only in foreign currency and using the money obtained from the auctions for other purposes than what the supporting invoices on the bid stated.
Banks are now expected to do their job since they are liable for failure to verify information submitted by their clients.
However, tax laws already compelled businesses to keep separate books for transactions in each currency used so they could pay the required percentages of their total tax liability at the same percentages each currency was used in transactions.
And many of the larger formal retail businesses simplified this by having separate tills for each currency, although others simply entered a code when using foreign currency to ensure the right currency was recorded in their financial system and the receipt reflected the currency used.
All supermarkets and other businesses that mark prices in local currency but which accept foreign currency have been displaying the auction rate, down to four decimal places, in their stores and since they do little direct importing were quite happy to use the auction rate.
However, there were businesses using different exchange rates sometimes because they were selling imported goods that were not on the priority lists, and so could not be funded through auction bids, or because they were greedy and lied that they were not using auction money.
There was little, until the new regulations, that the Reserve Bank of Zimbabwe could do except bar them from the auctions, but most of these businesses were not primary importers, buying from wholesalers who were the importers who had been doing the bidding.
That loophole is now closed. If your imports are bought using auction funds then your whole costing set up must use the auction rate, even if you bid on the high side, and if you fail to do this you can face financial penalties.
Yesterday the previously compliant businesses, such as major retailers and supermarkets, were continuing without any change in their business practices as they have been complaint for a long time.
A survey conducted yesterday in Harare, Beitbridge, Chinhoyi, Masvingo, Gweru and Kwekwe, Bindura, Marondera and Kariba showed prices were continuing to reflect the official rate of close on 1:84 in supermarkets such as OK, Pick n Pay, N Richards, and in major chain stores such as TV Sales and Home.
These are the sort of outlets that were already compliant.
But most pharmacies were now using the auction rate. There have been growing complaints that while pharmaceuticals were a major item each week on the auction bids, a number of pharmacies were using the black market rate or at least something like 100:1.
This is a sector where more change is expected.
At most shops visited in Beitbridge town yesterday, prices of goods were displayed in United States dollars, South African rands and RTGS, and dedicated pay-points have also been created to accommodate customers paying in a specific currency of trade.
In Chinhoyi, most large formal businesses were continuing as usual because they were already compliant. But some informal traders including boutiques and hardware outlets had not complied arguing that they were not accessing foreign currency from the auction system.
Police spokesperson, Inspector Margaret Chitove said teams have since been deployed to monitor compliance.
In Masvingo, while most huge corporates were complying there was a call to authorities to make the legislation clearer particularly on whether the legislation applied to everyone or only those who were obtaining hard currency from the auction floor.
In Gweru and Kwekwe businesses had complied and a brief survey conducted by The Herald established that in most shops the auction rate was being used.
In some supermarkets, there was still confusion with till operators declining payments in forex in favour of payments in mobile money platforms.
In Bindura and Marondera, some huge shops were declining United States dollars, worried about the legislation until they knew more.
Economic analysts spoken to said the legal instrument would give impetus on economic growth as it seeks to leave no one behind including the vulnerable but cautioned Government to continue monitoring its implementation for it to realise intended objectives.
Analyst Mr Percy Gwanyanya said the legal instrument was noble in that it was meant to protect the poor and economically vulnerable who most of the time are at the mercy of those financially strong.
The instrument, said Mr Gwanyanya is meant to nip arbitrage behaviour by some unscrupulous businesses who would have accessed foreign currency from the central bank auction system.
He said while the SI targeted those accessing hard currency from the auction system, economic benefits accruing would be felt across sectors of the economy.
“The RBZ is saying we need some order in the market particularly those who access foreign currency from the auction system and the benefits from the auction system has been accruing in the economy and I cannot think of any better way to help the vulnerable,” said Mr Gwanyanya.
“Benefits of the auction system are now beginning to be felt particularly in the agricultural sector like maize, soya and beans, prices have started to fall largely reflecting the benefit of accessing money by different corporates. A greater part of traders have been adjusting prices in line with the auction,” he said.
Mr Gwanyanya said reduction of prices will inevitably have a bearing in containing the inflation rate thereby helping in achieving Government economic targets as the marketing will be self correcting.
Confederation of Zimbabwe Retailers (CZR) president Mr Denford Mutashu implored firms accessing foreign currency through the auction system to lead by example in complying with the legal instrument.
“Those accessing forex from the auction market should take the lead on compliance and avoid engaging in arbitrage activities,” said Mr Mutashu.
“The SI rattled the market and business is busy trying to reconfigure their operating systems to comply with the new S.I 127. CZR unfortunately observes a wave of price increases on the market from basic commodities to non-essential products as interpretation of the policy was left for the open market,” he said.
Zimbabwe Coalition of Debt and Development (Zimcodd) commended the legislation saying it helped in ensuring that foreign exchange accessed on the auction floor was put to good use.
“Zimcodd commends the move to exercise strict monitoring of foreign currency recipients on the weekly auction system to ensure that the foreign currency is put to proper and intended use. In the same vein, perpetrators in illicit dealings in foreign currency should be prosecuted and blacklisted from benefiting from the auction system,” said Zimcodd in a statement.
It however, cautioned Government to ensure that the legislation did not create inequalities given that the economy was largely informalised and there were many traders who did not have access to auction hard currency.