RBZ “SI 127 is not designed to harm business”

In some near midnight tweeting, the Reserve Bank of Zimbabwe (RBZ) posted a thread clarifying Statutory Instrument 127 of 2021 (SI 127 of 2021). Here’s what the central bank had to say:

SI 127 more about the Forex Auction participants according to the RBZ

Some points to note on S.I 127 of 2021:

The purpose of the S.I is to ensure that those obtaining foreign exchange from the auction system do not use parallel market rates. 1

— Reserve Bank of Zimbabwe (@ReserveBankZIM) May 29, 2021

Fair enough… the provisions for companies that participate in the Forex Auction that ensure that they use the funds procured for their intended purpose(s), were robust and makes sense.

The use of parallel exchange rates of above 100, for example, on funds obtained from the auction at ZW$85 to US$1 is not good for the economy and consumers. It is these anomalies or arbitrage opportunities that the S.I is designed to deal with. 2

— Reserve Bank of Zimbabwe (@ReserveBankZIM) May 29, 2021

Again no qualms here…

A level playing field is what SI 127 is apparently all about

The S.I is not designed to harm business but to provide a level playing field for business and to protect consumers. 3

— Reserve Bank of Zimbabwe (@ReserveBankZIM) May 29, 2021

This is something that we talked about on our Technikari podcast. The assumption we made is that SI 127 of 2021, is a price control measure because businesses have to go by the forex auction rate. As I am sure you are all aware the parallel market rate is leaps and bounds ahead of the auction rate.

The estimate we have is that it’s around the region of ZWL$120 to 135 for US$1.00. Now in this scenario consumers are more likely to go and change their USD at the parallel market rate to try and edge out the retailers. On the other end of things, suppliers and outlets will price products higher in USD terms to make sure they get around about the same they were getting in local currency before SI 127 of 2021.

A good example of this, is a tweet by journalist Hopewell Chin’ono:

My plumber went into a hardware shop to buy this stuff.
It was Z$1600.

The shopkeeper said they are now forced by Mnangagwa’s Statutory Instrument to use the exchange rate of 82.
So in USD it was US$19.
Yesterday it would have been US$12.

He then paid US$7 for it in Mbare. pic.twitter.com/gVt8qstA2U

— Hopewell Chin’ono Today (@daddyhope) May 28, 2021

You can still buy goods and services in forex (but we already knew this)

The use of foreign currency for the payment of goods and services is still allowed as per S.I 85 of 2020. 4

— Reserve Bank of Zimbabwe (@ReserveBankZIM) May 29, 2021

SI 127 never said anything about banning the use of USD to make purchases but maybe this was something the RBZ saw on its end and is trying to dispell any who held this misconception.

Businesses given 2 weeks to get receipts in order

Businesses have been given 2 weeks to regularise their systems so that they can comply with the SI on the receipting of goods & services in either foreign currency or local currency. The S.I is an essential means of enforcing compliance which is necessary for continued stability

— Reserve Bank of Zimbabwe (@ReserveBankZIM) May 29, 2021

This part is the interesting bit, because there was a memo that was sent by OK Zimbabwe to all its branches saying they were to stop receiving USD payments because under SI 127 businesses now have to issue receipts according to the currency used by the buyer.

According to the Memo, OK hadn’t yet calibrated its tills to make the distinction between USD purchases and local currency ones.

“One will be guilty, if he or she, being a seller of goods or services, issues to a buyer thereof a receipt in Zimbabwe dollars for payment received in foreign currency, or records sales other than in the currency in which the sale was conducted.”

Statutory Instrument 127 of 2021

It might be a case that this wasn’t clearly communicated and OK Zimbabwe jumped the gun. But it’s good that RBZ made this point about SI 127 clear.

You should check out