Business sector complies with SI 127
WHILE most registered businesses continue to operate normally after the Government gazetted new regulations penalising errant operators that abuse forex, it emerged registered entities only account for roughly 30 percent of enterprises in the economy.
This means any solutions the Government may prescribe to address violations of the law on the usage of foreign currency, including from the auction, will need to bring on board the informal sector and entities that do not meet the criteria for auction funds.
Business leaders of registered entities said they were prepared to comply with the new regulations introduced by Government, but pointed out that compliance may be a challenge as long as disparities remain between the official and parallel market exchange rate.
The new provisions, contained in statutory instrument 127 of 2021, empowers the Reserve Bank of Zimbabwe (RBZ) to impose civil penalties on traders or businesses that abuse, directly or indirectly, any foreign currency obtained from the auction.
Under SI 127 of 2021, gazette under Presidential Powers (Temporary measures) (Finance Laws Amendment) Regulations, civil penalties are now imposed for issuing of local currency receipts for forex purchases, pricing goods and services above the auction rate, pricing exclusively in hard currency, and using funds from the auction other than the purposes originally intended.
In terms of the new regulations, traders or businesses may face a civil penalty of up to $1 million (Zimbabwe dollars) for abusing foreign currency or any of the offences listed in the latest legal provisions.
Those found guilty of infringing Exchange Control regulations, will be slapped with a fixed penalty of the amount of one million Zimbabwe dollars or an amount equivalent to the value of the foreign currency obtained (whichever is the greater amount). Offenders will, however, be given 48 hours, from the date of its issuance to show cause why the penalty order should not have been issued, that is to say, to show that the order to penalise was issued in error.
Confederation of Zimbabwe Industries (CZI) president Henry Ruzvidzo, said formal business enterprises are ready to comply with new regulations, but implored authorities to address the gaping disparity between the auction exchange rate and parallel market rate.
He warned compliance could become a big challenge if the gap between the ruling ($84) and open market rates remains or continues to widen. Currently the exchange rate disparity stands at around 25 percent.
“They should focus on what is causing the disparity. They should look at how we can reduce the significance of the parallel market rate so that the official rate is what is used in the whole economy,” he said.
Mr Ruzvidzo said while formal enterprises obtain foreign currency from the auction, they still incur a significant portion of their costs through inputs from the local market where prices are inflated by the parallel market rate.
Market watchers have indicated that the new regulations may see some business entities unjustifiably raising the US dollar prices to comply with the requirement for Zimbabwe dollar prices to follow the ruling auction rate.
This would, however, make locally produced goods less competitive on the market compared to imports, which would create a stampede for forex to import, creating further forex demand pressures.
Retailers association of Zimbabwe (CZR) president Denford Mutashu said registered retailers and wholesalers had continued to operate as they had been doing using the ruling auction market exchange rate.
He, however, pointed out that the challenge pertained to the fact that those who may willingly comply constitute only about 30 percent of total enterprises in the country with the bulk either operating informally or being businesses or traders that do not use the auction.
“We have 65-70 percent that do not participate on the auction; they source their own foreign currency from the underworld; so much is happening in the informal sector,” Mr Mutashu said in an interview.-herald.cl.zw
