News / National
Alternative currencies still legal tender in Zimbabwe
26 Mar 2019 at 02:18hrs | Views
Legal think tank Veritas says the use of alternative currencies remains legal as Statutory Instruments (SIs) 32 or 33 of 2019 do not prohibit their use for pricing, recording debts, accounting and settlement of transactions.
Both SIs 32 and 33 of 2019 were introduced shortly after the 2019 Monetary Policy Statement to legalise the local currency and underscore its uses. However, Veritas said even if a currency was legal tender, that did not mean its uses should be all inclusive.
"In summary, these provisions say that real time gross settlement systems (RTGS) dollars are currency and that they are legal tender. Neither statutory instrument goes further to say that RTGS dollars must be used for pricing, recording debts, accounting and settlement of transactions. That is important because the fact that a currency is legal tender does not mean that it must be used for all purposes," Veritas said.
"Legal tender means a currency which, if offered in payment of a debt, discharges the debt unless the creditor and the debtor have specifically agreed otherwise. So, if a debtor owes a creditor $20, say, the debtor can normally repay the debt by offering $20 in RTGS dollars (because they are legal tender).
"If, however, the parties have agreed that the debt should be repaid in US dollars, then the debtor must repay it in those dollars. There is no law in Zimbabwe which invalidates a contract that stipulates payment in a foreign currency. Similarly, there is no law in Zimbabwe that requires prices to be marked up in legal tender or accounts to be drawn up in legal tender."
According to Veritas, only paragraph 2,3 of the Reserve Bank's Directive RU 28/2019 makes mention of what RTGS dollars should be used for, stating: "The RTGS dollars, shall be used by all entities including government and individuals in Zimbabwe, for the purpose of pricing of goods and services, recording of debts, accounting and settlement of domestic transactions."
However, Veritas argues that though the central bank's directive repeats the Reserve Bank of Zimbabwe governor John Mangudya's statement about the compulsory use of RTGS dollars, the same specific statement did not appear in either SI 32 or 33 of 2019.
SI 33 of 2019, 4 (1) sub section D, states that: "For accounting and other purposes, all assets and liabilities that were immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall, on and after the effective date, be deemed to be valued in RTGS dollars at a rate of one-to-one to the United States dollar".
Further, Veritas added that the RBZ directive was not a generally binding law.
"Directives issued by the Reserve Bank become binding only if they are published in the Gazette or if they are served on the persons to whom they apply, or if it is proved that the persons concerned actually knew about them [see section 39 of the Exchange Control Regulations, 1996]," the Veritas analysis read.
"Although this directive seems to have circulated on social media, it has not been published in the Gazette nor has it been served on all traders, accountants and other people who are presumably expected to abide by it. Hence, the directive is not binding on them."
Already, despite SIs 32 and 33 of 2019, some companies are not adhering to these pieces of legislation, among them the National Foods Holdings Limited, Innscor Africa Limited and Truworths Limited, who have all reported their earnings in United States dollars.
Other companies, such as Simbisa Brands, are also charging in US dollars.
Even the public accountants and auditors board is still deliberating on how the company should compile its financial report in light of SIs 32 and 33 of 2019.
Both SIs 32 and 33 of 2019 were introduced shortly after the 2019 Monetary Policy Statement to legalise the local currency and underscore its uses. However, Veritas said even if a currency was legal tender, that did not mean its uses should be all inclusive.
"In summary, these provisions say that real time gross settlement systems (RTGS) dollars are currency and that they are legal tender. Neither statutory instrument goes further to say that RTGS dollars must be used for pricing, recording debts, accounting and settlement of transactions. That is important because the fact that a currency is legal tender does not mean that it must be used for all purposes," Veritas said.
"Legal tender means a currency which, if offered in payment of a debt, discharges the debt unless the creditor and the debtor have specifically agreed otherwise. So, if a debtor owes a creditor $20, say, the debtor can normally repay the debt by offering $20 in RTGS dollars (because they are legal tender).
"If, however, the parties have agreed that the debt should be repaid in US dollars, then the debtor must repay it in those dollars. There is no law in Zimbabwe which invalidates a contract that stipulates payment in a foreign currency. Similarly, there is no law in Zimbabwe that requires prices to be marked up in legal tender or accounts to be drawn up in legal tender."
According to Veritas, only paragraph 2,3 of the Reserve Bank's Directive RU 28/2019 makes mention of what RTGS dollars should be used for, stating: "The RTGS dollars, shall be used by all entities including government and individuals in Zimbabwe, for the purpose of pricing of goods and services, recording of debts, accounting and settlement of domestic transactions."
However, Veritas argues that though the central bank's directive repeats the Reserve Bank of Zimbabwe governor John Mangudya's statement about the compulsory use of RTGS dollars, the same specific statement did not appear in either SI 32 or 33 of 2019.
SI 33 of 2019, 4 (1) sub section D, states that: "For accounting and other purposes, all assets and liabilities that were immediately before the effective date, valued and expressed in United States dollars (other than assets and liabilities referred to in section 44C(2) of the principal Act) shall, on and after the effective date, be deemed to be valued in RTGS dollars at a rate of one-to-one to the United States dollar".
Further, Veritas added that the RBZ directive was not a generally binding law.
"Directives issued by the Reserve Bank become binding only if they are published in the Gazette or if they are served on the persons to whom they apply, or if it is proved that the persons concerned actually knew about them [see section 39 of the Exchange Control Regulations, 1996]," the Veritas analysis read.
"Although this directive seems to have circulated on social media, it has not been published in the Gazette nor has it been served on all traders, accountants and other people who are presumably expected to abide by it. Hence, the directive is not binding on them."
Already, despite SIs 32 and 33 of 2019, some companies are not adhering to these pieces of legislation, among them the National Foods Holdings Limited, Innscor Africa Limited and Truworths Limited, who have all reported their earnings in United States dollars.
Other companies, such as Simbisa Brands, are also charging in US dollars.
Even the public accountants and auditors board is still deliberating on how the company should compile its financial report in light of SIs 32 and 33 of 2019.
Source - newsday
