News / National
Mthuli Ncube's currency move triggers chaos
26 Jun 2019 at 11:35hrs | Views
GOVERNMENT's Monday move to dump its basket of foreign currencies, opting to use its own currency in local transactions, triggered chaos on the market yesterday, with some retailers closing shop for the better part of the day, while some financial experts described the legal instrument used to effect the changes as illegal.
Several shop owners in downtown Harare, Bulawayo, Gweru, Chinhoyi and other towns remained closed for business in the morning while closely monitoring the market's reaction to the new currency regime brought about by Statutory Instrument (SI) 142 of 2019.
Some retail shops, however, were open for business although they had marked up prices of certain goods in anticipation of a further fall in the value of the local Real Time Gross Settlement (RTGS) dollar.
This came as the country's main labour body, the Zimbabwe Congress of Trade Unions (ZCTU) threatened to mobilise for mass protests against the ban on the use of the multi-currency system for local transactions.
"As you can see, some shops are still closed. Most of us opened very late to allow ourselves time to monitor the market response to the new measures," a shop owner in downtown Harare said.
Government on Monday abolished the use of foreign currency in local transactions in a bid to curb black market demand, making the local dollar the only legal tender, nearly a decade after it was made redundant by hyperinflation.
The move caused panic in the market despite government's assurance that it would stabilise prices in a market that had been rocked by a three-tier pricing system for years.
Addressing wildlife stakeholders in Victoria Falls yesterday, President Emmerson Mnangagwa admitted that the move would cause some confusion on the market in the first few days as business and the public adjust to the new system.
"The question should be: Are we doing the right thing or not? I think we are on the right path. If you see us doing what we're doing, it means that fundamentals are already in place, or we are working towards that. We have not outlawed any currency. We have said if you want to trade in this country, use our local currency," he said.
But some shop owners said they were forced to close because they were not sure if they would be able to restock after buying their current stock using US dollars.
Some shops, especially those run by Chinese operators, were, however, rejecting electronic payments, while others still accepted US dollar payments despite the ban.
"Some have slightly hiked their prices in anticipation to buy the US dollar at the black market at inflated prices since demand for it on the parallel market will surely increase. All companies will not go after it after being ordered to stop selling in US$," another shop owner added.
In Harare, the US dollar parallel market plunged in the morning, trading at 1:11, but later picked up by midday to trade at about 1:13.
Pharmacies that have been demanding US$ for drugs had shifted to RTGS/ZWL$ while others remained closed for business, the same with some shops selling imported vehicle spares.
In Chinhoyi, the transacting public woke up to closed shops, while the few that were open defied SI 142 of 2019 and continued to sell groceries in foreign currencies.
Most Chinese shops, which had adopted the greenback as the only mode of payment, also shut their doors.
Business operators interviewed predicted a rise in prices of basic consumer goods, while others said the new currency reform would trigger shortages of products.
Mashonaland West Show Society chairman Godfrey Mavankeni said companies that import goods for resale locally would be hardest-hit by the knee-jerk government pronouncement.
"Some of our businesses depend on imports and, therefore, we are not sure how we are going to source the foreign currency to import goods for sale," said
Mavankeni, who runs a computer hardware shop in Chinhoyi.
"At the moment, it's a wait-and-see game. We are unsure how the market is going to respond as there are many fundamentals to be considered."
He opined there would be shortages of basic goods, while prices would tumble due to depressed demand aggregate.
Former Finance minister Tendai Biti said SI 142 was illegal and a disaster for the country.
Biti made the remarks in Parliament after a Zanu-PF legislator commended Finance minister Mthuli Ncube for bringing back the Zimdollar.
The opposition MDC vice-president said SI 142 was ultra vires the Constitution and should be repealed immediately.
"The SI 142 (2019) touches on our political economy, the economy of our country and the laws of our country. Section 44(2) of the Reserve Bank of Zimbabwe Act, which introduced the multi-currency regime in 2009, makes it clear that the British pound, euro, South African rand and Botswana pula shall be legal tender, and section 44(a)(2) — it being an Act of Parliament means that the Finance minister cannot repeal that provision," Biti said.
"Quite clearly, SI 142 (2019) is ultra vires the provisions of section 44(a)(2) of the RBZ Act and it is wrong at law and on the economy."
He said there was a relationship between a currency to exports and imports.
"As long as there is a deficit in your current account, I submit that we do not have a current account and reserves necessary to support our own currency. A currency is a subject of political confidence and in this country, as far as I am concerned, there is a kwashiorkor of political confidence and, therefore, I submit that SI 142 is a disaster," Biti said.
Justice minister Ziyambi Ziyambi dismissed Biti's concerns as premature.
"I would like to make a correction that all statutory instruments stand deferred to Parliament, which will scrutinise them through the Parliamentary Legal Committee (PLC). If the PLC feels there is something wrong with the SI, they will issue an adverse report and then Parliament will debate it," Ziyambi said.
"I am surprised because MPs are very much aware of the process and they want to debate it. An SI takes effect the moment it is published and I submit that it is very premature to start attacking it before it is scrutinised by the PLC."
Meanwhile, ZCTU president Peter Mutasa said the re-introduction of the local currency was hurriedly done without consulting other stakeholders such as business and labour, as provided for under the Tripartite Negotiating Forum (TNF).
"If the government does not reverse this ruinous policy immediately and announce US dollar salary payments, we will immediately mobilise workers for mass action," Mutasa said.
He said workers are demanding that government allows the use of multi-currency, with the US dollar being used as the base currency until economic fundamentals are put in place to ensure the introduction of a local currency.
Mutasa said the workers were going to use today's TNF meeting to demand for the reversal of the law, failing which they would be forced to call for mass action.
"This announcement came a day after the Minister of Finance had assured the nation that the Zimbabwean dollar will only be introduced when macro-economic fundamentals are in place," Mutasa said.
"Such a critical issue should have been subjected to intense dialogue, and it smacks of hypocrisy and is patronising for government to unilaterally make such a huge policy announcement at a time social partners were supposed to meet on Wednesday, June 26, 2019 under the auspices of the recently enacted TNF," Mutasa said.
Several shop owners in downtown Harare, Bulawayo, Gweru, Chinhoyi and other towns remained closed for business in the morning while closely monitoring the market's reaction to the new currency regime brought about by Statutory Instrument (SI) 142 of 2019.
Some retail shops, however, were open for business although they had marked up prices of certain goods in anticipation of a further fall in the value of the local Real Time Gross Settlement (RTGS) dollar.
This came as the country's main labour body, the Zimbabwe Congress of Trade Unions (ZCTU) threatened to mobilise for mass protests against the ban on the use of the multi-currency system for local transactions.
"As you can see, some shops are still closed. Most of us opened very late to allow ourselves time to monitor the market response to the new measures," a shop owner in downtown Harare said.
Government on Monday abolished the use of foreign currency in local transactions in a bid to curb black market demand, making the local dollar the only legal tender, nearly a decade after it was made redundant by hyperinflation.
The move caused panic in the market despite government's assurance that it would stabilise prices in a market that had been rocked by a three-tier pricing system for years.
Addressing wildlife stakeholders in Victoria Falls yesterday, President Emmerson Mnangagwa admitted that the move would cause some confusion on the market in the first few days as business and the public adjust to the new system.
"The question should be: Are we doing the right thing or not? I think we are on the right path. If you see us doing what we're doing, it means that fundamentals are already in place, or we are working towards that. We have not outlawed any currency. We have said if you want to trade in this country, use our local currency," he said.
But some shop owners said they were forced to close because they were not sure if they would be able to restock after buying their current stock using US dollars.
Some shops, especially those run by Chinese operators, were, however, rejecting electronic payments, while others still accepted US dollar payments despite the ban.
"Some have slightly hiked their prices in anticipation to buy the US dollar at the black market at inflated prices since demand for it on the parallel market will surely increase. All companies will not go after it after being ordered to stop selling in US$," another shop owner added.
In Harare, the US dollar parallel market plunged in the morning, trading at 1:11, but later picked up by midday to trade at about 1:13.
Pharmacies that have been demanding US$ for drugs had shifted to RTGS/ZWL$ while others remained closed for business, the same with some shops selling imported vehicle spares.
In Chinhoyi, the transacting public woke up to closed shops, while the few that were open defied SI 142 of 2019 and continued to sell groceries in foreign currencies.
Most Chinese shops, which had adopted the greenback as the only mode of payment, also shut their doors.
Business operators interviewed predicted a rise in prices of basic consumer goods, while others said the new currency reform would trigger shortages of products.
Mashonaland West Show Society chairman Godfrey Mavankeni said companies that import goods for resale locally would be hardest-hit by the knee-jerk government pronouncement.
"Some of our businesses depend on imports and, therefore, we are not sure how we are going to source the foreign currency to import goods for sale," said
Mavankeni, who runs a computer hardware shop in Chinhoyi.
"At the moment, it's a wait-and-see game. We are unsure how the market is going to respond as there are many fundamentals to be considered."
He opined there would be shortages of basic goods, while prices would tumble due to depressed demand aggregate.
Former Finance minister Tendai Biti said SI 142 was illegal and a disaster for the country.
Biti made the remarks in Parliament after a Zanu-PF legislator commended Finance minister Mthuli Ncube for bringing back the Zimdollar.
The opposition MDC vice-president said SI 142 was ultra vires the Constitution and should be repealed immediately.
"The SI 142 (2019) touches on our political economy, the economy of our country and the laws of our country. Section 44(2) of the Reserve Bank of Zimbabwe Act, which introduced the multi-currency regime in 2009, makes it clear that the British pound, euro, South African rand and Botswana pula shall be legal tender, and section 44(a)(2) — it being an Act of Parliament means that the Finance minister cannot repeal that provision," Biti said.
"Quite clearly, SI 142 (2019) is ultra vires the provisions of section 44(a)(2) of the RBZ Act and it is wrong at law and on the economy."
He said there was a relationship between a currency to exports and imports.
"As long as there is a deficit in your current account, I submit that we do not have a current account and reserves necessary to support our own currency. A currency is a subject of political confidence and in this country, as far as I am concerned, there is a kwashiorkor of political confidence and, therefore, I submit that SI 142 is a disaster," Biti said.
Justice minister Ziyambi Ziyambi dismissed Biti's concerns as premature.
"I would like to make a correction that all statutory instruments stand deferred to Parliament, which will scrutinise them through the Parliamentary Legal Committee (PLC). If the PLC feels there is something wrong with the SI, they will issue an adverse report and then Parliament will debate it," Ziyambi said.
"I am surprised because MPs are very much aware of the process and they want to debate it. An SI takes effect the moment it is published and I submit that it is very premature to start attacking it before it is scrutinised by the PLC."
Meanwhile, ZCTU president Peter Mutasa said the re-introduction of the local currency was hurriedly done without consulting other stakeholders such as business and labour, as provided for under the Tripartite Negotiating Forum (TNF).
"If the government does not reverse this ruinous policy immediately and announce US dollar salary payments, we will immediately mobilise workers for mass action," Mutasa said.
He said workers are demanding that government allows the use of multi-currency, with the US dollar being used as the base currency until economic fundamentals are put in place to ensure the introduction of a local currency.
Mutasa said the workers were going to use today's TNF meeting to demand for the reversal of the law, failing which they would be forced to call for mass action.
"This announcement came a day after the Minister of Finance had assured the nation that the Zimbabwean dollar will only be introduced when macro-economic fundamentals are in place," Mutasa said.
"Such a critical issue should have been subjected to intense dialogue, and it smacks of hypocrisy and is patronising for government to unilaterally make such a huge policy announcement at a time social partners were supposed to meet on Wednesday, June 26, 2019 under the auspices of the recently enacted TNF," Mutasa said.
Source - newsday
