News / Local
CABS taken to court over currency conversion
23 Jul 2021 at 03:58hrs | Views
ARCHITECTURAL firm Stone/Beattie Studio has filed a High Court application seeking to recover US$142 000 from Central Africa Building Society (CABS) that was converted to the equivalent local unit following promulgation of Statutory Instrument (SI) 133 of 2016 by government, legal documents show.
At the height of Zimbabwe's currency volatility crisis, the government gazetted the legal instrument, which introduced bond notes as legal tender trading at par with the greenback.
According to an application lodged at the High Court by Penelope Douglas Stone and Harold Stuart Beattie who are partners in Stone/Beattie Studio, seen by the Zimbabwe Independent this week, the duo contends that the conversion of its US$142 000 held in a CABS account to ZW$142 000 was illegal.
Consequently, Stone/Beattie are demanding restoration of their bank balance in the equivalent US dollars.
An affidavit signed by Stone lodged at the High Court traces the genesis of the collapse of Zimbabwe's currency to 2009, when the multiple currency regime was introduced by government, bond notes trading pari passu with the greenback in 2016 culminating in a central bank directive in 2018 ordering banks to separate nostro foreign currency accounts from RTGS accounts.
Banks were ordered to comply with the regulation until October 15, 2018.
CABS, Reserve Bank of Zimbabwe (RBZ) and Finance minister Mthuli Ncube are cited as first, second and third respondents, respectively.
"The second applicant (Beattie) and I (Stone) have suffered direct loss as a result of the actions of CABS, which actions are premised on Exchange Control Directive No. R120/2018 issued by the RBZ. The applicants challenge the constitutionality of the Exchange Control Directive No. R120/2018 and the aforesaid legislative provisions," the duo's affidavits read.
"The applicants bring this application in terms of Section 85(1)(a) of the Constitution of Zimbabwe seeking an order declaring the conversion of the applicant's US$142 000 to RTGS$142 000 unconstitutional and invalid as it violates Section 71 of the constitution (and) an order that CABS should pay to the applicants the amount of US$142 000."
The business partners further contend that provisions of the central bank's 2018 monetary policy statement, which separated foreign currency accounts from RTGS accounts acknowledged that the greenback was not equivalent to the local unit.
In 2019, the apex bank introduced yet another statement to float the Zimbabwe an dollar through the introduction of a forex auction system. At the inception of the auction system, ZW$2,5 was equivalent to US$1.
Currently, ZW$86 fetches US$1 on the auction market.
"What is obvious from this statement is that the (central bank) governor acknowledged that on the parallel market the US dollar and the bond note or RTGS do not trade at par. This put paid to the claim to parity," the business partners said through their legal representatives Biti Law.
"The legislature then promulgated amendments to the Reserve Bank Act through Finance Act (No. 2) 2019. This was effectively the conversion of the provisions of the SI 33 of 2019 into a statutory amendment. Section 44(c) sought to entrench the separation of bank balances in line with the Exchange Control Directive ... which is unconstitutional, grossly unreasonable and ultra vires ... of Exchange Control regulations, SI 109 of 1996 and invalid."
The affidavit further reads: "When the President gazetted SI 131/2016, it became obvious to us that the introduction of the bond note was the introduction of a quasi currency which would in fact lead to the devaluation of values in our bank account. In order to protect the value of the bank balance in USD ... we effectively instructed CABS to freeze the account so that there are no withdrawals or deposits.
"What motivated the second applicant and I to issue this instruction was our experience in 2007 and 2008 with the bearer cheques. We feared that the bond note, like the bearer cheques, would erode value in our bank account. We had no wish or desire to lose the balances in our bank account which were in US dollars."
Stone, chronicling Zimbabwe's currency volatility crisis and attendant measures implemented to contain it since 2009, contends that the government "debunked the fiction that US$1 is at parity with ZW$1 or $1 bond note."
At the height of Zimbabwe's currency volatility crisis, the government gazetted the legal instrument, which introduced bond notes as legal tender trading at par with the greenback.
According to an application lodged at the High Court by Penelope Douglas Stone and Harold Stuart Beattie who are partners in Stone/Beattie Studio, seen by the Zimbabwe Independent this week, the duo contends that the conversion of its US$142 000 held in a CABS account to ZW$142 000 was illegal.
Consequently, Stone/Beattie are demanding restoration of their bank balance in the equivalent US dollars.
An affidavit signed by Stone lodged at the High Court traces the genesis of the collapse of Zimbabwe's currency to 2009, when the multiple currency regime was introduced by government, bond notes trading pari passu with the greenback in 2016 culminating in a central bank directive in 2018 ordering banks to separate nostro foreign currency accounts from RTGS accounts.
Banks were ordered to comply with the regulation until October 15, 2018.
CABS, Reserve Bank of Zimbabwe (RBZ) and Finance minister Mthuli Ncube are cited as first, second and third respondents, respectively.
"The second applicant (Beattie) and I (Stone) have suffered direct loss as a result of the actions of CABS, which actions are premised on Exchange Control Directive No. R120/2018 issued by the RBZ. The applicants challenge the constitutionality of the Exchange Control Directive No. R120/2018 and the aforesaid legislative provisions," the duo's affidavits read.
The business partners further contend that provisions of the central bank's 2018 monetary policy statement, which separated foreign currency accounts from RTGS accounts acknowledged that the greenback was not equivalent to the local unit.
In 2019, the apex bank introduced yet another statement to float the Zimbabwe an dollar through the introduction of a forex auction system. At the inception of the auction system, ZW$2,5 was equivalent to US$1.
Currently, ZW$86 fetches US$1 on the auction market.
"What is obvious from this statement is that the (central bank) governor acknowledged that on the parallel market the US dollar and the bond note or RTGS do not trade at par. This put paid to the claim to parity," the business partners said through their legal representatives Biti Law.
"The legislature then promulgated amendments to the Reserve Bank Act through Finance Act (No. 2) 2019. This was effectively the conversion of the provisions of the SI 33 of 2019 into a statutory amendment. Section 44(c) sought to entrench the separation of bank balances in line with the Exchange Control Directive ... which is unconstitutional, grossly unreasonable and ultra vires ... of Exchange Control regulations, SI 109 of 1996 and invalid."
The affidavit further reads: "When the President gazetted SI 131/2016, it became obvious to us that the introduction of the bond note was the introduction of a quasi currency which would in fact lead to the devaluation of values in our bank account. In order to protect the value of the bank balance in USD ... we effectively instructed CABS to freeze the account so that there are no withdrawals or deposits.
"What motivated the second applicant and I to issue this instruction was our experience in 2007 and 2008 with the bearer cheques. We feared that the bond note, like the bearer cheques, would erode value in our bank account. We had no wish or desire to lose the balances in our bank account which were in US dollars."
Stone, chronicling Zimbabwe's currency volatility crisis and attendant measures implemented to contain it since 2009, contends that the government "debunked the fiction that US$1 is at parity with ZW$1 or $1 bond note."
Source - the standard
