News / National
Mnangagwa headache over moneychangers
07 Jun 2018 at 15:13hrs | Views
Finance minister Patrick Chinamasa has blamed the police for failing to arrest unlicensed foreign currency traders saying there was a legal framework in place to curb the vice.
This comes as the country is in the throes of a critical US dollar shortage it adopted as legal tender in 2009 after the worthless Zimdollar was wrecked by hyperinflation that peaked at 500 billion percent.
Following the introduction of the fiat "bond note" currency in a desperate bid to stem cash shortages in November 2016, US dollars vanished from banks but are in abundance on the streets and black market where they are traded at a premium of up to 50 percent.
Chinamasa told the National Assembly during a debate on the Money Laundering and Proceeds of Crime Amendment Bill on Tuesday that the police had allowed the illegal trading in currency to flourish on the streets despite laws on the statute books empowering police to arrest unlicensed foreign currency traders.
"We have the law that caters for that situation, the Exchange Control Act, Bank Use Promotion Act, which we recently amended. What is needed as we go forward is enforcement of the existing laws by arresting, confiscating, prosecuting those who are found involved in illegal exchange of money.
"What we encourage is to ensure that personnel who will be involved in enforcing these laws are adequately trained as you know this law is very typical, all enforcement agencies, police, prosecutors and officers at Zimbabwe Anti-Corruption Commission they need adequate training so that they will carry out their mandate from an informed position," Chinamasa said.
While repeated efforts to obtain comment from police national chief spokesperson Charity Charamba and her deputy Paul Nyathi were fruitless as their mobile phones went unanswered, Charamba told the State media in January that the Zimbabwe Republic Police (ZRP) was finding it difficult to bring the illegal forex traders to book.
"We, as the ZRP, have deployed officers in the streets to curtail the mushika-shika, street vendors and illegal forex traders as our main priority. However, it has been difficult to arrest cash vendors as it requires an officer of law to witness the culprits exchanging money," she said then.
"This operation is a joint venture with the Harare City Council to bring sanity in the central business district (CBD), which has witnessed several arrests of cash vendors."
Charamba said illegal forex dealers were slippery because some of them are always mobile, while others use their vehicles as convenient "offices" to conduct their business.
"Some of them are mobile and in most cases they get into vehicles and conduct their illegal deals. There is need to find a lasting solution such as deterrent sentences," she said. The police spokesperson also noted that it was not an offence to hold cash.
Chinamasa's sentiments came after David Chapfika, the chairperson of the parliamentary portfolio committee on Finance and Economic Development, called for tough action on the currency dealers.
"The (Money Laundering and Proceeds of Crime) Bill must incorporates provisions to address the spiralling parallel market for money and bring unlicensed currency dealers to book, especially the 'moneychangers' on the streets by ensuring that those caught are arrested and the proceeds are seized, forfeited, frozen and all financial organisations involved in such transactions are ruthlessly penalised.
"The RBZ must facilitate the registration of more Bureaux de Change and facilitate their access to foreign currency for the ease of the transacting public to avoid recourse to money changers when formal dealers are dry."
Zvishavane-Ngezi Zanu-PF MP John Holder blasted the government for failing to deal with moneychangers.
"When you enter Zimbabwe from outside the country, whether you come to Beitbridge or Botswana as you exit, you will find people on the side of the road changing money and nothing is being done about that.
"We can even go as far as Harare in some of the streets. You find that at every corner there are people holding money waiting to change. As long as the Reserve Bank of Zimbabwe does not put proper policies in place, this thing is going to continue until government will actually operate on what we call auto-pilot," Holder said.
This comes as the liquidity situation has escalated to such an extent that ATMs are empty and banks only allow customers to often withdraw $20 in bond coins a day.
This means people have become unproductive, wasting their days away queuing or even sleeping in front of banks.
The impact of the currency shortage has not been limited to everyday consumers and has seeped into other sectors of the economy. Local manufactures are unable to fulfil the most basic of functions.
Economists told the Daily News that arresting forex dealers was not the solution to the current cash crisis.
"These people are in the streets because there is a market which is providing them an incentive," economist Kipson Gundani said.
"The market exists because of financial distortion and the black market exists because of shortages. Arresting will not end the black market because the incentives remain there. This is not the solution, you can't arrest this situation through the police but you can solve the situation through addressing the fundamentals. The black market is there to address the inefficiencies. Cash must be available in banks to address this crisis."
University of Zimbabwe economics professor Ashok Chakravati concurred.
"The foreign exchange market should be liberalised. To criminalise the issue of moneychangers is not the way to go, they will continue underground. The RBZ must just craft a policy to deal with this issue.
"It is now clear that the bond notes are a local currency and the 1:1 aspect must be abolished. RBZ released $350 million bond notes and where are those bond notes? They are trading in our neighbouring countries, so we need to liberalise foreign exchange market."
Another economist, Christopher Mugaga, also said: "If you want to arrest moneychangers you are trying to arrest the underground economy and certainly you cannot be successful, you need to address the root cause."
This comes as government is finalising administrative mechanisms for the establishment of the Commercial Crimes Court, which will prosecute among others externalisation and illegal trade in cash.
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya recently said that the Commercial Court, expected to be operational before the end of this year, will also deal with issues of multi-tier pricing.
"The court is set to prohibit all illegal buying and selling of money and assist in reducing the backlog at the general courts, while also improving the ease of doing business," Mangudya said.
Zimbabwe is currently suffering a cash crisis as banks have run dry of bank notes. Recently, some financial institutions have flighted advertisements discouraging their clients from visiting banking halls for transactions that are available on mobile platforms.
Nonetheless, wads of cash are being channelled into the informal sector, where the exchange rate for the bond note is running wild.
While the bond notes were meant to trade at 1:1 vis-a-vis the United States dollar, rates have gone up by as much as 50 percent if not more.
The market has also experienced a three-tier pricing system with each form of transaction having its own price.
Heavy premiums apply to electronic transfers effected through the Real Time Gross Settlement System.
This comes as the country is in the throes of a critical US dollar shortage it adopted as legal tender in 2009 after the worthless Zimdollar was wrecked by hyperinflation that peaked at 500 billion percent.
Following the introduction of the fiat "bond note" currency in a desperate bid to stem cash shortages in November 2016, US dollars vanished from banks but are in abundance on the streets and black market where they are traded at a premium of up to 50 percent.
Chinamasa told the National Assembly during a debate on the Money Laundering and Proceeds of Crime Amendment Bill on Tuesday that the police had allowed the illegal trading in currency to flourish on the streets despite laws on the statute books empowering police to arrest unlicensed foreign currency traders.
"We have the law that caters for that situation, the Exchange Control Act, Bank Use Promotion Act, which we recently amended. What is needed as we go forward is enforcement of the existing laws by arresting, confiscating, prosecuting those who are found involved in illegal exchange of money.
"What we encourage is to ensure that personnel who will be involved in enforcing these laws are adequately trained as you know this law is very typical, all enforcement agencies, police, prosecutors and officers at Zimbabwe Anti-Corruption Commission they need adequate training so that they will carry out their mandate from an informed position," Chinamasa said.
While repeated efforts to obtain comment from police national chief spokesperson Charity Charamba and her deputy Paul Nyathi were fruitless as their mobile phones went unanswered, Charamba told the State media in January that the Zimbabwe Republic Police (ZRP) was finding it difficult to bring the illegal forex traders to book.
"We, as the ZRP, have deployed officers in the streets to curtail the mushika-shika, street vendors and illegal forex traders as our main priority. However, it has been difficult to arrest cash vendors as it requires an officer of law to witness the culprits exchanging money," she said then.
"This operation is a joint venture with the Harare City Council to bring sanity in the central business district (CBD), which has witnessed several arrests of cash vendors."
Charamba said illegal forex dealers were slippery because some of them are always mobile, while others use their vehicles as convenient "offices" to conduct their business.
"Some of them are mobile and in most cases they get into vehicles and conduct their illegal deals. There is need to find a lasting solution such as deterrent sentences," she said. The police spokesperson also noted that it was not an offence to hold cash.
Chinamasa's sentiments came after David Chapfika, the chairperson of the parliamentary portfolio committee on Finance and Economic Development, called for tough action on the currency dealers.
"The (Money Laundering and Proceeds of Crime) Bill must incorporates provisions to address the spiralling parallel market for money and bring unlicensed currency dealers to book, especially the 'moneychangers' on the streets by ensuring that those caught are arrested and the proceeds are seized, forfeited, frozen and all financial organisations involved in such transactions are ruthlessly penalised.
"The RBZ must facilitate the registration of more Bureaux de Change and facilitate their access to foreign currency for the ease of the transacting public to avoid recourse to money changers when formal dealers are dry."
Zvishavane-Ngezi Zanu-PF MP John Holder blasted the government for failing to deal with moneychangers.
"When you enter Zimbabwe from outside the country, whether you come to Beitbridge or Botswana as you exit, you will find people on the side of the road changing money and nothing is being done about that.
"We can even go as far as Harare in some of the streets. You find that at every corner there are people holding money waiting to change. As long as the Reserve Bank of Zimbabwe does not put proper policies in place, this thing is going to continue until government will actually operate on what we call auto-pilot," Holder said.
This means people have become unproductive, wasting their days away queuing or even sleeping in front of banks.
The impact of the currency shortage has not been limited to everyday consumers and has seeped into other sectors of the economy. Local manufactures are unable to fulfil the most basic of functions.
Economists told the Daily News that arresting forex dealers was not the solution to the current cash crisis.
"These people are in the streets because there is a market which is providing them an incentive," economist Kipson Gundani said.
"The market exists because of financial distortion and the black market exists because of shortages. Arresting will not end the black market because the incentives remain there. This is not the solution, you can't arrest this situation through the police but you can solve the situation through addressing the fundamentals. The black market is there to address the inefficiencies. Cash must be available in banks to address this crisis."
University of Zimbabwe economics professor Ashok Chakravati concurred.
"The foreign exchange market should be liberalised. To criminalise the issue of moneychangers is not the way to go, they will continue underground. The RBZ must just craft a policy to deal with this issue.
"It is now clear that the bond notes are a local currency and the 1:1 aspect must be abolished. RBZ released $350 million bond notes and where are those bond notes? They are trading in our neighbouring countries, so we need to liberalise foreign exchange market."
Another economist, Christopher Mugaga, also said: "If you want to arrest moneychangers you are trying to arrest the underground economy and certainly you cannot be successful, you need to address the root cause."
This comes as government is finalising administrative mechanisms for the establishment of the Commercial Crimes Court, which will prosecute among others externalisation and illegal trade in cash.
Reserve Bank of Zimbabwe (RBZ) governor John Mangudya recently said that the Commercial Court, expected to be operational before the end of this year, will also deal with issues of multi-tier pricing.
"The court is set to prohibit all illegal buying and selling of money and assist in reducing the backlog at the general courts, while also improving the ease of doing business," Mangudya said.
Zimbabwe is currently suffering a cash crisis as banks have run dry of bank notes. Recently, some financial institutions have flighted advertisements discouraging their clients from visiting banking halls for transactions that are available on mobile platforms.
Nonetheless, wads of cash are being channelled into the informal sector, where the exchange rate for the bond note is running wild.
While the bond notes were meant to trade at 1:1 vis-a-vis the United States dollar, rates have gone up by as much as 50 percent if not more.
The market has also experienced a three-tier pricing system with each form of transaction having its own price.
Heavy premiums apply to electronic transfers effected through the Real Time Gross Settlement System.
Source - dailynews
