27 firms fined for abusing forex auction system

Twenty one more companies have now been found abusing the foreign currency auction system, bringing the total to 39, and of these, 27 have been assessed civil penalties while 12 others have been issued with written warnings for aiding or abetting the flouting of exchange control regulations.

Those assessed civil penalties are barred from the auctions until they pay, and could be permanently blacklisted from the auctions if their breach of regulations was very serious, Reserve Bank of Zimbabwe Governor Dr John Mangudya, said in a statement yesterday.

The RBZ has been coming hard on companies abusing the funds obtained from the foreign currency auction system, and on June 15, the RBZ named and shamed 18 companies that were fingered in the abuse.

In a statement yesterday, RBZ Governor Dr John Mangudya said after investigations by the central bank and the Financial Intelligence Unit, another 21 had been found in breach of regulations, including transfer pricing, use of fraudulent import documentation, failure to bank cash and conducting illegal foreign exchange transactions.

"The punitive measures include prohibitions from participation in the foreign exchange auctions until the full payment of the fines imposed or permanent blacklisting from participation in the foreign exchange auction, depending on the seriousness of the breach," said Dr Mangudya.

Towards the end of May, Government announced Statutory Instrument 127 of 2021 Presidential Powers (Temporary Measures), which states that firms that abuse the foreign currency obtained at the foreign currency auction trading system could be heavily penalised by having civil penalties levied. The civil penalties can be imposed after a Reserve Bank investigation, and because they are civil penalties the standard of proof is on the balance of probabilities, rather than the higher level proof beyond reasonable doubt required in criminal proceedings.

The companies that have been fined so far, were penalised in accordance with SI 127. The initial group facing the penalties are National Foods (Pvt) Ltd, Georgia Petroleum (Pvt) Ltd, Tettola Investments (Pvt) Ltd, Africa Steel (Pvt) Ltd, Westvillle Investments (Pvt) Ltd (T/A Omni Africa), Flicknik Enterprises (Pvt) Ltd, Duo Valley Commodity Brokers, Faircclot Investments, GlenuLas Trading, Natural Stone Export Company, Nuvert Trading, Phirebrook Investments, Classic Energy, Clorex Energy, Explochem, Mutare Mart & Exchange, Souzrce Fuels, and Kimya Investments. SI 127 also compels business to price goods and services in line with the official exchange rate and penalises businesses for refusing to transact in the local currency. Businesses that refuse to accept payment in local currency at the official exchange rate are fined $50 000 or its equivalent in foreign currency.

Said the RBZ in a statement on June 15: "Going forward and in line with the recommendations from the business community on the need to continue to enhance stability in the economy, the bank's efforts to foster compliance in terms of SI 127 shall be limited to outliers that wantonly abuse the foreign exchange auction system, exchange rate manipulation and non-compliance with anti-money laundering rules and regulations."  

The monetary authority said its focus on the above key areas, coupled with business' reality check, self-discipline, self-monitoring and peer-review, will sustain inflation and exchange rate stability that are necessary for the economy to continue to rebound.

Since introduction of the weekly foreign currency auction trading platform in June last year, pricing and exchange stability have generally been achieved. However, when SI 127 was introduced, some companies tried to get round their intention by increasing US dollar prices, so that when a customer pays in local currency, they pay close to what was charged in the past. It is expected that competition in business will probably cramp this approach.