RBZ fails to stem black market

It’s mid-morning on a Saturday and people roaming in Harare’s central business district (CBD) are infused with the Heroes holiday fever.

Walking past the Robert Mugabe Road and Second Street intersection, cash dealers have “invaded” the Eastgate Shopping mall — a major attraction in the CBD.

What caught the attention of NewsDay was a parked ostentatious red Audi car swarmed by multitudes of money changers dishing out hard cash for circulation in the parallel market, with members of the police force appearing unfazed as they pass by the car.

“This car has been here since 7am and it’s supplying all money changers from Eastgate Shopping mall to Roadport bus station. All money changers are coming to get money from him.

Police are turning a blind eye,” Munyaradzi Muza*, who plies his trade along Robert Mugabe Road, said.

“I think these people are connected up to the highest office in the land. It’s sad that some people cannot get even a dollar from the bank, but these people splash large sums of money. We didn’t know the country could be like this, where getting your hard-earned cash is a myth.”

While cash was exchanging hands not far from the scene, a long winding queue of depositors in need of cash characterises a Steward Bank branch at the Eastgate Mall.

A ZB client told NewsDay that he had failed to get cash at the bank’s First Street branch after they were told cash had run out.

“We have been given cards and were told to wait for cash, only to be informed the bank has run out of cash. I want to travel to my rural area, so I need cash. I can’t go there without cash because there are no Point of Sale machines and transport operators don’t accept mobile money,” Claudius Munyoro said.

While depositors struggle to get cash, cash dealers have it plenty and they swarm the Eastgate Mall, Copacabana and Fourth Street bus terminuses — raising questions on the ability of the monetary authorities to weed out such malpractices.

Legal practitioner, Chris Mhike said it was scandalous that the cash that is scarce in banks was awash on the streets.

Mhike said the operation of illicit cash dealers was in contravention to the Banking Act, Bank Use Promotion Act, the Exchange Control Act and the Reserve Bank of Zimbabwe (RBZ) Act.

“The legislature has crafted several statutes that ought to regulate the distribution of local currency from the Reserve Bank of Zimbabwe to the transacting public, and to govern foreign exchange activities. The most notable statutes from that pool of relevant legislation include: the Banking Act, the Bank Use Promotion Act, the Exchange Control Act and accompanying Regulations, and the Reserve Bank of Zimbabwe (RBZ) Act. Virtually all informal ‘money changers’ on the streets of Zimbabwe today operate outside the provisions of the afore-mentioned financial and monetary services statutes,” Mhike said.

“The central bank is empowered under the RBZ Act to regulate the issue of banknotes and coins; to provide for matters connected with banking, currencies, monetary policy and coinage; and to provide for the supervision of banking institutions or money-related activities. Law enforcement agencies and border control authorities would then come in to ensure precise adherence to money-related laws by the powerful and influential members of our society who enjoy easy access to cash.”

Mhike said turning a blind eye on the rot was a reflection of repugnant corruption.

“That anomaly [of cash shortages at the banks, but abundance on the streets] is the result of either the fiscal and monetary authorities turning a blind eye on the criminal diversion of cash from the formal market onto the black market, or a case of sheer incompetence on the part of the same authorities. Turning a blind eye on the rot would be a reflection of repugnant corruption, while administrative incompetence would be a highly lamentable curse on the country,”

“The RBZ would be encouraged to exactingly observe the law by working hand-in-glove with registered banking institutions, building societies, regular micro-finance entities, formal Bureau De Change organisations, and other appropriately registered establishments for the distribution of local and foreign cash.”

While RBZ governor, John Mangudya is on record saying there was indiscipline in the market, observers say he has to crack the whip on the culprits.

What makes it worse is that banks have been complicit on the illicit sale of cash on the parallel market, while Mangudya has remained quiet.

State media reported last month that a Stanbic staffer was arrested after she was allegedly caught red-handed taking money to the black market.

Due to the drying up of the country’s nostro accounts — which has seen a $350 million deficit — companies are now resorting to the parallel market to get foreign currency to procure the required raw materials.

Faced with this scenario, some companies are using middlemen, who have offshore foreign accounts to source raw materials or solicit forex on the black market.

“What we have seen is that manufacturers were getting forex for raw materials through middlemen. Consequently this has made the final product very expensive because of premiums.

This is the biggest problem we have,” Confederation of Zimbabwe Industries president, Sifelani Jabangwe said.

Economist, Clemence Machadu said there was no political will to deal with the cash crisis as the black market has been proliferating right under the monetary authority’s nose.

“We now have a clear case of a virtual financial sector capture, whereby parallel market rent seekers are now controlling the way interest rates, exchange rates, prices of goods and services and other key financial matters should be pegged,” he said.

Machadu said dealing with the problem required collective action by a number of players, including the police, Zimbabwe Revenue Authority, banks and members of the public.

He said some of “these stakeholders are apparently not willing to come to the party due to inertia, benefitting from the status quo, no political will, among other reasons”.

“The central bank right now cannot account for or control a lot of cash that is in circulation, which undermines its very existence as monetary authorities. That authority now appears to be jointly shared with the unsaid or unknown players on the black market, whose principles or mission we do not know. This obviously calls for urgent revisit of our enforcement mechanisms, “he said.

BY FIDELITY MHLANGA