Govt headache over moneychangers

HARARE - 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.


 

Comments (11)

The small fish on the street are nothing. The source of the all that money should be takled and yes the underlying market for it needs to be fixed

Disgusted - 7 June 2018

Why attack the small fish on the street and the biggest looters still moving freeely

Teke - 7 June 2018

remove the bond notes from the system

JMABHENA - 7 June 2018

The US dollar is our problem. Why is it authorities even Mr Biti does not want to say the US dollar its our problem. We create wealth with the dollar and no sooner than we earn it its taken out of the country. We cannot control it. Even if its not in the street its in my pillow for speculative purporses. Unless we can all see that the US dollar is the problem we cannot sort out the cash problem at least

Senior - 8 June 2018

They (Govt) created the problem and Chinamasa was involved, why cry foul. They introduced bond notes at the back of cries from the citizens of this country and today its a headache. The problem with this ZANU PF govt is that they think money grows in trees. ZANU economics are that of printing worthless papers in order to shortchange citizens taking away real money from the people. This I tell you was never going to be sustainable, look at the loss of value of the bond note and poor citizens are bearing the brunt of poor policies. Today if you withdraw from a bank $50 and you are given 50 bond, you have lost value already while your account has been debited 50 US Dollars. What kind of economics is this.

Ballista - 8 June 2018

If you want to see and test that ZANU PF no longer have an ideas to run this country, you just look at history and present. Gono printed worthless bearer cheques and exchanged them for rands and USD from the public, today Mangudya prints bond notes exchanging them for the same forex. This is how ZANU PF destroys the economy. they are always repeating their bush economics even if they fail, they don't learn these Old Madala, they are too old, they just need food for the next day. What do you think Chiwenga can propose about the economy rather than thinking where he can get the next bottle of wine.

Bango P - 8 June 2018

Mr Chinamasa I've got only a few words of advice for you as follows:- 1. Listen carefully to Oliver Mtukudzi's song....Wongorora chikonzero chaita musoro uteme! Ugogadzirisa chikonzero chaita musana upande! 2.Turning a blind eye on the cause will not make the problem varnish. The so called monry changers have a supply of bond notes. They always have new bond notes meaning it the RBZ and the banks supplying them with the notes. Mr Chinamasa knows it and everyone knows this. If he does not know this then he is not fit to hold that office. Infact he is not fit to hold that office,Simple

mosquito - 8 June 2018

who is going to guard the guard of the guards question mark nga?????

marada - 8 June 2018

Let the market prevail - change your money wherever you like - if a bank offers you a bad rate then the street is the place to go - I dont always buy my tomatoes at TM !

ace mukadota - 8 June 2018

I do not have any prblem with money changers. They are using loopholes the government has just created. US dollars are not in shortage because people are banking under their pillows,but the shortage is due to government spending money which is supposed to be in circulation. Money is a tool for exchange so what crime have the traders done. Chinamasa should just close his mouth and step down.He has no clue how economics function. If $15b notes where to be injected into the banks to ease shortages. My question is how will traders withdraw 15billion from the banks and trade it on the parallel market when they do not have such kind of money. This shows double standards by the government when actually they are cause of the prevailing cash shortages we are experiencing.

Wonader - 11 June 2018

I concur with the likes of BangoP & Mosquito,Chinamasa doesnt have the technical know-how of economics so does the so called RBZ governor.As for those retired military commandos hapana chinozikanwa maybe when it comes to addressing party rallies.I reckon if the govt has put implemented some policies regarding the safeguard of the so much talked about Forex,they would not be in a position to cry foul.

mina leruex - 12 June 2018

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