WITH the new currency, Zimbabwe Gold (ZiG), hitting the market from tomorrow, the Reserve Bank of Zimbabwe (RBZ) has resorted to command economic measures — including Gestapo tactics — in a desperate bid to defend the shaky local unit buffeted by weak macro-economic fundamentals and lack of confidence.

BERNARD MPOFU

From tomorrow, banks will start receiving the new currency — ZiG1 to ZiG200 — while the public will begin to access the money on Tuesday.

However, RBZ governor John Mushayavanhu and his team have resorted to rigid controls to protect the weak currency, which has been greeted with suspicion, scepticism and derision.

While the authorities claim ZiG is backed by US$100m in foreign exchange reserves and 2.5 tonnes of gold valued at US$185 million, they have been running around in panicky mode to defend the currency which is fast-losing ground to base currencies, especially the United States dollar that overwhelmingly dominates the market.

Some of the rigid controls they have imposed in the market include a practically fixed exchange rate, aggressive mopping up of liquidity through market instruments, low bank withdrawal limits and virtual price controls.

The authorities are also using law and order instruments to deal with market forces in a bid to suppress the parallel market and control economic agents.

Gestapo tactics, including sweeping arrests, are being used to defend ZiG already struggling in the market as shown by the widening exchange rate differentials and arbitrage gap.
While the official exchange rate is US$1: ZiG13.56, in the market the rate has moved to at least US$1: ZiG20.

Parallel market traders see an opportunity, hence the RBZ’s tight liquidity control and arrests.

The authorities have descended onto the market with a heavy-handed crackdown: threats, arrests and prosecutions.

Vice-President Constantino Chiwenga a few days ago warned parallel market dealers that they would surely not want to see themselves crippled due to their activities.

“We wouldn’t want you to end up being crippled after being attacked,” Chiwenga threatened.

More than 70 black market forex dealers have been arrested of late in the police clampdown.
Finance permanent secretary George Guvamatanga has said Zimbabwe’s Treasury classifies illegal forex dealings as money laundering.

As part of the gamut of control measures, the RBZ has ordered banks to surrender their excess cash or liquidity, which is seizure of bank deposits.

Banks will now get Non-negotiable Certificates of Deposit yielding no interest.
Banks are to subsequently beg RBZ to meet their obligations by producing lists of individuals and companies who want their money before cash could be released to them.

The same applies to withdrawal limits. If banks and their clients want more than the miserably low withdrawal limits imposed, they have to beg and justify that first.

The RBZ holds the discretion, creating room for bottlenecks, rent-seeking and corruption.
This is part of authoritarian measures to mop up liquidity to control the exchange rate and inflation in an economy that has long plateaued and stabilised in crisis for decades.

It remains stuck in the doldrums despite optimistic official pronouncements, statistics and promises of growth and recovery.

The control measures amount to expropriation of liquidity, which throttles and distorts the market.

The RBZ’s Financial Intelligence Unit (FIU) has been operating on the ground, patrolling shops and monitoring transactions, while checking the exchange rate, prices and black market activities.

This command economic model approach is contrary to Mushayavanhu’s promise to introduce “a market-determined foreign exchange management system which links the local currency to a composite basket of reserve assets comprised of precious minerals (mainly gold) and foreign currency balances”.

In his recent monetary policy statement, Mushayavanhu diagnosed the disease, saying: “Currency and exchange rate instability has largely been driven by:

High demand for foreign currency as a store of value.

Reduced confidence due to continued currency volatility in recent months, and the widening margin between the interbank and parallel market exchange rates.
Reduced use of the local currency for domestic transactions.
Lack of certainty and predictability on the exchange rate front.”

To deal with the ailment, his prescription was: “In view of the above, the Reserve Bank will introduce a market-determined foreign exchange management system which links the local currency to a composite basket of reserve assets comprised of precious minerals (mainly gold) and foreign currency balances.”

Mushayavanhu also said he would ensure a stable currency; sustainable exchange rate; robust policy credibility; market confidence and solid macro-economic fundamentals.

However, on the ground he is not allowing “a market-determined exchange rate system” as he pledged.

The authorities are relying on crude measures to enforce exchange rate and pricing compliance.

The government has also been trying to pressure people to use ZiG in a market which is over 80% dominated by the United States dollar.

State enterprises, for instance Air Zimbabwe, are being forced to accept ZiG to give them a fair share of the market, yet the authorities fear allowing fuel, taxes and other obligations to be paid in local currency.

Mushayavanhu says increased demand for the local currency will “enhance its stability and role as a store of value and medium of exchange”.

But officials fear that if fuel is paid for in the uncertain and unstable ZiG, there may be shortages and the parallel market could explode.

They also fear if taxes are paid in ZiG, their budgets will be off the rails in an uncontrollable way, given the local currency’s poor store of value capacity.

When Mushayavanhu released his maiden monetary policy statement on 8 April as he also unveiled ZiG simultaneously, he made it appear as if he had a solid and viable plan.
However, his plan is unravelling — just three weeks into his new job.

This has left ZiG vulnerable, with some analysts pointing out the situation will not end well for the authorities and their psuedo-currency poorly clothed as a gold-backed means of exchange.

Analysts say while Mushayavanhu and his principals go around using Gestapo tactics, market forces cannot be arrested and their repressive measures will worsen or create market distortions.

Command measures: Command economic measures refer to government policies that dictate specific economic outcomes, often through direct control or regulation.
In the context of a fixed currency exchange rate and price controls, command interventions may include:

Fixed exchange rate: Government sets a fixed exchange rate between the local currency and a foreign currency.

Capital controls may be imposed to prevent currency fluctuations.

Price controls: Government sets maximum or minimum prices for goods and services, or alternatively use their agencies to police prices.

Price ceilings can limit profit margins, while price floors can guarantee a minimum income for producers.

This is not new. Zimbabwe has previously fixed the exchange rate and imposed price controls culminating in shortages of goods and forex, and the economic meltdown and hyperinflation crisis of 2008.

These measures are often implemented to address economic crises or stabilise prices, but they usually have unintended consequences.

Command economic measures, for instance, can lead to: Economic distortions; Shortages and scarcity; Black markets and corruption; Inefficient resource allocation; Reduced economic growth, innovation and prosperity.

VICE-PRESIDENT Constantino Chiwenga left the nation in a state of disbelief a few days ago as he brazenly misled people, rewriting Zimbabwe’s well-documented monetary history, claiming the now abandoned bond note was a Rhodesian currency initiative.

BRENNA MATENDERE

Officially opening the International Business Conference at the just-ended Zimbabwe International Trade Fair in Bulawayo on Thursday, Chiwenga said: “The ZiG is expected to provide a lasting solution to hindering inflation expectations which is critical for sustained price and exchange rate stability in the economy. Given these boundless benefits, I therefore call on the public, the private sectors who are in the majority here, including the households, labour and businesses, civic society and the international community to fully embrace and support the Zimbabwe Gold currency.”

Chiwenga added: “We have done away with the bond which we had inherited from the time of Rhodesia. After declaring UDI, they were given sanctions by the United Nations Security Council. That’s why they came with the bond. The bond did not come with Zimbabwe. It came with Rhodesia. It was Rhodesia bond that you used to see. So the bond is away we now have our Zimbabwe currency. Support it.”

Checks on Zimbabwe’s well-documented monetary history show this is clearly untrue and misleading. Rhodesia did not have bond notes, but pounds and then dollars. There was no currency called bond notes between 1965 and 1980 in Rhodesia. Or at any given time prior to that for that matter. Bond notes were first introduced in Zimbabwe in May 2016 by the Reserve Bank of Zimbabwe and they died on 5 April 2024.

The Zimbabwe dollar was introduced in 1980 and it was abandoned in 2009 in the aftermath of the economic meltdown and hyperinflation.

There have been six variations of the local currency which were buffeted by exchange rate volatility and runaway inflation, exacerbated by a protracted economic crisis and macro-economic instability.

The local unit was then demonitised in 2015. The Zimdollar was later revived in 2019 after 10 years, but collapsed earlier this month when the new currency, ZiG, was introduced on 8 April 2024, marking its end.

ZiG will run in a multi-currency system which has been legislated until 2030. The currency of Rhodesia after the Unilateral Declaration of Independence on 11 November 1965 by Prime Minister Ian Smith was the Rhodesian pound.

The Rhodesian pound was sub-divided into 20 shillings (100 cents). A shilling was equal to 12 pence. And a pound was therefore 240 pence.

On 17 February 1970, the Reserve Bank of Rhodesia introduced new bank notes in denominations of 1, 2 and 10 dollars, less than a month before the declaration of a republic on 2 March 1970 after a major diplomatic fallout with Britain over majority rule in the British colony that was reeling from a fiercely raging civil war, or liberation struggle for blacks dominated by white colonial settlers since 1890. And 5-dollar notes were added into the market in 1972.

Ezoic
The Rhodesia dollar replaced the Rhodesian pound at a rate of 2 dollars to 1 pound (1RP: R$2). The dollar proved to be a strong and resilient currency, as it traded at parity with the pound sterling.

However, between 1970 and 1980 the Rhodesian dollar was not a fully convertible currency, although it was used in South Africa, Botswana, Mozambique, Namibia and other countries. Its exchange rate was therefore not a reflection of Rhodesia’s underlying macro-economic fundamentals.

The Reserve Bank of Rhodesia replaced the Bank of Rhodesia and Nyasaland on 1 June 1965 and made the pound divisible into 20 shillings or 100 cents.

In 1980, when conversion was done the Zimbabwe dollar was valued at 1.47 United States dollars, which means it was stronger as it was at par with the British pound sterling.

Zimbabwe’s brief monetary history: – British currency, 1888-1940; – South African currency, 1920-1940; – Southern Rhodesia currency, 1940-1956; – Rhodesia and Nyasaland currency, 1956-1964; – Rhodesian Pound = (Rhodesia and Nyasaland pound) = 20 shillings = 240 Pence, 1964-1970; – Rhodesia dollar = (0.50 Rhodesia pound) 100 cents, 1970-1980; and – Zimbabwe dollar = (100 cents), 1980 = 1 pound or US$1.47.

Source: News Hawk

NAMIBIAN authorities say they are “meticulously examining” documents relating to the looting of the Small and Medium Enterprises (SME) Bank of about N$247 million (about US$15 million) to determine whether any criminal activities and Zimbabwean businessman Enoch Kamushinda (pictured) contributed to the bank’s collapse in 2017.

BY NATHAN GUMA

The country’s courts have said Kamushinda and his Zimbabwean accomplices should be extradited to Namibia for prosecution for looting the now defunct bank dry into a shell and eventual closure.

This comes as the Supreme Court of Namibia says Kamushinda and his local cronies “systematically looted” the now defunct SME Bank of about N$247 million (about US$15 million), in a new judgment which nails the Metropolitan Bank (MetBank) boss, with far-reaching consequences for him and others.

In a Supreme Court appeal, heard on 1 March 2024 in Windhoek by three judges — Sylvester Mainga, David Smuts and Theo Frank — before judgment was delivered on 13 March 2024, the justices said Kamushinda brazenly plundered the bank and fled to South Africa.

The judges said Kamushinda’s pillaging of the bank constituted criminal liability.
The court recommended his prosecution, raising the prospect of extradition and asset forfeiture.

Namibian Prosecutor-General Martha Imalwa says her team is closely studying the case to see if Kamushinda and those he acted in cahoots with should be arraigned.

Supreme Court judge Dave Smuts two weeks ago directed the court’s registrar to provide a set of documents the bank’s liquidators filed in the High Court to Imalwa.

Imalwa told The Namibian newspaper said her office would analyse the documents alongside the case file.

“A criminal case has to be proven beyond reasonable doubt. It’s a heavy burden we have as prosecutors, but it’s in my hands now,” Imalwa told The Namibian.

In those documents, the liquidators set out in detail the results of an investigation they carried out into the industrial-scale plunder of SME Bank.

The Supreme Court has ruled in favour of SME Bank’s liquidators, allowing them to pursue legal action against key figures in the bank’s collapse.

The judgment came after a High Court ruling in 2020 which made similar findings.
The Namibian government, through the company Namibia Financing Trust, owned 65% of the shareholding in the SME Bank, while MetBank was a 30% shareholder and World Eagle Investments — Kamushinda’s entity — had a 5% stake.

Kamushinda, former board chairperson of the bank; Tawanda Mumvuma, ex-finance manager; Chiedza Goromonzi, employed in the bank’s finance department; Joseph Banda and others were accomplices.

The bank is now under liquidation.

SME Bank’s joint provisional liquidators, Ian McLaren and David Bruni, said Kamushinda and colleagues were involved in coordinated theft, fraud and money laundering which resulted in the bank losing N$247 million in an intense four-year looting spree, from December 2013 to January 2017.

The liquidators also said Kamushinda, through his companies Crown Finance Corporation and Heritage Investment Holdings, of which he is the sole director, and his accomplices acted in connivance in the grand looting scheme.

Court papers say Zimbabwean expatriates were recipients and distributors of proceeds from unlawful activities as defined in Namibia’s Financial Intelligence Act.

McLaren and Bruni said they were involved in the creation and execution of false payment instructions at SME Bank from December 2013 to January 2017.

However, in their first response Kamushinda, his two companies, Mumvuma and Goromonzi initially raised exceptions to the claim, which they described as “vague and embarrassing”.

After the bank was put on provisional liquidation on 11 July 2017, MetBank, World Eagle and Kamushinda, World Eagle chair and SME Bank director in his personal capacity, brought an application on appeal against the liquidators and Bank of Namibia (BoN) for an order declaring that the closure of the SME Bank was in violation of their constitutional rights and a nullity. The application was opposed by the liquidators and BoN.

The liquidators then brought a counter-application against the appellants — which the appellants opposed — to rectify SME Bank members’ register and for MetBank and World Eagle to make outstanding payments for their shareholding; and for Kamushinda to be declared liable for bank liabilities under section 430 of the Companies Act 28 of 2004.

They also demanded that MetBank and World Eagle be declared liable for the liabilities of the SME Bank at the date of liquidation; and for judgment against the appellants jointly and severally for the following amounts: (i) N$1 028 286 903,13; (ii) N$60 million; (iii) interest on these amounts at the legal rate from 12 July 2017 to date of payment; and costs.

The appellants later withdrew their application and opposed the liquidators’ counter-application. Appellants raised preliminary points of prescription and non-joinder.

The High Court proceeded to hear the counter-application and granted judgment as sought against the appellants on 29 October 2020, save for the relief sought against the appellants jointly and severally for the amount of N$60 million which was abandoned.

Notice of appeal against the judgment of 29 October 2020 and the record of appeal were filed timeously, on 26 November 2020 and on 28 January 2021 respectively.

The bond of security was however only filed some months later on 31 May 2021, not in compliance with rule 14 of the Rules of the Supreme Court.

Appellants brought an application for condonation for this non-compliance and reinstatement of the appeal only on 21 January 2022. The matter was initially set down for hearing on 27 March 2023.

After the matter was set down for its initial hearing on 27 March 2023, the appellants’ erstwhile legal practitioner sought a postponement through a letter to the respondent’s legal practitioners and to the registrar of the court on 13 March 2023.

The respondents declined this request and on 17 March 2023, the appellants’ then legal representative filed a notice of withdrawal.

The respondent’s representatives pointed out that the said notice failed to comply with the peremptory requirements of rule 3A of the rules of the court.

On the day of the hearing, a new legal practitioner representing the appellants appeared before court and submitted that she had not had the opportunity to consult with her clients and that she was not in a position to argue the application for condonation and reinstatement and asked for a postponement of the matter to enable her to bring a formal application for deferral.

This request was denied and the matter was struck from the roll with costs.

Source: News Hawk Zimbabwe