Local companies have described the Statutory Instrument (SI) 127 of 2021, recently gazetted as an ‘eye sore’ and are pushing for its repeal to allow the market to regulate itself, Business Times can report.
Under the SI 127 of 2021, the central bank has been empowered to deal with companies accused of abusing foreign currency accessed from the auction system.
Th e Reserve bank of Zimbabwe said legal instruments would foster market discipline.
Th e Zimbabwe National Chamber of Commerce (ZNCC) is now demanding the monetary authorities to remove SI127 and allow the market to regulate itself.
In its latest report, ZNCC said the market was saddled with debate on the latest offering, SI 127 of 2021 as business was stuck between a rock and a hard surface.
“Th e recent SI 127 of 2021 remains an eyesore to our vision for a liberalised economy. We shall continue engaging the government for its total repeal, knowing fully well the unintended consequences this piece of legislation will pose as it attempts to amend the parent or enabling act, that is, the Exchange Control Act,” ZNCC said.
ZNCC also said the foreign currency auction system, launched last year in June, was received with scepticism, given its yester-year dismal failure.
But, there was slight warming up to the intervention.
Th e Confederation of Zimbabwe Industry (CZI) said amendments should be made to SI127 for it to be fully functional.
“We can’t say SI127 of 2021 should be totally repealed but a lot of amendments need to be done,” CZI president Henry Ruzvidzo told Business Times.
Th e RBZ said it would punish only those that abuse forex accessed from the auction system.
To date 18 companies were found guilty of allegedly abusing the forex they procured from the auction system in an eff ort to instill discipline in the market.
However, the central bank is yet to decide how it is going to deal with the 18 companies.
Th ere was, however, likelihood that the companies would be suspended from participation on the forex auction market.
Analysts said this week that if the RBZ fully enforces the legislation, this will reduce rent seeking behaviour in the market.
Th e government has in the past accused errant businesses of accessing foreign currency at the auction market at a rate of ZWL$85 but pricing at a rate of ZWL$140.
Th e first companies to be penalised are National Foods Limited, Georgia Petroleum, Tettola Investments, Africa Steel, Westville Investments, Flicknick Enterprises, 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.
The entities would be dealt in accordance with SI127, according to the RBZ.
Th e RBZ said 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 noncompliance with anti-money laundering rules and regulations in line with the recommendations from the business community on the need to continue to enhance stability in the economy.