RBZ faces lawsuit

LIVINGSTONE MARUFU

Local companies are threatening to take legal action against the Reserve Bank of Zimbabwe (RBZ) over its painful decision to withhold payment for outstanding foreign currency auction allotments, Business Times can report.

However, the Reserve Bank of Zimbabwe (RBZ) governor, Dr John Mushayavanhu, vowed he will not reverse the decision.

Companies said they are battling working capital constraints as a result of having  been  compelled to surrender the Zimbabwe dollar equivalent  to the central bank  upfront.

In response to local companies that have not received their allotted hard currency—estimated to be over US$80 million—from the now-defunct foreign currency auction trading system, Dr. Mushayavanhu said  the central bank would issue non-negotiable certificates of deposit (NNCDs) or a two-year Zimbabwe Gold (ZiG) instrument at an interest rate of 7.5% annually.

Mushayavanhu also said exporters would also be issued with a one-year ZiG instrument from the Treasury for the 25% of export earnings they have to surrender to the Ministry of Finance, Economic Development and Investment Promotion.

“I’m sorry, but we are not going to budge,” Dr Mushayavanhu said adding that: “We had to lock the money up. I would rather inconvenience a few comrades than jeopardise the whole economy.”

“So, be it unfulfilled auction rate obligations or those issued by banks and so on, we are hoping to keep them as NNCDs.

“When we talk about confidence in the economy, it is not something that can be legislated. So, we will think about it but definitely not now.”

Industry executives who asked to remain anonymous told Business Times yesterday that businesses were considering suing the central bank.

They claimed that their tolerance for the RBZ’s delaying strategies was wearing thin.

“… some firms within our business member organisation (BMO) are mulling legal action against the RBZ as engagements are not yielding any meaningful results.

“We are being sued left right and centre by our clients whom we have already taken money from and we have no capacity to repay them,” one business leader told Business Times.

The CZI president, Kurai Matsheza, declared that Dr. Mushayavanhu’s decision  was bad for business.

“Various companies are owed  a total of US$80m from the outstanding forex auction allotments  and that is a lot given the current state of the industry in Zimbabwe.

“We have engaged the RBZ over the release of the aforementioned amount and we will continue to engage.

“We will knock  and continue knocking till the doors are open. Companies have thin working capital and are in dire need of that capital to ramp up production,” Matsheza said.

He added: “It is our hope that the governor will listen to us and release the amounts in batches.”

In his 2024 Monetary Policy  Statement, Dr Mushayavanhu said following the establishment of a refined interbank foreign exchange market, all outstanding auction allotments will be converted into ZiG at the current interbank exchange rate.

This will allow the new system to start on a clean slate using the interbank foreign exchange system.

Dr Mushayavanhu said this process will allow the beneficiaries to maintain the value of their proceeds under the new framework.