PHILLIMON MHLANGA
Captains of industry say the unresolved conflicting judgments related to currency insolvency has resulted in investors and financiers reluctant to invest and lend local businesses in US dollars.
This has created uncertainty which was affecting the viability of the companies, they said.
Business executive and lawyer, Claudius Nhemwa said: “We are managing businesses in a very uncertain environment because of the unresolved currency judgment.”
CEO Africa Roundtable board member, Kenias Mafukidze said the determination by the Constitutional Court was taking too long.
“We are swimming with the shark. When courts are issuing conflicting statements, it discourages investment. Conclusion of this matter is key to business. It’s critical that the Constitutional Court issue an appropriate order on the matter,” Mafukidze said.
The call by business leaders comes after High Court judge, Justice Joseph Mafusire ordered CABS to pay back architects Stone/ Beattie vs CABS US$142 000, which was liquidated at 1:1 into local currency in 2018.
There is, however, a need for the matter to be confirmed by the Supreme Court. However, the Supreme Court is yet to make a determination on the matter.
However, Justice Webster Chinamora issued a conflicting ruling in the case of Cocksedge vs CABS.
He said CABS should not pay US$179 000 being the balance converted to Zimbabwe dollar at the height of currency reforms in 2019. Duncan HughCocksedge had approached the High Court seeking an order to compel CABS to pay him the money in question.
Analysing the two judgments, University of Zimbabwe law lecturer Advocate Tazorora Musarurwa said in the case of Stone vs CABS, Justice Mafusire noted it amounted to deprivation. He said the judge noted that the impeached laws (Finance Act No.2, Exchange Control Section 44c 21() and (d) amount to deprivation of property.
“Government has to justify any deprivation under these impeached laws if it affects public order, public health, defence and public safety.
He added: “In the second case, Justice Chinamora used Section 17 of the Banking Act, which states that all banking institutions must comply with RBZ directives. The judge said the applicant did not show that the money received was not offshore, so there was no deprivation at all.
“He did not take time to apply modern law. He just looked at American law, which doesn’t hold constitutional supremacy. All need to be consistent with the constitution.”
Musarurwa said according to the Constitutional Court rules, it is supposed to release a judgment within three months.
“But, in practice the Constitutional Court has gone for more than a year. If they can comply with its rules, we should have the judgment before the end of the year,” Musarurwa said.
He added: “Clearly this has created uncertainty. The Constitutional Court can nullify the judgment. But, I believe the Constitutional Court will make appropriate order to avoid chaos in the market.”
Former president of the Institute of Chartered Accountants, Tapiwa Chizana, said exposure to banks stood at about US$9.48bn, which they will find difficult to repay.
Chizana said borrowers were also exposed to close to US$4bn.
“The financial implications are huge. As at December 2018 commercial banks had about US$7.99bn in terms of deposits while building societies had US$1.49bn. In terms of loans US$2.84bn was issued by commercial banks and US$1.09bn. So, you can imagine how it will unravel something like this. It will be complicated.
He added: “I don’t think local banks have the US$9bn to pay back the depositors. I don’t think it will be practical. No banking institution will be able to pay such, they would go bankrupt.”
The RBZ Monetary Policy Committee member Persistence Gwanyanya said Treasury has since issued Treasury Bills (TBs) worth US$2.5bn to compensate bank depositors and pensioners for losses they incurred during the currency reform process.
He also admitted that the war against de-dollarisation was tougher than the central bank expected, saying there were “strong forces against de-dollarisation” they are “fighting with as an economy and it appears the war is actually very tough on de-dollarisation”.
“But, we understand that it’s expected when the currency is losing value, the tendency to demand US dollars is actually more, that’s why we are trying to bring in an element of gold. No-one knows, let’s see what happens in 2025,” Gwanyanya said.
The RBZ in 2020 announced a five-year dollarisation roadmap. The central bank detailed how the economy would transition over the period, meaning the US dollar would be permissible for settlement of local transactions in the five years to 2025.
CEO Africa Roundtable CEO, Kipson Gundani said the fundamentals were not right for the economy to de-dollarise by 2025.
“And the RBZ target of 2025 for the economy to de-dollarise is constrained. So, you cannot borrow long-term when you don’t know what’s going to happen. Don’t you think the central bank is creating an unnecessary bottleneck in the market?
He added: “By his [Gwanyanya] own submissions, he admitted that there are forces that are stronger towards dollarisation. Don’t you think dollarisation is a better evil at this juncture so that we allow the economy to function or the banks to lend long-term.”
