Harare businessman and lawyer sues Zimbabwe's Finance minister over loss in value of bank balances
Harare, Zimbabwe (PANA) - Harare lawyer and businessman Tawanda Nyambirai has sued Minister of Finance and Economic Development Mthuli Ncube, Reserve Bank of Zimbabwe (RBZ), and 13 banking institutions for compensation following a loss in the value of bank balances through Statutory Instrument (SI) 33 of 2019.
Nyambirai is suing Ncube, demanding compensation as SI 33 of 2019, introduced in February, “arbitrarily” dropped the US$1:RTGS$1 forex rate to a devalued one.
Nyambirai argued that this move constituted compulsory deprivation of property as highlighted in Section 71(3) of the Zimbabwean Constitution.
Ncube was cited as the first respondent while the RBZ was second in an urgent application made at the High Court of Zimbabwe.
“As prescribed by 1st Respondent, 2nd Respondent compulsorily converted Real Time Gross Settlement system balances that were in United States Dollars other than those referred to in Section 44C(2) of the Reserve Bank Act into RTGS Dollars.
“The bond notes and coins were also compulsorily delinked from the United States dollar and were linked to the new RTGS dollar on a 1:1 basis in accordance with the Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations.”
Part of Nyambirai’s application at the High Court of Zimbabwe reads: “Before their conversion into RTGS Dollars, the Real Time Gross Settlement system balances and the bond notes and coins were at par with United States Dollars. In fact, the RTGS balances were actually United States Dollar Balances while Bond Notes and coins carried a promise to pay United States Dollars on demand. Therefore, the RTGS balances and the bond notes and coins represented a currency (the US Dollars) that was inherently stronger than the new floating RTGS Dollars. Only persons with foreign obligations have been allowed compensation based on the principle that they will pay RTGS Dollars for the US Dollar obligations on an exchange rate of 1:1.”
“By failing to provide for compensation to the holders of the RTGS balances and the bond notes and coins before their conversation to RTGS dollars, the 1st and 2nd Respondents compulsorily deprived me and the members of the public who were holding the RTGS balances, Bond Notes, and Coins of our property in contravention of Section 71 (3) of the Constitution of Zimbabwe.”
The promulgation of SI 33 of 2019, came after years of government holding what many considered a fake forex rate.
This is where the US dollar was trading at par with local currency, in this case the RTGS dollar, now Zimbabwe dollar.
The RTGS dollar became a local currency, despite the US$1:RTGS$1 parity held by government, as electronic money became far more than the actual cash in the market to back it.
Currently, there is about ZWLS$10 billion worth of electronic money against foreign currency ranging between US$1 billion and US$2 billion.
However, the consequence of abandoning the parity between the US dollar and local currency through SI 33 of 2019 meant depositors’ bank balances instantly got devalued by two and half times.
This was due to SI 33 of 2019 putting an official forex rate of US$1:RTGS$2.50 from the previously held US$1:RTGS$1.
Basically, someone who held RTGS$100 used to be US$100 before SI 33 of 2019, but following the SI was now worth US$40.
Without the corresponding forex or market confidence, the RTGS dollar has been devaluing.
So, when Ncube promulgated SI 142 of 2019, on June 24, which banned foreign currency usage and reintroduced the Zimbabwe dollar the rate fell further to its current official forex rate of US$1:ZWL$9.
“1st Respondent issued the Reserve Bank of Zimbabwe (Legal Tender) Regulations, Statutory Instrument 142 of 2019 in terms of which he provided that foreign currencies that are lawfully held by members of the public shall no longer be legal tender in any transactions in Zimbabwe with the exception of foreign payments, payments for import duties and payments for international airline services.
“2nd Respondent operationalised Statutory Instrument 142 of 2019 by publishing the Exchange Control Directive RU102/ 2019. The provisions of Statutory Instrument 142 of 2019 and the Exchange Control Directive RU102/ 2019 are in contravention of Section 71(3) of the Constitution of Zimbabwe and therefore null and void,” part of Nyambirai’s application read.
“The records of the RTGS balances that were converted to RTGS Dollars need to be preserved and the 1st and 2nd Respondents need to be prevented from implementing any policies, rules or regulations that could affect the rights of holders of RIGS balances and the rights of holders of foreign currencies pending the determination of this matter.”
The urgent application was placed before the High Court on July 5, 2019 and is currently pending.
Nyambirai is representing himself and acting on behalf of public interests in terms of Section 85 (1)(a) and (d) of the Constitution of Zimbabwe.
Nyambirai’s application adds to a growing number of lawyers challenging the recent monetary measures made by Ncube and RBZ governor John Mangudya since February.
Just a day before Nyambirai’s application, on July 2, 2019, Rudo Magundani and Evans Moyo of Scanlen and Holderness Legal Practitioners, members of Zimbabwe Lawyers for Human Rights, and Godfrey Mupanga, a human rights lawyer, filed papers against SI 142 of 2019.
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