Harare, Zimbabwe (PANA) - Local legal think tank, Veritas, says using foreign currencies in Zimbabwe is not illegal despite the promulgation of Statutory Instrument (SI) 142 of 2019 banning their usage.
This followed an application filed on 2 July by Rudo Magundani and Evans Moyo of Scanlen and Holderness Legal Practitioners, members of Zimbabwe Lawyers for Human Rights, as well as Godfrey Mupanga, a human rights lawyer, at the high court challenging the ban on multicurrencies.
According to Veritas, a total of two cases have so far been filed in the High Court challenging SI 142 of 2019 as it is ultra vires with the Reserve Bank of Zimbabwe Act, under which it was promulgated.
Veritas, in an analysis of SI 142 of 2019 on Friday, said there was substance in these challenges.
“It needs to be asserted strongly that, contrary to what the Governor of the Reserve Bank said, it is not a criminal offence to use foreign currency in transactions within Zimbabwe or to price goods in a foreign currency,” Veritas said in an analysis of their reasoning.
“The multi-currency system was introduced in 2009 by the Finance (No. 2) Act, 2009, but it was done in rather an odd way. Section 17 of the Act first amended the Reserve Bank of Zimbabwe Act so as to insert a new section 44A which gave the Minister of Finance power to make regulations prescribing that tenders of payment in specified foreign currencies would be legal tender in Zimbabwe.
“However, section 17 of the Finance Act confused matters by adding a further provision stating that British pounds, US dollars, South African rand and Botswana pula ‘shall be deemed to be legal tender’ as if the new section 44A were already in force and the Minister had made regulations under it.”.
Veritas continues that, as a result, the multi-currency system was not introduced by regulations made under section 44A of the Reserve Bank of Zimbabwe Act.
“It was introduced by the Finance (No.2) Act itself, which deemed the Minister to have made the appropriate regulations. Under our law, ministers cannot make regulations amending or repealing Acts of Parliament, and it is arguable by enacting SI 142 the minister has repealed the Finance Act’s declaration of foreign currencies as legal tender ‒ which he cannot do,” Veritas said.
The multicurrency regime was introduced in 2009, following a period of high hyperinflation that made the Zimbabwe dollar worthless, leading to its cancellation. The use of multicurrencies was introduced as a measure to stabilize the economy.
The banning of the multicurrency regime came as Finance minister Mthuli Ncube sought to deal with rising parallel forex market rates where the prices of basic commodities were being indexed on.
Since the introduction of SI 142 of 2019, the parallel forex market rates have fallen to about US$1:ZWL$9, a 35.71 percent drop from its previous US$1:ZWL$14 on June 23, a day before the Zimbabwe dollar reintroduction and multicurrency ban.
At these current rates, they are now nearly at par with the official forex market rates of US$1: ZWL$8.95.
However, prices of basic commodities still remain high as firms are still trying to maintain the value of their goods or services indicating that both the official or parallel forex rates are speculative at present.
This is due to the Zimbabwe dollar, as the sole legal tender, not being adequately backed by neither foreign currency nor market confidence.
“Even if it is valid, SI 142 does not expressly state that foreign currencies cannot be used in transactions or to price goods. Instead, it provides that the Zimbabwe dollar is the sole legal tender in Zimbabwe for all transactions,” Veritas said.
Veritas, in a June 24 analysis said: “Legal tender means a currency which, if offered in payment of a debt, discharges the debt unless the creditor and the debtor have specifically agreed otherwise. So if a debtor owes a creditor $20, say, the debtor can normally repay the debt by offering $20 in RTGS dollars (because they are legal tender). If however the parties have agreed that the debt should be repaid in US dollars, then the debtor must repay it in those dollars.”
In terms of whether using foreign currencies is a criminal offence, Veritas adds: “There is no provision in SI 142 of 2019 stating that the use of a foreign currency rather than Zimbabwe dollars is a criminal offence. There could not be any such provision because sections 44A and 64 of the Reserve Bank of Zimbabwe, under which the SI was made, do not allow the Minister to create criminal offences — or, to put it more precisely, the sections do not provide expressly for criminal offences and, in the absence of such a provision, the Minister cannot create them.”
“The statements made by the Governor of the Reserve Bank (John Mangudya) and the Police are therefore wrong. But they are not just wrong ‒ they are dangerously wrong because they may lead to serious violations of the rule of law. The rule of law is an elastic concept but fundamentally it means that people’s rights and obligations must be determined by laws rather than by individuals or groups of individuals exercising an arbitrary discretion,” Veritas said.
However, many proponents of the SI 142 of 2019 which is alleged to have been forced on Ncube by the Presidential Advisory Council, say that it is legal.
“The introduction of multicurrencies happened through the Finance Act in 2009 which provided for the use of a basket of multicurrencies. This Finance Act amended the Reserve Bank Act by inserting a specific provision, mainly section 44 A, which allows the minister to promulgate regulations allowing the use of multicurrencies in Zimbabwe and two conditions are given in that particular section,” MMC capital executive director Itai Chirume said.
“The first one is those multicurrencies can be used, number one, for all transactions in Zimbabwe and number two, for specific transactions that are provided in regulations, right. So what has happened through SI 142 in my respectful view is that the minister has gone for option two, limited use of multicurrencies so that section has not been repealed by SI 142.
"There is debate that a subsidiary legislation cannot come and repeal provisions of principal legislation. I respectfully differ with that view, so in my view, there is little merit in the challenges that are being contemplated and I think SI 142 is here to stay.”
Legal expert and lawyer Thembinkosi Magwaliba told PANA that a minister running a ministry was responsible for the Acts which were under him, including the Reserve Bank Act in the case of Ncube.
-0- PANA TZ/MA 5Jul2019