Zimbabwean businesses adjudged to be manipulating the new ZiG currency face new stiffer penalties while they are also now mandated to open bank accounts and to use point-of-sale machines as the government clamps down on resurfacing parallel market exchange rates.
Roiled by hyperinflation in previous years, Zimbabwe this year introduced the Zimbabwe ZiG currency which it says is backed by foreign currency and gold reserves held with the central bank.
While the ZiG has maintained pricing stability since its introduction in April, parallel market exchange rates have started to resurface.
The government of President Emerson Mnangagwa says this is frustrating efforts to dedollarise in a nation where up to 80% of all transactions are US dollar-based.
“Penalties are being enforced against all perpetrators of unjust price hikes, manipulation of the ZiG currency, smuggling, and all forms of unfair trade practices. The government is going to review the fines from a minimum of $200 (R3 665) Level 5 to a maximum of $5 000 Level 14 or the ZiG equivalent for the various offences,” reads a briefing statement after Mnangagwa’s cabinet meeting on Tuesday.
Mnangagwa’s administration touts the ZiG currency as a substantive solution to the country’s hyperinflation challenges over the years. Zimbabwe previously introduced bond notes, the Zim dollar, bearer cheques, agro cheques (agricultural cheques), and rebased its earlier local currencies but with no respite.
According to Zimbabwe’s Treasury, introduction of the new currency in April has anchored the exchange rate and price stability with blended month-on-month inflation decelerating to -0.1% as of July, 2024. The forex component of broad money had also eased from a peak of 87% in February, 2024 down to 84% as of May, 2024.
Although dollarisation is still entrenched, Mnangagwa’s cabinet agreed yesterday that a road to dedollarisation be implemented. Zimbabwean Finance Minister Mthuli Ncube is set to present timelines for dedollarisation although the government’s critics say confidence in the local currency has to strengthen first before the current multiple currency regime is abandoned.
Officials agreed yesterday on the “modalities to operationalise the ZiG currency as legal tender” for use in the economy.
“A dedollarisation roadmap is now in place with a time frame by the minister of finance, economic development and investment promotion,” they said.
The cabinet meeting had noted though that “some retailers and some manufacturers have been reportedly using the unofficial exchange rate” in their operations, actions that the government was now set to take measures against.
These include having the Reserve Bank of Zimbabwe strengthening “mandatory licensing requirements for all business operators to have a bank account and point- of-sale machines” and the deployment of inspectors to curb misdemeanours that militate against price stability”, and availability of basic commodities.
To boost demand and usability of the local currency, Ncube has mandated that corporate income tax be settled on a 50:50 basis for companies whose forex revenue exceeds 50%. Corporate tax payments will be payable in proportion only in the currency of trade where local currency transactions dominate.
In another measure to boost demand for the local currency, user fees to government departments are now also liable for payment in local currency, except for passports and other specified payments in US dollars.
BUSINESS REPORT