Zimbabwe’s central bank threatened to cancel the licences of banks and foreign currency dealers found to have violated new exchange control regulations aimed at easing a dollar shortage.
The Reserve Bank of Zimbabwe last week sent a directive changing the way banks and other authorised foreign-currency dealers are required to handle export earnings, adding measures aimed at encouraging companies to export their products through an incentive fee, according to a copy of the circular obtained by Bloomberg News and confirmed by the central bank. The regulator also plans to bolster compliance monitoring systems to ensure adherence to the rules, the circular said.
Zimbabwe, which abandoned its own currency in 2009 because of hyperinflation, trades mainly in US dollars, while the rand and euro are also used. Lenders limited cash withdrawals from ATMs last month as the country’s ailing economy caused supplies of the greenback to evaporate. It also introduced so-called bond notes, which will be equal in value to the dollar, while drawing up a priority list of what can be imported into the country using foreign currency.
“Penalties shall be imposed on those authorised dealers that fail to comply,” according to the central bank’s directive. The regulator “will not hesitate to withdraw authorised dealership licences”, it said.
In terms of the rules, half of all proceeds from the sale of platinum, ferrochrome and other minerals will be transferred to the central bank’s offshore account, the central bank said. The regulator will then immediately transfer the equivalent amount into the authorised dealer’s account for the exporter, while an incentive equal to 5% of the proceeds will be credited to another account set up on behalf of the exporting company, the Reserve Bank said.
The rules are being applied “to gradually adhere to the principle of 75% local content by the resource-based sectors of the economy and in order for the economy to benefit from the liquidity derived from the export of its natural resources,” the central bank said.
Zimbabwe, a $14bn economy for which mining is the biggest source of foreign currency, has the world’s biggest platinum reserves after South Africa and also has chrome, gold and iron ore. Lenders operating in the country include units of London-based Barclays and Standard Chartered, as well as those of Johannesburg-based Standard Bank Group and Nedbank Group.
Land invasions wrought havoc
Tobacco merchants who draw on their offshore facilities to finance purchases and production will have to transfer 80% of the funds to the Reserve Bank’s foreign account, which then immediately deposit the equivalent amount with the authorised dealer. The remaining 20% will remain in an offshore account of the authorised dealer, the central bank said.
Zimbabwe was the world’s second-biggest tobacco exporter and also sold corn, paprika and cut roses to foreign buyers in 2000, the same year that land invasions began that slashed export income, also causing famines and an economic and political crisis that has seen gross domestic product more than halve.
Authorised dealers will also retain all of the export proceeds in their offshore accounts for other industries in the economy ranging from manufacturing and agriculture to telecommunications and transport, the central bank said. The regulator will then remit 50% of the proceeds sent to its account abroad to the exporting company’s overseas bank, it said.
The Reserve Bank of Zimbabwe was also scheduled to this month start an interbank foreign currency committee, which it will head to ensure “transparency and efficiency in the distribution and management of foreign exchange resources,” according to the circular. The regulator plans to put in place “an enhanced compliance monitoring framework” and will reconfigure its compliance systems to take account of the new exchange-rate policies, it said.