Gono offered tax-evasion assistance to exporters while at CBZ?

Indigenous banks like the Commercial Bank of Zimbabwe had found a niche market offering tax-evasion assistance for exporters that they were not likely to stop this practice despite the announcement of a new exchange rate by the government.

This was the comment of United States ambassador to Zimbabwe Joseph Sullivan to news that the government had approved a new exchange rate through which exporters could get half of their money at a rate of Z$800: $1 and the remainder at Z$55: 1.

Sullivan said some exporters were already getting rates of Z$1 400 or more so they were not likely to be drawn back into the fold.

Central bank governor Gideon Gono was the chief executive officer of CBZ at the time.

Full cable:

Viewing cable 03HARARE433, What is Zimbabwe’s new exchange rate?

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This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS HARARE 000433

SIPDIS

SENSITIVE

STATE FOR AF/S

NSC FOR SENIOR AFRICA DIRECTOR JFRAZER

USDOC FOR 2037 DIEMOND

PASS USTR ROSA WHITAKER

TREASURY FOR ED BARBER AND C WILKINSON

STATE PASS USAID FOR MARJORIE COPSON

¶E. O. 12958: N/A

TAGS: ECON EINV ETRD ZI

SUBJECT: What is Zimbabwe’s new exchange rate?

Ref: Harare 347

¶1. (SBU) Summary: Businessmen in Zimbabwe have spent the

past week trying to figure out how the GOZ’s new export

support mechanism will work. Although different

interpretations abound, two cabinet officials apparently

reassured a group of prominent CEOs yesterday that

exporters would enjoy a significant devaluation. End

Summary.

Conflicting Interpretations

—————————

¶2. (U) In reftel, we explained that exporters may

exchange 50 percent of earnings at 800:1. Then we

offered two scenarios for the other 50 percent: exchange

at the official rate of 55:1 (1st option) or gain access

to it in foreign currency — presently, an effective

market rate of 1420:1 (2nd option). On the other hand,

some locals have been told the GOZ means to offer

exporters a flat rate of 800:1 for their entire revenue

(3rd option). A parallel but equally important debate

centers on whether importers may access U.S. dollars at

800:1. Businessmen have complained to us that neither

the Finance Ministry nor Reserve Bank has been willing to

clarify the policy. The businessmen can only wait for

the law’s official printed version, which may appear in

the government gazette within a few days. Given that

companies are shutting down or cutting back operations at

an alarming pace, a clear enunciation of Zimbabwe’s

exchange rate is crucial.

The Latest Word from Govt

————————-

¶3. (SBU) The Finance Director of a large corporation told

us that his and several other CEOs met yesterday

afternoon with Vice President Simon Muzenda and

Information Minister Jonathan Moyo to plead for

clarification. They were apparently told the GOZ has

“nearly” decided on a hybrid of the second and third

options described above. Exporters must exchange the

first 50 percent of revenue at 800:1. They then deposit

the second 50 percent in the Reserve Bank and apply for

permission to use it for qualified imports, permitting —

if granted — an effective rate of 1420:1 currently on

the parallel market). The blend rate would be over

1100:1. If exporters are unsuccessful convincing the GOZ

to allow them access to the second 50 percent held in

forex within 60 days, they also receive the other 50

percent at 800:1.

Comment

——-

¶4. (SBU) If true, this is not the worst of scenarios.

Companies tell us 800:1 is the minimum effective rate

needed to restart exports. However, those exporters

still in operation have grown accustomed to sheltering

earnings offshore and enjoying a market rate of 1400 or

higher. Since the GOZ’s export-unfriendly budget

statement in November, in fact, indigenous banks like CBZ

have found a new niche offering tax-evasion assistance

for exporters. The GOZ will have a difficult job drawing

them back to the fold.

Sullivan

(42 VIEWS)