Why Zimbabwe is cracking down on black market pricing

Zimbabwe had to crack down on the pricing of goods using the black market rates because prices were now being determined in corporate offices and not on the shelves, Deputy Finance Minister Clemence Chiduwa told Parliament yesterday.

Responding to questions on the recently gazetted regulations that say businesses must use the foreign currency auction rate for pricing, Chiduwa said there was nothing new about the regulations.  They were simply there to enforce compliance.

“There is nothing new with regards to SI 127 but the issues that the Statutory Instrument is trying to address is the issue…of compliance.,” Chiduwa said.

“Under the Exchange Control Act, we were basically looking at illicit trade in foreign currency and the banking promotion where we are saying businesses, corporates and individuals should make use of the banking system.

“What we are imposing now because if you check the system that was there, we were dealing with moral suasion but what is there now is; we are imposing civil and administrative penalties.  In terms of enforcement, if you have gone through the S.I, there are what are referred to as designated authorities.”

Chiduwa said: “Yesterday, we moved around town, checking shops to see which are compliant.  I can tell you that we came up with a long list of corporates that were not compliant.  Starting today, we actually issued a lot of tickets and penalties.

“In terms of compliance, do not worry about that one. We are handling the issue so well. The other issue which is being raised to say the S.I. 127 is going to result in rampant increases in prices both in ZD and foreign currency, I think this is just a transitory issue.

“If you check in terms of the proportion of formal business to informal businesses, 60% of our businesses are informal, which means that our people have got choices to make.

“We have seen that the black market prices – the pricing regime models have gone to offices. They are no more on the shelves. It is the corporates that are making the pricing models in their offices using black market prices and transferring them to the shelves, but this again we are managing it. I am sure because of competition, a lot of them are going to comply.”

Zimbabwe’s industry has called for the regulations to be suspended arguing that they will reverse the recovery programme that Zimbabwe has embarked on, a point also raised by independent legislator Temba Mliswa who said if the regulations were brought to Parliament they would be rejected.

Chiduwa, however, said there would be no policy reversal.

“We have seen a lot of compliance but what I can assure you is there is nothing new with regards to S.I. 127. It used to be there and what is only new is compliance mechanisms and the call that is coming in to say there be a suspension of S.I. 127, there is no policy reversal that is going to be done, because what is on the ground is what has been existing except that we are now giving administrative and civil penalties,” he said.

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