THE Supreme Court of Zimbabwe on Tuesday delivered a landmark ruling declaring that a debt owed in US dollars incurred on or before February 22, 2019 could be liquidated by paying in local currency — the Zimbabwean dollar — at the rate of 1:1, liberating debtors while throwing several companies, including foreign investors and creditors, under the bus.
To put the daylight robbery into context, the US dollar is fetching ZW$25 on transfer and around ZW$17 in cash on the black market, meaning creditors are due to suffer heavy loses.
Although it was not a shocking judgement, the ruling effectively legitimised theft on a grand scale.The ruling was premised on the ridiculous Statutory Instrument (SI) 133 of 2019, legislation through which the RTGS$ was officially made a currency and legal tender.
The SI explicitly stated that RTGS balances expressed in the US dollar “immediately before the effective date, shall from the effective date be deemed to be opening balances in RTGS dollars at par with the United States dollar”.
It also stated that “for accounting and other purposes, all assets and liabilities that were, immediately before the effective date, valued and expressed in United States dollars …shall on and after the effective date be deemed to be valued in RTGS dollars at a rate of one-to-one to the United States dollar.”
The ruling was delivered in favour of Zambezi Gas Zimbabwe (Pvt) Ltd in a matter involving NR Barber (Pvt) Ltd, which was owed over US$3 885 000 by the gas company. NR Barber effectively receives money which will only be able to buy US$155 400 on the black market or US$228 530 on the interbank market. What a robbery!
Bad laws certainly give rise to bad judgements.The full repercussions of the determination are yet to be felt, but it is a significant judgement whose effects will have devastating consequences home and abroad.
Among investors and in the international community, the ruling serves as a reminder of the volatile economic situation in the country. It also justifies why investors have been calling for policy consistency and predictability.
The transacting public was caught unawares by the SI, and now several businesses are counting the losses, while Zimbabwe has further been confirmed as an unsuitable investment destination.
But, of course, there are many people who benefitted from the unjust law and the judgement.These include the political elite and their companies, relatives and associates, who have access to high value loans.
These include political and business bigwigs, whose non-performing loans were absorbed by taxpayers after being inherited by the Zimbabwe Asset Management Corporation (Zamco).
Should they decide to pay Zamco, which is in doubt, they will pay only a fraction of what they borrowed.The SI and the Supreme Court ruling have certainly legitimised a grand heist and decimated the country’s investment prospects.What a shame.