THE ruling by the Supreme Court of Zimbabwe last month declaring that a debt owed in United States dollars (US$) incurred on or before February 22, 2019 should be discharged in the local currency (Zimdollar) at the 1:1 rate could impoverish financial institutions, employers have warned.
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 before February 22, 2019, the effective date of Statutory Instrument (SI) 33/2019.
The bond note, a fiat currency, was introduced in 2016 by the Reserve Bank of Zimbabwe as part of measures to address the liquidity crisis and pegged at par with the United States dollar.
This has, however, worsened the distortions in the market and has instead fueled the black market as the disparity between the surrogate currency and the greenback continues to widen.
Employers’ Confederation of Zimbabwe(Emcoz) president Israel Murefu told participants at an employers’ symposium held yesterday that the judgement could cripple financial institutions which had given out mortgages in United States dolllars which they would have borrowed from outside the country.
“Let us say if a bank gives mortgages worth US$10 million from money that is borrowed outside the country it means because of the judgement the bank will get ZW$10 million, which is about half a million dollars in US dollars,” Murefu said.
Murefu warned that the Supreme Court judgement could impoverish the financial sector, particularly building societies.Labour lawyer Rodgers Matsikidze added that the judgement will not only affect the balance sheets of banks but also discourage investment into the country.
“An investor wanting to put money in the country will say if I put my money and such a law is put in place, what will happen to it? This is totally against the government’s open for business mantra, which I am sure is not government’s intention,” Matsikidze said.
He suggested that a legal instrument can be promulgated in retrospect to save the banking sector from financial ruin.Matsikidze told participants that the outrage against the Supreme Court was unjustified as the judges had merely interpreted the law, saying the country should instead address its concerns to lawmakers.
Zimbabwe Congress of Trade Unions president Peter Mutasa, in an interview with this paper last month, described the judgement as theft as well as the “final nail on the coffin of the Zimbabwean economy.”
“The government has been using coercive power of statutes to literally steal from citizens. Unfortunately, some businesses thought this would affect workers’ salaries only and they supported such stupid policies,” Mutasa said. “This judgement is the final nail on the coffin of the Zimbabwean economy. There are no foolish investors out there who will put money in a country where a single decree can wipe your millions away and dump useless balances in your account.
Sadly, the judiciary has further shown that there are no checks and balances in the exercise of power in this country. The judges showed everyone that the constitution does not matter when it comes to political decisions. This has a chilling effect on all economic agents and, more specifically, potential investors”.
Mutasa said the judgement will result in the closure of companies, particularly those with exposure foreign lines of credit.
Meanwhile, Emcoz will hold its 2020 Human Resources Indaba in Kariba from March 25 to March 28.