BY MELODY CHIKONO
THE central bank is facing a gigantic task in curbing illicit financial flows with exporters having devised complex ways of evading high retention thresholds as swap deals top the list of their illegal dealings, the Zimbabwe Independent has learnt.
Last year, the Reserve Bank of Zimbabwe (RBZ) reversed a decision to force exporters to liquidate unused foreign currency earnings within 60 days, but increased the retention threshold to 40% from 30%.
This came after exporters complained over the compulsory liquidation of unused funds into the weakening Zimbabwe dollar, saying it erodes value.
This is also coming against the background of a managed exchange rate of US$1:ZW$85,5 against parallel markets highs of ZW$140 to the US dollar.
Activities such as undervaluation of goods through agents, exchange of cash for goods transactions as well as transfer pricing are some of the forms of illegal capital flight that have been orchestrated by exporters in Zimbabwe.
Early this year, the Financial Intelligence Unit (FIU) — an arm of the RBZ — opened fresh investigations into firms and individuals who are using shelf companies to siphon money from the foreign exchange auction and channelling it to the black market with the results exposing eight companies.
The same exporters evading the high retention also get forex from the auction system. Sources say exporters now run offshore accounts through swap deals with foreign nationals to get liquid cash in Zimbabwe while exports are being undervalued at a time the central bank’s coffers are running dry.
Preliminary investigations by this publication show that the central bank could have lost millions of dollars as exporters avoid the retentions systems through which they get a devalued Zimdollar.
Sources close to the exporting circles told this publication that the swap deals by the exporters also involve offshore agents. Under this arrangement, exporters either set up agents in offshore markets with minimal forex restrictions such as Mauritius.
The agent then generates a purchase order to a Zimbabwean exporter and the invoice is usually understated to enable the exporter to retain a percentage of their export proceeds offshore and then reduce the amount subjected to the 40% liquidation by RBZ.
In other cases, exporters also under declare the grades/quality of their exports. A high grade export is declared as an inferior export and the resultant export proceed is understated.
The agents then retain a portion of the export proceeds and thus reduce the value of export proceeds that is subjected to the 40% liquidation at the auction exchange rate.
Banking sector sources who spoke to this publication say the web is too complicated for an ordinary man to pick but the policy inconsistency in Zimbabwe is forcing even the politicians who are into export business to take the route as they evade their own policies.
The sources believe the central bank could be facing an uphill task given that the transactions are very difficult to trace as the agreements are being done outside formal channels of business with official papers showing lower figures than actual exports.
“Someone may invoice, for example, flowers for US$100 dollar but will be having an agreement with an agent where the exporter will get US$150. So in fact, the exporter will only declare US$100 and retain the other US$50. You need to understand that that it is standard for our exporters to only access international markets via agents who in most cases have off take agreements with the retailers in the international markets. It is therefore very difficult to trace these complex transactions done by the exporters with the agents and even the RBZ is aware of this,” said one of the banking sources.
“Exporters are also understating the quality of their exports. When exporting they have grades, say one is exporting super beef, they may put it on paper as commercial and the agent will know that it is super beef that is being paid for at the end of the day,” the source added.
Money from these agents is then brought in in the form of cars or paying something for another exporter offshore then someone gets hard cash in Zimbabwe at parallel market rates.
Sources say the exporters are also involved in transfer pricing where they are exporting goods at subsidised prices to their international subsidiaries to lower the amount that will be retained by the central bank.
“Some get offshore loans. For you to get the loan you have to register with the Reserve Bank. Some may get loans in the form of equipment which is overpriced. On paper it will indicate that someone got a loan for specialised equipment say of US$1 million but the actual loan could be for say US$500 000 . What then happens is that on servicing the loan the 40% is deducted on net proceeds after loan repayment which is already overstated,” another banking source said.
Bankers Association of Zimbabwe (BAZ) president Ralph Watungwa said while there have been isolated cases of people who have been involved in illicit financial flows through the banking system, he was yet to come across exporters schemes through banking system.
Watungwa who is also the CEO of the local Standard Chartered Bank said his bank was secure enough for these flows with the services offered by its parent offshore bank aiding its stance on illicit financial flows.
“As BAZ I can’t really confirm to a certain case that we are aware of but should this be happening through the banks I would want it to be known that we will not tolerate it and we are ready to ensure that we do all we can and out mechanisms to plug financial leakages through the financial services systems” he said.
Both the central bank and Zimbabwe Revenue Authority did not respond to questions sent to them.
This story was produced by Zimbabwe Independent. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at www.wealth-of-nations.org. The content is the sole responsibility of the author and the publisher.