BY LENIN NDEBELE
The Law Society of Zimbabwe is suing the government for unilaterally declaring the country’s new currency to be the equivalent of the US dollar.
The new real-time gross settlement (RTGS) systems are specialist funds transfer systems in which money or securities are transferred from one bank to another on a “real-time” and on a “gross” basis.
The society said the new (RTGS) currency was no longer worth the same as the dollar and had wrecked the value of savings.
In court papers on Friday, the society called the government’s decision “daylight robbery”.
It is challenging a Reserve Bank monetary policy statement in October 2018 which directed banks to separate accounts that held dollars and the RTGS.
The instruction meant customers could no longer access dollars from their primary accounts. This was because the Reserve Bank said RTGS balances were for practical purposes no longer requiring US dollars.
Before the government ruling, people who had deposited US dollars were able to withdraw them. The new policy meant people needed more of the devalued RTGS currency to buy US dollars.
The law society’s court papers said that by devaluing bank balances in this way, the state deprived the public of its right to own assets with a dollar value.
The lawyers said the constitution prevented anyone being deprived of property unless it was in the public interest. The compulsory conversion of dollar-denominated assets was unconstitutional.
The lawyers also challenged a high court ruling in January that said debts incurred in US dollars before February 22 could be repaid in RTGS at the rate of 1:1.
One of the hardest hit was the Zimbabwe Electricity Supply Authority (Zesa), which is owed US$1.2bn by consumers.
Energy & power development minister Fortune Chasi told the Sunday Times that if Zesa were to meet its commitments to creditors, the US$1.2bn was needed either in hard currency or at the prevailing exchange rate.
“They [debtors] have to pay in that currency [US dollars] or at an equivalent market rate because that debt was incurred when the currency was in hard currency,” he said.
“The power was either generated or procured in that currency because when the exchange rate was liberated from 1:1 there was a massive reduction of that amount in US dollars.
“But it’s on record, so we cannot wish it away. Zesa has got to switch off defaulters because they cannot continue to import expensive power and add on to debt that is there while others consume for free.”
If Zesa’s debt is paid at the prevailing exchange rate, it will amount to US$100m at most. Zesa owes regional power suppliers, including SA’s Eskom, US$70m.
This week, the Reserve Bank said it was liberalising the exchange rate after the parallel market rate reached US$1:RTGS42 while the controlled bank rate stood at US$1:RTGS18. The parallel market controls the price of imported goods and services.
“When the rate is up, imported product prices go up and that affects workers,” said Stevenson Dhlamini, an economics lecturer at the National University of Science and Technology.
“For example, a civil servant’s salary was increased to around RTGS3,000 in February, when that could buy more than US$150 on the parallel market. But when you look at it now, that money can hardly buy even US$80. That’s how one can easily see the way the Zimbabwe dollar is losing value.”
– Additional reporting by Maxwell Chingaira