RBZ “Refines” Operations of Bureau De Changes In Response To Spiralling ZWL$

Farai Mudzingwa Avatar

Over the past two weeks, forex rates decided to take up space exploration as a hobby and have thus rocketed in a manner that has left businesses and the public in shock.

The central bank is responding to all this by changing the way Bureaux De Changes operate. The RBZ has sent out a press document titled Refinement of the Operations of Bureaux De Change and it looks to solve the current problems as follows:

1. The current interbank foreign exchange market is currently governed by the willing seller – willing buyer concept, without making reference to the interbank foreign exchange rate.

2. In order to bring sanity on the operations of the Bureaux de Change, the following shall strictly be enforced: –

(a)All the interbank trades shall be processed at a margin of plus or minus 7% of the interbank mid-rate;

(b)The Bureaux de Change shall only sell foreign currency cash to individuals for foreign travel, upon submission of a passport. The current cash limits for Personal Travel Allowance of USD300 per day, per travel, and up to a maximum of USD10,000 per year, should strictly be adhered to. The Bureaux de Change are, henceforth, required to endorse passports of travelers who would have purchased foreign currency;

(c) The Business Travel Allowance of USD400 per day, and up to a maximum of 7 days per travel, shall be strictly monitored;

(d)The Bureaux de Change shall be required to strictly adhere to the daily reporting requirements to the Central Bank; and

(e) The Bureaux de Change are required to visibly display the interbank exchange rate on their FX rate boards.

3. The Financial Intelligence Unit (FIU) and Exchange Control Division shall immediately mobilise resources to enforce compliance by all foreign exchange market players.

4. Non-compliance by any Bureau de Change shall result in the imposition of heavy financial penalties, as well as revocation of the operating licence.

RESERVE BANK OF ZIMBABWE – 20 September 2019

The only problem with our central bank is that as in most cases they are reactive and not proactive. If these measures are effective in solving the current spiral, expect a few problems to arise down the months and then a panicky central bank to once again attempt to put out the blaze.

PS: My pessimism at the effectiveness of these measures is a result of being part of the Zimbabwean circus for 21 years…


What’s your take?

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  1. M2

    Defying the economic laws of supply and demand – it will never ever work, not in a thousand years. Gono tried all these directives/refinements to no avail. Mangudya is just doing the same and hoping for a different outcome. Without a credible currency this country is going nowhere. Bond notes/RTGS are like trying to fuel a jumbo jet with water. It will not take off the ground and if it is already in the air in will come down – simple.

  2. wokenman

    All this does is drive all the action BACK to the black market – and we will see the gap between the two rates widen again after all the effort that was already spent bringing them closer. Better rates lead to more people moving to that market, leading to the formal market being starved, its rate gets even less attractive: it becomes a cycle. This currency cannot be saved. A currency that has become a commodity can’t be saved – only the USD survives as a commodity currency because it’s the wolds reserve currency. But FORGET THE ZIM DOLLAR – it’s dead. Part of me thinks the current ZWL is just a a massive BETA test – an experimental currency; that’s why they are always doing all this refining and fine tuning without actually actively going after the black market. They are using it to set up the systems and processes and rules for the REAL new currency.

  3. Axl kaMpofu

    Having had the opportunity to live in and out of Zimbabwe for a couple of years I can say that these “new” measures are nothing new but part of the best practices in most countries if you are to buy Forex for traveling purposes. If anything, the surprise is why these measures were not implemented at the first instance.

    They say history is the best teacher. Any student of Zimbabwe’s contemporary economic history will tell you that the economic actors in Zimbabwe will find a way of abusing the system. As such, in comparing with other countries in the region and further abroad, I can already identify potential weakness in policing the adherence to the measures. The weaknesses stem from:
    •The nature of the measures themselves
    •The lack of adequate technology within some bureau de changes
    •The underlying purpose of the bureau de changes
    I explain;

    The nature of the measures
    These measures are based on an assumption that ‘ordinary folk’ are buying forex from Bureau De Changes. I don’t have scientific evidence to support this claim; however, the existence of the parallel market just vindicates my point. There’s no way a bureau de change will sell you a USD for ZWL$18 only for you to go and exchange it for close to ZWL$25 (as of last week’s highs on the parallel market). They will run out of their forex reserves! It’s that simple. So the measures fail to address the fundamental nature of the market itself; there are phantom customers – most of these Bureau De Changes are in existence to just mop up the forex in the market.

    Know your customer
    The principle of knowing your customer is one of the prescribed ‘best practices’ in banking or financial transactions. When you approach American Express to sell or buy forex they are going to ask you for your particulars. These particulars are used to maintain a database that’s used to monitor one’s adherence to the forex exchange regulations. Herein lies the inherent weakness of the system; how many Bureau De Changes have a serviceable client database? What we are going to see are passports being stamped with no verification of actual intended travel.

    The purpose of the Bureau De Changes
    Related to the above two points is the underlying purpose of the Bureau de Change. The purpose of the business can be simplified as ‘buy low and sell higher for a profit’. A question can be asked as to how many travellers are actually buying forex from the Bureau De Changes. Given the way businesses have conducted themselves in Zimbabwe, one can rightfully speculate that Bureau De Changes are only buying forex right now.

    In conclusion it is incumbent on the central bank to enforce their monitoring mechanisms. Otherwise for the financial regulator to continue with their current modus operandi further reinforces the point that’s advanced by most people that the RBZ has been reactive rather than proactive.