Offenders Driving Parallel Market Rates Are Big Companies - Economist

An economist, Nathan Gurira, has claimed that the offenders who are driving parallel market rates are mainly big companies. Gurira said efforts by the Reserve Bank of Zimbabwe (RBZ) to uproot widespread misconduct in the economy may not be effective if other institutions are not vocal about the mischief. Gurira speaks after the RBZ has named individuals who are allegedly driving the parallel market rates through money laundering. Said Gurira:

When he twice threatened to deal with those who are brewing chaos in the markets while addressing a business conference at the just-ended Zimbabwe International Trade Fair and more recently at the Harare Agricultural Show, Vice President Constantino Chiwenga could have been firing some warning shots before pulling the trigger because the state knows exactly who the real culprits are.

The offenders who are driving parallel market rates are largely the big companies, including local and foreign contractors who are working on infrastructural projects around the country; petroleum firms, fast-moving consumer goods firms, and retailers, amongst others. It has also been said and not denied that big businesses are double-dipping by using their surrogates to buy foreign currency on the auction but still charging their products at parallel market prices that would make the devil himself pity Zimbabwe’s poor who buy from the shops at those extortionate prices.

The involvement of big business in this probably explains the government’s hesitancy closing in fast on them for fear of frightening capital markets. However, after that chilling warning from Chiwenga, it may not be long before the authorities take their gloves off because allowing the chaos to continue would be career-limiting, especially for the political elite who have a lot to lose.

He added that while the public expects the central bank to single-handedly clean up the mess, the central bank was limited. He observed that the RBZ operates in terms of the Reserve Bank Act, Chapter 22:15, whose scope confines the institution to the maintenance of price stability, formulation and execution of monetary policy and fostering a stable financial system using financial instruments at its disposal.

He argues that these statutes do not give the bank wide-sweeping powers to extend itself beyond certain boundaries nor the carte blanche to turn itself into a big brother with authority to interfere with other State institutions. He added:

For all we care, the bank’s autonomy was surrendered to the Treasury during the unity government (2009 – 2013) when the then Finance Minister, Tendai Biti’s obsession with clipping ex-RBZ governor Gideon Gono’s wings, led to regrettable amendments that compromised its independence.

He suggested that the RBZ should work with other economic agents and regulatory authorities which must be seen to be playing their part as well in fostering economic stability. 

More: The full version of Nathan Gurira’s article was published by iHarare. Gurira can be contacted at nathangurira@gmail.com