13 July 2017

Zimbabwe: RBZ Moves to Formalise Forex Trading

The Reserve Bank of Zimbabwe (RBZ) last week relaxed rules for starting bureaux de change, as it seeks to promote formal forex trading and counter a resurgent informal currency exchange market following the introduction of bond notes late last year.

Analysts said the move would encourage Zimbabweans to use formal channels for foreign exchange transactions, therefore undermining the black market.

"It's positive as it will reduce the cost of accessing foreign currency through formal channels," said Prosper Chitambara, a Harare-based economist.

He said the RBZ was trying to "deal with the black market" but noted that given the fact that Zimbabwe was now a highly informalised economy, the black market was unlikely to be destroyed by the current move.

The central bank measures appeared to buck the trend both on the continent and elsewhere in the management of the foreign currency traders, who have been accused of becoming "wholesale dealers" illegally dolling out millions of dollars to customers in Nigeria or capitalising on "loopholes for corruption and money laundering" in Tanzania.

But in its decision this week, the RBZ said interested individuals and institutions should register as bureaux de change with limited authority as provided for under Exchange Control (Authorised Dealers with Limited Authority) Order 2015, Statutory Instrument 104 of 2015.

The move, said the central bank, was part of its efforts "to enhance the ease of doing business and foster financial inclusion and the level of participation in the financial services sector".

"Currently, there is a limited number of licensed bureaux de change with the majority of urban centres, including ports of entry/exit, having no formal bureaux de change services. Accordingly, interested parties are being called to embrace this opportunity and provide bureaux de change services to the public and travellers and enhance access to formal services for exchange of currencies in the country's multicurrency system including bond note," said the RBZ.

Zimbabwe, which ditched its currency in 2009 to tame hyperinflation, is currently a hard currency economy, but cash shortages led to the introduction, in November, of bond notes which were meant to mitigate what the central bank described as "externalisation of US dollars".

The unavailability of forex from banks, as well as the introduction of bond notes, fuelled the resurgence of a black market for foreign currency, which is now competing with banks as a source of foreign cash for individuals and institutions.

A banker said the initiative by the central bank sought to "monitor foreign currency dealers outside our doors."

"The central bank is trying to have oversight over forex trading outside the banking sector," said the banker, who cannot be named for professional reasons.

Asked if the measures would impact on the business of commercial banks, the banker said: "To some extent. But they (bureax de change) are third or fourth channels in the foreign currency market."

The RBZ allowed bureaux de change to resume operations in 2009 after banning them in 2002 for fuelling a black market.

They had also been accused of offering inflated exchange rates, undermining the formal banking sector which charged commissions and taxes for foreign currency transactions.

Although few reopened for business, many later closed down due to poor business under a multiple currency regime.

There is a perception within government that there is a huge amount of foreign currency that is unbanked.

But how this could be harnessed through bureaux de change remains unclear.

Due to failure to access cash when they want it, Zimbabweans are now shunning banks, preferring to keep their money at home or elsewhere outside the formal system.

The challenge the new regime by the RBZ may face will be how to bring the bureaux de change under control to curb money laundering.

Zimbabwe is a member of the Eastern and Southern Africa Anti Money Laundering Group.

Bureaux de change buy or sell foreign currency or exchange one currency for another through the application of exchange rates.

newsdesk@fingaz.co.zw

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