TUESDAY’S Supreme Court ruling declaring that debts owed in
United States dollars (US$) incurred on or before February 22, 2019 should be
settled using the Zimdollar at a 1:1 parity will further deepen investor
mistrust and complicate the prospects of economic revival, analysts have said.
The court upheld a government decree introduced in February
last year through Statutory Instrument 33/2019 that converted debts accumulated
in US$ to the local RTGS currency.
The ruling came after Zambezi Gas Zimbabwe Pvt Ltd appealed
against two judgments of the High Court in June 2018 and May 2019 ordering the
company to pay coal and chrome mining company, NR Barber Pvt Ltd, over US$3,8
million in debts.
Economist Godfrey Kanyenze said the ruling had thrown the
country on the edge of an economic precipice exacerbated by worsening investor
confidence, thereby jeopardising the country’s prospects of economic revival.
“We have regularised the abnormal and now, in terms of
prospects of economic revival, the year 2020 will be complex due to the
deepening mistrust and lack of investor confidence in the government,” Kanyenze
said.
“No investor will want to keep money in the country. This
is the second time assets have been transferred from the creditors to the
borrowers.”
Kanyenze said the financial services and real estate
sectors will be the worst hit.
“The people in debt will celebrate, creditors will mourn,
which destroys the basis of the sanctity of lending and borrowing. This
destroys the basis of the society, store of value and medium of exchange,” he
said.
Kanyenze said government was the biggest beneficiary of SI
33/19 which eroded salaries as well as consumer buying power.
Another economic analyst John Robertson said there was need
for government to change its policies and attitudes if ever it was to entertain
prospects of economic recovery. He said Chief Justice Luke Malaba’s ruling
maintained the 1:1 parity but at the same time mentioned the issue of value,
which is at the core of the problems in Zimbabwe.
“The value of a Zimbabwe dollar today is between one
seventeenth and one twenty-fifth of its value a year ago,” Robertson said.
“Unfortunately, government appears to be determined to pay
back only a fraction of the amount they borrowed by selling Treasury Bills to
our pension funds and banks. Even more unfortunately, they borrowed billions of
US dollars and they don’t have, and never did have billions of US dollars to
settle the debts.
“Creating and then devaluing the RTGS dollars was
government’s only way out of debt because they now want to pay six US
cents-worth of Zimbabwe money for every US dollar they borrowed. Once again, our
bank balances and pension fund savings have been almost wiped out.
“To rescue the country, we have to start now to behave in
ways that persuade investors that we are deserving of their trust. That will
call for a complete change in government policies and attitudes.”
UK-based Zimbabwean lawyer, Alex Magaisa, in his legal
opinion released on Tuesday, described the ruling as a “greatest heist” by
government, saddled by an US$11 million domestic debt, adding it was “hard to
make sense of the reasoning” of the judges.
“A reduction in an asset from US$3,8 million to US$144 000
is, by all accounts, a serious erosion and violation of one’s private property
rights,” he said, adding the judges’ argument showed that there was erosion of
private property rights.
“The government has reduced its domestic debt by theft. All
those who are owed by the government must count their losses,” he said.
“One thing for sure though is that this judgment brings to
the fore the hazardous nature of the Zimbabwean economic terrain for those
engaged in trade and commerce. Just a simple decree can have devastating
consequences.”
Lawyer Tawanda Nyambirai said the ruling was simply
confirming what had been in place since February last year when SI 33 was
introduced. “The effect was that all balances except foreign debts would be
converted to local currency,” Nyambirai said.
“All our balances that were in US$ were converted using the
1:1 exchange rate. The effects, we started feeling them last year. The effects
were devastating on employees, Zimbabwe dollar loosing value on fixed salaries
pegged on US$. Consumers were affected and so were retailers who benchmarked
their prices to the parallel rate where consumer spending had been cut. People
were impoverished.”
He added: “This is why I applied to the High Court
challenging SI 33 because it constitutes compulsory acquisition or deprivation
of property without compensation.”
Nyambirai filed an urgent chamber application in July last
year challenging SI 33, which now constitutes Financial Amendment No 7. The
court, however, ruled that the application was not urgent and had to give the
opposing part time to file heads of argument, which they have now done and
await a court date. Newsday
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