Saturday 31 March 2018


By Matt. E.T Matigari,  (The Source) – On 28 November 2017, days after his inauguration as President of the Republic, Emmerson Mnangagwa announced a three months long amnesty window for the return of funds illegally kept abroad by individuals and companies.

“Those affected are thus encouraged to take advantage of the three-month moratorium to return the illegally externalized funds and assets in order to avoid the pain and ignominy of being visited by the long arm of the law,” his proclamation said. At that point, it is clear that Mnangagwa intended to show that he had a different, no-longer-business-as-usual approach.

Months later, a long list of one thousand eight hundred companies and individuals alleged to have externalized over $800 million was published. This move elicited both derision and praise which mirrors the politics of the day, showing how polarised Zimbabweans are.

The first point is to highlight a dichotomy. Generally, value can leave Zimbabwe in two ways, legally and illegally.

The legal way is when one uses the official channels to send value outside Zimbabwe’s borders. For example, an exporter will follow procedure to exports goods and services, or an individual can instruct his bank to wire funds to a recipient in another jurisdiction. The illegal route is the one that’s not prescribed by the state and its authorized agencies. For example, one can stash dollar bills in a duffel bag and smuggle it to another jurisdiction.

Based on that dichotomy, it should follow that the state cannot know when value has been moved illegally and may struggle to have a record of it. Illegal movement of value is largely black-market activity and untraceable. The reason why people who partake in it use it is so that they cannot be traced.

Because Robert Mugabe’s government was in power for so long, and harbored a lot of corrupt activity for so long, the governed lost significant trust in the government. As such, the governed believe that the country lost billions of dollars through smuggling and black market activities and they believe it was by the elite. They believe that millions if not billions leaked out of the country without trace – including diamond value leakages. It is possibly for this reason that people that disparaged the externalisation list did so.

The most important thing here is that I doubt that the government would have records of such leakages for the simple reason that the black market ‘externalisers’ would not want to be traced. For example, there are allegations, made by Aljazeera and other sources, that Grace Mugabe was involved in ivory smuggling. The first question would be how did the ivory leave the country? It is said that her bags were never opened at the airport by customs officials, meaning there were possibly no records kept of those activities. If that was cash being smuggled, it could even be more difficult to trace because cash is fungible. So once the state cripples its own capacity to police black market’s illegal movement of value, it is most likely that it won’t have records of it.

Having dispensed with the aspect of illegal movements, let us explore the legal transfer of value. Mnangagwa’s “name and shame” list had categories, which included exporters as well as value transferred to “foreign banks in cash or under spurious transactions”. This brings me to the next point.

The second point is that these funds deemed externalised, in fact belong to the people who externalised them. They do not belong to the government. Before dollarisation (which is still possibly the case now) all foreign exchange belonged to the government. In other words, its treated as a national asset. This issue became grey the moment Zimbabwe adopted multiple currencies. So that we don’t get trapped in legalese, there is a reason for that.

In Zimbabwe’s multi-currency environment, theoretically, if you remit funds back to Zimbabwe, it doesn’t mean the funds now belong to the state. The funds still remain yours, just that they become part of the nation’s collective reserves – a national asset. So, all those listed on the “name and shame list” can still bring the funds back to Zimbabwe and the funds remain their funds.

The challenge is after bringing the funds back into a local bank, into the national pool, you can use the funds locally, but you struggle to pay offshore obligations. This is largely because of the mirage that Zimbabwe uses the United States dollar and that balances in local banks are equivalent to the US dollar. This is a sore point for many exporters as they are left lurching for solutions when they want to import goods and services.

But why should an exporter’s earnings be deemed to be national assets? The answer lies in the whole essence of states. Within a state or jurisdiction, in theory, all resources in there belong to everyone. The state has a stake in the means of production – land, labour, resources etc. The state owns all resources, underground, on the ground and above the ground. They then licence individuals and businesses to exploit them for a profit. It is for this reason that if you own a piece of land and you want to drill a borehole, you must get a licence because the water underground is not yours even if you own the land.

If you own a farm for example, and there are minerals underground on that farm, the minerals don’t belong to you until you are licensed to mine them. This is why under Zimbabwean law as it stands, mining takes precedence over farming. If your farm is on another person’s mining claim, their mining claim has precedence over your farming operations.

Another example is telecoms operators. In the past, operators were largely parastatals owned by the state – the reason being that telecoms uses a scarce/finite resource called bandwidth. The nation has a limited amount of bandwidth available, which they licence out to few operators. Not everyone can be issued bandwidth, so its licensed out to a business which has its own obligations to the state and nation for the privilege to use that bandwidth.

So, all exporters have an obligation to make sure that the revenues earned when they exported are brought back to Zimbabwe where they got the privilege to use the nation’s resources to earn that foreign exchange. This is the case anyplace else.

The third point is, thanks to Mugabe’s government, and to former central bank governor Gideon Gono’s destructive policies, Zimbabwe has the pathetic distinction of being currency-less, using a hotchpotch of other nations’ currencies, mainly the US dollar. As such, Zimbabwe must earn the currencies it uses via exports, foreign direct investment and remittances among other limited options.

With a few thousand exporters and 15 million citizens who want to have the value in their banks in cash, the challenge is onerous, especially given that some of the cash leaks illegally. In short, we all want our money in US dollars, but we don’t all earn US dollars. This includes the President and his cabinet ministers. For example, a few hundred thousand civil servants all want to be paid in US dollars, but they don’t export anything. So do millions of Zimbabweans. This presents a big challenge.

Because of the above, exporters must bring back all value earned from exports. This is standard all over the world. In Zimbabwe, exporters are licensed – it doesn’t matter whether it is an open licence or closed/restricted licence. When you are licensed to export, you do so on certain conditions and all exporters would be familiar with the procedures.

Key parties to exports are your bank, referred to as an authorized dealer – because they are some sort of agent for the central bank, the exporter, tax agency Zimra and the customer on the other side of the border. For the Zimbabwean exporter, the procedures are clear. These procedures are put in place to make sure that the nation’s exports are properly accounted for. Unless smuggled, no exports leave the country without being declared to Zimra.

This declaration is done on the now too familiar customs declaration form 1 (CD1), working with your bank (the authorized dealer), where the exporter declares the exports value and freight among other things. If you are an exporter, it is a condition of exporting that you must receive the money due on the exports within 90 days, which is why the CD1s must be acquitted within 90 days. In other words, you should not send value in goods and services that belong to the nation for nothing.

The earned revenues must be repatriated back to the country. Their repatriation does not mean it’s now state money – it’s still the exporter’s money. The repatriation means non-exporters, who do not have the privilege of the licence an exporter holds, can also access foreign exchange.

So the list that Mnangagwa released is a list of people who moved money of out the country through official channels. All exporters know when they exported, what they exported and when they should have gotten the proceeds repatriated to Zimbabwe, a condition upon which they exported. You don’t export and then keep the funds offshore. Exporters must therefore ensure funds are repatriated.

While the government is very blameworthy for cash shortages, for example, through the printing of money artificially priced at par to the US dollar, part of the cash shortage problem is due to the non-repatriation of export earnings. This is delinquency on exporters’ part. If there are reasons why an exporter has not repatriated export earning within the stipulated 90 days, it is their duty to explain their challenge to the state which licensed them to export. I suspect this is why there was a moratorium of 90 days.

Lastly, when the Panama papers leaked, it was deemed a major scandal and the International Consortium of Investigative Journalists had a large group of reporters digging through the material. I think I saw only one Zimbabwean journalist, Ray Choto, who was involved.

Interestingly, when Mnangagwa’s list was released, the local media in general simply dismissed it as an exporter’s list. There was no further exploration of the list – checking who owns what company and so forth. This was weird because that list shows almost a billion dollars of Zimbabwean value kept offshore. Some even demanded that the list must have contained the names of individuals behind those companies. But most people who cheat, or move value across borders, don’t usually do it using their personal banks accounts. They use front companies to do so. To find out who actually moved the value, you have to lift the corporate veil.

Most people also do not know that if a deposit of above $50,000 is made into a personal bank account in Zimbabwe, that transaction is flagged and often reported to the central bank under anti-money laundering rules. People who want to move large sums of money know this and won’t use their personal bank accounts.

Mnangagwa’s name and shame list was derided and applauded in equal measure. This is a symptom of the deep-seated polarisation in Zimbabwe, as well as lack of trust between the government and citizens. But the bottom-line is Zimbabwe has lots of value stuck offshore inaccessible to citizens, and the nation needs this value back.

The author is a former banker, and a private equity investor in small start-up companies in many sectors in the region. He holds a post-graduate qualification from an Ivy league university in the USA. He can be contacted on [email protected]


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