‘SI 127 seeks to kill arbitrage’


LAST week Government enacted Statutory Instrument (SI) 127 of 2021 which seeks to penalise issuance of local currency receipt for a foreign currency purchase, pricing goods and services above the ruling exchange rate, pricing of goods and services in foreign currency only and using the money obtained from the auctions for other purposes other than what the supporting invoices on the bit stated.

Gazetted under Presidential Powers (Temporary Measures) (Financial Laws Amendment) Regulations, the new SI stipulates that businesses cannot price or charge services exclusively in US dollars.

Any business that refuses to take local currency at the official exchange rate for goods or services priced in US dollars may face a fine of up to ZWL$50 000. 

The SI dictates that businesses should use the US$1: ZWL$84+/- exchange rate or the prevailing rate of the day.

And there shall be no discount for customers paying in foreign currency.

Anyone who puts a premium on goods and services in local currency to induce a buyer to purchase in foreign currency will now face a ZWL$50 000 fine. 

One will be guilty, if he or she, without Exchange Control authority, uses the foreign currency obtained directly or indirectly from a foreign exchange auction or an authorised dealer for a purpose other than that specified in the application to partake in the auction or in the application for foreign currency.

The fine is pegged at ZWL$1 million or the equivalent amount to the value of the foreign currency taken from the auction. 

In this case, whichever is higher is one that one has to pay.

Banks are now liable for the information submitted by their clients should they make an application for forex. 

If a client submits false information and the bank does not do its due diligence, then the financial institution will face a ZWL$5 million fine.

The SI is an essential means of enforcing compliance which is necessary for continued stability.


According to the Zimbabwe Republic Police, teams have since been deployed to monitor compliance.

Those found on the wrong side shall be penalised.

It seems Government means business.

Reactions to SI 127

SI 127 of 2021 has sparked widespread criticism from different sectors of the economy. 

Some reports suggest that the SI has caused great panic, confusion and chaos.

But, for many parents, the SI has brought relief as most private schools which were charging school fees in United States dollars were using the black-market parallel rate of US$1: ZWL$130.

Some wanted the US dollar exclusively and did not entertain any Zimbabwe dollars.

“Good move by Government. No one is being paid in US dollars so there is no justification for schools to charge fees in US dollars exclusively,” said one parent.

“It would be unfair for schools to charge school fees in US dollars when civil servants, who form the majority of Zimbabwe’s workforce, are not paid in that currency.”

However, since the enactment of the SI, the black-market rate has surged from US$1: ZWL$120 to US$1: ZWL$130 for small amounts and up to US$1: ZWL$135 for big amounts.

Some schools have sought to cushion themselves from the new SI by increasing school fees in US dollars by more than 50 percent.

Parents from Samuel Centenary Academy, a private school in Harare, told The Patriot they have since received a letter from the school notifying them of an increase of fees from US$1300 to US$1750 for the second term school fees and US$1900 for the third term.

According to economic experts, the SI may see some business entities raising the US dollar prices to comply with the requirement for using the auction rate.

“Given the fact that the official exchange rate is more or less around ZWL$84 to the US dollar while the black market rate is at ZWL$130, it means businesses will likely increase US dollar prices. It will happen by default really,” said Tilda Moyo.

A snap survey by The Patriot reveals that Novafeeds has increased its US dollar prices for its Broiler chicks and feeds.

Novafeed broiler grower pellet (50kg) which used to be US$27 is now going for US$41, with broiler chickens now at US$132 from US$100.

Point of lay chickens which used to be US$9 are now US$13.

And poultry farmers say this will result in an increase in chicken meat from US$5 to about US$7 per bird.

However, supermarkets, such as OK, Pick ‘n’ Pay, N Richards and Metro Peach prices continue to reflect the official rate of ZWL$84.

Some economic analysts opine unscrupulous businesses will hike prices in Zimbabwe dollars as most of them buy foreign currency from the parallel market.

This will heavily weigh down on many Zimbabweans who get incomes in Zimdollar as the hike will erode their salaries.

“This also has a ripple effect on imports, as Zimbabweans will go for cheaper imports from neighbouring South Africa, Zambia and Botswana, among others,” said Moyo.

“A shift towards cheaper imports will drive imports upwards; that means more foreign currency will be used for imports. This will be in sharp contrast to the low levels of production in Zimbabwe which spell low exports. An ever-widening trade deficit is never a good thing for any economy.”

However, economic analyst Percy Gwanyanya says the legal instrument is noble as it is meant to nip arbitrage behaviour by some unscrupulous businesses who would have accessed foreign currency from the central bank system.

Dispelling fears and clarifying the Statutory Instrument, the Reserve Bank of Zimbabwe (RBZ) says SI 127 is not designed to harm businesses.

“The purpose of the SI is to ensure that those obtaining foreign exchange from the auction system do not use parallel market rates,” said RBZ on their twitter platform.

“The use of parallel exchange rate of above 100 for example on funds obtained from the auction at ZWL$85 to US$1 is not good for the economy and consumers. It is these anomalies or arbitrage opportunities that the SI was designed to deal with.

The SI is not designed to harm business but to provide a level playing field for business and to protect consumers.”

Only time will tell if business will comply with the new instrument that ensures that foreign currency accessed on the auction floor is put to good use.


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