Zimbabwe’s Goverment says it will contest last week’s High Court ruling that ‘reversed’ the conversion of United States dollar accounts to the local currency.
Earlier in the week, the country’s High Court delivered a landmark ruling declaring that the central bank’s 2018 directive ordering banks to convert depositors’ US dollar account balances into RTGS balances was illegal.
The High Court ruling was delivered in favour of The Stone/Beattie Studio which had sought to recover US$142 000 which was converted into RTGS$ by CABS.
Finance and Economic Development Minister Mthuli Ncube said the court ‘failed to properly interpret’ Exchange Control Directive No. R120/18.
“The Attorney General has brought to my attention the judgment on the Exchange Control Directive No. R120/18 pertaining to the separation of RTGS FCA accounts and FCA Nostro accounts.
“Government and the Reserve Bank of Zimbabwe do not agree with the conclusion in the judgment to the effect that the Exchange Control Directive is unconstitutional. They take the view that the court has failed to give a proper interpretation to the directive,” said the Treasury boss.
“In the circumstances, Government and the Reserve Bank intend to file an appeal against the judgment. They are further fortified in this cause of action by the fact that the court
did not impugn the provisions of the Finance (No.2) Act, 2019 and the amendments made to the Reserve Bank of Zimbabwe Act [Chapter 22:15] which were based on the Exchange Control Directive in question.
“Accordingly, Government and the Reserve Bank of Zimbabwe wish to assure the nation that the monetary arrangements which were put in place as a result of the Exchange Control Directive in question will remain in place pending the outcome of the appeal to be noted in the next few days.”
According to an analysis by Chimuka-Mafunga Commercial Attorneys, although the latest High Court decision is logical it will be difficult to enforce unless there are significant changes to the relevant legal and regulatory framework.
“The High Court decision confirms the banker-customer relationship. One sacred element of that relationship is that of a creditor and a debtor. If a customer deposits United States Dollars into the bank he/she/it must withdraw the same currency and amount.
“In simple terms if one lends a cow, the pay back can only be a cow and not a donkey. It is that rule which the High Court enforced. Before the High Court enforced the rule against CABS it correctly recognised that the hand of CABS had been forced by operation of a law. The High Court then ruled the Exchange Control Directive unconstitutional and then ordered CABS to pay United States Dollars and not RTGS$,” said the attorneys.
“It is apposite to note that whilst the Exchange Control Directive was held to be unconstitutional, the provisions of the Finance (No.2) Act of 2019 as confirmed by the Supreme Court still remain. 3.10 Section 22(1)(d) of the Finance (No. 2) Act of 2019 states that all liabilities that were valued and expressed in United States Dollars shall be deemed to be values in RTGS Dollars.
“The catch word is ‘liabilities’. Given that CABS is a creditor, its obligation to pay deposited funds on demand to its customer is also a liability in terms of the Finance (No. 2) Act of 2019. CABS can legally discharge its obligation of what used to be US$142 000.00 by tendering RTGS$142 000.00 in terms of the Finance (No. 2) Act of 2019. This position remains until the Finance Act (No. 2) of 2019 is also declared unconstitutional.
“As matters stand the RTGS is still legal tender. Practically therefore, the High Court decision might be difficult to enforce.”