Hilary Muza 
BUSINESS leaders walk a tight rope of balancing commercial interests with regulatory compliance. On one hand there are shareholders baying for blood when dividends do not improve.
Then on the other, you have regulatory authorities waiting to slap you with a hefty fine should you fall foul of any laws. This is a double edged sword if ever there was one. This reminds me of the sword of Damocles constantly hanging over the heads of chief executives (CEs) in business today.
A CE can be raking in profits because the company is not compliant, and this can send things into disarray. Balance is needed. The good news is business people can strengthen their regulatory compliance, and with it their profit margins, by paying closer attention to Zimbabwe’s exchange control matrix.
This article will look at the status of procedural directives issued by the Reserve Bank of Zimbabwe, why they are important and why business people miss key compliance issues by focusing solely on Acts of Parliament and statutory instruments, without reading the law as a whole. The worst thing one can do in interpretation of law is to read one piece of legislation in isolation. Often, and particularly in the context of exchange control, the meaning of a legal provision is explained in other similar legislation, or can be found in subsidiary legislation. This is where hierarchy of laws enters the fray.
There is primary legislation, being an Act of Parliament, then there is subsidiary legislation such as statutory instruments and by-laws. Regulatory compliance practitioners should go deeper than the Acts and statutory instruments. In this regard, directives, circulars and orders such as those published by the central bank from time to time are instructive.
Their purpose is to explain certain pieces of legislation and to provide for how to implement them in a pragmatic fashion. Reading a statutory instrument on its own, for instance, often leads to an interpretation that is devoid of context and practical application. Certain business activities and/or obligations may appear to be permissible in terms of the governing statutory instrument, but are in fact outlawed when one considers the applicable directives.
For instance, Exchange Control Directive RU 102/19 serves as an aid to interpreting the RBZ (Legal Tender) Regulations, 2019 published in statutory instrument 142/19. Firstly, it explains that SI 142/19 effectively discontinued the multi-currency system. Secondly, and more importantly, it delimits the nature and character of Nostro FCA accounts that shall remain in place for purposes of receiving offshore funds and to facilitate foreign payments. This is a very important clarification because, essentially, the character of an entity’s Nostro FCA account determines its liability when it comes to making payments locally. This naturally includes the settling of debts as well.
In short, one cannot say with confidence that if they have a debt, it must be paid strictly in local currency because of the dictates of SI 142/19. That obligation rests entirely on the characterisation of the entity as either a foreign or local entity. In like manner, certain entities are required to pay foreign currency in terms of SI 142/19. Which entities these turn out to be is more fully explained in RU 102/19.
The moral of the story here is to read all the relevant legislation and understand how it affects one’s operations. Understanding what your company can and cannot do is the beginning of understanding how to manoeuvre and finesse the market.
This is an important step in the business matrix as it ultimately affects pricing, which in turn affects profit margins. This view is supported by the words of the American Supreme Court in United Savings Association v Timbers of Inwood Forest Associates, 484 U.S. 365, 371 (1988) where it was stated that, “[s]tatutory construction … is a holistic endeavour.
A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme — because the same terminology is used elsewhere in a context that makes its meaning clear, or because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.”
Aren’t RBZ directives binding on banks only? No, they are not. Directives can give insight as to the import of legislation, while adding duties and obligations of their own. This is the case in Exchange Control Directive RU 102/19, which amplifies SI 142/19.
SI is a law generally applicable to all persons in Zimbabwe.
What if you consider the law to be wrong? Where the law explicitly demands that a company performs an act, the company must comply first and challenge the correctness of the law after the fact.
Any arguments as to the efficacy of any law or as to the binding nature of directions, for instance, is for the courts of law. Until a law is set aside, it remains valid, binding and must be complied with. Are penalties provided for in directives binding?
Yes, they are. They are law. The RBZ can issue a fine, which is binding on the offending party as long as the conduct complained of falls within the ambit of the relevant directive.
Exchange Control Directive RU 28/2019 further illustrates that any penalties are not issued in terms of the directive itself, but in terms of the parent Act, which is the Exchange Control Act [Chapter 22:05] together with section 37 (i), (ii), and (iii) of the Exchange Control Regulations, Statutory Instrument 109 of 1996.
When all is said and done, CEs can better deal with the double-edged sword of Damocles hanging over their heads by zeroing in on compliance issues, which allows them the latitude to lead their companies more effectively and profitably.
Muza is an admitted legal practitioner, conveyancer and notary public. He writes in his personal capacity and is reachable at hilarykmuza@gmail.com and at 0719 042 628.
