The decision by the Financial Intelligence Unit of the Reserve Bank of Zimbabwe to freeze the foreign currency accounts of Harare City Council is an effective way to prevent the council from continuing to break two sets of law by charging exclusively in foreign currency and by using the black market rate.
Freezing accounts does not mean the money is being confiscated or declared forfeit. What it does mean is that nothing can be put into those accounts and nothing taken out without permission, in this case presumably having to be given by the Financial Intelligence Unit.
It is extremely unlikely that any permission will be given for payments into the account generated from that daft decision to charge for certain services exclusively in foreign currency.
And we cannot see any entity connected to the Reserve Bank willing to use any exchange rate except the interbank rate, even where payers have the option of choosing which currency they will pay in.
By converting their high tariffs into foreign currency at the black market rate Harare City Council is basically admitting that it was overcharging when it set the tariffs, since it is willing to give a discount to those who pay in foreign currency.
That is worrying. Most people have to pay in local currency and to be treated as second class residents of their own city cannot be allowed.
The Reserve Bank, besides stopping this discounting for the possessors of US dollars and forcing the rest of the people into ever greater penury, was careful not to add to the burdens of the people by levying civil penalties.
Harare City Council did, at one stage, say they would be charging arrears in foreign currency, or at least pricing these in foreign currency for conversion on the date of payment. Here they were on more reasonable grounds, but we never heard of the council applying for permission to do this, and apparently when they were doing it they again were willing to use the black market rate.
Generally those in arrears are expected to pay interest on their overdue accounts, and that should be the way the council works it, rather than messing around in currency markets.
If the interest rate in the present circumstances is considered to be too low, and it probably is, then the simple solution is to apply for a higher rate.
This is an administrative decision by those who do the setting, and it would be easy to argue that this rate must match bank interest rates since the council has to borrow to pay its bills while it waits to ratepayers to pay theirs. If the council in effect is lending money to delinquent ratepayers, then it should be able to charge the sort of interest others who lend money are allowed to charge.
But of course it did not do that, and appears unwilling to do that. It seems to believe that it can just do what it wants.
The Financial Intelligence Unit and the Reserve Bank did not use their full range of powers in dealing with the council.
If a private company was caught doing what it was caught doing then the likely outcome would a set of huge civil penalties, plus the freezing of the accounts, plus criminal charges laid against those who issued the instructions.
The civil penalties were not imposed, and presumably this was because the council would simply use rate payments to meet them, and the residents of Harare would suffer even more than they are doing. The potential criminal charges must remain, at the very least as pressure against the council.
Instructions were given that the council must, for all services, give the payers the option of which currency they will use.
Paying in foreign currency is an option for residents, not an option for the council. And the law is crystal clear that the exchange rate that must be used for all payments, both into council and out of council, must use the interbank rate on the day of the payment.
While the Government cannot stop the council paying its own suppliers until the invoices have been checked both for exchange rates and for value, what it is insisting that ministries now do before they send the bill to the Treasury, the Reserve Bank now can force the council to do that, and about time too.
It would be interesting to find out if the council knows who has paid what into these foreign currency accounts, and what money taken out of the accounts has been used for and how it has been used.
Harare City Council’s accounts are in a mess. The council has been using for the past few years a financial system designed for small businesses, not the second largest concern in Zimbabwe after the central Government itself.
As a result the Auditor General has raised the alarm over US$190 million that no one can tell her how it was spent. It might have been spent quite properly and legally, there might have been payments for goods or services never delivered, or there could even have been hands in the till. The problem is that she does not know and cannot find out.
A Parliamentary sub-committee is now having a go, using its considerable powers to make people talk. Perhaps it might win.
It certainly wants the city council to return to the South African software supplier it was using, sort out the fees, and get the accounts straightened out so the Auditor General and everyone else can find out just what is going on.
The council itself is not that fanatical over audits. Apparently it last audited its own accounts in 2017 in an internal audit, and councillors are remarkably vague when they arrange budget meetings with the public and are asked specific questions on what money budgeted for in the past was actually used for, a not unreasonably request when you are shoving up the rates and fees.
Ratepayers like to know what the money they were charged for water, which may never have come, or for refuse removal when the truck comes one a month if you lucky, was spent on. These are itemised fees on the monthly accounts, if you are lucky enough to get one or can even find out what you owe if you contact the council.
There is obviously need to get the council’s finances straightened out and having this done quickly.
At the same time the council needs to obey the law rather than act as if it is a sovereign state, although even the most pathetic banana republic would have more accurate accounts than Harare apparently possesses.
In the end the people who suffer are the residents of Harare, admittedly the same people who elected the council that has so resolutely failed them, but still there is suffering.