Online Reporter
Martin Kadzere
The Reserve Bank of Zimbabwe (RBZ) has imposed heavy financial penalties on seven cotton merchants for violating exchange control regulations during the previous marketing season, sources said.
Each company has been fined US$100 000, bringing the total penalties to US$700 000.
The central bank moved to penalise the firms after investigations revealed that the merchants paid cotton farmers 100 percent in United States dollars.
While beneficial to farmers, this directly contravened the standing 70:30 payment regulation, which mandates merchants to pay 70 percent in foreign currency and the remaining 30 percent in local currency (ZiG).
“The merchants essentially prioritised farmer satisfaction over regulatory compliance,” said a senior banking official.
“By disregarding the 30 percent local currency requirement, they bypassed the liquidation of about US$3 million, a move the central bank views as a threat to the stability of the multi-currency framework.”
Some cotton merchant officials confirmed the penalties but expressed hope that ongoing engagements with the RBZ, facilitated by the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development and the Agricultural Marketing Authority, will yield an amicable solution.
According to a directive issued by the RBZ to the respective banks, the fines were applied uniformly across the merchants, regardless of the volume of cotton purchased by each company.
Official data shows that during the last season, about 30 million kilogrammes of cotton were produced and sold at an average price of US$0,30 per kg. Under the 70:30 payment framework, roughly US$2,7 million should have been liquidated into ZiG to pay the 30 percent component.
