Exchange Control (Currency Exchange) Order, 2004(Statutory Instrument 9 of 2004)

Statutory Instrument 9 of 2004

Exchange Control (Currency Exchange) Order, 2004

ARRANGEMENT OF SECTIONS

PART I

PRELIMINARY

3. Application of order in relation to licensed investors.
4. Establishment of Currency Exchange.
5. Functions of Currency Exchange.
6. Foreign Currency Auction Committee.
7. Exporting business organisations to offer proportion of foreign currency for auction by Currency Exchange.
8. Lodging of bids with the Currency Exchange.
9. Procedure on tender day.
10. Gold producers to offer proportion of foreign currency for auction by Currency Exchange.
11. Tobacco proceeds.
12. Other foreign currency receipts.
13. Supplementary directions.

SCHEDULE

Proportions of Export Proceeds to be Offered for Sale at Fixed Rate and by Auction.

IT is hereby notified that that the Reserve Bank of Zimbabwe has, in terms of section 40 of the Exchange Control Regulations, 1996, and with the approval of the Minister of Finance and Economic Development, made the following order:—

1. Title

This order may be cited as the Exchange Control (Currency Exchange) Order, 2004.

                                                                                         2.   Interpretation

In this Order—

“cut-off price” means the price below which any bids for the purchase of foreign currency will be rejected;

“exchange rate direction” means the Exchange Control (Exchange Rate) Direction, 2002;

“export documentation” means the Form CD1, CD3, TRl, TR2 or any other form evidencing the export of goods or services and the receipt of payment therefor, and all other documentation therewith;

“fixed rate” means the rate at which the Zimbabwe dollar may be exchanged for the United States dollar in terms of the exchange rate direction;

“gross export proceeds” means export proceeds before the deduction of any loan repayments, royalties, management fees, agency fees or any other payment whatsoever;

“group of business organisations” means companies or other bodies corporate that are related to each other as holding company and subsidiary, or as subsidiaries of the same holding company, for the purposes of section 143 of the Companies Act [Chapter 24:03];

“foreign currency auction” means an auction of foreign currency conducted in terms of section 9;

“joint-venture licensed investor” and “licensed investor” bear the meanings assigned to them by section 2 of the Export Processing Zones Act [Chapter 14:07];

“ruling auction rate”, in relation to any transaction to which this order applies, means the rate at which the Zimbabwe dollar may be exchanged with the United States dollar, as fixed by a foreign currency auction occurring on or immediately before the date of the transaction;

“tender day” means the day appointed by the Currency Exchange in terms of subsection (1) of section 8 as a day when a foreign currency auction will take place.

(2) Any word or expression to which a meaning has been assigned in the Exchange Control Regulations, 1996, the Exchange Control Order, 1996, and the exchange rate direction shall have the same meaning when used in this order.

                                                              3.   Application of order in relation to licensed investors

This order applies to all business organisations as it relates to them, including local licensed investors and to joint-venture licensed investors if the proportion of the joint-venture licensed investor that is owned by persons domiciled in Zimbabwe is equivalent to or exceeds sixty per centum.

                                                                        4.   Establishment of Currency Exchange

• There is hereby established a unit of the Reserve Bank, to be known as the Currency Exchange
• The staff of the Currency Exchange shall consist of such officers, inspectors or employees of the Reserve Bank referred to in section 46 of the Reserve Bank of Zimbabwe Act [Chapter 22: 15] as are nominated by the Governor of the Reserve Bank.
• There shall be a Chairperson of the Currency Exchange who shall be appointed by the Governor of the Reserve Bank after consultation with the Minister of Finance and Economic Development.

5. Functions of Currency Exchange

Subject to this order, the functions of the Currency Exchange shall be—

• to conduct foreign currency auctions; and
• to perform such other function as may be assigned to it by or under this order or as the Governor of the Reserve Bank may assign to it by direction in writing.

6. Foreign Exchange Auction Committee

• The operations of the Currency Exchange shall be governed by a committee, called the Foreign Exchange Auction Committee.
• The Foreign Exchange Auction Committee shall consist of —
• a chairperson, who shall be the Chairperson of the Currency Exchange; and
• not more than seven persons appointed by the Governor of the Reserve Bank from members of the staff referred to in subsection (2) of section 4; and
• a representative of the Ministry of Finance and Economic Development appointed by the Minister of Finance and Economic Development.

(3) The Foreign Exchange Auction Committee shall perform the functions of the Currency Exchange in terms of section 9.

Exporting business organisations to offer proportion of foreign currency for auction by 7. Currency Exchange

(1) With effect from the 1st January, 2004, every business organisation engaging in the export of goods and services shall be required to acquit the export documentation in respect of those exports— (a) on the basis of gross export proceeds; and

(b) no later than 90 days from the date when the export documentation in respect of those exports was raised (hereinafter referred to as the “maximum acquittal period”:

Provided the Reserve Bank may for good cause shown authorise an extension of this period.

(2) Subject to subsection (3), where foreign currency held in a business organisation’s foreign currency account represents the proceeds from exports, the business organization—

• shall, if it acquits the export documentation in respect of those exports in advance or within any period sooner than the maximum acquittal period as indicated in the first column of the Schedule—
  • offer the proportion of the currency indicated opposite thereto in the second column of the Schedule for sale at the fixed rate to the authorised dealer that processed the export documentation in respect of those exports; and
  • offer the proportion of the currency indicated opposite thereto in the third column of the Schedule for sale by auction by the Currency Exchange through the authorised dealer referred to in subparagraph (i);
• shall, if it acquits the export documentation in respect of those exports on the day after the maximum acquittal period or within any other extension of that period approved by the Reserve Bank, as indicated in the first column of the Schedule—
  • offer the proportion of the currency indicated opposite thereto in the second column of the Schedule for sale at the fixed rate to the authorised dealer that processed the export documentation in respect of those exports; and
  • offer the proportion of the currency indicated opposite thereto in the third column of the Schedule for sale by auction by the Currency Exchange through the authorised dealer referred to in subparagraph (i);
• may retain the balance remaining in the foreign currency account after offering the proportions referred to in paragraph (a) or (b) for up to twenty-one days, during which the business organisation may draw down on

the account for the purpose of settling any exchange control approved transactions, including—

• the settlement of any external loan repayments; and
• the purchase of any imports; and thereafter, if the currency has not been withdrawn earlier, the business organisation shall sell it to the Reserve Bank through the authorised dealer at the ruling auction rate.

(3) If a business organisation fails to acquit the export documentation in respect of any exports within the maximum acquittal period and no extension of such period is approved by the Reserve Bank in terms of paragraph (b) of subsection (2), no amount of the proceeds from exports may be retained in its foreign currency account, and the business organisation concerned shall forthwith offer—

• twenty five per centum of the proceeds for sale at the fixed rate to the authorised dealer that processed the export documentation in respect of those exports; and
• seventy-five per centum of the proceeds for sale by auction by the Currency Exchange through the authorised dealer referred to in paragraph (a).
• The amount of foreign currency offered for sale by auction in terms of paragraph (a) or (b) of subsection (2) shall be specified by the business organisation concerned in a form provided by the Reserve Bank to authorised dealers for the purpose, which form shall be submitted to the Currency Exchange before 12.00 p.m. on the day immediately preceding the tender day next following the completion of the form.
• If an exchange control authority is satisfied after due inquiry that a business organisation has contravened paragraph (a) of subsection (1), subsection (2) or subsection (3), the exchange control authority may in terms of section 35 of the principal regulations direct any authorised dealer to do all or any of the following— (a) to close any foreign currency account operated by—
  • the business organisation concerned; or
  • where the business organisation is a member of a group of business organisations, by all members of that group;

(b) not to permit the business organisation to open a foreign currency account; and the authorised dealer concerned shall take all necessary steps to comply with the direction:

Provided that the exchange control authority shall without delay notify the business organisation or group of business organisations concerned, in writing, of the terms of any such direction.

                                                                   8.   Lodging of bids with the Currency Exchange

(1) Subject to subsection (2), any person who wishes to purchase foreign currency offered for sale by auction by the Currency Exchange in terms of section 7 shall forward through an authorised dealer to the Currency Exchange a written bid in a form provided by the Reserve Bank to authorised dealers for the purpose, specifying— (a) the amount of foreign currency, denominated in United States dollars, sought to be purchased; and

• the preferred exchange rate for the foreign currency sought to be purchased; and
• the purpose for which the foreign currency is sought to be purchased; and
• the source of the funds with which the person proposes to purchase the foreign currency; and (e) relevant exchange control authority for the foreign currency payment.

(2) No business organisation referred to in section 7 shall qualify to bid for foreign currency offered for sale by auction by the Currency Exchange for any purpose unless it satisfies an exchange control authority that— (a) its balance referred to in paragraph (c) of subsection (2) of section 7 is insufficient for that purpose; and

(b) in the case of a business organisation wishing to buy foreign currency for the purpose of making any external loan repayments, the insufficiency referred to in paragraph (a)—

• is absolute, that is, no balance at all existed at the time in question to enable it to make payments for any purpose whatsoever; or
• arose after it had drawn down on its balance exclusively for the purpose of settling those repayments.

(3) An authorised dealer will comply with any other directions issued by the Currency Exchange with respect to the eligibility of persons to purchase foreign currency offered for sale by auction by the Currency Exchange in terms of section 7, including directions with respect to—

• the aggregating of bids by persons for amounts not exceeding five thousand United States dollars; and
• the purpose for which the foreign currency is sought to be purchased; and
• the provision of security by the bidder, or the furnishing of adequate proof that the bidder is capable of fulfilling his or her obligations in the event that his or her bid is successful.

(4) Upon consideration by an authorised dealer of all bids received in terms of subsection (3), the authorised dealer shall—

(a) seal all eligible bids and forward them to the Currency Exchange no later than 9.00 a.m. on any tender day within a period of seven days after the bid is sealed; and (b) notify the bidders concerned accordingly.

(5) No bidder may withdraw a bid once it has been lodged with the Currency Exchange.

                                                                                 9.   Procedure on tender day

• The Currency Exchange shall give every authorized dealer not less than twelve hours’ notice of a tender day.
• On the tender day the Currency Exchange shall—
• receive, open and examine the bids for that day and reject any bids that are ineligible by reason of noncompliance with any directions referred to in subsection (2) of section 8; and
• fix a recommended cut-off price by collating eligible bids with the foreign currency available for sale on that day, and immediately forward the recommendation to the Governor of the Reserve Bank, who may accept the recommendation as final or specify an alternative final cut-off price;
• immediately upon being informed of the Governor’s decision in terms of paragraph (b), reject any bids that are below the final cut-off price and match the foreign currency available for sale on that day with the remaining bids, in order of preference from the highest to the lowest bidder:

Provided that if two or more eligible bidders offer the same price in Zimbabwe dollars for an amount of foreign currency sought to be purchased, the bidder seeking the greater amount of foreign currency shall be matched before the other bidder or bidders.

(3) At the conclusion of the auction—

• foreign currency shall be awarded on the basis of bids matched in accordance with paragraph (c) of subsection (2); and
• the Chairperson shall announce to authorised dealers the results of the auction and the ruling auction rate; and
• any foreign currency unsold shall be purchased by the Reserve Bank at the ruling auction rate; and
• every unsuccessful bidder may make a new application in terms of subsection (2) in respect of the next auction.