IS 142 and RU102/2019: Where do NGOs go from here?
Posted on 01 July, 2019 at 12:00
By Luxon Kalonga
A quite hectic Monday it was, I checked my planner for the week and one of the key expected outputs was the successful hosting of a Breakfast Meeting on the effect of recent taxation regulations on NGOs. I had muted my Whatsapp so I could get organised at least for the first half of the day. A colleague shouted from the other end of our open plan office, “Have you read the SI?” Looking a bit confused, I reluctantly chuckled to brush him off. “Check your Whatsapp”, he suggested. Little did I know I would meet a document that was to throw my whole week’s plan out of balance! A hazy image reading ‘Statutory Instrument 142 of 2019’ gave me a shock of the week. Despite a previous headline that a new currency was to come in 9 months, the Zimbabwe Dollar had just been resurrected and the Multiple Currency Regime abolished.
What struck me most about SI 142 was clause 2(2) which stated that the Zimbabwe Dollar would be the sole legal tender in all transactions. At that point I construed that to mean all payments, including organsiations’ payments to employees would have to be in the rejuvinated local currency. The breakfast meeting meeting we had been planning became completely irrelevant! I thought of writing an article about the Statutory Instrument but I sensed there would be more clarification just like what happened with the introduction of the 2% Intermediated Monetary Transfer Tax last year. A day later, the Reserve Bank of Zimbabwe (RBZ) issued Exchange Control Directive RU102/2019 to Bank CEOs but in this social media age, I bet the directive was first received by a street dealer.
Information that has been disserminated to the market through various media has brough better clarity on the Zimbabwe Dollar.
All transactions within Zimbabwe will now be settled using the Zimbabwe Dollar (ZWL) as the sole legal tender. All foreign currencies can only be used to settle international payments save for the payment of customs duty and VAT for the importation of “luxury goods”. Payments to international airlines will also be allowable in foreign currency.
The Exchange Control Directive gave a
window period of up to 30 June 2019 for the receipt of local foreign currency
deposits in Domestic Nostro FCA accounts. Thus, in the past week NGOs were able
to transfer their employees’ salaries and could make Nostro to Nostro payments
to other service providers. After this date, all deposits into the Domestic
Nostro FCA Accounts would have to be from foreign sources only. However, a
tweet by the Central Bank
It should however be noted that, as per a
successive tweet by the Bank
The Directive also maintained the maximum of US$2,000 for the exportation of cash in person. Therefore, where NGO employees need to travel abroad, they can only carry cash of up to US$2,000. It would therefore be necessary that all costs for travel, accommodation and other applicable expenses to be incurred abroad to be settled before the individuals travel in order to minimize the amount of cash they have to travel with. Alternatively, VISA or Mastercard services can be used.
The previous US$10,000 limit on Bureaux de Change transactions was removed to allow the foreign exchange dealers to trade currencies without any limits. It will now be possible for NGOs to change any amount of foreign currency in their accounts into ZWL in order to implement their activities within Zimbabwe boarders.
It is clear that we are now in a completely different environment and NGOs would need to quickly adapt to ensure they continue impacting our societies. We outline below some of the changes that would need to be implemented for swift adaptation.
Adjustment of Budgets and Reporting Templates
Most of the existing grant agreement were based on the scenario that local NGOs would be spending donor funds in foreign currency, hence the budgets and reporting templates were designed as such. The existing reporting templates would need to embed both ZWL and the foreign currency to enable currency conversion. NGO should therefore engage their donors for clarity on the necessary adjustments to periodic reporting. Upcoming budgets may need to be prepared in ZWL and converted to USD or other currency. It would be necessary to also take into account the anticipated inflation preparing budgets in local currency. Budgeting in volatile currencies needs to be more flexible as price changes are likely to occur frequently. Therefore, the budgets would need to be flexed periodically, for example every quarter, in order to remain realistic. Alternatively, budgets can still be prepared at current foreign currency levels and the local currency equivalent budgets prepared by indexing the monthly local currency amounts using expected future exchange rates.
Operating in a volatile currency environment requires tight treasury and cash flow management. Tight cash flow planning should be carried out on a monthly, even fortnightly basis to establish the urgent local currency needs. NGOs would only need to liquidate their Nostro FCA balances to obtain local currency fortnightly or monthly to meet the immediate requirements.
Value for money also becomes crucial in treasury management. Whenever NGOs need to change foreign currency to local currency, they would need to shop around the reputable financial institutions to obtain the best available USD/ZWL rate. The competitive bidding guidelines established in the organisations’ policies would be crucial.
As we have entered into this “Mono-currency era”, we are likely going to receive further clarification on the operation on the Zimbabwe Dollar. What remains clear is that NGOs have to brace for change and continue operating despite the challenges. KFM Consultants will be available to assist the organisation sin every way possible to ensure continued impact.
On the 2nd of July 2019, KFM Consultants will be hosting a breakfast meeting on Operating in the Zimbabwe Dollar Environment.
Reserve Bank of Zimbabwe. (2019, June
25). Exchange Control Directive RU102/2019. Directive Issued in Terms of
Section 35(1) of the Exchange Control Regulations Statutory Instrument 109 or
1996. Retrieved June 28, 2019, from
Reserve Bank of Zimbabwe. (2019, June 24). Press Statement on Strengthening the Interbank Foreign Exchange Market. Retrieved June 28, 2019, from https://rbz.co.zw/documents/press/Press-Statement-on-Strengthening-the-Interbank-Foreign-Exchange-Market-.pdf
ReserveBankZIM. (2019, June 28). Cash withdrawals; Payment of salaries in foreign currency; Under the newly announced policy measures, salaries for NGOs remain payable in foreign exchange where funding for such NGOs, International Organisations, is from offshore. [Twitter Post]. Retrieved June 29, 2019, from https://twitter.com/ReserveBankZIM/status/1144491334541049858
ReserveBankZIM. (2019, June 28). In cases where the holders of such funds intend to settle domestic transactions, the funds shall be liquidated at the prevailing interbank market to facilitate payments in ZWL, which is now the legal tender. [Twitter Post]. Retrieved June 29, 2019, from https://twitter.com/ReserveBankZIM/status/1144493211634634752
The Government Gazette. (2019, June 24). Statutory Instrument 142 of 2019. Reserve Bank of Zimbabwe (Legal Tender) Regulations, 2019. Retrieved June 28, 2019, from https://www.zimra.co.zw/index.php?option=com_phocadownload&view=category&id=25:statutory-instruments&download=1099:s.-i.-142-of-2019-reserve-bank-of-zim-legal-tender-regulations-2019-1&Itemid=1