EDITORIAL COMMENT: Use all tools to hammer speculators, cheats Minister Mthuli Ncube

When assigning blame for recent price rises and for the creation of artificial shortages by diversion of goods to foreign-currency-only tuckshops and retailers, we need to be able to find those actually responsible in the value chain so effective action can be taken.

It can be easy to blame the final retailer, and in some cases quite justly so, but in many cases the blame lies higher up the value chain and the retailer is just as much a victim as their customers. 

So the whole chain, from manufacturer or importer, through distributor to retailer needs to be checked out.

Sometimes it will be just one business in the chain, sometimes two and we might well find cases where everyone is involved in deliberately breaking the law and the only innocent victims are the poor consumers. 

One advantage of the general switch in Zimbabwe from an economy using banknotes to one using electronic transfers is that a lot of records are automatically created in the banks and the money transfer services. 

This allows the Financial Intelligence Unit of the Reserve Bank of Zimbabwe to see just what is going on, and some of what they see only makes sense when you assume that what is going on is not really ethical or legal.

This saw over the weekend four major distributors of goods having their bank accounts frozen, with Minister of Finance and Economic Development Mthuli Ncube making it clear that more faced the same action. 

Freezing accounts does not take away the money in the accounts, but makes it exceptionally difficult to do business before detailed explanation have been given.

In fact it is possible to even operate a frozen account for individual transactions by getting permission for each transaction while investigations continue.

For the honest, if they have been frozen by mistake, the net effect is extremely irritating, but not a disaster. In the past we have seen the honest and legal caught up in scams by others moving swiftly with their accounts and spreadsheets and sorting everything out.

One example was the determination by the Finance Ministry last year to receive certification of value for money before payments were made. 

The result was first those who had clean hands rushing in with their accounts and models and persuading the authorities they were legitimate, and being paid with only a few days delay. 

The large minority who were overcharging had to admit their errors, redo their calculations and eventually were paid. Some were so out of kilter that criminal charges resulted.

Even with foreign currency cash transactions, where bundles of US$100 notes can change hands, there are limits. 

Money has to be moved around, and quite understandably considering the number of robberies in recent years there are many who are reluctant to carry big bundles of foreign currency banknotes around. 

But it does happen and other techniques need to be used.

One additional factor in the present investigations is to involve Zimra, to check on whether those cheating on distribution and pricing are also cheating on taxes. 

In theory Zimra is not worried if you overcharge, or what currency you use. But it does want accurate records detailing just what money you are taking in, and what currency you are taking it in, so that the correct taxes can be charged.

Every transaction usually involves a VAT payment, which the buyer pays but the seller collects. So a seller cheating, and it is the sellers who cheat by not declaring their deals, is not just cheating Zimra, but also cheating their customers by not forwarding the tax they have collected from those customers. Customers need to complain. 

Sometimes tax investigations can be extremely effective. We should remember that the American gangster Al Capone was eventually jailed for not filling in his tax returns, not for murder, extortion, robbery and the like. 

None of us like paying taxes, but the tax burden is just tolerable when we know that everyone else is paying. When some people manage to cheat on taxes it means that the rest of us have to pay more, so we should always be ready to help turn the cheats in.

With the flourishing of small businesses and tuckshops the cheating can amount to a lot of money. This is where the Zimra enforcement might have to be stepped up.

In the latest scam of diversions to the informal sector there could be double cheating on taxes, by both the diverter and by the businesses who receive the diverted goods. 

Another malpractice that has arisen is the use of point-of-sale machines by dealers in the black market, even by street dealers. 

This takes us back to the days when controls and limits on mobile money transfers were minimal, and it was found that the major black-market dealers, the accumulators, were abusing the mobile money system.

Much of that was eventually blocked by some carefully targeted controls, done in a way to ensure that those using the mobile money legitimately were not affected, but that the dealers were hit. 

Businesses still cannot recycle their mobile money takings directly, having to access them through their bank accounts.

Abuse of point-of-sale machines will need a more careful response, since there should be no limits on these in normal business, but there does need to be ways to notice if transactions fed into a bank account make commercial sense or if they amount to money laundering, which is internationally banned. 

Admittedly the laundered money might be to buy foreign currency on the black market, not sponsoring terrorism, but it still needs to be checked out and the checking process can stop all such laundering.

Last year a concentrated attack on the black market worked. That attack had a wide range of programmes, and in combination they beat back the nuisance. 

Fairly obviously a whole group of speculators studied the victory or the authorities and reason and decided what steps they could take to make money by cheating rather producing. 

Once again we will have to have a multiple response, and this is what we now starting to see as the authorities look into each type of cheating and see how to kill the speculation.

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