Yesterday, NewsDay Business examined the losers of last month’s Supreme Court ruling that upheld Statutory Instrument (SI) 33 of 2019 legislated in February 2019.

SI 33 of 2019 allowed for the settlement of United States debts prior to its promulgation to be done as ZWL, at parity. But, considering how the local currency has been devaluing, creditors have been left with massive losses.

However, while the creditors are nursing their wounds, debtors have been given relief. In this instalment,we look at the beneficiaries of the ruling.


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As explained yesterday, government had a domestic debt of US$8,5 billion at the end of 2018, but the Supreme Court ruling allows government to settle such debt as ZWL$8,5 billion, a significantly lower amount. When the exchange rate is applied, this debt becomes US$480 million in real terms.

With government struggling with a debt overhang due to years of overspending, Treasury has been under pressure both locally and externally to deal with this debt to build investor confidence and access fresh lines of credit.

As such, the Supreme Court ruling has allowed government to address its domestic debt, something not lost on Information permanent secretary Ndavaningi Mangwana.

“There are winners and losers in this, we cannot totally dismiss that, but the court has spoken,” he told NewsDay Business.

When pressed further, he distanced government from the ruling saying the Supreme Court is another branch of the State.

“This one-to-one is not coming from government, it is coming from the courts. Government when it made its decision it said interbank to which the courts have said ‘no, it’s one-to-one’,” Magwana said.

He was referring to how Cabinet, shortly after promulgation of SI 33 of 2019, decided that government debt could be settled with its creditors at the interbank rate at the time of US$1:RTGS$2,50.

In the previous article, Mangwana tried to downplay the benefits of the Supreme Court ruling saying that government was already renegotiating contracts with its creditors, suggesting that it would not be total losses for its creditors.

However, in his analysis of the Supreme Court ruling, United Kingdom-based legal scholar Alex Magaisa said the ruling was a windfall for debtors whose debts were denominated in US dollars.

“The ramifications of the government’s decree (SI 33 of 2019) were felt across the economic landscape and predictably, the drama was soon being played out before judges in the courts of law,” he said.

“This is because debtors suddenly found the energy to pay up their debts — by simply converting their US dollar-denominated debts to RTGS dollar debts at the rate of one-to-one, effectively profiting at the expense of their creditors.”

State enterprises and parastatals

In the Auditor-General’s report on parastatals and State enterprises for 2018, concern was raised on how the entities continued to fall in arrears, thereby remaining unaccountable.

In the report, as at May 31, 2019, 103 out of 179 State enterprises and parastatals had submitted their financial statements for audit.

This is because State enterprises and parastatals have become a huge burden on government’s finances as these entities have failed to account for State funds annually.

Such poor governance saw the parastatals owing US$490 780 504,19 to the tax collector as at the end of 2018.

But, with the Supreme Court ruling, this has translated to ZWL$490 780 504,19, wiping out at least US$463,4 million in debt in real terms for these State entities.

Apart from Zimbabwe Revenue Authority (Zimra), State enterprises and parastatals also have other creditors under Treasury’s Debt Management Unit that have still not been disclosed.

“The court decision affects both debtors and creditors. Given that parastatals have both debtors and creditors they are affected relative to the amount of credit or debt,” said State Enterprises Restructuring Agency (SERA) executive director, Edgar Nyoni.

“As it looks attractive in paying off their erstwhile US dollar-denominated creditors in local Zimdollar currency, it is painful to them when they are paid by debtors in the same currency. The public entity that had a huge creditors’ book relative to debtors’ book seems to benefit more.”

Property owners

Thanks to the Supreme Court ruling, property owners have been accorded a chance to buy properties at very cheap prices.

So basically, if a property owner owed US$5 000 to a property developer, for a residential stand, they now owe ZWL$5 000 or US$279 as an example.

“Property owners may be affected especially where long-term leases have been entered into and tenants are in default,” Real Estate Institute of Zimbabwe president, Alexander Millin said.

“This implies that if and when the arrears are eventually settled time value of money implies the property owner will receive less rental income in real terms.”

He added: “Properties sold in instalments could be affected particularly where the buyer has failed to honour the regular instalment payments. This means that such transactions may be terminated or the seller will have to carry the loss as the arrears will be settled on the one-to-one basis.”

Winners and losers

With all these winners and losers, the question now remains, who stands to benefit more from the Supreme Court ruling.
You decide.