EXCHANGE CONTROL DIRECTIVE RTO2/2018, 13 Febnuary 2018 “The Chief Executive Officer Bank Location Street HARARE ATTENTION: CHIEF EXECUTIVE OFFICER Dear Sir/Madam, DIRECTIVE ISSUED IN TERMS OF SECTION 35 (1) OF THE EXCHANGE ‘CONTROL REGULATIONS STATUTORY INSTRUMENT 109 OF 1996 INTRODUCTION 11. Reference is made to the January 2018 Monetary Policy Statement announced by the Governor on 07 February 2018. In order to operationalize the measures: announced therein, Authorised Dealers are advised as folows; Enhancing the Nostro Stabilisation Facilities, 2.1. Authorised Dealers are advised that the Reserve Bank is enhancing the Nostro ‘Staiisavon factves to support the folowing, 1Page22 23 24 25 a) Ring-fencing of International Remittances In order to Incentivize recipients of International remittances and to promote bonking of such funds, Authorised Dealers arc required to put in place effective ‘measures to ensure that all international remittances and individual foreign currency inflows received through normal banking channels are available to beneficiaries for us. 1b) Payment for Critical Imports ‘Authorised Dealers are advised that part of the Nostro Stabilisation Facilities shall be utlised for critical foreign payments related to fuel, medications, electricity, ‘cash imports, and industrial raw materials for the manufacture of cooking ol, other food products, packaging and other critical inputs. This will be done through the current system of foreign currency allocation mechanism. Authorised Dealers: should therefore, ensure that the funds are utilzed In Ine with the purposes for Which such funds are allocate, ©) Enhancing the Zimbabwe Portfolio Investment Fund In order to give comfort to portfolio investors on the remittabilty of thelr investment funds, Authorised Dealers are advised that all portfolio investment receipts shall be ring enced to meet portfolio investment outflows. While both the Initial capital invested, capital appreciation and dividends shall all be settled, priority shal frst be given to the remittance of inital capital Invested, after which capital appreciation and dividends shall be settled. ‘Banks (Custodial banks) administering the Portfolio Investment Fund are therefore, reminded to submit to Exchange Control on a weekly basis, returns that clearly show inflows and outflows of inital capital invested, capital appreciation and 2\Pagedividends. In addition, Authorised Dealers shall be required to keep an aut tral ofall portfolio investment receipts and payments for Exchange Control monitoring purposes. 3. 7% tax-free savings bonds on non-resident transferable funds 3.1. In order to preserve the value of investment returns (e.g. dividends, profits ete) ‘and other remittable funds awaiting repatriation (eg. funds in approved Transitory/Collection Accounts), Authorised Dealers are advised that such funds. ‘an now be invested in the 7% tax-free savings bonds offered by the Reserve Bank, 3.2 To ensure smooth implementation of this policy and to accurately determine qualifying amounts, Authorised Dealers are requested to submit the following, Information to Exchange Control by Friday, 23 February 2018 as per set format; ‘Table 1: Information on Remittable Funds z Enhanced Export Incentive Scheme for Horticulture, Cotton, Macadamia nuts and Gold 4.1 Authorised Dealers are advised that the current export incentive scheme shall be ‘maintained to promote export competitiveness at the current thresholds whilst the ‘export incentive for hortcuture, cotton, macadamia nuts and all gold producers has been increased to 10% with immediate effect. Tobacco growers shall receive {an export incentive of 12.5% as already announced, 3PageExport Promotion and Development 5.1 To ensure increased activity towards boosting the country’s exports, given their contribution to foreign currency generation, Authorised Dealers ate required to compliment the export facties and export promotion initiatives offered by the Reserve Bank, by accelerating efforts towards creating exporting capacity at bank level. In this regard, all Authorised Dealers must furnish Exchange Control with their action plans regarding contribution to export promotion and development by 02 March 2018. 5.2. The action plans must show in clear terms, the measures putin place to promote ‘exports at bank level with the measurable objective Deing the growth in bot the ‘number of registered exporting entities and exports value per bank. 6. Upward Review of Foreign Currency Retention Thresholds 6.1 Authorised Dealers are advised that foreign currency retention forall exports of jg00d6 and services, with the exception of minerals, tobacco and cotton shall remain at 100%, The retention threshold of expert proceeds for privately ‘owned clamond firms, platinum and chrome producers has been reviewed ‘upwards to 35% while the retention threshold of export proceeds from gold, ciamond from publicy-owned firms and tobacco shall remain as per current policy. Table 2: Export Retention Thresholds for Various Sectors | Platnum, Chrome, Privately owned damond frms ‘Other minerals (@clding acid & diamonds rom pubic owned Fras) | General agrcuture, _forieature, — mancfachuing, tourism, lelecomunications, anspor, seivies atk ay UU Secure OL mentioned above 50% 100%6.2 The retained foreign currency recelpts shall be avaible to the exporter for own business use within 14 days of receipt of such preceeds, after which they shall become available for use by the rest of the administering bank’s clients, In ine Uith the Foreign Payment Priority List Guideline. Exchange Control shall continue to closely monitor the utilisation to ensure that the foreign currency is efficiently Used towards the productive sectors of the economy. In addition, Exchange Control shall revoke ths retention threshold to exporters and banks that abuse this ‘arrangement through inefficient utilization of foreign currency receipts. 6.3. In order to effectively account for the export incentives pald out to exporters of ‘goods and services, the EC-Form ~ Foreign Currency Receipts has been amended ‘accordingly. Authorised Dealers should therefore, adopt this new reporting format (Annexure 1). Upward Review of Threshold far Exports by IF iduals 7.4. In order to improve the ease of doing export business with immediate effec, the threshold of the value of exports by an individual without completion of 2 Form (CDI has been reviewed upwards to US§2,000. The individuals are, however, ‘expected to repatrate back into the country the resultant export proceeds. 7.2. All commercial exports by corporatesfinstitutions shall continue to require the ‘completion of Form CD1, regardless of value of export. 8. Downward Review of Cost of Export Documentation 8.1 Authorised Dealers are advised that the administrative penalty applicable to ‘porters with overdue earnings (red Ragged) has been reduced from US450 to USS20 per Form. Exporters without overdue earnings (green flagged) shall access S]Page‘export declaration Forms at US§S. The CEPECS system is being configured to reflect this new flagging system, Increasing tobacco and gold support facilities ‘8.1 In order to enhance foreign currency inflows from tobacco and gold production, the tobacco input finance facity has been increased from the US§2B milion disbursed in 2017 to USS70 milion, wile the gold support facility has been increased from USS74 millon in 2017 to US150 millon 10. Purchase of green leaf tobacco using locally sourced funds 10.1. The Exchange Control Tobacco Finance Order, Statutory Instrument 61 of 2004, requires tobacco merchants to source offshre funds for the purpose of buying ‘green leaf tobacco. Deserving tobacco merchants who have demonstrated their inability to secure offshore lines of credit, shal, however, be granted Exchange Control authority to purchase tobacco from the auction floors using local resources up to Exchange Control approved limits after furnishing the following: (), Documentary proof of inabilty to secure offshore lines af cre; (W) Traceable confirmed orders or correspondence indicating engagement With prospective customers; and (Wi) Tobacco Industry Marketing Board (TIMB) registration certificate. ((v) TIME recommendation. 10.2. The dispensation granted shall be solely for the purpose of buying tobacco for processing and export. All the resultant export proceeds from the export of such processed tobacco, shall be repatriated back tothe country and administered in line with current policy on the treatment of expatt proceeds retention. Authorised Dealers should advise ther clients that this dispensation is not meant to ensure 6\Pagering-fencing of export proceeds for the specific buying entity's foreign currency requirements. 414. Purchase of Gold by Jewellery Manufacturers for value addition ut In order to enhance jewellery manufacturers’ contribution to foreign currency earings, Fidelity Printers and Refiners (FPR) shall proitise the sale of gold towards export oriented jewellery production. Where the jewellery manufacturer purchases gold from FPR using RTGS funds, upon export of the jewellery, the ‘manufacturer shall retain 35% ofthe export value for own use within the 14 day: retention period. The balance should be transferred to the Reserve Bank nostro ‘account. Exchange Control further advises that approved jewellery manufacturers shall ‘subject to avallabilty, be availed not more than 3 kgs quarterly for the local market. The following details shall be submitted to Exchange Control by Jewellery manufacturers for authority to purchase gold from Fidelity Printers and Refiners through Authorised Dealers; Valid licence from the Ministry of Mines and Mining Deveopment; ‘Audited financial statements for the preceding year and / or management accounts; li, Jewelery manufacturers audited Gold utilisation book; lv, Tax clearance cetiicate by Zimbabwe Revenue Authority (ZIMRA); \V. Physical address where the value adéition or processing of Gold is done; i, Jewellery Council of Zimbabwe recommendation; Vi, Ust of authorised signatories, clearly indicating full name, designation and the signature; vill, CR14 Form indicating the names of Directors; Ix. Evidence of confirmed export order (s) in cases were the application to purchase Gold is meant for jewellery exports. 71Page411.3 For subsequent applications, the jewellery manufacturer should provide Exchange Control with Gold Purchases and Utlisation Return (Annexure 2), accounting for the previous gold purchase, This must be duly signed by the companys Managing Director or CEO or their authorised proxy. 12. Establishment of an Investment Desk to Cater for the Diaspora Investors 424 Authorised Dealers are advised that the Reserve Bank has established a dedicated desk to assist and faciitate investment proposals by Zimbabweans in the Diaspora. The purpose of the desk isto help ensure speedy consideration of| investment proposals, as well as structure various investment products for the Diaspora. Contact detals for Diaspora Investment Desk are: Ena iasporadesk@rbz.cc.20 Telephone +263 4 703000, Department : Exchange Control 413. Issuance of Diaspora Tobacco & Gold Production Financing Bonds 13.1_In order to allow participation of Zimbabweans in the Diaspora in the funding of tobacco and gold production, the Reserve Bank shal issue Tobacco and Gold Production Financing Bors lo viaspora iwestors, Detailed modalities on Une Bonds shall be availed to the market in due course, 14, 7% tax-free Savings Bond to Zimbabweans in the Diaspora 44.1 In order to allow greater participation by the dlaspora community in. the economy, the Reserve Bank is offering @ 7% tax-free savings bond to Zimbabweans in the diaspora. Ihe funds to be mvested into the savings bond BiPageshould emanate from offshore and should be transferred into the country through normal banking channels. 15, Payment Arrangements for the Sale of Immovable Property 45.1 Exchange Control has noted the iregular transactions in the real estate sector where property sales are being settled offshore. Stakeholders such as real estate ‘agents, property developers and conveyancers are advised that such practices {are not consistent with current Exchange Control rules and regulations. 15.2 All proceeds from the sale of immovable properties in Zimbabwe must be settled locally and accounted for through normal banking channels prior to utilization, Consistent with the thrust to motivate inflows into the county, Authorised Dealers must put in place measures to ensure that such foreign currency receipts are available to the beneficiary for use. Exchange Control shall, however, consider on a case by case basis exceptions to this policy. 16. Payment Arrangement for Service Fees 46.1. In terms of current Exchange Control policy, local companies receiving services from external service providers are permitted to remit payments up to 3% of ‘annual turnover. To enhance monitoring of foreign service payments, all corporate recipients of external services are required to submit to Exchange Control, bi-annual reports dearly stating the nature of services received and ‘amounts remitted to service providers to facilitate ex-ante and ex-post validation by Exchange Control. 5|Pare47, Purchase of Air Tickets by Resident Zimbabweans. 17.1 Exchange Control has noted the increase in Real Time Gross Settlement (RTGS) transactions for the purchase of air tickets through a system called Sold Out Ticketed Outside, "SOTO". This arrangement entails purchase of tickets hy locals through RTGS on behalf of beneficiaries who wil be outside the country and whose fights originates and terminates outside Zimbabwe. 17.2 In view of the need to efficiently and effectively manage foreign exchange, with Immediate effect, travel agents or airines operating in Zimbabwe shall only make use of local resources to process sales of arline tickets by locals on behalf Of beneficiaries whose travel originates end terminates in Zimbabwe. Where the tickets are for flights outside Zimbabwe, funding should be from offshore Exceptions to this policy shall requir pri Exchange Control approval. 18. Presidential Amnesty on Externalised Foreign exchange and Assets 48.1 Authorised Dealers are advised that the period for complying wth the: Presidential Amnesty remains 28 February 2018. The Amnesty pertains to externalised foreign currency (excluding demonetized Zimbabwean curency) and assets bought outside Zimbabwe using Zimbabwean resources through acts or commissions which includes: 1. Export of any currency above permissible thresholds; |. Smuggling of gold or other precious stones; li, Non-repatriation of export proceeds due to the country; Undervaluation of exports and overvaluation of imports and retention of funds offshore; \¥. Trade mis-invoicing by importers to evade customs duties, VAT, or income taxes; vi. Non-return of temporary exports and disguised exports of samples; 10/Pagexl. xi ai, Payments for imports of goods and services whose corresponding value has not been received into the country; Remittance of funds used for investments offshore without Exchange Control approval; Offshore retention of funds realised from sale of local assets for ‘example, shares in local companies to foreign residents; Offshore retention of investment income such as dividends, profits and ‘management fees due to the country; Remittance of funds for repayment of fctitious offshore loans; Fictitious and unreasonable management fees and technical fees; Settlement of purchase prices offshore, for an Immoveable property situated in Zinbabwe; Operation of illegal offshore bank accounts by individuals end ‘companies funded from Zimbabwe; Offshore retention of sale proceeds realised from smuggled goods or ‘minerals; and ‘Any other unauthorised offshore retention of funds without Excharge Control approval 18.2 The Bank is offering 7% tax-free savings bonds for funds to be repatriated under the amnesty dispensation where funds were extemalised under the auspices of free funds. Where such funds were used to acquire assets, the assets should be deciared to Exchange Control Authorised Dealers are advised that the Amnesty: does not affect funds and assets acquired by Zimbabweans inthe dlaspora using funds generated in the Diaspora, 18.3 Authorised Dealers are advised to treat this as an amnesty which seeks to correct pas: Exchange Control errors of omission and commission and no legal ‘ection will be taken against those who volunteer such Information end) comply [Page19. 19.4 19.2 193 With this Presidential Amnesty. The Bank has revisited Statutory Instrument 145, of 2017 to ensure consistency with this amnesty arrangement. Review of Authorised Dealership Licensing Framework Under the current Exchange Control Compliance Rating System (EXCORS) framework, Authorised Dealership licences are renewed on an annual basis based on compliance with Exchange Control Rules and Regulations. In order to Improve operational and administrative efficiency in the monitoring and renewal of Authorised Dealership licences, the renewal peried of Authorised Dealership licenses has been reviewed to two (2) years with immediate effect. During the two (2) year period, Exchange Control shall conduct ful scope, offsite ‘and ad-hoc inspections on each Authorised Dealer to inform an interim rating hich shall be communicated annually. & fina rating shall be issued at the end Of the two (2) year period to inform renewal of the Authorised Dealership licence. Authorised Dealers are therefore advised that a score below the ‘minimum EXCORS score for ether the interim or final rating wil result in the ‘cancellation of the Authorised Dealership icence as is the current case, ‘The licensing fees remains US$1,000 for the Head Office (annual fee) and 1USS500 for the branch (annual fee) but will now be payable at the time of renewal of the Authorised Dealership licence. In the spirit of financial inclusion, Exchange Control will on a case by case basis grant waivers on licence fees for branches located in rural areas. Foreign Exchange Management Return Further to our Exchange Control Directive RS119 dated 04 August 2017, the: Foreign Exchange Management return has been amended to enhance monitoring 12|Pagecof foreign exchange receipts and utlisation, Authorized Dealers are with Immediate effect, now required to submit the return using the new format (Annexure 3). 21. Compliance by Authorised Dealers and other Market Participants 211 Authorised Dealers and other market perticipants are reminded to ensure compliance with Exchange Control Rules and Regulations at all times. The Bank holds compliance as key in ensuring the effective and efficient management of the country’s foreign exchange and assets as clearly provided for in the Exchange Control Act (Chapter 22:05] and ancilary regulations. Accordingly, Exchange Control will not hesitate to impose stiff penalties for non-compliant market participants. Please be guided accordingly. HOW psd F. Masendu Director EXCHANGE CONTROL cc: Exchange Control Head ‘Treasury Head 3|Page