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Zimbabwe Arrests Top Businessmen for 'Externalizing Foreign Currency' - 2004-05-23

At least 20 of Zimbabwe's top business people have been arrested and jailed during the past two weeks, accused of breaking foreign currency rules.

The latest 13 business executives put behind bars are from one of Zimbabwe's largest manufacturing conglomerates, Treger Group of Companies, in which the ruling Zanu PF party is a major shareholder.

Police say several more of the company's senior executives are out of the country, and will be arrested if they return.

The previous weekend, chief executives of at least three leading companies, one a major supplier to the mining industry, also spent three nights in police cells.

They were taken to court and charged with what is called externalizing foreign currency. They were then released and will face trial at some time in the future.

Externalizing foreign currency means converting Zimbabwe dollars into foreign currency without going through the Zimbabwe Central Bank, as required.

Private sector economist John Robertson says any business that survived 2002 and 2003 was forced to use unofficial channels to handle its foreign currency. He says the Central Bank ran out of foreign currency because exports declined, particularly tobacco, beef, and other agricultural products. In addition, the Central Bank used an exchange rate that over-valued the Zimbabwe dollar to about six times its market value.

During those years most commercial banks, and even Zimbabwe's Central Bank, bought millions of U.S. dollars on the black market to pay for essential imports such as fuel and electricity, as well as other goods and services.

The chief executive of one company said every cent of foreign currency he bought on the black, or parallel, market was used to buy mining equipment imported into Zimbabwe. Another chief executive released from jail last week said all his foreign currency transactions on the parallel market were accounted for in audited statements.

Both men asked not to be identified.

It is not yet clear whether there will be similar explanations by the directors of the Treger Group, who are spending this weekend in police cells.

Early this year, the Zimbabwe Central Bank began foreign currency auctions, increasing the supply available and bringing its price closer to the parallel market rate.