SI 133 of 2016: Whether or not it can withstand constitutional scrutiny in a competent court of law

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ON the 31st of October 2016, the President of Zimbabwe Robert Gabriel Mugabe gazetted S1 133 of 2016 which provides a legal framework for the introduction of bond notes as acceptable legal tender in Zimbabwe. S.I 133 of 2016, Presidential Powers (Temporary Measures) Amendment of the Reserve Bank of Zimbabwe empowers the central bank to issue out bond notes using its preferred design, form and material. The bond notes are meant to operate as a ‘surrogate currency’ to the United States dollar which implies that for all intents and purposes it has the ‘same value’ as the United States dollar.
First and foremost it should be noted that the in terms of Section 2 of the Constitution, the Constitution is the supreme law of the land which in other words means that the Constitution is above even the President and any law or practice inconsistent with it is invalid to the extent of the inconsistency. The President grabbed the function of Parliament by amending section 44 of the Reserve bank of Zimbabwe Act to introduce section 44B which provides as follows:
 “1. The Minister may by notice in a statutory instrument prescribe that a tender of payment of bond notes and coins issued by the Bank that are exchangeable at par value with very specified currency other than Zimbabwean currency prescribed as legal tender for the purposes of section 44A shall be legal tender in all transactions in Zimbabwe to the same extent as that prescribed currency” and
‘2. Section 42 shall apply to bond notes prescribed under subsection (2) as they apply to banknotes”
It is clear that the President grossly exceeded his powers and in so doing violated the Constitution. Constitutionally, the proper course would have been for Parliament to create a framework for the introduction of bond notes by amending the Reserve Bank of Zimbabwe Act pursuant to a monetary policy.
In terms of Chapter VI of the Constitution, the primary-law making body of Zimbabwe is Parliament which consists of the Senate and the National Assembly. The President has the power to assent bills passed by Parliament before they become law. In terms of section 131(1) of the Constitution, Parliament’s legislative authority is exercised through the enactment of Acts of Parliament.Advertisement

However, the President’s function in this regard is limited to approving or disapproving content deliberated upon by Parliament after extensive debate and scrutiny. The President’s role is not, in the first place, to decide what laws should be in place – such an approach would obviously affront the time-honoured separation of powers doctrine because it would mean that the President rules by decree which is not permitted by the Constitution.
In terms of section 134 of the Constitution, Parliament may, in an Act of Parliament delegate power to make subsidiary legislation in accordance with the powers granted in an Act of Parliament. However, the chief qualification here is that Parliament’s primary law-making power must not be delegated or assigned to anyone else. In other words, Parliament cannot arrogate or assume to another agency of Government – and especially not the President, the power to make, amend or repeal Acts of Parliament.
The reason behind this limitation on the scope of subsidiary legislation is to avoid a situation where the President circumvents or dodges the expedient of Parliament to create laws in a manner that raises the potential for the abuse of state power. It also seeks to ensure that Acts of Parliament (primary legislation) go through the rigours and robust Parliamentary debate, public hearings and scrutiny by the Parliamentary Legal Committee to ensure that a law that is passed is a “good law.”
It goes without saying that any law ‘passed’ in breach of the Constitution – including the bond note regulations – is ultra vires the Constitution and accordingly invalid and of no force or effect.
It is interesting, but at the same time worrying too, that the President invoked the expedient of the Presidential Powers (Temporary Measures) Act as the “enabling law” to pass the regulations. There can be no doubt that the said Act is ultra vires section 134 of the Constitution as it purports to give the President some primary law making power and, on that basis alone, the resultant regulations are invalid.
It should also be noted that, in terms of section 6(1) of the Presidential Powers (Temporary Measures) Act, the lifespan of any regulations made in terms of the Act is one hundred and eighty-one (181) days. The clear interpretation of this is that the legal framework for the “bond notes” will expire within 181 days. The Act, on its own, is unconstitutional as it only permits for the making of urgent regulations. This is compounded by the fact that the President did not even give the Minister an opportunity to craft the bond notes regulations but “deemed” him to have done so in section 3, where he also purported to retrospectively legalise bond coins.
Additionally, it can be argued that it is grossly irrational, thus a violation of section 68 of the Constitution, for the President to decree an exchange rate of 1 is to 1 between the bond note and the US dollar. The basis that was used for such a valuation of Zimbabwean paper is unknown. The President does not have authority to determine the rate for the bond notes against the US dollar. Exchange rates are determined by basic supply and demand factors. The demand for a currency is influenced by factors, such as interest rates, economic growth and inflation.
The Zimbabwean case is outside of the textbook. Here is a government wanting to have two significantly different currencies trade at 1:1 inside its borders. The same currencies can’t trade at the same rate outside of Zimbabwe because one of them is not a fungible currency, nor tradable outside of the country. The interplay between imports and exports will certainly impact the value of the surrogate currency due to its inability to trade internationally.
In economic theory, it is impossible to hold two different currencies at par without creating shortages and illegal markets as long as the currencies are materially different in properties/ functions and fundamentals that support them. Laws cannot adequately regulate a market unless they accommodate the judgement. It is also noteworthy that no measures have been put in place to curb the excessive printing of this money. The law as it stands allows the government to print as many of these bond notes as they need or want to. Thus no safeguards are in place to curb inflation.
To sum up, it is noted that the regulations are unconstitutional and thus an illegality. The people of Zimbabwe should not accept the SI 133 of 2016 as the President did not follow proper procedure. It is possible to seek an interdict to stop the circulation of bond notes.