eBusiness Weekly
Jeffrey Gogo
Zimra turned down a request for a block-chain technology learning event that may have prepared the tax collector for further engagement in the nascent but rich cryptocurrencies industry, for tax purposes.
The event was hosted last November by Harare-based cryptocurrency exchange Golix.com and featured a number of local companies as well as some of Zimbabwe’s finest minds in the financial technology sector.
Taking the form of a Summer School, the event guided participants step-by-step to the technology that’s behind digital money called block-chain — basically a public record of transactions that is full-proof and transparent — and the implications for trade in and regulations of such currencies, the over 1 300 of them.
“They told us they were not interested in digital currencies,” said Golix chief executive Tawanda Kembo, of the Zimbabwe Revenue Authority’s (ZIMRA) reaction to his invite, which he personally delivered.
“We had intended to educate organisations, including ZIMRA, on cryptocurrencies. We hoped they would pick up a thing or two,” Kembo told the Business Weekly in an interview this week.
He hoped that the Summer School could help shape policy at ZIMRA, in respect of taxation of cryptocurrencies like Bitcoin, Ethereum, Litecoin, Dash and others, which are traded on Golix.com.
Virtual currencies remain somewhat a grey area for local legislation, floating in between a currency and a commodity, and yet, being neither of the above, at least according to existing Zimbabwean financial laws.
Capital markets regulator the Securities Exchange Commission of Zimbabwe says cryptos aren’t regulated because the law does not recognise them as anything more than a speculative fad.
This means that trading in cryptocurrencies cannot be taxed, as would common stocks where investors pay capital gains on the sale or purchase of equity.
ZIMRA spokesperson Canisio Mudzimu yesterday told the Business Weekly that digital currencies went beyond the scope of the Authority, deflecting responsibility to the Reserve Bank of Zimbabwe (RBZ).
“ZIMRA’s mandate covers revenue collection, facilitation of trade and travel and advising the Government on fiscal matters,” Mudzimu said, in emailed responses.
“The management of currency issues is the preserve of the RBZ. In that regard, any overtures seemingly in ways not advised by the responsible authorities would not be prudent, especially taking into consideration indications that the operations of cryptocurrencies were not covered by the law,” he said.
The tax collector has in the past told this publication that Bitcoin — and the rest of its crypto cousins — will be taxed, even though it doesn’t know clearly how.
When regulation eventually comes to the Zimbabwean shore, taxation on cryptocurrencies could take on the form of the one on shares, which as a financial asset can be bought, held or sold, and then taxed on income generated.
Digital currencies are, in this sense, tradable securities liable to capital gains tax.
For Kembo, Zimbabwe will likely treat cryptos more as a currency, and not commodity, as has happened elsewhere, in economies currently grappling with regulation of the same.
The “Dancehall” CEO that holds no cryptos
It is often said not to judge a book by its cover. But in business image is everything. And there, covers matter. Or do they?
Kembo, the Golix chief executive, a software engineer, betrays this stereotype.
His blue-checkered shirt hung loosely above the khaki-white cargo pants, and on the one side the shirt sleeve rolled-up mid-way through his right arm, and the other flying, unfastened. Spiky hair anchored in the feet by blue canvas shoes to match the shirt complete this dark, shy, bespectacled CEO’s ragged look, that on another day could easily pass for the now ubiquitous “ghetto youth”, of the ZimDancehall mania.
But the 30-year old Kembo represents a new generation of chief executives that do not need to wear executive suits to work. They wear ideas. His style fits perfectly into the image of the modern technological geek epitomised by Zuckerberg’s bottomless collection of the grey T-shirt, the ultimate symbol of simplicity and humility, that belies the often big ideas and huge wealth of the invidual wearing them.
Until two years ago many Zimbabweans had struggled to open accounts with foreign virtual currency exchanges because of the 2001 trade and financial embargo imposed on the country by the US, a restriction respected by most of its peers in the industrialised world.
Tawanda Kembo is credited with changing all that, introducing crypytocurrencies to the domestic market under an organised system, and allowing participation by locals in ground-breaking financial technology, using locally accepted notes and coins. Even though the Golix trading platform remains a work in progress.
There’s a claim Kembo makes, that he built his first software program at the young age of 13, because “engineering flows through my blood, a fourth generation engineer, from my father and my father’s father, and his father before, who were all civil engineers.”
And how in later years while reading for a computer science degree at the University of Zimbabwe was contracted by the same institution as a web developer in his first year, which ended rather badly. He was sacked.
“I would rather we didn’t discuss this specific issue,” Kembo weaved his way out of the conversation, with a sly, naughty smile. But when after leaving his job with a local company that built security systems for hospitals he started setting up a few small enterprises, often folding within months of operation, Kembo had dedicated himself to “bringing financial autonomy to the peoples of Africa” through technology.
“We believe cryptocurrencies make sense for countries in Africa, where they could be used to facilitate online and foreign payments more easily and speedily, which isn’t really an issue say for someone in America,” he said.
“I knew at the time I first heard about Bitcoin in 2012 that this would be the solution for making cheap international payments from Africa. I had personally been charged $50 to send $50 abroad by a local bank,” Kembo narrated.
Back in 2014, Kembo had teamed up with sustainable development expert Verengai Mabika, to found BitFinance Ltd, which owns Golix, before marketer and PR practitioner Taurai Chinyamakobvu brought in the money to run the operation. Five directors of diverse backgrounds sit on the BitFinance Ltd board today. We were here at his Batanai Gardens office in central Harare, one fairly big room, a few desks and computers scattered about and chairs terribly scattered, discussing the potential of cryptocurrencies in Zimbabwe.
Leading me away into a corner that from the look of things must be the CEO’s “private” office space, Kembo says they are moving offices. His staff has just got bigger, a complement of about 17 now, all but two in their twenties, after recent recruitments. Across the isle, a new office is under renovation, and the name Golix imprinted in bold against the blue wall. A sign of a company going somewhere, perhaps?
But that was before the youthful Golix chief executive made one outrageous remark: “Cryptocurrencies are very risky investments. I do not invest in cryptocurrencies because I am risk-averse,” Kembo claimed, the irony of it all lost on him. It was a massive anti-climax to the discussion, a contradiction of unimaginable proportions. Here was a man building a digital currency business, operating a crypto-exchange and not practicing what he preaches.
A little skepticism is even less surprising considering Kembo appeared edgy when asked about the kind of protection or compensation available to investors keeping their funds on Golix, in the event of a hack, malware or fraud. “Invest responsibly”, Kembo advised. “We try to let people know the risks involved”.
This would be cold comfort to digital currency investors here. The Reserve Bank of Zimbabwe has since warned crypto investors are doing so at own risk, and that they will have no legal protection from or against any regulator.
“I advise people not to invest in cryptocurrencies. But a lot of people would go on to invest anyway. It is better to look at cryptocurrencies as more of a currency that is useful for making online or international payments, not as an investment, a store of value,” Kembo concluded, apparently satisfied with himself.
