Valentine T. Mushayakurara v Zimbabwe Leaf Tobacco Company (Private) Limited

The respondent, a company engaged in tobacco financing, accessed offshore funding to lend to tobacco growers for the 2016/2017 season. On 19 July 2016, the appellant (a tobacco farmer) and respondent entered into a tobacco growers' agreement, whereby the respondent advanced funds in cash and inputs for crop financing. On 19 September 2017, the appellant signed an acknowledgement of debt for US$101,089.46. After failing to repay, the parties signed a Deed of Settlement on 18 September 2018, requiring payment in annual instalments of US$30,000.00 commencing 31 August 2019. On 31 August 2019, the appellant tendered RTGS$30,000.00, which the respondent rejected, demanding payment in United States dollars. The respondent then applied for default judgment. The key dispute was whether the debt could be discharged in RTGS dollars at parity (1:1) under SI 33/19, or whether it had to be repaid in United States dollars as offshore-sourced funding.

• Whether funds advanced under a tobacco growers' agreement sourced from offshore funding constitute 'foreign loans and obligations denominated in foreign currency' under s 44C(2)(b) of the Reserve Bank of Zimbabwe Act
• Whether the debt could be repaid in RTGS dollars at parity under SI 33/19 or had to be repaid in United States dollars
• Whether the Deed of Settlement constituted a compromise that superseded the original loan agreements regarding currency denomination
• The proper interpretation of s 44C(2)(b) of the Reserve Bank Act and its exception to the parity rate established by SI 33/19

The appeal was dismissed with costs. The Court confirmed the High Court's order that the appellant must repay the debt in United States dollars as per the Deed of Settlement.

Foreign loans and obligations denominated in foreign currency, as contemplated by s 44C(2)(b) of the Reserve Bank of Zimbabwe Act, are explicitly excluded from the deemed parity valuation in RTGS dollars established by SI 33/19 and must be repaid in the foreign currency in which they are denominated. Where funds are sourced from offshore lines of credit for specific purposes (such as tobacco production financing), and the contractual arrangement shows that parties agreed the funds were from offshore sources denominated in United States dollars, the debt must be repaid in United States dollars. Tobacco growers' contracts constitute sui generis contracts that execute offshore funding obligations, and the contract arrangement must be interpreted with reference to the source of funding to preserve the nature of the funds advanced.

The Court observed that allowing payment in RTGS dollars contrary to s 44C(2)(b) would defeat the purpose of ensuring tobacco farmers benefit from offshore funding lines of credit, which would be detrimental to the national interest in protecting and promoting the development of the tobacco industry. The Court also noted that tobacco is a crop sold in foreign currency in the market to enable beneficiaries of offshore funding arrangements to repay their creditors in foreign currency so that creditors can service their offshore funding contractual obligations. The Court distinguished the Zambezi Gas case, noting that case dealt with different circumstances not involving offshore funding obligations.

This case establishes important principles regarding the exception to currency parity rules for offshore-funded obligations in Zimbabwe. It clarifies that s 44C(2)(b) of the Reserve Bank Act creates a clear exception to SI 33/19's parity rule for foreign loans and obligations denominated in foreign currency. The judgment is significant for the tobacco industry and other sectors relying on offshore funding, confirming that such obligations must be repaid in the foreign currency in which they were denominated, regardless of domestic currency regulations. It also establishes that tobacco growers' contracts are sui generis contracts that must be interpreted in light of their offshore funding source and the national interest in protecting such funding arrangements.