The Zimbabwe ‘Game of Thorns’ – Who really is to blame: The MoF vs the Governor

By Chenayi Mutambasere

I had started to write about 10 things the Ministry of Finance (MoF) can do differently (look out next issue) when in my research I encountered the glaring deadly sins committed by the MoF and the Governor of the Reserve Bank of Zimbabwe (RBZ).

Between them Minister of Finance and Governor of the Reserve Bank of Zimbabwe have made a real dogs dinner of the Zimbabwean economy. I mean before we venture into international perception they have created an economy whereby prices literally change on your way to the till.

Never mind planning for your children’s future when you can’t plan the next 2 minutes of your life because prices are likely to change.  So here I will examine the 4 deadly sins committed and hopefully decide who really is to blame or are they jointly culpable?

Central to understanding who is to blame is deciphering who is responsible for what decisions.  That said in a government whereby investors are interviewed directly by the president the reality of roles and responsibilities is vaguely implemented.

The central bank i.e. the Reserve Bank in this case is an independent authority whose core responsibility is being a custodian of the economy. Independent being in relation to being non partisan – they  exist to make sure the economy is assured as well as safeguarding citizens from profiteering and risk taking banks.

In some countries the central bank is the lender of last resort as has been seen in England in recent years where the central bank has had to bail out some banks. The reserve bank undertakes economic research and design a monetary policy that is both strategic and responsive.

Often the Governor of the Central Bank is employed on having a proven record to design and implement a sound monetary policy.  It’s also worth highlighting that the central bank is also the government’s main banker holding the government’s main account.

On the other hand the Ministry of Finance (MoF) is a government role responsible for managing the government’s financial assets, proposing economic and financial policy and coordinating and supervising these actions in line with that country’s constitutional law.

Their function is to prepare the fiscal budget and monitor compliance as the ultimate guardian of financial prudence. That is they have a big brother role over other ministries to ensure that they are spending within budget etc. and using finance in a prudent legal way.

Examining 4 actions committed by the MoF and governor let’s establish how and why we apportion them a share of the blame for the economy’s demise.

• The curious case of the treasury bills

Treasury bills are securities issued by the government  to increase its borrowing, the lenders benefit from low risk and short term nature of these.  Between 2017 and 2019 the central bank issued USD $971million treasury bills to raise the money that was owed by government.

The bills were issued in a private auction and the funds raised apportioned to $840million agriculture supplies, $51million Malaysian Airlines (the planes that never flew) and $80million to recaptilise the state owned Zimbabwe Consolidated Diamond Company (as first reported by Desmond Kumbuka of Bloomberg).  

The treasury bills were approved post issuance by the then MoF, Patrick Chinamasa. Pertinent question for governor – WHY?  What were these bills that were being cleared for command agriculture and indeed what was the return on investment. Who were they issued to?

To the incumbent MoF why in more than 1 year of his tenure did he not attempt to investigate further as to these treasury bills and take to task the governor on his actions.

The other glaring matter is why the reserve bank was allowed to step out of its remit and conduct deals on behalf of the government? The issuing of these bills is now being discussed in parliament implicating several businesses including Sakunda Holdings in the process. 

The other issue with the issuance of the treasury bills is the increased USD supply. This is in direct conflict with the arbitrary announcement of using a local national currency in June.  The existence of the USD in the economy will mean that the newly announced ZWL or zwd will continue to chase the USD which will result in high exchange rate. Why did the MoF not consider this ahead of his announcement?  Why did the governor support an expansionary policy in this instance? 

• Lack of Willingness to Exorcise the Corruption Demon  

I once claimed ahead of the Bond notes being first announced that there is little point putting new money in a pocket with a hole. You will continue to stay broke. It seems there is little appetite from either the governor or the MoF to reduce corruption.

Both are constitutionally ordained to exorcise this evil but neither seems willing to do it? The most public scandal would have been the case of NSSA where it is estimated that US$175million was prejudiced by an individual working for NSSA. This scandal saw a lot of money being transferred from the NSSA pension fund to several contractors. 

The NSSA audit report revealed that US$304million was awarded to a company that was less than a week old (Housing Africa Corporation) for them to build 8000 homes but to date not a single property has been erected from this fund.

NSSA being tasked by the government would have fallen under the direct remit of the MoF who should have picked up any non-prudent actions and made a timely move. As it stands none of the money alleged to have been taken from NSSA has been recovered with the majority of pensioners living in abject poverty.  

Some of the accused such as the former NSSA chairman Robin Vela are yet to appear before the courts. All this while pensioners who made years of contribution to the pension fund are not able to access their pensions and when they do a meagre amount is paid out in domestic currency when contributions were made in USD.

In the last two years there have been several accounts of corruption cases that have been highlighted in parly and other forum none of which have yielded much results in the way of recompensing the citizenry or indeed seeking justice in the courts.  

While most of Zimbabwe sits in the dark there has been a reported US$100million ZESA scandal. This case cited irregular payments to the amount of US$35million. 

Granted that the MoF came into office long after the scandals are purported to have happened –  the expectation would have been that these would be his low hanging fruits that he could investigate and remediate immediately. However to date no concrete outcomes of investigation have emerged since 2014 when this scandal first appeared in the public domain.

What is particularly interesting is that the central bank continues to be a silent bystander in these cases. How are transactions of millions of dollars going in and out through the government’s main account without raising any alarm at all?

In most countries transferring  one million dollars from your personal account is bound to require some sort of due diligence process to be followed. The impact it has for that bank’s liquidity and indeed the monetary supply requires such. How do these cases surface as hearsay when they have been undertaken via a regulated banking service?

• Disregard of the Constitution – being above the law.

It’s fair to say in Zimbabwe our silver linings have been few and far between. Infact most of them are attributed to the period of the coalition government..

One of these slight silver linings was the development and publication of the Zimbabwean Constitution. Publicly consulted socialised and eventually voted on. It therefore begs logic when the men in office exercise a complete disregard of this document. 

In November 2016  RBZ governor John Mangudya announced that he would be issuing an alternative tender known as the bond notes. It was argued at the time the Reserve Bank Act did not include a definition or recognition of the bond notes.

Other lawyers counter argued that while the RBA did not include bond notes the constitution allowed for such a provision on the basis that it was a form of borrowing by the government.

However the total aggregate of the bond notes borrowing had to remain below 30% of the government’s revenue. Further it was also presented that the Minister of Finance would constitutionally be required to report bi-annually to parliament on the level of bond notes used as well as the use of the purported Afreximbank loan which was meant to back the bond notes.

None of this was followed through, bond notes to this day are in circulation and have transitioned by magic from a government borrowing facility (as per constitution) to a fully-fledged domestic currency. Notwithstanding the harm that this has done to the economy where people’s savings went from being hard dollar currency to these continuously devaluing bond notes – the bond notes failed to avert the liquidity crisis and things went from possibly bad to definitely worse.

Mthuli Ncube (MoF) announced that there will be a 2% charge on electronic transactions- this is inspite of  most electronic transactions being undertaken because of a government induced cash crisis. As opposed to addressing the US$10billion budget deficit through socio-political reform as is so obviously needed the MoF insists on continuing to make things worse for the common man.

Nevertheless former Finance Minister Tendai Biti approached the courts on the matter citing that this 2% charge was illegal, the courts’ ruled in Tendai Biti’s favour annulling the tax thus agreeing that it is indeed illegal. However Mthuli didn’t bother appealing the ruling he instead took to issuing a note saying that inspite of the court’s ruling the charge would remain.

This continuing disregard of the constitutional law by both the MoF and the Governor is very disturbing no man should consider themselves above the law in any land. This only continues to make a mockery of the mantra open for business as real investors would not flock to a country where certain individuals are above the law- how would they know that their investment would be protected from these individuals?

• Arbitrary Announcements

Another characteristic of this duo is that ‘kuvhundutsa vanhu’ action. Overnight Mthuli denounced the use of USD.  We all had to do a double take when he was announcing that all buying and selling would be transacted in a local currency that literally was non-existent.

On realising this almost 48 hours later he announced that by local currency he meant his trio of otherwise called mthuli dollars (ecocash, rtgs and bond notes). Overnight he expected citizens would stop using real money for the domestic currency money that can only be used in-country.

In a country with a huge trade deficit, estimated to be circa US$10billion, with imports more than quadruple the exports, how can it become desirable to deal in domestic currency?

Further the issuing of treasury bills means that there are already millions of USD in the economy which invariably means that the local currency will be chasing the USD.  Needless to say this announcement saw the domestic currency devalue by almost double.

The rtgs were themselves  arbitrarily announced as part of his budget statement earlier in the year. This poor judgement formalised a disparity between cash in hand and balance transfers. With the more liquid form of money being worth more.  

The governor has also had his fair share of odd announcements from pegged currency rates that are at huge parity with the open market to increased interest rates – all of which have done little in the way of helping the economy. His announcements have not only been backed both by discrete ’private’ loans but also by fake promises.

After increasing the interest rate to 70% this year the Governor explicitly said ‘ the bank expected the inflation to start declining …. as attested by ebbing exchange rate depression pressures…’ To date none of this has come to pass.

Though the most damning  was the promise that if the bond notes failed to recover the economy that he would resign from his job. Perhaps we should have pressed him for a time period from failure as no move to resign has been tabled inspite of the obvious failure.

So as Zimbabweans hunger and thirst these two remain key players in the ‘Game of Thorns’ like any villain the possibility of this duo choosing to make things better is not too far fetched an idea. However as of yet there is no evidence to suggest their interest is for true long lasting economic betterment.

A philosopher once said ‘If you can’t change the people, then Change the people!’ I shall leave you to ponder on that one…

Chenayi Mutambasere (Msc Development Economics and Policy) is the MDC UK and Ireland Province Secretary for Industry and Commerce. You can follow her on Twitter: @ChenayiM