The RBZ governor, Dr John Panonetsa Mangudya sat down for an interview with Trevor Ncube. We talked about what was said in the first part of the interview here. Now, we continue with the story and get to the meat of the interview, in my opinion.
I feel I must warn you that if you didn’t like what he had to say in the first part, you are going to hate this a wee bit more.
The independence of the RBZ governor
The interviewer, Trevor Ncube, told Dr Mangudya that he interviewed the former governor, Dr Gideon Gono in the past. Dr Gono expressed that he wished he had fought for his independence from the Ministry of Finance and from the president. So Ncube asked the current governor what he thought about his autonomy.
Dr Mangudya was sly in his answer, almost like a seasoned politician. He talked about independence being an abstract concept that can only be subjectively measured. He went on to talk about how even in independence, one can never survive as an island. Therefore, cooperation is the wise course of action.
He was slick. So, he was asked whether he has ever disagreed with President Mnangagwa or Dr Mthuli Ncube. The concerning answer was an emphatic ‘no.’ He has never disagreed with the president or finance minister in all his years as governor. How that happens in an economy where tough decisions have to be made regularly is beyond me.
The secret to his pacifier success is that he engages his principals on all monetary matters. Apparently, they are all peas in the same pod and tend to agree on courses of action pretty much every time.
SI 127 and its devastating consequences
If you remember, Statutory Instrument 127 (SI 127) prohibited businesses from; quoting prices at an exchange rate higher than the auction rate, giving buyers a discount for paying in USD and so on. This SI was a bad move and prices of goods shot up and have never fallen since. Dr Mangudya, on the SI, said,
SI 127 was not as bad as people want it to beDr Mangudya
So, he definitely agrees it was bad. However, he thinks we exaggerate how bad it was, and is, but we think he downplays its effect. He says those of us who think SI 127 was the worst, are malevolent (i.e evil-minded or spiteful) and are actually sadists (getting pleasure or sexual gratification from the pain/ humiliation of others).
He feels we put him in a ‘damned if you do, damned if you don’t’ situation. After all, we are the ones who complained that businesses were continually increasing prices. Yet, we were the first to complain when the RBZ addressed that using SI 127.
I’m lost here guys. He expected us to congratulate the RBZ for an SI that achieved the opposite of what it intended to? Should we have been impressed that they did something about the price increases when their solution led to even steeper price increases?
I know people love complaining, sometimes we grumble when there is nothing to grumble about, it’s human nature I suppose. However, in this case, we are 100% justified in expressing our frustrations, even if we are labeled sadists for it. SI 127 was ill-advised and it backfired, period.
The reinterpretation of SI 127
After the spectacular failure of SI 127, it was then revealed that actually, we had misinterpreted it. It was meant to apply only to those who were abusing the forex auction. It is only those businesses that were getting 100% of their forex needs from the forex auction that were the target of SI 127.
All other businesses were then asked to revert back to their pre-SI 127 prices and they were not interested in that. After all, SI 127 was not repealed and so it was not wise to obey these reinterpretations. The language in the SI was clear and a business could face litigation for thinking that law did not apply to them.
Dr Mangudya then said the SI also targeted those who were manipulating the currency to increase their profits from arbitration. In addition, it was meant to aid in the fight against money laundering and terrorism financing.
Forcibly liquidating people’s forex
We discussed how 40% of receipts by exporters are forcibly converted into Zimdollars at the auction rate. For the rest of us, of the forex we bank, 20% is forcibly converted into Zimdollars at the auction rate.
Mr Mangudya says it is their job to ‘find a home’ for those Zimdollars they force unto those who had earned their forex fair and square. He means making sure we can pay our taxes and other similar services which are priced using the same auction rate. Rather than having to use those Zimdollars we never wanted in the first place in the market where prices are quoted using the parallel market rate.
He says what they are doing here will help improve the value of the Zimdollars. So, do not expect this forced liquidation to stop. The message to the RBZ though is, don’t expect us to bank our forex if we can help it. Honestly. Dr Mangudya talked about promoting the use of banks but as long as these forced liquidations and arbitrary policies remain, most of our forex won’t enter the official banking system.
Banks sitting on US$1.7 billion
We have demonised banks for having US$1.7 billion in their vaults and not lending it out. The RBZ governor says about 25% of that has been deployed into the market. In his eyes, that is okay under the circumstances.
He says exporters and those importers who do earn forex locally and can then pay back the USD loans are the ones benefiting.
We have talked about some of the challenges banks are facing here. In short, there is no interbank collaboration. Also, Zim banks no longer have relationships with foreign banks (correspondence banks) where they had overdraft facilities. Hence the extreme caution.
RBZ ‘guarantees’ survival of banks
I now get why Zim banks are able to get away with a lot of shenanigans. The exorbitant charges, poor service delivery, low lending practice and the like will not be addressed with any enthusiasm. Dr Mangudya says,
The closing of a bank, it sends the wrong signal also to the marketDr Mangudya
This means that of the banks that fail to meet the US$30 million capital requirement by year end will get an extension. The RBZ boss said so. It also means their golden goose, high bank charges, will not be plucked or slaughtered. The high charges are necessary for most of these banks to remain profitable. Without them, some banks would fold and that would send the wrong signal to the market.
Dr Mangudya hails technology for improving financial inclusion in the country. He says mobile banking / mobile money has allowed the formerly unbanked to get access to financial services. He mentions the farmers getting loans through their phones as an example.
I find it funny when he talks about people having mobile wallets which give them access to financial services. That’s because his RBZ has been working overtime to kill the most important mobile money service provider, EcoCash.
In the same breath, the govt reintroduced tax on the importation of the mobile phones that allow for that financial inclusion. In addition, for the phones that avoided paying that tax, a new US$50 levy is in the works. These measures make for expensive mobile phones, thereby derailing or delaying our financial inclusion efforts.
Don’t hold your breath for crypto legalisation
As a central bank we don’t believe in cryptocurrencies, we don’t believe in these bitcoins. We believe in central bank digital currencies.Dr Mangudya
Despite that ominous statement, he goes on to say now is not the right time to introduce cryptos. He does not rule them out completely.
For now, our prayer is that we work on a central bank digital currency, before we go this other route of cryptocurrencies.Dr Mangudya
I know the crypto enthusiast is thinking,
Technically, it appears there is a chance but I’d caution you against holding your breath.
We talked about central bank digital currencies here. Find out why they won’t help much in Zimbabwe. The new information on this is that apparently we have made progress in our central bank digital currency journey. He says we are almost there, as progress has been swift, as they have been working with a fintech company to assist in the research. We believe we know the fintech company they are working with, in due time we shall all find out.
Blockchain unlawfully used to create money in Zimbabwe?
What concerns me are the RBZ governor’s thoughts about blockchain and mobile money. He continues with the narrative that people were creating money on EcoCash. And apparently he thinks they were using blockchain technology to do that. Maybe he misspoke. But that is what blockchain and bitcoin remind him of, people creating money out of thin air.
Bitcoins, or blockchain like you said it. You see, it reminds some of with what happened to mobile banking [mobile money] transactions in Zimbabwe. Whereby some people were just creating money from blockchain, and creating money supply in the economy.Dr Mangudya
I think I missed that period in time when people were using blockchain technology to create money through mobile money wallets. If you know what he is talking about here, please let me know in the comments. If he’s mistaken, which I think he is, it may be why his RBZ is unjustifiably hostile towards blockchains.
The RBZ governor’s resignation
You remember how he said he would resign if bond notes did not succeed. We talked about how they succeeded in his mind here. That’s all in the past but fast approaching is the end of Dr Mangudya’s tenure as RBZ governor. He began his reign in May 2014 and he leaves office in 2024.
If you don’t like him, it’s only about 2 and a half years before he is gone, console yourself with that. The bad news is that you probably won’t like his replacement. After all, you hated his predecessor, Dr Gideon Gono even more.
This was a long article but now we are done with all that was revealed in the interview. I know you have thoughts on all this, feel free to share in the comments section below.