Zimbabwe Review

Reflections on Zimbabwe

Posts Tagged ‘Zim dollar’

Impressions of Zimbabwe in August 2009

Posted by CM on October 25, 2009

Visitors to Zimbabwe who have been fed a BBC/CNN-type diet of news about ‘The Zimbabwe Crisis’ and how everything in the country has ‘collapsed’ will be surprised at how ‘normal’ Harare looks at first glance. Driving from the airport into town, there are certainly signs of decay since a few years ago, but no immediate or obvious signs of the ‘collapse’ that certain media have in recent years hysterically, lovingly and perhaps even hopefully talked about.

Looking out of the airplane’s windows as it circled to land and on the drive into town in early August, the most obvious change for me was how areas that had once been at least semi-savannah on the outskirts of Harare had been stripped of trees. One manifestation of ‘The Crisis’ in recent years has been the difficulty in accessing forms of modern energy that had once been taken for granted: petrol, diesel, paraffin, butane, coal, electricity, etc. Their availability had been erratic for many years and their cost prohibitive, forcing many people to resort to firewood for energy. Hence the massive deforestation, which I later found was widespread.

The still newish airport is clean and well maintained, though the number of vacant boutiques compared to, for instance, Nairobi airport’s full complement of seemingly thriving over-charging boutiques was one indicator that things were not quite ‘normal.’ On the drive home from the airport there was no dramatic evidence of ‘The Zimbabwe Crisis,’ though the buildings did look shabbier than before and there were definitely more potholes to dodge on the roads. But the over-riding impression for me was the powerful natural beauty and colour of Zimbabwe, not the indices of the difficult times the country has undergone in recent years.

Having had a few days to unwind at home, I began to gradually drive around and explore my home city Harare. There definitely seemed less traffic on the roads than I remembered from a few years ago. Finding a parking spot in the city center was surprisingly easy at any time of day and the roads there were generally in very good shape, as appeared to be most of the visible infrastructure.

In town and in many of the suburban shopping centers there were many more vacant shops than before, but I was also impressed by the number of businesses that had hung on during the difficult years. But almost all had ‘diversified’ in various ways, with all selling a much wider variety of goods and/or services to survive. I thought the general level of service in shops had declined noticeably. I didn’t encounter any outright rudeness but it seemed noticeably common to be met by disinterested, bored and sometimes almost sullen store personnel. Almost all stores I remembered from a few years ago had a much narrower range of goods than during ‘the good old days,’ but many people mentioned to me that what I thought was a limited range of goods was a vast improvement from the situation a few months ago, and that the availability of goods was improving dramatically by the day, one of the early benefits of the US-“dollarization” of the economy.

While the widespread shortages of all kinds of goods was rapidly receding into the past as price controls and currency restrictions fell away, most things seemed very expensive, sometimes absurdly so. In the weeks before my visit home I had visited Europe and the U.S., as well as having passed through Senegal’s capital city Dakar,  a city not known to be cheap, and so I particularly keenly felt the comparatively high cost of goods and services in Harare. It was easy to understand why many Zimbabweans are only grudging in their praise of the ‘normalization’ that has begun to take place. “We are happy the shops are full again but we can’t afford the goods” was a frequent complaint I heard. But even as people grumble about “we can’t afford anything” the shops are certainly not empty of customers, although many merchants and traders said the level of spending was still low and still limited mainly to necessities. Yet all I spoke to agreed that the situation was significantly better than before, and dramatically better than in 2008, the period everyone agreed was Zimbabwe’s low point, with hyperinflation, shortages, violence and political tension and so on at their worst.

As ridiculously expensive as almost everything seemed to be, even in just the one month I was there prices were creeping down to more realistic levels. And if one took the trouble to shop around, which many more people were doing than I remember from before, it was possible to find widely varying prices for the same thing. A big culture change was that even in ‘formal’ shops it was possible to negotiate for price reductions, common in many countries all over the world but previously almost unheard of in Zimbabwe’s stiff formal economy. So merchants are feeling the effects of consumer resistance and growing competition from the opening up of the economy and the greater availability of goods, and they are being forced to respond by lowering their prices. In the shortage economy that had prevailed for several years, the relatively few people who could raise the hard currency to import goods became accustomed to charging huge, arbitrary mark-ups. The merchant was king, not the customer.

One of the most disheartening remaining signs of how Zimbabwe has slid was in the complete absence of a daily media alternative to the state media. There are no daily independent newspapers and at US$2 an issue, the weekly private newspapers are way out of reach of most people. Of course there is no private TV or radio so there is a huge information deficit. But this is not to say the state media dominates the shaping of opinion. Despite its near monopoly, state newspapers, TV and radio are so dull and so blatantly pro-establishment that their credibility is extremely low. The public has largely learned to sense when they are being fed propaganda instead of news, which is rather often, and to dismiss and ridicule it even if they don’t know for sure what the other sides of the story are. Even more than before, the propaganda is so crudely done that I found myself often marveling that the government didn’t find it embarrassing and a negation of its attempt to win heart and minds. The stiffness, awkwardness and the over-the-top nature of much of the state media in the support of Mugabe and ZANU-PF and against Tsvangirai and the MDC had an almost surreal, self-defeating quality in its crudeness.

President Mugabe is still ass-licked by the state media as much as ever before, and in a way that I do not think does him any credit. One big change was that Reserve Bank of Zimbabwe Gideon Gono was no longer the swashbuckling public hero the media had tried to make him out to be when he was first appointed five or so years ago, promising to swiftly bring down hyper-inflation and perform all kinds of other miracles. Even in the slavish state media Gono’s gloss had long turned dull, with him now struggling to defend his controversial legacy to a tired-of-him, sceptical public. One would have to have been there in his early days in office and to experience what a dominant public presence he came to be to understand how far the man has fallen in public esteem.

Electricity and water cuts were frequent, although even in these regards many people said I had visited when the situation was getting much better than it once was. People are inconvenienced but out of necessity have had to adjust, and the down times are handled very matter of factly. Up until a few years ago I had never even seen a fuel-powered electricity generator but now many in the cities who can afford them have them and they are widely advertised in the Press. Those who have boreholes or wells can avoid the worst inconveniences of the periods without running water, but I was shocked by the number of people who calmly mentioned having gone for months without seeing a drop of municipal water in their taps, a major cause of last year’s cholera outbreak.

Visits to some of Harare’s once-bustling industrial areas were depressing. A few years ago a quick drive through any of them would have been enough to show anybody why Zimbabwe’s economy was the sub-region’s most dynamic after South Africa’s. Now they are quiet, many companies still open but quite clearly operating at a low level. The areas do not have the bustle of before; buildings, roads and company premises are no longer maintained like they once proudly were. But from job-seekers to company owners, many people said whereas most companies were just treading water for several years, there are now signs of activity picking up as a result of the policy changes in the economy and the relative political calm.

With low productivity in agriculture and industry for several years, and given all the crises the country has undergone, it is startling to see the number and proportion of smart late-model luxury cars on the streets of Harare. There seemed a very bizarre disconnect between the economy under-performing as it has done for years and the number and types of expensive cars which would have turned one’s head even in a wealthy, ‘normal’ economy. While the signs of the lack of investment in many critical areas of the economy were everywhere, this certainly did not seem to extend to the cars many higher-ups in government and the private sector drive. I’m still trying to figure out what this says, and whether this is positive or not.

My impressions are of a tiny slice of life in Zimbabwe. For instance, I only made two one-day forays into rural areas to visit relatives, and only made one other one-day trip out of Harare during my one-month stay. There are obviously many parts of the traumatic economic and political period Zimbabwe is just coming out of that will only be fully understood by those who were there during it. But the instinctive adaptation that one “who was there” undergoes to the rapidly changing situation is also precisely why it can be hard for them to pin down and catalogue the changes, even though they will have an insider’s deeper understanding of events they were a part of. On the other hand an inside-outsider like me, visiting for the first time in about three years, can much more quickly see what is different even if he has no first-hand knowledge and experience of the factors and events that drove the change.

When I ended my previously visit to Zimbabwe, in early 2007, it was with a very heavy heart. The economy was very steadily declining and the tensions between the rival political parties escalating. That state of affairs had been on-going for close to 10 years. There was a widespread sense that the country was still going down, with no one able to guess when we would hit bottom or how bad things would be then. I left home then worried and depressed.

My feelings were quite different this time. There remain many political and economic problems but there is now a widespread feeling that the worst is behind the country. There is not the same feeling of widespread political dread and economic desperation, even though things are far from easy or back to any definition of ‘normal.’  Everybody grumbles about how high the cost of living still is, but unlike before, prices are stable and in many cases even declining, and goods are widely available, which is a very different scenario from early 2007!

I found widespread relief at the existence of the inclusive government of the major political parties, and I thought that most people were generally much less passionately partisan than I remembered. I also think cynicism about all politicians was higher and more widespread than before, which may be a good sign!

The last ten years or so have been a lost decade for Zimbabwe in many ways. And there is no guarantee that the beginnings of stabilization that are being experienced will take hold or that the country will organize itself to get close to meeting its great potential. The possibility of the political parties going back to the bitter fighting that has contributed so greatly to Zimbabwe’s misery remains very real. But when I left Harare in early September after a month at home, for the first time in many years I felt the stirrings of hope about the country’s prospects.

Posted in business, Economy, People | Tagged: , , , , , , , , , , , | 1 Comment »

The futility of trying to put a number to Zimbabwe’s hyper-inflation

Posted by CM on December 10, 2008

Zimbabwe’s current astronomical and rising inflation rate will provide years, decades worth of study for scholars. But the over-riding concern now is the way an inflation rate said to be in the millions percent makes hour-to-hour survival a huge struggle for ordinary Zimbabweans.

But it can also be examined as a sort of sad but fascinating, incomprehensible game. And The Zimbabwe Crisis provides all sorts of opportunities for people of all types to sell their ‘expertise.’

A case in point is the silly game of trying to pin down what exactly Zimbabwe’s rate of inflation is. Obviously if an ‘expert’ is asked, s/he can not give the most honest answer and say, “Prices are changing so rapidly, so variably and so unpredictably it is impossible to say what Zimbabwe’s inflation rate is with any certitude.” Or even merely reliably, even with a very large standard deviation. I might add that it is a mostly meaningless exercise anyway.

But that doesn’t stop some people from trying. Newspapers need copy every day and today’s Zimbabwe provides some of the most colourful. And there is no shortage of “experts” who are happy to be quoted by the media. Builds up the consulting CV.

The Guardian (UK) had a story recently about the present cholera epidemic. The report wandered over from discussing hospitals and disease to tackling inflation.


Money is a complicated business in Zimbabwe even if most people do not have much. Cash has been in desperately short supply because the government cannot print fast enough to keep up with hyperinflation. Officially inflation stands at 231m percent, but that was in July. Since then the central bank has regarded economic statistics as a state secret.

John Robertson, one of Zimbabwe’s most respected economists, has accurately estimated the rate of inflation in the past. He says it shot through the billions, trillions and quadrillions between August and October until it reached 1.6 sextillion percent last month. A sextillion has 21 noughts.

Robertson says the number is almost meaningless. “Inflation at the present rate is academic. Nobody says they’ll increase salaries on this figure. It’s impossible to work with it.”

An interesting piece of  diversion from the reality of what the levels of hyper-inflation mean for Zimbabweans just trying to get by from day to day.

I grinned at the reporter’s judgment that his quoted source had “accurately estimated the rate of inflation in the past.” If it was an estimate, how then could it also be accurate? Besides that nit-picking detail, who adjudged the ‘accuracy’ of the source’s previous guess? On what basis?

Despite the reporters awkward attempt to put a plug in for his source’s reliability, at least the source was honest enough to admit that Zimbabwe’s rate of inflation is so high that the numbers being bandied about, likely including his, are completely meaningless.

Besides knowing that price increases have astonishingly got out of control in Zimbabwe, no one has the slightest clue what the rate of the change is. People like John Robertson might just protect their reputations if they learned that sometimes when reporters come calling it is better to just say, “no comment.”  

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Gono again blames inflation symptoms; causes, solutions remain beyond his control

Posted by CM on December 6, 2008

For the five years that Gideon Gono has been governor of the Reserve Bank of Zimbabwe he has tried all kinds of things to try to prevent inflation from shooting way out of control. All have failed.

But the economic, social and political pressures of hyper-inflation are so strong that he must be seen to continue to be trying to control it, even though its ultimate causes are way beyond his purview.

One does not need to be an economist to understand how falling productivity in agriculture, mining and other sectors caused the currency to lose its value. And how then continually printing more currency over the years for all sorts of needs without linking it to to increased economic productivity simply devalued the Zim dollar even further. That inflation has now reached the unprecedented, unfathomable level of millions of percent!

In normal times we would expect Gono’s RBZ to control inflation by adjusting the quantities of currency in circulation and putting in place various monetary policy measures to try to control production and spending in one direction or another. But Zimbabwe’s inflation situation has gone way beyond the ability of the central bank to do that.

The currency is not going to be suddenly stabilised and then strengthened by increased economic activity. There is absolutely no reason to believe there is going to be any sudden increase in earnings from agriculture, tourism, mining or manufacturing in the short term. Foreign credit that would also help to artificially shore up the Zim dollar is no longer available to the country in any meaningful amounts.

Given these basics, there seems no other realistic currency/inflation-stabilising pressure to look forward to other than a large hard-currency injection of some sort. And that is impossible to imagine in the absence of an implemented political settlement between Robert Mugabe’s MDC and Morgan Tsvangirai’s MDC. Even with it, there is no guarantee that aid and loans would come in the quantities required and soon enough to lower inflation to the levels pertaining in the rest of the world in a hurry.

Obviously Gono and the RBZ have no influence on the successful  implementation of power-sharing between ZANU-PF and the MDC. And not only does the RBZ no longer have the ability to control inflation by controlling money supply, the hyper-inflationary pressures have forced it to do the exact opposite: print cash like crazy so that the public can try to keep up with prices that escalate by the minute, but in the process further “fuelling” hyper-inflation.

Gono is criticised by economists for worsening inflation by churning out more currency every week despite falling production, making the currency ever more worthless. But if he tried to “rein in” inflation by reducing circulating currency, there would be an outcry from the public who would not be able to access the amounts of currency required to keep up with skyrocketing prices. What you need a bag of cash for this week you may need a suitcase’s worth next week.   It is hardly surprising that after years of this  situation that simply could not continue indefinitely, foreign currencies like the US dollar, South African rand and Botswana pula have become the preferred media of change, causing other problems.

Mr. Gono is on a treadmill and cannot get off: he is fully aware of these inter-linked imperatives of a capitalist economy like Zimbabwe’s, but he is in a position where he simply has no choice but to try to reconcile the un-reconcilable. The effect is that all his efforts are to merely run around in endless circles. Only a political settlement and emergency external hard-currency injection of some sort can now break the circle enough to eventually make it possible for him to eventually play a traditional central banker role in any positive, meaningful way.

Three days ago Gono released the country’s first ever $100 million note to try to reduce the daily bank queues as people struggle to withdraw amounts of currency sufficient to keep up with galloping prices (not just of goods, but of the forex that is now very necessary to buy all sorts of goods and services at all). The system struggles and fails to keep enough of that currency because of the extent of the hyper-inflation, and despite the currency printing presses working overtime to keep pace. And it is  necessary to print currency of ever outrageously higher numerical value. It has already been announced that next week a $200 million note will be released. A billion dollar note cannot be far into the future at this rate, but this can’t go on forever, or even for very much longer.

So Gono releases trillions of Zim-dollars’ worth of his new $100 million note to the banks the day before it is to become legal tender. The next day he has a temper tantrum against some of these banks for releasing the notes into circulation a few hours before they technically became official currency. Gono goes to town, accusing the banks of being responsible for many of the sins for which he and the RBZ are often blamed, such as buying foreign currency from the street, making nonsense of the official exchange rate(s).

All of Mr. Gono’s many pent-up frustrations seemed to find an outlet on the discovery of this infraction by the banks. We are told of how the managers at several banks “have been relieved of their duties after vast sums in new notes issued to them by the Reserve Bank of Zimbabwe found their way onto the illegal parallel market on Wednesday evening (i.e. night of release to the banks by the RBZ and eve of becoming official tender). Several top bankers found themselves “banned” from their profession for five years.

Gono makes  a very big deal about the notes hitting the streets a few hours “early.” He insinuates that this is proof that the banks have a big role to play in ‘economic sabotage’ activities like driving the ‘illegal’ foreign currency market.

“We are sick and tired of being labelled crooks,” said Gono in regards to himself and the RBZ (said to be the biggest buyer of ‘illegal’  forex, not an unreasonable suspicion given that none is easily available ‘legally.’) His over-dramatic out-burst seemed designed to say to the public and what he as called his ‘principals, ‘ “Aha, you see? You have been accusing/suspecting me of being the bad guy all along, but here are the real culprits; we have caught them red-handed, I have been innocent all along.”

Technically and legally Gono has a point about the impropriety of the notes being released a few hours before they should have been. But the technical, legal correctness of his position has been far superceded by the economic realities. In the circumstances, it is petty in the extreme of Gono to make a big deal about this.

The banks acted exactly as you would expect based on the economic survival imperatives that have come to over-rule any law in the Zimbabwe of today. It is now overwhelmingly about survival, not a relatively little thing like legality. The “early” release of the notes, whether to buyso-called  illegal foreign currency or to just pay account holders writing cheques, was simply to try to use the currency before it lost a big chunk of its value, which it is doing by the millisecond. A deal negotiated the afternoon of the RBZ’s release of the new note to the banks, but only paid for the next morning when the note was legal would have been worth considerably less for the cash recipient. That is how fast the currency is losing its value.

So yes, banks that are supposed to be outstanding upholders of propriety can be accused of acting willfully illegally in this case, but my point is that the overall economic environment is such that this is a petty point: almost everybody is always technically flouting one law or another in the course of just trying to stay one tiny step ahead of hyper-inflation and all the other things that have gone wrong in the economy.

So the banks may have acted technically illegally, but they behaved entirely rationally for the situation. It is fooling no one for Gono to mainly focus on what in the circumstances is the really minor ecnicallegal, legal point of the ‘early’ release of the new notes.

Far more important are the bigger, more significant factors that account for that behaviour being entirely expected and rational in the present situation. Unless and until those factors are dealt with by Gono’s principals, then his little temper tantrum was simply an irrelevance of a side-show. Banks, their clients and everyone else will keep trying to find ways, legal or otherwise, in the ultimately futile exercise of trying to avoid, reduce  or delay the effects of hyper-inflation.

Gono famously said “failure is not an option” in regards to lowering inflation when he began his first RBZ term with much fanfare five years ago. What Gono’s little performance in regards to the release of the latest note shows is that for now, failure is a reality, and not necessarily for reasons within his control.

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Gideon Gono’s star starting to fade

Posted by CM on December 30, 2007

by Chido Makunike

The last few weeks have not been good for Gideon Gono, governor of the Reserve Bank of Zimbabwe.

Gono featuredly prominently at the ZANU-PF congress at which President Mugabe somehow arranged yet another ruling party endorsement as its sole candidate in the elections scheduled for March 2008. We saw images of Gono grinning broadly, seemingly basking in the glow of Mugabe’s approval. He got tongues wagging with a tough speech in which he accused un-named high ranking government officials of being behind many of the nefarious “black market” activities that led to phenomena like the current perplexing shortage of Zim dollar currency notes.

Gono has never made secret of his personal closeness to Mugabe, which reports have traced to his being the president’s banker, dating from the days when Gono was chief executive of the Commercial Bank of Zimbabwe. Gono parlayed his revival of that once floundering bank back into solvency into a reputation as a “turn around expert.” It is that image he carefully cultivated over some years that eventually landed him the RBZ top job with much fanfare in 2003.

His closeness to Mugabe made him automatically an object of suspicion to many. But others hoped that he could use it to make Mugabe “see sense” about measures needed to right the economy’s many wrongs in a way the president light not have been prepared to do with previous economic advisors.

There was a circus around Gono’s taking on the job of central banker. The media was roped into hailing him as a conquering hero who had come to slay the dragon of high inflation, the country’s then first experience of local currency shortages and all manner of other economic ills.

If the media seemed to adore him, he clearly loved the media attention just as much. His “monetary review statements” were broadcast live, and his every word was treated as gospel. In the Gono-euphoria that erupted, cautions that the country’s deepening economic problems could not be separated from governance, political and diplomatic issues were swept aside. Gono promised to “turn around” the economy in short order, confidently making inflation-lowering and other targets which the country has come nowhere near to achieving, and vowing “failure is not an option.”

Four years after all the hype surrounding his appointment and all the high hopes in his tenure by many, the December 23 2007 main headline in the Zimbabwe Standard was a harsh summation of how far Gono has fallen in public esteem. It screamed, “Gono labelled ‘No. 1 saboteur.’

Citing the thousands of Zimbabweans who had to spend the end of year holiday season in long queues for cash from their bank accounts, the story quoted Elton Mangoma, an opposition party official, as saying, “Gono is clearly the biggest saboteur of Zimbabwe’s economy. He is simply playing politics with a serious national crisis that needs immediate attention from a central bank governor who takes the people’s suffering seriously.”

The MDC, the Zimbabwe Congress of Trade Unions and economists, all said the cash crisis was ample evidence that the RBZ had failed in its mandate to provide liquidity, the story continued. The critics said it was “very cruel” of Gono to plunge the ordinary people into the crisis in a miscalculated move “to fix” people whose identity he knew.

Critics said blaming cash barons was a diversionary tactic designed to mask the incompetence of the central bank. “There is no money from the so-called barons because if the money was there, the parallel market would be booming,” said Dr Daniel Ndlela, head of an economic consultancy firm. “This fellow (Gono) is not only heartless, but he does not understand who he is punishing. The people in the queues are not barons.”

The Standard’s story continued:

Mangoma added: “The people are not failing to access their cash because of the cash barons but because of Gono’s policies which have eroded people’s confidence in the banking system in this country. No reasonable person would put their money into a bank when they know they will fail to access it the following day.”

Ndlela said Zimbabweans could be in for more suffering “as long as we have a poet” for a central banker. “He has totally failed. If he had a bit of professionalism and dignity he should have resigned a long time ago,” he said.

This is unprecedented harsh public criticism for Gono. Until recently, he had somehow been able to straddle the awkward twin roles of being an intimate insider of a floundering, unpopular government and yet also able to cast himself as a “man of the people” folk hero. That bubble seems to have burst in a way that some cynics may say was inevitable.

Defending himself in The Herald in an interview which was gently but still unusually critical in the tone of the questions asked by the state’s primary propaganda newspaper, Gono said “The cash shortages that we see are a mere symptom of much deeper and greater fundamental misalignments in our economy than the ability or inability of the central bank to provide adequate cash.” In this regard, it was unfortunate that all the blame had been heaped on RBZ, the newspaper quoted Gono as saying.

Went on Gono in the interview, “We are back to economic fundamentals which we must tackle head on… It’s about sanctions whose debilitating effects on the economy and on the ordinary lives of our people must be a matter for which we must all speak with one voice as Zimbabweans to see that these sanctions are lifted. It’s about the productivity of … every form of economic activity in the country. We must raise the bar of productivity to underpin our commercial transactions.”

“It’s also about economic and pricing distortions, which we must deal with decisively. It’s about economic patriotism. It’s about discipline. It’s about building a corrupt-free economy. It’s about international relations. So don’t take a simplistic view of the queues and simplistically place 100 percent responsibility on the central bank or the Governor, however easily tempting or fashionable it might be.”

“That’s my interpretation of the cash queue. In the absence of a disciplined approach to our economic affairs, to corruption, hard work and economic patriotism, the winter of discontent with cash queues will not go away. “

Everything Gono says here is true, of course. But it was all just as true four years ago when he somewhat over-confidently boasted “failure is not an option” amidst warnings that the country’s problems were deeper than could be addressed by monetary measures. For instance, the lifting of sanctions and issues of international relations are beyond the purview of Gono and the RBZ. Yet they are critical components to Zimbabwe’s economic fortunes, and to Gono’s own success as RBZ governor.

All these points had been repeatedly made by many long before Gono came onto the scene as central banker. Some who had made similar points to those Gono is now making were accused of being traitors to the country and forced to resign their positions for publicly stating unpalatable truths. The hope had been that Gono’s reputation as a “favoured son” who enjoyed the particular attention of Mugabe’s ear would give him more leverage than others before him had.

While Gono has clearly been the most powerful central banker yet, with unprecedented latitude to try all sorts of economic experiments, he has met the ultimate brick wall: that there will be no solution to the country’s hyper-inflation or its cash, fuel and other shortages without going back to production, diplomatic, political and other basics which the ruling authorities have shown no inclination to do over the years.

In a way Gono is a victim of his own initial hype and over-promising of what he could achieve in the prevailing political environment. In taking the RBZ job, he gambled that he could influence Mugabe and the politicians to take measures they had resisted before, or alternatively, that he could use his wide-ranging powers to bring about economic improvements even without reform of the rest of the system of governance. The increasing criticism from all sectors of the media and the public suggests many people believe that he has lost his gamble.

Without giving details, in the Herald interview he promises to solve the immediate cash problems in the next several days. But this would seem to contradict his point in the same interview about how the cash queues will not go away without the country addressing a comprehensive raft of other issues than just how much currency the RBZ releases into circulation. Certainly his credibility is at its lowest ebb, even if he still enjoys the fickle Mugabe’s support, which I am not sure anyone knows for certain.

So what next for Gono?

Hyperinflation and the Zim dollar’s depreciation continue unabated, so two major reasons for the current cash shortage will still be in place no matter what he does to assuage the public’s anger about the shortages. The low farming/industrial productivity and international diplomatic isolation issues will likely continue for all sorts of reasons that are way beyond Gono’s ability to do anything about.

With his repeated “failure is not an option” mantra, resignation is not an easy option. I wonder if it is even an option available to him at all. In return for his unprecedented power, prominence and latitude of action as RBZ governor, he may have had to make personal concessions which may not make it possible for him to walk away unless Mugabe now wishes him to go. He may be too deep into the system as the author of many unorthodox interventions to attempt to stop the economy’s slide in the last four years that being seen to abandon the Mugabe ship would not be looked at kindly at all!

Could Mugabe, on reading the public mood of rising disaffection with Gono, be ready to sack him, in a way giving Gono the easiest way out of a continually sinking ship?

This is not unthinkable for a crafty Mugabe who is a master at finding and nailing scapegoats for problems that are ultimately his responsibility. But it is probably unlikely.

Whatever his faults, Gono has indeed worked very hard at a series of unconventional interventions to try to tame Zimbabwe’s economic melt down. Gono has also very carefully always made a sometimes almost slavish loyalty to Mugabe clear.

Unless Mugabe is now ready to go “conventional” in regards to economic management and international relations, he needs someone like Gono who is tireless at trying unconventional measures, no matter how half-baked some of them may be. In an economic environment even worse than when Gono became RBZ governor, it is hard to imagine Mugabe finding anyone as bold and hard-working at trying new things as Gono has proven himself to be. A more conventional economist at the RBZ would recommend to Mugabe the same conventional political and economic measures that Mugabe has found so unpalatable over the years.

Gono will therefore likely continue at the helm of the RBZ and the economy beyond his current term, but with no more illusions on anyone’s part of a dramatic “economic turnaround” on the horizon. Out of frustration at having failed to achieve it, as well as having lost the public and media adulation he wants enjoyed, he may become an increasingly bitter and capricious economic tsar. In the manner of his boss Mugabe in the political sphere, Gono may continue to be “in power” to issue warnings, threats and decrees to various sectors of the economy, but make little difference to the country’s economic slide.

Gono as RBZ governor rose to dizzy heights in public affection on the alluring but dangerous, fleeting back of a masterfully conducted public relations campaign and charm offensive. The only way to have kept that unrealistic momentum was for him to have then produced the kind of economic results which were not possible under an environment in which his boss continued to make statements and decisions that neutralised Gono’s efforts.

Those decisions are often influenced more by short-term populism and patronage considerations than what is in the best interests of the country. And so farms and implements are given to the political elite than to those best able to use them, with the attendant results on productivity, and ultimately, on inflation and the value of the Zim dollar. It is a waste of time to deal with the economic symptoms without addressing the political root causes.

Ditto for the current cash crisis. It is a waste of time to scapegoat a “cash baroness” who is simply a messenger of well connected and protected political players who are the real black marketeers. Gono says he knows most of them, but appears not to want to rock the political boat by naming them. That may be understandable, but the point is that being politically hamstrung like this makes nonsense of his economic efforts, dooming them to failure. Apart from nailing even the highly placed politicians and others who are “fueling” the black market, there is also the fact that only measures that make such a black market un-necessary will eliminate the problem, even if those measures go against Mugabe’s own brand of ideological orthodoxy.

Gono continues to run from pillar to post, trying this and that cosmetic measure to deal with the symptoms of deeper problems he increasingly shows signs of accepting are beyond the ambit of the RBZ to address. The carefully scripted story of his dramatic professional and public-image rise make for gripping melodrama, but his current floundering is also sadly predictable and depressing given the unchangingly negative political environment in which he chose to try to make a lasting positive impact as RBZ governor.


Posted in People | Tagged: , , , , , , | 3 Comments »

The mysterious case of the disappeared 10 billion dollar court exhibit

Posted by CM on December 30, 2007

I had to check several times to verify that this stunning story was really featured in The Herald (http://www.herald.co.zw/inside.aspx?sectid=28982&cat=1), the government’s own main propaganda rag sheet. Because the Herald’s online archives are so spotty, it is worth reproducing the article in full here:

HARARE provincial magistrate Mr Mishrod Guvamombe yesterday blasted the police and the Reserve Bank of Zimbabwe for frustrating the course of justice by disposing of the $10 billion exhibit recovered from illegal foreign currency dealer Dorothy Mutekede before it was brought to court.

Mr Guvamombe took a swipe at the police and the central bank when it emerged after the testimonies of deputy officer commanding CID Serious Frauds Section Chief Superintendent Alison Nyamupaguma and RBZ director of Financial Intelligence Unit Mr Mirirai Chiremba that the money had already been deposited with the RBZ before the case was finalised and that its serial numbers were not recorded.

In his testimony, Chief Supt Nyamupaguma told the court that on the night Mutekede was arrested, police took the $10 billion cash exhibit to the central bank where it was deposited into a cash detention account.

When the money was taken to the RBZ, it was not booked in the exhibit book at the police station, which is a prerequisite for all exhibits according to the Criminal Procedure and Evidence Act.

Neither did RBZ officials serialise the money on receipt but returned it into circulation.

This prompted Mr Guvamombe to criticise the two institutions for frustrating the justice delivery system, describing their conduct as tantamount to defeating the course of justice. This, he said, made it difficult for the court to establish the source of the cash.

When asked by the court to explain why the police failed to follow the normal procedure of handling exhibits, Chief Supt Nyamupaguma said, “There was a mistake and we need to revisit the whole system,” said Chief Supt Nyamupaguma. “I now see the loopholes in the system and they should be rectified.”

Mr Guvamombe was not convinced with the explanation.

“Both the RBZ and the police are defeating the course of justice. They have taken away our exhibits and we are left with no work to do. In future you should know that exhibits are court property and should not be disposed until the matter is finalised. The RBZ should not be used by the police to frustrate our cases here and I do not know how you should communicate this among yourselves.”

“Why are you not keen to investigate the big fish as opposed to this youthful lady? You are not interested in getting the barons. If you are after the cash barons why bring “runners” like this 24-year-old lady. If I was in your position, I would have investigated the leakage. It is clear that there is no way this woman could have possessed the cash without getting it from the RBZ. You should have the same zeal in investigating the source that you had in dealing with Mutekede’s case. I expect speed and diligence in matters of national interest like that,” said Mr Guvamombe.

Mr Guvamombe said it was apparent that the youthful Mutekede had no access to such a huge amount of cash.

“It is clear that the money came from the RBZ. The money ‘is talking to every one that it is coming from RBZ’, in view of its packaging,” said Mr Guvamombe.

The court also sought an explanation from Chief Supt Nyamupaguma why police were reluctant to probe Harare businessman Jonathan Kadzura on his alleged involvement in the case. He said the matter was still under investigation and they wanted to first complete Mutekede’s case before moving on to other people.

Mr Tapuwa Mudambanuki of Mudambanuki and Associates, who is now representing Mutekede, said his client had no access to such an amount of cash and does not qualify to be called a cash baroness.

“I appreciate that the cash is RBZ packed (sealed in the RBZ’s pre-dispatch plastic packaging) and such amounts are dispatched to meet a (bank) branch’s needs for a day. Commercial banks cannot give such a huge amount to individuals and it would be queer for a young lady like Dorothy to acquire it. The biggest amount deposited in Mutekede’s bank account was $500 million and would it not be a misnomer to call her cash baroness?”

“The RBZ Governor Dr Gideon Gono on (ZTV programme) ‘Face The Nation’ recently was visibly angry with cash barons and baronesses and there is need to get to the bottom of the case,” Mr Mudambanuki said. He attacked police for seeking to punish his client and leaving culprits who were hoarding cash.

“You should have done your work with due diligence. It’s a gross miscarriage of justice to seek to punish this innocent lady for being used as a conduit of cash barons who have access to large sums of money from the RBZ,” said Mr Mudambanuki.

He said his client was being prejudiced as the police applied the law selectively.

“It cannot be possible that she has access to $10 billion from the RBZ. We want to know the truth of this matter because it has an impact on her moral blameworthiness in this case.”

Asked why Mutekede was temporarily released on Saturday night and then rearrested on Sunday afternoon, Chief Supt Nyamupaguma said the arresting detail — a sergeant — thought the case was clearcut since Mutekede had admitted to the charge.

“The arresting detail thought the case was a straightforward one and that there was no need to detain her since she was pleading guilty. He briefed me the following morning and Mutekede was rearrested,” said Chief Supt Nyamupaguma.

In his evidence, Mr Chiremba said when the money was brought to the central bank, it was deposited into a cash detention account, where it could be released by way of a court order. He explained that it would be put into the system but if the police needed it, it would be released to them in the form of a cheque or through a transfer.

Under cross-examination, Mr Chiremba said the serial numbers of the $500 000 new bearer cheques were not recorded and its origin could not be traced.

“If police seize money, they can bank with us and it is treated like any other normal cash deposit in the cash detention account. If they want their money back, they will get it through a transfer or cheque payment. We did not serialise the money at the bank and the source cannot be easily traced,” he said.

Mr Guvamombe warned the RBZ against being used by the police to frustrate matters before the courts. “You should sit down and revisit the cash detention facility because in this case you have destroyed the exhibit. You have handicapped us and we do not know whether that was deliberate or a mistake and I am left baffled,” he said.

After the testimonies by Kadzura, Chief Supt Nyamupaguma and Mr Chiremba, Mr Guvamombe excused Kadzura and said the court would call him if the need arises.

Prosecutor Mr Zvekare argued that Mutekede’s case was now confusing as she initially pleaded guilty to illegally dealing in foreign currency but later shifted goalposts saying Kadzura had given her the $10 billion to source foreign currency for him on the black market.

Mutekede was remanded in custody to Monday for sentence. Earlier, Kadzura had told the court that Mutekede was his “casual intimate girlfriend” of seven months but denied he gave her the said $10 billion. He said he did not know anything about the money and was not aware why Mutekede implicated him.

He initially said Mutekede was just an “acquaintance,” but after further probing by prosecutor Mr Tawanda Zvekare, Kadzura told the court that she was actually his girlfriend but could not disclose the occasions they became intimate.

“She (Mutekede) was my casual girlfriend and I cannot disclose the number of times I took her to bed. It was difficult for me to firstly say she is my girlfriend because I did not see her regularly. If you do not see each other for months, it becomes difficult to safely say she is your girlfriend. Our relationship started about six to seven months ago and in that period I met her on not more than eight occasions.

“I used to visit her at Roadport (a Harare terminus for trans-border buses) but she would only come to my car and we would talk for about two to three minutes. I would go there about once or twice per week although I am no longer very sure of the frequencies,” he said.

Kadzura said he was neither an RBZ employee nor did he have any links at the central bank to facilitate the release of such an amount of money. “I am not a permanent employee of the RBZ and I am not even on the board. I am not even an advisor to the bank and the police in their papers lied. Some may mistake me for an advisor by merely being an economist,” he said.

Kadzura sat on an RBZ advisory panel which was dissolved in January this year. He admitted that he was aware of Mutekede’s illegal foreign currency dealings saying he even advised her on several occasions to shun criminal life. He denied having communicated with Mutekede after her arrest saying the messages purportedly sent to him by Mutekede never reached him.

Mutekede tendered her mobile phone to the court which showed five text messages she sent Kadzura after her arrest and two blank messages purportedly from him.

The phone had the following messages: “call,” “call urgently,” “Hillside Police,” “I am in trouble” and “Jonathan in trouble I need your help.”

In her statement read in court, Mutekede also claimed that she lied to Kadzura that one of her clients, Mohammed Mussa, had offered $20 billion in $200 000 bearer cheques to source foreign currency. She said this was to entice Kadzura to give her the $10 billion to source foreign currency for him.

Kadzura denied having received the said phone messages until the court adjourned to consult Mutekede’s cellular phone service provider, Econet, to verify her claims.

Econet could not provide proof of the messages she sent and received saying it required about two months to trace. But Econet did provide the court with a print out of calls made by Mutekede and it was stated that Mutekede phoned Kadzura on 16 occasions in one-and-a-half hours while she was in police custody on December 23 although Kadzura insisted that he did not communicate with her.

He said he was avoiding answering Mutekede’s calls after learning that she had been arrested. He further averred that his children had access to his phone and Mutekede might have talked to the kids when she phoned.

Mr Guvamombe said the evidence from Econet showed there was communication between the two.

One could take a long time peeling this story like an onion, it has so many juicy, pungent layers.

First of all, it is unprecedented for an arm of the system to openly call into question the integrity of the RBZ as magistrate Guvamombe did. Particularly under its current governor Gideon Gono, the RBZ has been portrayed as the country’s best hope of overcoming hyper-inflation and its many other problems. There almost seemed to be an official campaign to cast Gono as a super-hero who could work miracles, particularly in the state media.

Clearly all that has changed. It is a damning statement for the magistrate presiding over the case of the so-called “cash baroness” to openly say, “It is clear that the money came from the RBZ. The money ‘is talking to every one that it is coming from RBZ’, in view of its packaging.”

In whatever way the RBZ would explain it if Guvamombe’s suggestion on the cash baroness’ source of the Z$10 billion were true, it puts the central bank in an awkward position. It implies that the central bank is very much a part of the “illegal” street foreign currency market, as has been whispered for years. Having to source scarce forex from the street because of the official system’s unattractive fixed exchange rates is inevitable. Yet the RBZ has been crusading against the same market it is accused of being the biggest client of. Gono’s RBZ has always managed to be accuser and finger-pointer, but now more individuals and sectors are openly doing their share of pointing fingers at the once seemingly untouchable Gono and the RBZ.

And indeed, the failure by the RBZ and the police to ensure they had the serial numbers of the exhibit on which their whole case against the “cash baroness” rests stretched credulity. It inevitably causes one to ponder, like the magistrate did, whether this was a “mistake” as the quoted police commissioner claimed, or whether it points to something more sinister.

The pointed barbs of both the magistrate and the defense lawyer about the seeming reluctance of the RBZ and the police to vigorously pursue the real big guns who have access to huge sums of currency while the ordinary folk cannot withdraw small amounts from their own bank accounts are also telling. These open suggestions of the once-revered RBZ being involved in a cover up are unprecedented. They show the extent of the change in public perception of Gono and the RBZ in recent times. It has become obvious to a once unrealistically hopeful public that the problems it hoped Gono could magic-wand away are far deeper than can be dealt with by the RBZ without a wholesale change in the country’s entire system of doing things.

The involvement of Kadzura in Mutekede’s situation was strangely not pursued vigourously by the RBZ or the police. Even the magistrate seemed to contradict his own expressed sentiments about following cases to wherever the leads suggested. The Herald story suggests that Kadzura has far more interesting information to reveal than the investigation or judicial processes have sought to find out.

So the exhibit money has disappeared back into circulation in a way that it cannot be traced. The accused increasingly appears as merely a small cog in a much bigger machine. An apparently key accomplice of the accused is surprisingly given a lot of room and time to cover his tracks. The RBZ has been splashed with a lot of mud which it will be very difficult to clean itself of.

We may never get to the bottom of this particular case, but enough has been revealed to confirm the suspicion of many Zimbabweans that the rot and cynicism of the system runs very high and very deep.

Posted in Economy | Tagged: , , | 14 Comments »

‘Cash barons’ are only a symptom of deeper Zim economic malaise

Posted by CM on December 29, 2007

Things continue to spiral out of the control of the authorities in Zimbabwe in regards to the economy. They try all sorts of quick fixes for the multiple and increasing number of holes, but the bleeding seems to only get worse, whether in regards to inflation or general shortages of all kinds of goods.

The latest and most severe currency shortage to date has spawned all sorts of bizarre happenings. I say “latest” because I was recently reminded that Gideon Gono was brought in as central banker and general economic trouble shooter a few years ago in the midst of the first cash crisis, though not as severe as the current one. Lauded as a miracle worker by the state propaganda services then, Gono’s one-time idolisers are increasingly turning on him as it become clear to all that he cannot tame the economy’s multiple problems.

Where have all the Zim dollars gone to? Why must people queue endlessly to withdraw their own money from their bank accounts?

As in so many other areas of life in Zimbabwe, it is hard to get straight answers to these kinds of basic questions. But it seems a part of it is just that the local currency has so deteriorated in value against hard currencies (today one website says one (1) British pound is equivalent to seven million (7, 000,000) Zimbabwe dollars) that people who need foreign currency for one thing or another just need huge amounts of the Zim dollar to do the exchange. Currency speculation is no doubt also a big part of the reason for the “disappearance” from circulation of huge quantities of cash.

I don’t know if the fact that the amount of currency printed and in circulation is just failing to keep up with inflation and the Zim dollar’s continuing depreciation is also a significant factor. But whatever the reasons for it, it is certainly strange for the citizens of a country to fail to get their hands on their own currency!

We now have the bizarre situation wherein it is a reason for suspicion for a person to have large amounts of cash, and yet the situation forces one to horde it if one is involved in any kind of trade, particularly in import. The silly new term “cash baron” is supposed to conjure up the image of a sinister black marketeer who keeps large amounts of currency in order to deal on the “illegal” forex black market.

But one could easily make a case for the fact that it is not the dealing of forex outside official channels that is a problem. It is instead the ridiculously, unrealistically low exchange rates of the official channels that make it pretty much inevitable that anyone with forex will avoid those official channels like the plague and seek to sell it on the “illegal” black market. With so little forex available on the official market, buyers must resort to the black market. As the local currency hourly deteriorates in value from 10,000+% inflation, those buyers need higher amounts of Zim dollars everyday to purchase the same amount of hard currency.

By criminalising human behaviour that is entirely predictable under the circumstances, the authorities create a whole new list of “crimes” but also create an impossible situation for themselves. The reasons and incentives for dealing on the “black” money exchange market are so much more powerful than the fear of running afoul of the law that everybody is now technically a criminal in this regard, including the central bank and the government itself. In such a situation the applicable laws are nonsense, only useful for “getting” a few deliberately targeted people for show, but absolutely useless as a deterrent to the “crime.” It cannot and is not working.

We have now got accustomed to saying and believing “Zimbabwe has a shortage of foreign currency.” And indeed the country earns much less from exports and tourism than it is used to, and no longer has access to many of the sources of international credit it could count on in previous years. But it is also clear from the size and thriving nature of “the black market” that if you are willing to pay the free market rates, foreign currency is available in Zimbabwe. What is in real short short supply is forex at the low, government-stipulated rates that no sane person would willingly sell their hard currency at.

There is the interesting case of the 24 year old woman who was recently arrested and demonized in the Zimbabwean media for being a “cash baroness.” She was caught with Z$10 billion of the new $500,000 notes within days of this new currency denomination being introduced. This was despite the daily bank withdrawal limits for individuals being only Z$50 million (US$35 at today’s rate) and double that for companies.

In other words, if she had that much money in her account, it would have taken her 100 withdrawal-days to get it out through legitimate channels. It is not thought she bought it off the streets for forex because (1) the Z$500,000 denomination currency note was only a few days in circulation and not then widely available and more importantly, (2) the Z$10 billion was still neatly, tightly packed in its original Reserve Bank of Zimbabwe plastic wrapping!

The implication is that someone, unlikely to be her, either got much more from a bank than they should have been allowed, or that they got it straight from the RBZ itself! Indeed, there have long been allegations that the RBZ is one of the biggest customers of the black market forex dealers, despite Gono’s regular rhetorical huffing and puffing against them.

In an open society the several stunning revelations of the Mutekedeke case would have brought down the whole elaborate house of cards that is the foreign currency trading system in Zimbabwe. It would have exposed many of the country’s high and mighty as people who say one thing while regularly doing the exact opposite, to their considerable benefit and to the great suffering of the country.

The term “cash baron” may be meant to suggest an evil saboteur out to deliberately wreck the economy and inconvenience people. But the phenomenon of hoarding large amounts of cash is not the problem per se, but just another symptom of all the structural things that are wrong in the Zimbabwean economy as well as its overall body politic.

But for whatever it is worth, the internal contradictions of the whole system of the country’s rulership are becoming clearer by the day.

Posted in Economy | Tagged: , , , | 4 Comments »

Harare’s million dollar beer

Posted by CM on December 12, 2007

by Michael Clemens

What’s it like to live in a country whose economy has been shattered by its own leaders? Here’s how a beer purchase in Zimbabwe looks these days:

That’s $1 million Zimbabwe dollars, in four chunky packs of Z$500 notes–collectively, the price of a single beer purchased at a bar in Harare on November 24th. When the beer was quaffed, at the “official” (read: “fantasy”) exchange rate, that was about US$33. At the “black” market exchange rate, that was just under US$1. Today, just twelve days later, it’s only worth around twenty five US cents. Such an economic Twilight Zone forces anyone running a business with the smallest international component to choose between illegality and immediate closure.

Things have gotten so bad that, in a stunning development, enterprising employees of the Reserve Bank of Zimbabwe are selling Zim dollars at the unofficial rate inside the central bank itself to top up their scant wages.

The reason Zimbabwe has the highest inflation on earth is that the regime of President Robert Mugabe is recklessly printing money to finance its expenditures. High inflation has been shown to markedly increase poverty because nominal wages never quite seem to keep up with galloping prices. But why should mass poverty concern Mr. Mugabe, whose chauffeur whisks him around in a Rolls Royce convertible?

Most poverty on earth is so complex that its roots are difficult to trace. In Zimbabwe, the source of the recent surge in poverty is crystal clear. One can only hope that the death-grip Mr. Mugabe holds on his country will soon wither. Until then, Todd Moss and Stewart Patrick have some ideas on how to prepare for the aftermath.

Center for Global Development

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