Can Gono really make things happen
Verdana; mso-bidi-font-size: 12.0pt; mso-fareast-language: JA”>By Eric Bloch
OVER the last 10 days, since the announcement was made that President Robert Mugabe had appointed Dr Gideon Gono as the new governor of the Reserve Bank, a “crisis of expectations” has developed within Zimbabwe’s many economic sectors.
Those expectations have been fuelled by three major factors. The first is a recognition that Zimbabwe is in desperate need of major transformation, that a critical component of such a metamorphosis must be very different monetary and economic policies to those that have prevailed for all too long and reduced most Zimbabweans to penury, and that recognition being accompanied by a desire and anxiety that the change commence as rapidly as possible. This is so because the Zimbabwean economy has been brought to such a state of distress that most Zimbabweans face each new day with a sense of dread, fearing ever greater poverty, discomfort and difficulty to survive.
The second factor stimulating great expectations that Gono will, almost miraculously, be able to transfigure the economy from one verging upon death to one which is reinvigorated and virile, is that many are conscious of his proven banking skills. It was Gono who took the helm of the Commercial Bank of Zimbabwe when it was on the point of collapse after the demise internationally of its former parent, the infamous Bank of Credit and Commerce International. He took the devastated bank which had been saved from liquidation by the intervention of government and converted it, in a remarkably short time into a strong and very successful player within the financial sector. He had also evidenced remarkable abilities at procuring substantial lines of credit internationally for the near bankrupt Zimbabwe, when almost all others had been unable to do so.
And the third, and probably most pronounced factor stoking the surging expectations that Gono will bring about massive, positive change has been the extent to which the media in general, and the state-controlled media in particular, has not only lauded Gono’s appointment with outpourings of ecstasy, but has sought to convince its
readers that that appointment is, together with an allegedly imminent wide-ranging restructuring of the Reserve Bank, the forerunner of constructive changes to monetary policies, containment and reversal of inflation, and procurement of considerable inflows of foreign exchange, concurrently with a dynamic crackdown on illegal foreign currency trading.
It cannot be denied that Zimbabwe’s economy has plunged to almost inconceivable depths and that, therefore, the unifying factor for most Zimbabweans is not only the commonality of their misery, but also the magnitude of both their disillusionment and distress, and their anxiety for a rapid reform of the economy. Similarly, it cannot be plausibly suggested that Gideon Gono does not have the capacity to achieve that which so many now expect of him, insofar as his skills, his expertise and his will are concerned.
Over many years he has proven himself to have great acumen, considerable banking skills, immense drive and determination, and a patriotic love for Zimbabwe and its people. He has shown himself to be dynamic, innovative, filled with initiative, able to surmount obstacles, not easily deterred or diverted from pursuit of his objectives, and to have achieved considerable successes. It is, therefore, readily understandable that so many should expect wonders to result very rapidly from Gono’s appointment.
That the state media should eulogise Gono’s appointment is not surprising. After all, it enthuses endlessly over anything and everything done by government and the president. If its praise for the appointment of Gono had been founded solely upon his skills and ability, it would have been well-founded.
In practice, however, it would have as effusively welcomed the appointment as governor of the Reserve Bank of Popeye the Sailorman, or anyone else appointed by the president. So, the media have aided the development of the crisis of expectations, but not necessarily on good and sound grounds.
Unfortunately, there is little upon which the expectations can be pinned as can justify those expectations, for it is long-established that history has a habit of repeating itself. All the attributes justifiably attributable to Gideon Gono were as justifiably attributable to the last governor of the Reserve Bank, Leonard Tsumba. He entered his post as governor more than 10 years ago with a wealth of banking experience, a profound knowledge of economic affairs, a strong appreciation of actions required for economic wellbeing, and a very sound interactive network with the international monetary community. Over and over again he identified Zimbabwean economic needs, and how they could best be fulfilled.
But, just as frequently, he was prevented from taking the actions he knew were necessary, when they did not accord with government and the president’s perceptions. That this divide was created between the state and the Reserve Bank governor was widely known — not because he made it known (in fact, he loyally struggled to conceal it), but as disclosed, whether intentionally or inadvertently, by many of the hierarchy of the government and the ruling party, in parliamentary debates, at party conferences and congresses, and at political rallies.
If that was the circumstance that prevailed for 10 years, there are no evident grounds to suggest that things will be any different during the tenure of Gono. In fact, there are strong signs that the reverse is the case. As recently as last week, the president told the Zanu PF central committee that “textbook economics” do not work, and Zimbabwe must go beyond them. He said so in blissful disregard of the fact that Zimbabwe has long disregarded “textbook economics”, and not only has such disregard not aided the economy, but it has consistently retarded and worsened it.
Zimbabwe has discarded adherence to fundamental economic principles and the result has been economic regression and impoverishment of the nation. If that is the continuing political philosophy of the president and government, all of Gono’s abilities must come to naught in trying to restore the economy to good health.
The actions required to transform the economy are many. They include that Zimbabwe must realistically devalue its currency. But when 16 months ago a former Minister of Finance sought to do so, the president said that “advocates of devaluation are saboteurs and enemies of the state”, and when the current Minister of Finance did, albeit belatedly, adjust currency exchange rates, ie devalue, he said further such adjustments would occur quarterly in line with purchasing power parity. But no such further adjustments occurred, he not being allowed to effect them. So, will Gono be allowed to adjust exchange rates whensoever necessary, and eventually to enable market forces to determine exchange rates? It seems improbable!
Vitally needed for economic recovery is to bring inflation down to tenable levels. But the Reserve Bank has never been given the autonomy necessary for effective inflation-targeting. Will that independence now be given to Gono? Most unlikely!
Necessary for economic recovery is adequacy of foreign exchange. However, that cannot be attained single-handedly by Gono. It requires export recovery, which needs not only devaluation and containment of inflation, but also meaningful export incentives, a reconstruction and recovery of agriculture, and facilitation of export-related investment. Those are not in the hands of the Reserve Bank, so Gono cannot make them happen. Only government can, and it has yet to demonstrate the will and ability to do so. And a viable foreign exchange circumstance will not be forthcoming without constructive interaction with the international community. Gono’s extroverted personality and his knowledge can be a factor in attaining that interaction, but only when government ensures a restoration of law and order, and democracy in Zimbabwe. That is not in Gono’s hands!