THOSE who have watched Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono splashing trillions of dollars during his 23-month reign could be forgiven for doubting the com
mon saying: “money does not grow on trees”.
He has been doling out money like it does grow on trees after all. Over a period of 23 months, Gono has given out more than $23 trillion. This means that since his appointment in December 2003, he has handed out an average of $1 trillion every month, which translates to a massive $33 billion a day.
In December Gono will be two years old in the governor’s office but with nothing to show for it, although he has spent a fortune in his efforts to revive the economy.
The results of this extravaganza have been disastrous because it is based on the warped assumption that major sectors of the economy are crumbling because they lack funding, analysts say.
However, the continued collapse of the economy, company closures and galloping inflation show that money dished out has not translated into real growth or at least stopped the hemorrhage in the economy.
The accelerated collapse of the economy, analysts say, is evidence that what Zimbabwe needs is not a reckless injection of local currency, but an urgent correction of economic and political fundamentals.
They say there is need to create a stable and predictable environment under which business can operate.
A predictable environment, they say, means a stable local currency, clear foreign currency laws and zero government interference in the market. It also means policy consistence in government.
The analysts say unless the central bank and government start singing from the same hymn book on key policies, the economy will remain stuck in the mud no matter how much money the governor doles out.
They note that Gono can throw money at big problems but they will not go away unless the politics of this country are corrected.
Zimbabwe has one of the highest political risk ratings because it has continued to trample on property rights and wanton disregard of the rule of law.
Companies are arm-twisted to charge uneconomical prices for their products as part of government’s political gimmick to “cushion” the poor.
The political crisis and government’s skewed economic policies therefore make Gono’s generous spending a waste of national resources that has since started to boomerang with rising inflation due to increased money supply. It has sunk the economy that he claims to be turning around.
Analysts say that Gono blundered in the first place by believing that money fixes every problem. Almost all of the previous monetary reviews, save for his inaugural one on December 18, 2003, have been accompanied with a new money doling facility.
He kicked off the year 2004 on a high note giving $400 billion in liquidity support to troubled banks, most of which still collapsed despite the capital injection.
The figure grew more than $2 trillion with interest and was never recovered, leaving a yawning gap in the treasury and the national savings.
Only two of the seven banks – Metropolitan and Intermarket – that received liquidity support survived.
Trust, Royal and Barbican, some of the biggest beneficiaries of the facility, collapsed. They were later forced into the Zimbabwe Allied Banking Group (ZABG) whose future remains uncertain eight months after formation.
Time Bank is yet to come out of the woods while Century, which later merged with CFX, is still limping.
Gono also gave more than $2 trillion under the Productive Sector Facility (PSF) at heavily subsidised rates of 30%.
The money, as the governor claimed, was meant to boost production but the situation in the agricultural and manufacturing sectors has worsened with more companies closing shop and production plunging.
Despite receiving more than 36% of the funds under the facility, industry has continued to collapse with recent reports from the Zimbabwe National Chamber of Commerce (ZNCC) saying capacity utilisation has slumped to 25%.
This is probably the lowest capacity level of utilisation in Zimbabwe’s industry since Independence in 1980. The lowest level hitherto was two years ago when it reached 35%.
The agricultural sector, which has so far received more that $4 trillion over the past two years, has continued down the cliff.
This year alone Gono has given out more than $3 trillion to the agricultural sector but forecasts already show that Zimbabwe could have a serious food shortage next year.
According to a document compiled by the research department of the central bank itself, the country is going to produce about 750 000 tonnes of maize next year against a national requirement of 1,8 million tonnes.
The document also says the country will produce less than 150 000 tonnes of wheat this season, far less than the national requirement of 400 000 tonnes.
These shortages are forecast despite the fact that Gono has so far injected more than $4 trillion into the sector.
Experts say no amount of money can resuscitate the aricultural sector unless Zimbabwe regains its international market, restores property rights, stops further land invasions and restores order in the sector.
“These are simple fundamentals that do not demand trillions,” said economic consultant Daniel Ndlela.
“It’s the fundamentals that are wrong. By throwing money at every problem they are stoking inflation, pillaging the value of the dollar, that is dangerous,” Ndlela said.
Perhaps the clearest example that money does not matter when fundamentals are crooked, are the parastatals whose service delivery has not improved despite receiving billions of dollars from the central bank.
Parastatals like the Zimbabwe Broadcasting Holdings and the National Railways of Zimbabwe have gobbled billions of dollars under the fund but their fortunes have continued to dip. If anything, service at the NRZ has worsened on the back of a bloated wage bill and incompetence.
Loans to the Zimbabwe Electricity Supply Authority (Zesa), the Zimbabwe Iron and Steel Company (Zisco), Agriculture and Rural Development Authority (Arda) and the Grain Marketing Board (GMB) have also not changed anything. It is unclear whether these parastatals have repaid their loans.
Refusing to learn from past mistakes, Gono then came up with another $10 trillion fund, which he dubbed Parastatals and Local Authorities Re-orientation Programme (Plarp).
Under Plarp, Gono gave out trillions to parastatals that had already failed to service their loans under the PSF. Zesa Holdings and Zisco are reported to be in line for a massive loan of $1 trillion each.
Ailing Air Zimbabwe, the NRZ and Arda will also receive trillion- dollar loans.
Local authorities are also reported to have accessed funds but the service is still atrocious. Service delivery in Harare, for example, is still shambolic.
Ndlela said by pumping out money, Gono has fuelled inflation, helped undermine the value of the dollar and reduced the value of labour.
“What he has done is to pillage the value of the labour that one puts into the eight hours at work. In real terms, Zimbabwean workers now earn almost a third of what they earned in January,” said Ndlela.
Economist John Robertson said by throwing money at every problem Gono was only dealing with symptoms of a broader crisis that needed a drastic policy shift to solve.
“Lack of money is only a symptom. He has to deal with the problems that have wrecked the economy in the first place,” Robertson said.
“Companies in this country are suffering because there is no foreign currency, fuel and power.
“No matter how much Zimbabwean dollars you give them, this problem will never go away. It might postpone the problem but it will still be there.”
He said Gono’s profligacy has accelerated inflation. There are fears in the market that inflation could increase to 500% by year-end.
Year-on-year inflation is around 265% and judging by the trend in the economy, it is unlikely to end the year below 80% as predicted.