RBZ governor needs more muscle

Ngoni Chanakira

THE business community says whether Zimbabwe has a new Reserve Bank governor or not does not make any difference because he is just a ceremonial figure, busy rubber-stamping

government dictates.


The community says the country does not need just an engine overhaul, but a completely new engine to move the economy ahead.


President Robert Mugabe is expected to announce a new RBZ governor anytime now replacing Leonard Tsumba whose second five-year term has expired.


Insiders predict the new fellow to occupy the plush offices located on Samora Machel Avenue already has his work cut out for him like his predecessors because he will be arm-twisted as usual.


In an interview Zimbabwe National Chamber of Commerce (ZNCC) policy and advocacy manager James Jowa said the RBZ governor in Zimbabwe was just ceremonial because of the nature of the Act that governs the central bank.


“It is Cabinet and the Ministry of Finance and Economic Development that call the shots at the RBZ,” Jowa said. “The RBZ is not autonomous as is the case with progressive economies the world over such as South Africa.”


South Africa’s governor Tito Mboweni was voted the world’s 2001 Reserve Bank Governor of the Year after steering the country’s economy on a steady growth path with inflation averaging less than 10%. It presently stands at 11,3%.


Mboweni has, however, clashed with President Thabo Mbeki on several occasions on his desire to maintain a strong rand, arguing that this would help subdue inflation.


Last month Mboweni told parliament: “We certainly have no intention of weakening the rand. As long as I am Governor of the Reserve Bank, that’s going to be my position.”


The rand strengthened by seven cents to 7,88 against the dollar after Mboweni’s comments.


Jowa said regardless of the effectiveness or otherwise of any new RBZ governor, one of the critical issues to restore the economy was to reduce money supply growth in order to bring some stability on inflation and the exchange rate.


“This means that the RBZ governor should stand his ground and not allow the government to spend as it wishes,” Jowa said. “This is going to be a very difficult task in light of the forthcoming supplementary budget.

Moreover, the RBZ is already working overtime to print more money to meet the hyperinflation-induced demand against any set targets on money supply growth.”


Outgoing RBZ boss Tsumba has been blasted for allowing government to continuously borrow funds for various unbudgeted activities, further increasing its domestic debt which stood at $446,1 billion as of May 16.


Some of these activities include the $50 000 golden handshakes dished out to war veterans for their role in the liberation struggle, the regular increments given to the civil service, medical fraternity, armed forces as well as government chefs.


Only last week President Mugabe and his ministers received 1 000% salary hikes and this, analysts say, would further deplete already empty state coffers. The RBZ this week said total domestic savings had also been declining since 1995, with the savings ratio falling from 20,8% of gross domestic product in 1995, to 9% in 2000. The bank said the significant decline in domestic savings occurred against a background of high inflation and negative real rates of return on domestic savings.


“The country is at the brink of total collapse, and it appears we are heading for a big crunch unless something gives in,” Jowa said. “The instability is characterised by a high budget deficit, high levels of debts, low levels of domestic savings and productive investment, high inflation, a crippling shortage of foreign currency and company closures.”


Century Holdings Ltd (Century) led by Gary Shoko said among the key issues the new RBZ governor would have to immediately tackle were the foreign exchange rate, interest rates, economic growth, as well as stabilisation of the Zimbabwe dollar.


“The central bank agreed with exporters six months ago to review rates (foreign exchange) quarterly,” Century said in its advice to the new governor. “However, the rates have remained stagnant impacting negatively on the country’s ability to attract foreign currency to flow back to Zimbabwe from the diaspora.


“There is need to have consistency on policies regarding rates (interest), that is low or high rates. It is important to have consistent and transparent methodology used to determine rates, as was the case prior to the year 2001. This impasse compromises most business’ ability to plan for long-term productive investments.”


The group said the current scenario was one whereby investors were mostly displaying activity in short-term, speculative consumptive trends.

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