SHARP policy differences have emerged between President Robert Mugabe and Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono over government̵
7;s intended move to seize private companies and stick to price controls.
Since Independence in 1980, Mugabe has always been a disciple of the command economy while Gono strongly believes in a market economy.
Mugabe and Gono publicly differed on Monday on policies the government should pursue to extricate Zimbabwe from the current economic crisis.
This was the second time President Mugabe and his chief economic advisor have clashed within two months over price controls.
The public fallout forced the two into a five-hour meeting on Wednesday in which a temporary truce is understood to have been reached.
However, sources said, fundamental policy differences still exist between Mugabe and the central bank boss.
In his mid-year monetary policy on Monday, Gono attacked the government for trying to take over companies through the Indigenisation and Empowerment Bill, arguing that the “grab all and run strategy” would be disastrous to the economy.
Gono warned that company seizures would result in capital flight, massive disinvestment and further economic recession.
The Bill, which was passed by both houses of parliament and now awaits presidential assent, seeks to give local business people a 51% stake in local firms including mines and banks.
Gono implored the government not to take over foreign-owned companies, especially mines and banks. The RBZ boss said the banking sector, by far the most black-owned sector, should not be destabilised by a few “well connected cliques, some of whom are already making the most noise in ostensible support of this initiative, who would want to amass wealth to themselves in a starkly greedy but irresponsible manner”.
“Of particular concern to us as monetary authorities would be any attempts to forcibly push the envelope of indigenisation into the delicate area of banking and finance,” Gono said.
The central bank boss said while indigenisation of companies was noble, legislators and the government should strike a balance between its objective and the need to attract foreign investment.
Gono called for caution and suggested a gradual approach to indigenisation based on the capital invested.
He said indigenisation should be done over a period of between one and 15 years.
For companies capitalised to the tune of US$500 million, Gono suggested that full indigenisation (of over 51% local ownership) should happen over a maximum period of 15 years.
At least 20% of similar companies must be transferred into black hands in the first five years and 45% up to 10 years.
Gono said he was against price controls.
“The existing challenges (in the country) have been made worse by the breathtaking and stressful developments of the last three months that have left our supermarkets with empty shelves while incapacitating the supply and delivery chains of basic services while at the same time creating a serious confidence crisis and mistrust between government and the business community,” Gono said.
He added that the nation found itself “trapped by a proverbial winter storm” in which the people’s fears and hopes were running neck-to-neck “dangerously propelled by the threat to mutually destroy each other”.
In July Gono clashed with Mugabe over the government’s price slash blitz that left shops empty and the economy tottering on the brink of collapse.
Gono likened the price blitzkrieg to the United States and its allies’ invasion of Iraq without an exit strategy.
While Gono was presenting his policy, Mugabe was telling thousands of his supporters at Harare International Airport that his government would stick to price controls and would seize profiteering companies.
Mugabe was speaking soon after arriving back from the United Nations general assembly in New York.
The ageing president said his government would ruthlessly deal with firms engaged in profiteering.
“We will have to seize the companies, and the services… whether transport or any other service being rendered by a company or organisation,” Mugabe said. “If they don’t follow our way, we will takeover the companies. We are warning you, be straight forward, this is our country together.”
Mugabe recently accused the business community of working with the US, Britain and other Western states to effect regime change in Zimbabwe.
On Tuesday, Gono briefed Western diplomats on his latest monetary policy.
The diplomats reportedly wanted to know whether or not they should heed Mugabe or Gono on economic policy matters.
They reportedly also wanted to know whether Zimbabwe would have an economic policy shift.
Gono repeated to diplomats that there was a link between political troubles and the economic crisis, a view that angers Mugabe.
“Our economic challenges and policies cannot be read and viewed in isolation of the political challenges,” Gono said.