HomeBusiness DigestRBZ teeters on the brink of collapse

RBZ teeters on the brink of collapse

THE house that central bank governor Gideon Gono built over the past six years is tottering on the brink of collapse, weighed down by under-funding, a protracted labour dispute and failure to service debts, among a host of other problems.

The bank confirmed this week that its existence was under threat.

Impeccable sources at the bank told the Zimbabwe Independent that Gono created a “monster” that was now haunting the Reserve Bank of Zimbabwe (RBZ) when he stitched a number of quasi-fiscal facilities since his appointment in December 2003.

The facilities, among them, the Productive Sector Facility, Basic Commodity Supply Side Intervention (Bacossi), Local Authorities Reorientation Programme (LARP), the Farm Mechanisation Programme and the Agricultural Support Enhancement Facility, were financed by printing money.

The quasi-fiscal activities, Gono argued, were meant to keep the country limping and to bust economic sanctions.

But with the dollarisation of the economy last January, printing money was rendered useless and the central bank’s life blood dried leaving Gono with no option but to turn to the treasury for funding.

Finance minister Tendai Biti has not been of much help to the central bank as he has refused to adequately fund the RBZ arguing that there was need for reforms at the bank and that there was need to clip the governor’s wings.

A war of attrition between Biti and Gono worsened the situation and now the bank’s existence is under threat.

Sources told the Independent that the bank has operating without a board since 2008 and Biti had not shown any urgency to appoint a new one.

The absence of a board, the sources said, had resulted in the central bank failing to make crucial decisions to realign itself with the new economic dispensation in the country.

The bank’s last board was made up of Gono as chairperson and members, Grace Chella, Clever Mumbengegwi, Mike Ndubiwa and Phineas Chihota. Its term of office ended in December 2008.

Staff morale at the bank, the sources said, had reached rock bottom with the top bank reportedly still paying its workers’ salaries in the demonitised Zimbabwe dollar piling in their bank accounts. Employees at the bank are paid a US$150 monthly allowance.

This, the sources said, had resulted in the workers committee clashing on several occasions with Gono –– who is the chairperson of the bank’s works council.

The sources said the workers and the RBZ went for arbitration last year and the bank was told to pay salaries in US dollars backdated to last July, but could not do so because there was no board to ratify the ruling and the bank was broke.

The bank has a staff compliment of between 1 500 and 2 000 compared to less than 500 workers when Leonard Tsumba was governor.

“Gono has told the workers that he cannot retrench them because the bank has no money to pay packages,” a senior manager at the bank said. “The opulent life we enjoyed before dollarisation is gone and we are struggling to make ends meet.”

Workers at the bank have alleged that management has adopted a strategy of frustrating them out of employment so that the RBZ would not incur any expenses through payment of severance packages.

During the height of quasi-fiscal activities, central bank employees were some of the best paid in the country and used to enjoy executive benefits when executing their duties such as currency change under the Gono-coded Sunrise 1 and 2 operations.

“The bank is also facing problems in servicing its debts,” one of the sources said. “The bank is facing litigation from various service providers.”

While the sources could not give figures on what the central bank owes its creditors, the bank is reportedly facing eviction from premises it was renting throughout the country after failing to pay rentals.

Some of its projects such as building of houses in the capital under its Homelink facility have reportedly been halted and some of the properties were now under the hammer.

So serious were the problems facing the central bank that the International Monetary Fund (IMF) last October said the bank had continued to channel statutory reserves to finance quasi-fiscal projects, which rendered it incapable of backing up banks.

The multilateral financial institution said between January and August last year, US$16,3 million from the bank reserves was used to finance non-core activities that included financing Air Zimbabwe, paying presidential scholarships and financing diplomatic missions.

The IMF also revealed that the central bank accrued operating arrears in salaries, debts to the Zimbabwe Revenue Authority, pensions, communications and courier services.

Gono defended the use of the reserves saying the central bank was yet to be recapitalised by the treasury.

In response to several written questions from the Independent to the RBZ, the bank’s public relations executive Kumbirai Nhongo confirmed the bank was under-funded, but refused to give further details.

“Whilst we can confirm that treasury is seriously under-funding the central bank to levels that are now threatening the very existence of the Reserve Bank of Zimbabwe, itself a constitutionally enshrined institution, it would be inappropriate for us to go into the operational issues that are under the consideration of our principals in the global political agreement,” Nhongo said in written response. “We remain confident that objectivity and the Zimbabwe-first spirit will prevail sooner rather than later.”

Efforts to speak to Gono or Biti were in vain yesterday as they were reportedly on holiday.

Last December, the central bank said it could no longer exercise its function of the lender of last resort because of the under-funding by treasury.

The apex bank said this when banks were unable to dispense cash to clients during the festive season.
“The central bank is being acutely under-funded by treasury leaving the institution with no capacity to independently perform the lender-of-last-resort function let alone afford to import currency for banks,” the RBZ said.

It said in 2009 it received US$1,5 million from treasury to cover all operations, overheads and any other statutory obligations the bank had to implement.

Biti and Gono have been engaged in a duel for the control of the country’s economic levers since the inclusive government was incepted last February.

Their war of attrition also divided politicians along party lines as evidenced by the debate on the RBZ Amendment Bill last November.

The Bill was passed by the House of Assembly but faced resistance in the Zanu PF-dominated Senate.
In the 2010 budget, the RBZ was allocated US$10 million for all its operations including the “sustenance of the electronic payment system and subscriptions to SWIFT service providers”, a figure the bank said was too little.


Constantine Chimakure



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