GOVERNMENT has finally agreed to take over debts amounting to about US$1,35 billion incurred by the Reserve Bank of Zimbabwe (RBZ) over the years after much hesitation. By so doing, it is hoping to achieve two targets.
First, it intends to deal with the bank’s legacy issues that had precluded government from recapitalising the institution.
Second, it wants to make good what was forcibly taken away from various companies in their foreign currency accounts (FCAs) through an act of unilateralism which struck at the core of business confidence by infringing on property rights.
Many will recall how company executives woke up one day to find that their FCAs had been ransacked by the RBZ without notice. And rightly so, the courts have ruled against the raids, leaving the administering banks badly exposed.
As noble as government’s intention might sound, a word of caution will suffice.
There is real danger government might be fooling itself into thinking it is fully resolving the RBZ’s legacy issues and restoring the bank’s lender-of-last-resort function when in actual fact it is merely scratching the surface. The point here is that government must be absolutely sure it is not adopting a piecemeal approach to resolving issues impeding the RBZ from effectively discharging its duties.
The pertinent question to ask in order to bring out this point is: Is government not simply relying on figures supplied by the very individuals that created this mess in the first place, and therefore could be manipulated to hide their tracks?
The RBZ’s challenges go beyond recapitalisation as the officials at the bank would want us to believe. The majority of the challenges are a result of the erosion of confidence in the bank’s ability to execute its duties.
That it was under the RBZ’s watch that the country’s currency lost its value speaks volumes about this, particularly given that the bank’s primary goal is that of maintaining the internal and external value of the Zimbabwean currency.
Because the RBZ could not safeguard the country’s currency, it also lost its responsibility to formulate and implement monetary policy, ensuring low and stable inflation levels and maintaining a stable banking system through its supervisory and lender-of-last-resort functions.
It is well and good that government is in the process of bringing a new broom to give fresh direction to the RBZ, but that should not end there.
Government must also bring in experts to carry out a thorough forensic audit of the RBZ, in particular of the creditors and related transactions in order to bring out every material piece of information to ensure that its intervention is based on facts and not hearsay.
Government can also invite those who feel they might have been prejudiced by the RBZ to come forward and state their case.
Some of these cases might be brought before an independent arbitrator or the justice delivery system could be requested to establish a special court to expeditiously deal with these matters to enable the RBZ to start operating unencumbered by the debt burden.
Alternatively, government can make information on the RBZ’s indebtedness public so that those who have queries can take their concerns up with the relevant officials.
While we are aware that part of the debt could be classified as of a state security nature, there surely must be a way of ring-fencing this sensitive part of the debt, and only bring out that which falls outside this bracket.
The objective here is that of making sure Treasury avoids relying on one-sided information in dealing with the RBZ’s legacy issues. It would be a sad day for Zimbabwe if government is to leave out other creditors simply because it didn’t bother to do its homework.
It would have failed to uphold the constitution by discriminating against other creditors, especially where there is neither an audit of all the creditors nor an invitation for all creditors to lay their claims.
In the past, the media has reported several wrangles pitting the RBZ and external parties, which must form the basis of government’s investigations in establishing the true facts.
What immediately comes to mind is the current dispute between the central bank and its former employees retrenched in 2009 who have not been paid their packages in full. There are also disputes between the RBZ and other parties who are contesting the way they were treated by the regulator and are claiming compensation.
And yet what appears to have been forwarded by the bank to government are debts relating to funds that were seized from FCAs and loans secured from the International Monetary Fund, the World Bank, African Development Bank and other governments as well as expenditure incurred in the procurement of such critical things as fuel, drugs, medicines and agricultural equipment at the pinnacle of the economic crisis. But is that all?
I believe not.
I have seen officials from the RBZ fighting each other publicly on issues directly linked to this subject. One of the disputes that immediately comes to mind is one pitting former RBZ governor Gideon Gono and his former advisor and now Member of Parliament for Bikita West, Munyaradzi Kereke, who made claims to the effect that the bank could have been prejudiced through some of the transactions conducted by its officials.
Surprisingly, nothing is being said about these transactions and other potential obligations that have the effect of rendering the RBZ ineffective if swept under the carpet.
The government should avoid half measures by interrogating these issues on its own without being led by interested parties who may be swimming against the tide, in order to deal with the RBZ’s historical issues in a holistic manner.
Sithole is a member of the Zimbabwe Economic Society. He writes here in his personal capacity.