THE RESERVE Bank of Zimbabwe (RBZ) has tried to communicate to the public its signature bond notes project and the associated US$200 million facility meant to finance the so-called 5% export incentive scheme.
The Brett Chulu Column
The message is little understood beyond the intelligentsia. Jargonising, messaging inconsistency and elite discoursing have been the main impediments to reaching the ordinary masses, a key economic constituency.
Three thinkers sum up the errors of commission and omission our central bank has made in its recent communication endeavours.
Kelli Jae Baeli nailed it when she observed that: “Good communication is less about saying what you mean, and more about defining what you say.”
George Bernard Shaw remarked that: “The single biggest problem in communication is the illusion that it has taken place.”
Stephen Covey made a pertinent observation: “When the trust account is high, communication is easy, instant, and effective.”
Define, verify, build trust — these are the take-aways from the words of the wise on communication, trite but essential wisdom.
Unfortunately, to a greater extent, our central bank has fallen short of these barebones of communication when it comes to the US$200 million African Export-Import Bank (Afreximbank) facility. By extension, the same can be said about the bond notes which are said to be backed by the facility.
To say Afreximbank availed a facility to back the export incentive scheme is almost a non-message. The term facility as a formal financial management term is too broad to pin exactly what this Afreximbank facility is about. When applied to companies, a facility is simply a loan taken out by a company to finance its operations.
Typical facilities are overdraft, revolving credit, lines of credit, term loans, swing-line loans and letters of credit. Overdraft is a short-term loan given out when a borrower’s cash account is empty. A revolving credit is a loan whereby the borrower does not need to reapply each time funds are required as long as the request is within an approved credit limit. A term loan has a pre-set interest rate and a known maturity date. A swingline facility is a loan to be settled in typically five to 15 days given out to settle another loan. There are other types such as committed facility. The point in enumerating different types of facilities is to illustrate two points.
First, there is a need to define exactly what the RBZ means by facility. This helps the non-technical public to understand in unpretentious terms the ideas carried by formal financial management jargon. The whole point of communication is to simplify complex and esoteric ideas. Failure to simplify formal money language has the unpremeditated effect of marginalising the majority of Zimbabweans from participating in a critical debate in an informed way. The RBZ is constrained by democratic ideals to recover the money debate from the vaults of the impenetrable.
Second, the fact that the term facility can be granulated into finer categories, places a burden on the RBZ to be precise about the nature of the facility Afreximbank is assisting us with to finance the bond notes/export incentive scheme.
Afreximbank, in which Zimbabwe is a shareholder member, states in its official communiqués that it extends short to seven-year medium-term loans. It follows that the RBZ, at the minimum, must state without equivocation if the US$200 million facility is either a revolving or a term loan or a mixture of both.
Terms have been used quite liberally in connection to the facility. This has opened the door for multiple messages, hardly the desired endpoint of effective communication. Just last week, Afreximbank was depicted as guaranteeing the export incentive scheme. Ordinarily, when guaranteeing is invoked in matters of money, it paints the picture that the money going to the borrower is coming from elsewhere. In the absence of an explanation of the contextual meaning of “guaranteeing”, one is left with an impression that the US$200 million is not coming from Afreximbank. Choice of words matters.
One would expect the RBZ to own its message in terms of how its intended financial narrative is handled and fed to non-expert publics. You see this shortcoming in how our apex bank has messaged the Afreximbank trade debt-backed securities (Aftrades) project to fund interbank liquidity.
An ordinary reader going through the official description of Aftrades might get the impression Afreximbank is directly pouring money into the country to fund interbank liquidity. The fact of the matter is that it is the local banks having excess funds that are putting in the dollars.
Afreximbank’s role is to use the weight of its name and size of its wallet to affix its name on papers that a local bank in need of funds can acquire. The borrower gives these papers to the lending peer bank as a surety that in the event of default Afreximbank will chip in. Of course, for using the word issued by the trusted name, the borrower must pay. The point here is that use of formal finance terminology does little to communicate to the ordinary person the dynamics involved in formal financing projects.
Consistency in messaging is critical to getting a message across. The RBZ has not done well in this respect. A case in point is how it has at times allowed its narrative on bond notes to be hijacked and re-interpreted. At first, it sponsored the storyline that bond notes were a currency. Powers that be reinforced the message by saying bond notes were a surrogate or substitute currency. Later, this version was deftly shunted to the margin in favour of bond notes as a payment medium for export incentives. No sooner had this recasting gained traction than the currency version was re-appropriated.
The RBZ did not attempt to correct this. Instead, it offered a new explanation that bond notes are zero-coupon tax-exempt debt instruments. There are just too many loose ends in its collective storyline. In its first communiqué on bond notes, the RBZ argued bond notes would help plug US dollar leakages out of the country and would help alleviate cash shortages. Last week, the RBZ said they were not sure if bond notes would reverse the current debilitating cash shortages.
As it stands, it is not clear if Afreximbank is the one supplying the US$200 million or if it is just guaranteeing a loan from somewhere. That cash is needed and not just a paper promise is common-sense since the export incentives have to be backed by hard cash sitting inside the country.
In its ongoing six-week campaign, we expect the RBZ to simplify its message by de-jargonising it to allow non-experts to understand a scheme that directly affects ordinary people. We expect the messages to be accessible in our indigenous tongues. The RBZ must look beyond electronic and print media. In doing so, our central bank must bear in mind Shaw’s truism — avoid the assumption that communication has taken place. It cannot craft its message as if it is just for the cognoscenti. The RBZ must replenish its overdrawn trust account. Trust is like a revolving facility — keep repaying and fresh access is automatically renewed.
Chulu is a management consultant and classic grounded theory researcher. He has published research in an international peer reviewed academic journal.