FINANCE minister Tendai Biti is pushing for comprehensive Reserve Bank of Zimbabwe (RBZ) reforms to weaken his rival at the central bank, Governor Gideon Gono, as the political war between the two intensifies.
Biti and Gono are locked in an intense tug-of-war which has drawn in cabinet ministers and senior government officials. The current battle is part of a wider power struggle within the inclusive government between President Robert Mugabe and Prime Minister Morgan Tsvangirai.
Biti, who has vowed to remove Gono, is now working on a number of measures to reform the RBZ. If his proposals succeed, Biti would gain a strategic advantage over Gono and possibly ensure his removal from the institution. The Gono issue has been part of the talks between Zanu PF and the MDC factions.
Biti has never hidden his desire to get Gono out of the RBZ, saying he has ruined the economy through quasi-fiscal activities.
“He has been stoking the fires of inflation through quasi-fiscal activities. In other countries if a central bank governor admits to printing money he will face the firing squad. Gono is the number one economic saboteur, terrorist and Al Qaeda,” Biti said last year.
After assuming the reins at the Finance ministry, Biti has been crafting reforms that he wants implemented soon. The minister told a meeting between RBZ officials and himself two weeks ago that changes were coming.
Informed sources said Biti said he intends to appoint a new RBZ board. He would remove Gono as the board chair and have it chaired by a non-executive board member.
A number of names of a potential RBZ board chair are being proposed, including those of University of Zimbabwe lecturer Tony Hawkins, businessman David Govera and MDC-T lawyer and negotiator Innocent Chagonda.
Besides Gono, the current board is also made up of his three deputies – Edward Mashiringwani, Charity Dhliwayo and Nick Ncube – and non-executive members, former Chartered Institute of Secretaries president Grace Chella, University of Zimbabwe lecturer Clever Mumbengegwi, former Bulawayo council town clerk Mike Ndubiwa and businessman Phineas Chihota.
However, Biti’s moves are facing resistance from Gono and his allies. Gono this week warned of “alien pieces of advice” in Biti’s policies. Gono’s advisor Munyaradzi Kereke has told Biti that having an RBZ board that is not chaired by the governor or chaired by a non-executive board member would be “inconsistent with Sadc guidelines as well as international best practice”.
Kereke said if that were to happen the day-to- day running of the bank would be “paralysed”.
Under the Reserve Bank Act, the central bank governor chairs the board and its members are appointed by the president “after consultation” with the minister.
Sources said Biti wants to ensure that Gono is completely sidelined. They said he wants to take charge of the affairs of the ministry and the RBZ to push his reforms and policies.
Besides, Biti wants to form a Monetary Policy Committee to deal with monetary policy technicalities. Gono, according to the plan, would chair the committee.
The sources said Biti also wants to amend the Reserve Bank Act to remove Section 6 (i) (d) which states that one of the functions of the RBZ is “to advance the general economic policies of government”.
But Kereke has told Biti that removing this section from the RBZ Act would undermine the constitutional and economic relevance of the institution as its main and overall objective was precisely that.Â
Biti has asked Gono and Kereke to put their concerns in writing.
He also wants to look into Section 31 of the RBZ Act that deals with optimal capital levels. He has ordered the RBZ to look into the issue and report back.
Further, Biti wants Gono to issue indexed inflation—adjusted and foreign—currency—denominated 2008 financial statements. But Gono has told Biti via the Ministry of Finance accountant general Judith Madzorera the instruction is “not feasible and is not based on sound advice”.
Sources said Gono wrote to Madzorera three days ago, saying that the accountants of the country in consultation with international boards of accounts had indicated this was not possible for last year’s accounts.
Gono said the Public Accountants and Auditors Board, which regulates accountancy in Zimbabwe, the Zimbabwe Accounting Practices Board and Zimbabwe Stock Exchange had issued a joint statement on financial reporting explaining why 2008 accounts “had to be in local currency terms and at historic values”.
He said the transition to multi-currency and therefore foreign-currency-based reporting was announced by acting Finance minister Patrick Chinamasa in January and confirmed by Biti himself in his revised budget in March.
“Therefore, the required compliance with foreign currency reporting can only be legally achieved in relation to audited financial statements for the year ending 31 December 2000 and not as directed for accounts ended 31 December 2008,” Gono wrote.
He said it was clear to him Biti was being misled by his advisors.
Biti has also been pushing for the investigation of Gono over an alleged breach in borrowing procedures. However, the minister was blocked at last week’s tense cabinet meeting from probing Gono.
Information minister Webster Shamu subsequently said Gono would not be investigated, a position taken by his colleagues in cabinet last week.
Despite cabinet’s position, a senior finance official said Biti legally has powers to investigate Gono. In terms of the RBZ Act, Section 38 titled “Investigation into the bank’s affairs”, the minister can lawfully probe the RBZ.
“The minister may at any time cause an investigation to be made into the affairs of the bank by one or more persons authorised by him in writing to do so,” the Act says.
This section works in tandem with Section 37, which deals with the powers of auditors.
Sources said Biti during the meeting also proposed a reduction of statutory reserves from the current 10% to 2% of depositors’ funds. This, sources said, would be a reprieve for troubled financial institutions that were battling to source money for lending.
The existing high ratio has resulted in fluid deposits and low confidence in the financial system due to general dis-intermediation.
While Biti has been pushing hard, Gono has also come out fighting. The central bank governor stepped up his fight back campaignÂ last week when he published two supplements in the public media, slamming Biti over a number of issues.
Gono hit back at Biti over allegations that he had borrowed over US$1 billion (US$5,3 billion in total) without approval from treasury. He has produced authorisation letters which were signed in the past by one of Biti’s current advisors, permanent secretary for Finance Willard Manungo.
The letters show the authorisations were done by past Finance ministers Herbert Murerwa and Samuel Mumbengegwi.
Murerwa is apparently one of those who agreed at the ministerial economic committee meeting last week that Gono must be investigated.
Biti and Gono are also fighting over the distribution of cars given by the RBZ to MPs. Biti has ordered Gono to withdraw the cars he has given to the MPs and Gono initially indicated he was going to comply.
But he has been distributing more cars instead of taking them back. Zanu PF and MDC MPs are refusing to hand back the cars, despite orders from the MDC leaders to their own legislators to return the vehicles. Gono said in an insert in the Herald this week that the wrangle over the cars was “needless controversy”.
BY BERNARD MPOFU