Dear Dr Mangudya,
I hope this communication finds you in good stead.
I am writing to you as a concerned citizen and part of the broader banking community of Zimbabwe. I am also writing to you as a sister in the Almighty. An ordinary article where I would be grumbling and whining would not have sufficed because as a respected elder in my beloved church, the United Methodist Church, it would not go down well with me if I am perceived, rightly or wrongly, to be making a personal attack on you.
That said, your recent announcement left all of us within the banking public, totally startled and astounded. You were quoted as having said:
“The central bank has stopped giving United States dollars to banks for individuals to withdraw. This is because the dollars were being used to fuel the black market. Even if we put a lot of money into ATMs, people will take the money and go and sell it because the US dollar is being looked to as an investment as opposed to being a medium of exchange.
So what makes people take money from the ATM is that they want to sell it 50 cents above its value … it has become an industry of selling money but we need to sell products. Should we put more money into ATMs for people to get money or should we put more money into the industry, which is employing people? It’s better to go for the latter.”
If these allegations are true, then, with all due respect governor, as a seasoned economist yourself, may I jog your memory on the basics of Micro Economics 101, specifically, the theory of demand and supply.
The law of supply and demand is a theory that explains the impact on pricing during the interaction between the supply of a resource and the demand for that resource. Generally speaking, if all other factors remain unchanged, the low the supply of a resource, whiledemand is high, the higher will be the price for that resource. The greater the supply of a particular resource while demand falls, the lower the price.
I am not sure I understand what informed your thinking, but as it stands, your logic is somewhat faulty and unsound. One need not have studied basic Micro Economics 101 to understand that the rationality of denying the public access to their hard-earned money via ATM withdrawals is flawed.
The banking public in Zimbabwe is not vacuous and vapid. Fractured, disorganised and fearful, we are, but certainly not uninformed. Over the last 20 years, we have been cowed into silence by the political power elite and those holding the weapons of mass destruction. We do seem like a docile lot but we are not moronic nor are we imbecilic.
Following the argument of the law of demand and supply, the reason why the US dollars are being traded at a premium is because they are in short supply. Any measure to restrict the availability of the US$ further, exacerbates the problem instead of ameliorating it. In essence, this means, you could be, without intention, aiding and abetting the illegal money trading industry.
As the head of the central bank, we expect you to be increasing the US$ in circulation, not restricting them. By taking this course of action, the RBZ is inadvertently enabling the thriving of the black market and enriching money traders and everybody else with access to foreign currency.
Governor, please understand that we are already on our knees. Please spare us more hardship. The posture you have taken, at top down approach, without consulting us, the banking public will only serve to worsen our plight. Zimbabweans are substantial consumers of the products from industry. As a result, the plight of industry also on its knees, will worsen, as the detrimental effects of this ill-conceived and injudicious measure will have far-reaching effects on the economy.
As the banking public we have known for the longest that there is a shortage of US$ within official channels. This is because, USDs dried up from ATMs a long while ago.
When we observed that ATMs waere dispensing fewer and fewer USDs, both inside the branch networks of banks and at ATMs, we regrouped as a self-preservation measure. Anyone with commonsense knows that it is foolhardy to consciously deposit US$ cash into an account if there are no guarantees it would be available on demand when needed. That, Dr Mangudya, is how the money traders saw a gap in the market and turned it into a business opportunity. It is the law of demand and supply.
In the first place, I doubt that you have got adequate reserves of US$ to service personal accounts of the public banking community, including the requirements of industry. An honest announcement stating that reality and how you intended to mitigate it, I believe, would have been better received by the public.
Governor, if the truth be told, the introduction of the US$ in 2009 was ill-advised in an economy that was either no longer structured to be export-led or if there were exports of particularly mining resources, most of the proceeds were not remitted back. Unless we created new US$ from exports, the use of the US$ side by side with the Bond note was going to create a parallel market.
As a Central Bank, you are sitting with all the data. Your high offices are well aware of who has been looting the coffers of US$. So Dr Mangudya, please refrain from the political grandstanding and fallaciousness and spare the public who are eking out a living under trying circumstances.
When you ambushed Zimbabweans by introducing the Bond notes on November 28 2016, as part of a desperate bid to stave off a cash flow crisis, you indicated that the Bond note was at par with the US$. This announcement, the Zimbabwean banking public knew was being economical with the truth. You mopped up real money from our accounts and replaced it with a currency not at par because hardly two days later, on November 30, unofficial money traders were demanding a 25% premium in Bond notes for every US dollar. In fact, most retail operations started charging more to clients using the Bond notes.
Your recent announcement confirms what we have always known — that the Bond Note is hardly worth the paper it is printed on. The Bond note was stillborn because it is not tradable outside Zimbabwe but most importantly, the economic policies pursued during the last three decades crippled production in virtually most sectors of the economy. In addition, the curse of corruption, nibbling away at the country’s revenue and resources has meant that new venture creation at all levels has been compromised, in essence, stymieing current and potential production.
The low hanging fruit in terms of increasing production and therefore giving any envisaged local currency gravitas and potency in terms of purchasing power is undoubtedly agriculture because we have the land, people resources, water, inputs and competencies.
Unfortunately, a significant number of the landholders we have occupying the land today are indolent, ignorant, absent, and impecunious, in most cases having been allocated the land dubiously and mainly for speculative purposes. This useless parasitic class of land “owners” have no business hanging onto this land and should be evicted forthwith. Unfortunately, this is unlikely to happen because this class of people I have made reference to, are the very same policy- makers and bureaucrats who control the levers of power and are therefore unlikely to evict themselves!
The depravity of corruption on our country is not imagined. Transparency International Zimbabwe “reported in October 2016 that Zimbabwe is losing at least $1 billion annually to corruption, with police and local government officials among the worst offenders.” This scenario might have been curtailed somewhat since November 2017, but without any known successful prosecutions, the economy remains maimed and left for dead.
In a March 2017, in new24.com publication, it was highlighted that “Corruption (in Zimbabwe) is a threat to foreign investment because it is an extra cost to doing business…and in Zimbabwe, corruption has distorted the economic and financial environment, compromising domestic and foreign therefore investment inflows into the economy.” Indeed corruption has been a significant contributor to Zimbabwe’s economic woes characterised by the “very low levels of economic growth, inefficiency in the provision of public services, and massive inequalities in resource distribution”.
Personally, I empathise with you, for I believe your job is an onerous and burdensome task, where you are always finding yourself between a rock and a hard place. Whilethe official line is that you genuinely would like to support industry, it is an open secret that political considerations always trump industrial or any production priorities. If our power elite’s history of decision- making were to be laid bare, it would be a testament to that.
And as a political appointee, you would be expected to toe the line. As for the banking public’s needs, they cease to be prioritised, like you have just done because as a fearful, fragmented and unorganised lot, we are easier to railroad and disenfranchise.
But then again you accepted the appointment knowing full well that it operates in the funereal and gloomy alley, distinguished by its copious amounts of blood, sweat and tears. The prospect of leaving your job might be inconceivable, lest you are accused of abandonment and disloyalty to the establishment given the amount of information you know.
It is indeed a row too hard to hoe. Be that as it may, I hope that in good time the sensibilities of your conscience will prevail and you will not continue on the bandwagon of bluffing the banking public.
Gloria R Ndoro-Mkombachoto
Very concerned citizen