BY Kuda Chideme
AS the curtain comes down on Reserve Bank of Zimbabwe (RBZ) governor John Mangudya’s five-year term of office, speculation has been rife on whether he will be handed another contract or not.
Mangudya came into office at a very interesting time, as from the outset, he had his work cut out for him given that the country was still in a stupor following years of economic meltdown.
The then Finance minister, Patrick Chinamasa, in May 2014 pointed out that the governor was coming into office at a time the “power and influence of the central have been diminished”.
This was so because Zimbabwe had just dumped its own currency, which had been rendered worthless by record-setting hyperinflation, and adapted a basket of currencies anchored by the US dollar.
So in the absence of a local currency, the bank did not have much control over monetary supply.
Hyperinflation had been tamed, but the stress of using a strong currency in the greenback were starting to show as liquidity became tight, marking the genesis of today’s pressing bank note shortage.
The central bank was effectively broke and could not play its role as lender of last resort.
Mangudya’s predecessor, Gideon Gono, had bankrupted the central bank, leaving it with more than a billion dollars in debt.
Gono had gone on a wild escapade using bank funds to finance Robert Mugabe’s government.
The bank would pay for everything from basic commodities, which were in short supply as the country’s manufacturing sector was as good as non-existent, to diesel and agriculture implements, which were then used to oil Mugabe’s system of patronage in return for safeguarding his protracted stay in power.
A year after his appointment, Mangudya pushed for the state to take over the bank’s $1,3 billion debt, shifting the burden of Gono’s reckless spending onto the taxpayer.
He argued the move would allow the RBZ to start on a clean slate and allow it capacity to be the lender of last resort.
Around the same time Mangudya was also setting up a vehicle to buy bad debts from the local banks, which were facing excessive levels of non-performing loans of over 20%, way above the international standard of below 5%.
Being a former president of the Bankers’ Association of Zimbabwe, the governor had intricate and intimate knowledge of the country’s banking industry, hence his keenness to set up the Zimbabwe Asset Management Company (Zamco) and save the banks from collapse was only natural.
By 2018, Zamco had taken up $1,13 billion in bad loans.
Commenting on Zamco, Newswire had this to say: “Zamco has indeed successfully given companies and banks a clean slate.
“What is needed, equally, is a clean slate on disclosure and accountability. It must start now, with full publishing of a list of defaulters.
“Taxpayers have paid bills for companies and the greedy elite for too long. They deserve to know whose bills they have been paying for.”
Just like with the RBZ debt, Mangudya has refused to disclose the names of those that defaulted on the loans, which were taken over by the state through Zamco.
The lack of transparency has been a key feature, which has characterised Mangudya’s tenure of office.
Mangudya spent some years at Africa Export and Import Bank (Afrexim bank) working his way to become regional manager in charge of southern Africa.
As governor, he would go on to use his relationship with the regional lender to secure numerous credit lines at a time the rest of the entire ecosystem of international financial institutions had shut their doors on Zimbabwe because of its history of not paying back debts.
Afreximbank has doled out facility after another to Harare be it to finance the procurement of fuel, to stabilise nostro balances, or to support local companies — the bank has always had some extra cash to throw at Mangudya.
Ordinarily, borrowing is not a bad thing at all, every other country relies on borrowing.
While Mangudya would want to be praised for securing these crucial loans, what makes this relationship questionable is again the lack of disclosure surrounding the engagement — detail on all these facilities is always known only to Mangudya.
The bank, on the other hand, never seems bothered to make disclosures on its dealings with Zimbabwe, which is so uncharacteristic of a bank of its stature.
It was Afreximbank which reportedly bankrolled the introduction of bond coins ($50 million) and the subsequent $200 million facility that we were told was backing bond notes.
Despite numerous assurances, the story that the bond note would maintain its value, pegged at par to the greenback, never gained any currency as Mangudya had a difficult time in calming a spooked market.
A number of poorly done public relations stunts, including the framing of the bond notes as an export incentive scheme to promote exports, failed to stave off fears that the bond note would see the return of the dreaded local currency.
The people’s confidence and trust in the central bank was eroded and Mangudya certainly was not the person who would bring it back.
It was only last year after Finance minister Mthuli Ncube’s appointment that the world got to know of the excessive levels of debt that government was in as details emerged that the overdraft with the central bank stood at $2,3 billion, as at end of August 2018, well above the statutory limit of $762,8 million.
The stock of Treasury Bill issuances had also gone unchecked, increasing from $2,1 billion in 2016 to a cumulative $7,6 billion, by end of August 2018.
Mangudya had been facilitating government’s unchecked spending, a concern which he would always dismiss suggesting that the he was supporting a form of quantitative easing (QE) that had helped take the country out of deflation.
Mangudya’s time has been tumultuous, full of deceit and costly communication blunders which could have easily been avoided. The fact that the governor himself is a poor orator who easily gets wound up when asked to explain his own policies did not help his cause, but in all fairness it was not as disastrous as his predecessor.