Jaded Mangudya betrays frustration as cash crisis puzzle eludes him

John Mangudya

HARARE,– Presenting his latest monetary policy statement on Wednesday, central bank governor John Mangudya looked like a runner who had just done the Gutu Half Marathon in mid-October.

Journalists covering his speech remarked how tired and jaded he looked. Although he tried to keep his usual pleasant humour, there was little of the confidence and verve he had shown just a year ago.

This time last year, it had been three months since he had announced the introduction of bond notes. He was deftly fending off critics, meeting #ThisFlag activists in this same auditorium, and vowing that his unique plan would work.

“If these policy measures fail, if the bond notes do not work out, I’m willing to resign,” he confidently declared at a meeting in Zvishavane last September.

A year later, he looks more irritable and frustrated than confident. The bond notes are not working so far, and yet he is bringing in more of them, and has to repeatedly justify his actions.

Watching him deliver his speech, one expected him to stop midway through his speech, throw it away, and declare that there was really no point to all this.

His frustration is showing, and it seeps through the 100 pages of his mid-term policy statement released this week.

I know the problems and how they must be fixed, but I can only do so much, is the one key message from Mangudya in his latest statement.

He points out the problems well. The root cause of the forex crisis, he says, is high government spending and low production and exports. Of these, he can only print bond notes and tinker with incentives, a policy he describes creatively as “non-traditional home-grown monetary policy tools.”

“The other two imperatives (state spending and low production) are outside the purview of Monetary Policy,” he complains.

He lists all the things that need to be done but that he cannot do; cutting the deficit, reducing state spending, executing structural reforms that increase investor confidence, transforming state owned enterprises, enforcing law and order and issuing bankable 99-year leases.

Until Zimbabwe can generate more foreign currency, there is nothing more I can do, Mangudya is saying. He has the disturbing data to show it. Currently, just five products – tobacco, gold, platinum, chrome and diamonds – are earning 85 percent of the country’s foreign exchange. Of the country’s 13 commercial banks, only six have exporting clients on their books.

“Zimbabwe needs to produce and create exports. Foreign exchange must be earned and spent wisely in order to survive. There is no substitute for this narrative as the country’s external position is already weakened by more than 16 years of economic and international isolation,” Mangudya says.

There is nothing Mangudya can do about all this. He cannot end the 16 years of isolation; in the corridors of power, those seeking reengagement are being called sell-outs.

Mangudya cannot force a cut on state spending either. Just this past weekend, President Robert Mugabe reversed a decision to lay off 2,000 youths who are leeching off the Government payroll without doing any work.

Mugabe claimed the retrenchments were never approved, but they were in fact part of the Public Service Wage Bill rationalisation measures approved by Cabinet in November 2015, and a key step in Finance Minister Patrick Chinamasa’s reform and debt relief plan.

Mangudya cannot force state enterprise reforms. A proposed law to improve the management of parastatals, the Public Entities Corporate Governance Bill, has been blunted by ministers who fear losing control of the state companies they use as feeding troughs.

The central bank chief cannot force Government to respect law and order; chaos is what keeps ZanuPF in power. The 99-year leases that may put transferable value to land may never come, as they may disrupt the patronage system that sustains the ruling party.

With no power to change the things that really matter, Mangudya knows he is only being sent out to try and tinker with the ticking time bomb. Whatever he is tinkering with now, bond notes included, is not solving anything. With no supporting reforms, he is just being sent on a mission to delay the inevitable.

There is the time bomb of the swelling pile of Treasury Bills, which have become a new Zimbabwe-dollar.

He says use of TBs has been “developmental in nature and productive.” However, in the next line, he admits “it is critical, going forward, that an equilibrium position of a sustainable fiscal deficit is ascertained to ensure that TBs do not crowd out foreign exchange in the market.”

The black market rates, which he creatively calls “scarcity premiums”, are a sign of a lack of confidence in the formal system, he admits.

The bond notes were supposed to be a genius move that ends cash shortages and shames critics. But the lines outside banks remain and companies are having to buy critical forex from street dealers.

Another sign of his frustration came when he accused media of not understanding him.

“This year I have said nothing but the truth, but media puts words in my mouth,” he said.

But the media are not misunderstanding him. He just needs to keep it as honest as he has in his latest statement. Instead of all the overconfident bluster we got from him previously, he just needs to state what everyone knows; that he has very little to work with.

The little that he controls – money supply – is just not working, because it is being affected by all the many other things that he does not control. – Source