The Reserve Bank of Zimbabwe (RBZ), and its principals, are solely responsible for the most extensive and sustained drain of wealth and destruction of people’s welfare in Zimbabwe’s colonial and post-colonial history.
By Matt E.T. Matigari
Between 2004, (when Gideon Gono took over as governor of the central bank) and early 2009, the RBZ engaged not only in desperate activities to keep a collapsing regime in office, but implemented massive programs that drained wealth from the people, funnelling all of it to a semi-military regime that has over the years transformed itself into an unchecked ruling class.
Because of the irresponsibility of the ever-hungry elite who are in fact insatiable bottom-feeders, all these resources literally went down the rabbit-hole, creating hyperinflation never heard of in modern times and consigning the Zimbabwe dollar to the graveyard of such similarly mismanaged currencies. The effect: Zimbabwe’s economy was ravaged, drained of foreign exchange, and left in the intensive care unit.
It is clear to sane minds that the massive transfer of wealth from the people and businesses to satiate the lifestyles of the elites was done by Gono through the printing of money, which happened continuously during his time at RBZ. After printing money, Gono would deploy bags of cash in the streets to buy off all remaining hard currency. He had plenty of runners who would offload ‘Changani’ bags of Zimbabwe dollar cash in the streets, bring back hard cash while enriching themselves through arbitrage and looting.
A friend recalls going into the then RBZ head of the Financial Intelligence Inspectorate, Evaluation and Security (FIIES), Mirirai Chiremba’s office at the time, and not being able to see the wall because there were stakes of bearer cheques from the floor to the ceiling. Remember the case of (the late) Jonathan Kadzura – one of Gono’s runners, who was also an advisor to the RBZ?
Recall that his girlfriend was caught with newly minted Zimbabwe dollars that the RBZ had not yet officially released into the streets! When illegal currency dealer Dorothy Mutekede, also Kadzura’s girlfriend, was caught with the bearer cheques, Gono, RBZ and ZRP frustrated the case which was being presided over by chief magistrate Mishrod Guvamombe by disposing of the $10 billion exhibit recovered before it was brought to court.
A frustrated Guvamombe made the following remarks:
“Both the RBZ and the police are defeating the course of justice. They have taken away our exhibits and we are left with no work to do. In future you should know that exhibits are court property and should not be disposed until the matter is finalised. The RBZ should not be used by the police to frustrate our cases here and I do not know how you should communicate this among yourselves.Why are you not keen to investigate the big fish as opposed to this youthful lady? You are not interested in getting the barons. If you are after the cash barons why bring “runners” like this 24-year-old lady. If I was in your position, I would have investigated the leakage. It is clear that there is no way this woman could have possessed the cash without getting it from the RBZ. You should have the same zeal in investigating the source that you had in dealing with Mutekede’s case. I expect speed and diligence in matters of national interest like that.”
In short, the people of Zimbabwe were robbed and pauperised. It’s clear that the RBZ transferred massive values from the people, giving them worthless paper with a shocking number of zeroes. This is no joke – people died because they could not access medicines, surgeries and basic health care while others were malnourished. Yet the same players who ran the RBZ still do, except with the exit of Gono himself, Munyaradzi Kereke, Charity Dhliwayo and the entry of John Panonetsa Mangudya and Khupukile Mlambo.
By May 2016, Zimbabwe was in the midst of a stinging cash crisis, with bank queues outcompeting the queues of rural villagers lining up for food aid. At this point, John Mangudya made a startling announcement, he was going to print bond notes, as an extension of bond coins. He masked these bond notes as an export incentive.
He added that he had negotiated an Afreximbank loan to back the bond notes. Mangudya was a “fresh” face at the RBZ, but I nevertheless did not trust him. In any case, the crisis had evolved from an intermittent problem to a full-blown one under his watch. But most importantly, the RBZ is never a central bank for the people – rather a tool through which the people’s wealth is robbed by the elites.
No sane Zimbabwean trusts the RBZ because of its legacy. It was for this reason that I did not believe Mangudya, and reasonably so. From that point on, my hypothesis was the bond notes story was not just subterfuge, but another gigantic scam to drain massive amounts of wealth from the people which had been accumulated between 2009-2013.
It is important to highlight that Zimbabweans led the adoption of the US dollar between 2008 and 2009. The government had no option but to just make it official in 2009. Even though at that time, there were few reserves of the US dollar, there was never a cash crisis in Zimbabwe. During the tenure of the “government of national unity”, there was never a cash crisis.
It was when Zanu PF engineered its “victory” in 2013 and took sole control of government that the bottom of the can came off. Its policies saw a massive drain on foreign exchange and cash in the market, something never experienced during the GNU. Between 2013 to 2015, the books which previously somehow balanced started treading in the red. Chinamasa started running budget deficits, which have now started worrying international lenders.
Not only did they mess up with the books, but they increased their own salaries, with Mugabe notably increasing his own salary multiple times. It was also during the same period that the government started struggling to pay civil servants, announcing staggered salary dates every month. It was clear then that the mud had hit the fan. In 2015, Chinamasa, mindful of his unbalanced books, made a rather suave move announcing suspension of civil servants bonuses. It did not take Mugabe long to give his subordinate a public smackdown, reversing that position during the 35th Independence Day celebration.
All this told me that Mangudya’s announcement on bond notes was a move resulting from political pressure. Mugabe’s government was under the vice as the country had become a political pressure cooker. The failure by civil servants to access their salaries was the greatest threat to Mugabe’s hold on power, more potent than the threat from our vacillating opposition.
Recall that part of the reason the ‘This Flag’-led shut down was very successful was because civil servants heeded the call and didn’t show up for work. I was of convinced that Mangudya’s stories were not his, and that there was more to the bond notes story than his explanations that Afreximbank was backing the bond notes issue with a $200million loan. As a result, for months, I sought to prove my hypothesis. And then, one day, I did.
I have an acquaintance who works for Afreximbank in Cairo (name withheld at his request). He isn’t just anybody, but a top honcho at the institution. For a while, he dithered around over the issue, till one day a few weeks ago. It’s all a lie, he told me. In short, the whole bond notes issue is a scam.
If the RBZ transferred large amounts of value from citizens to its kleptocratic principals over many years during Gono’s era, this time, it has managed to drain massive amounts of value from the people to its principals in a short space of time.
In short, between November 2016 when the bond notes came into the market and now (a period of less than a year), the level at which wealth has been sucked from the people and companies is staggering. Yet the scams didn’t even start with bond notes.
The grand scheme actually started the moment Zanu PF took sole control of government. Back then, Chinamasa started creating a digital version of bond notes through the RTGS system, issuing treasury bills and sucking out value from the system to fund government activity. This was followed by an order by the RBZ where it transferred control of balances held by local banks in correspondent banks offshore to itself.
While overall market liquidity had always been tight for a long time, these moves by Chinamasa and Mangudya drained the market of real US dollars, triggering a cash crisis. And the bond notes became their last-ditch attempt to not only cover their tracks, but also complete a massive transfer of wealth from the people to the elites.
While the people suspected that they were being shepherded into a giant con, they were not forceful enough to stop it. Activists, especially Evan Mawarire and his “This Flag” movement got an audience with Mangudya who gave them nothing but his word. His selling point was that people should just trust him. But clearly, he is a man never to be trusted. First, he promised an independent board to oversee issuance of the bond notes, which never happened.
Secondly, he refused to disclose the term sheet for the so-called Afreximbank loan. Zimbabweans will recall that real faces behind the bond notes were exposed when citizens started challenging the legality of bond notes, at which point Mugabe used the Presidential Powers law to get the bond notes into the market against the wishes of the people. Further legislation was issued to peg the bond notes to the US dollar. This move completed the illegitimate massive transfer of wealth from the people.
My questions to Afreximbank were simple. Does the loan backing bond notes exist? If it does, is there are term sheet and what are the terms? To be clear, I was asking about the $200 million Stabilisation and Incentive Support Facility which Mangudya claimed the bond notes were based on.
“My brother, do not believe that guy,” my Afreximbank contact said. “Such a loan does not exist. Because the loan doesn’t exist, it follows that a term sheet doesn’t exist,” he explained.
He went further to explain that Mangudya’s announcement that bond notes would be backed by an Afreximbank loan had created a reputational crisis for the multi-lateral lender.
“Our Zimbabwean office had to have a crisis meeting to decide whether to repudiate Mangudya’s claims or not,” he told me.
He further said that in the end, they had to remain quiet as any denial of the loan would have caused another confidence crisis since Zimbabwe is a member state of the bank, and that Mangudya himself is a ‘Class B’ member of the Afreximbank Board of directors.
He referenced the current IMF problem in Mozambique where the country did not disclose secret loans it had taken prior to IMF funding.
He further told me that Mangudya’s falsehoods had created problems for Afreximbank because some Zimbabwean lawyers tried to subpoena documents related to the non-existent loan from the Afreximbank offices in Zimbabwe at Eastgate Building. What saved them, he said, was that there is embassy-level security at their offices, so they just never opened the doors to the lawyers. He further said that Zimbabwe has already reached its country risk limit and unless it pays up existing loans, it may not continue to access Afreximbank loans.
On February 24, 2017, the Zimbabwe Independent published an interview with John Mangudya. The following is an excerpt of that interview:
Zimbabwe Independent: Before the introduction of bond notes in November 2016, you announced that there would be an independent board to monitor the bond notes in circulation. What has changed since then?
John Mangudya: That is still the position. The independent board is required to ensure integrity and restore confidence within the financial system. As you may be aware, the appointment of the independent board was temporarily delayed by the need to ensure that the Bill to amend the Reserve Bank Act is passed by Parliament. This was done and the Bill now awaits presidential assent. Once the Bill is signed then the independent board will immediately be put in place.
In March 2017, way after bond notes had started circulating, Robert Mugabe signed the Reserve Bank of Zimbabwe Act, putting a legal veneer to the wealth heist through bond notes.
To hoodwink the masses, that law says “…bond note means a unit of legal tender whose par value in relation the United States dollar is backed by a guarantee extended to the Reserve Bank by one or more financial institutions and ‘bond coins’ shall be construed accordingly.”
Four months later, Mangudya has never set up an independent body to monitor the printing of bond notes as per his undertaking prior to their release. The reason he hasn’t set up that board, and may never do, is that bond notes are a scam, a lie, a fraud! A giant fraud perpetrated to transfer wealth at a large scale once again from the people to the kleptocrats.
Editor’s Note: The Reserve Bank Governor John Mangudya was given an opportunity to respond to allegations raised in this Opinion. He did not respond.
The author is a former banker and a current equity investor in small start-up companies in Zimbabwe, Botswana, Zambia and South Africa. He holds a business postgraduate qualification from an Ivy League university in the USA, where he carried out research on code driven versus regulated corporate governance issues in the late 90s.