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Economic governance framework at the core of Zimbabwe’s macro-economic problems

RBZ governor Dr John Mangudya
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It is now a time-tested fact that the long-term macroeconomic and development outcomes of any society are not narrowly defined by simple answers to simple questions like which individual is presiding over the State, particular ministries or specific public entities?
Overwhelming literature attests to the supremacy and sustainability of systems over individuals, structures over individual talent and institutions above those who man them.

Unfortunately for Zimbabwe, like a number of other African states, these facts continue to evade us. Instead we have consistently, over time, erroneously chose to blame all our woes on individuals while, by the same measure, pinning all our hopes for a better tomorrow again on individuals.

Some political science scholars consider this individual based and obviously fallacious model of national destiny as the main reason for perpetual political instability in most African countries.

Broadly speaking, economic governance refers to the sum total of entities, institutions and the constitutional and legal framework on the basis of which these institutions interact to deliver macroeconomic and development outcomes to society.

That said, no single individual, be it President, Minister, Central Bank Governor or any other public official can single-handedly deliver sustainable economic growth in a poisoned economic governance framework.

The starting point for Zimbabwe should be interrogating our economic governance framework to gauge its capacity to allow office bearers to discharge on their constitutional and legal mandates while providing ample space for private enterprises to create value for the economy.

To drive my point home on economic governance as the elephant in our room, I will pick on the topical issue of the Reserve Bank of Zimbabwe (RBZ) as a relevant and current case study.

A lot has been said and written about the operations of the RBZ and more will be said now as the economic situation continues to deteriorate and business associations and analysts submit their input into the national budget for 2020.

Key issues emerging include the growth in money supply, quasi-fiscal operations and whether the Governor should chair the RBZ Board and Monetary Policy Committee (MPC), among others.

A high level of accountability and transparency is being demanded from the Central Bank more than what is obtaining in the rest of the world as if everything starts and ends with the RBZ.

What people forget to mention is that a high level of accountability is an outcome of a high level of autonomy which, in turn, is derived from the strength or otherwise of the economic governance framework.

This does not apply to the Central Bank only but all Government institutions including Ministries hence the now widely known failure by Treasury to stop the Command Agriculture program despite its monumental failure to address food security and its negative implications for monetary and price stability in the country.

This brings to the fore the now old, though, still unresolved issue of the institutional independence of the Central Bank, not focusing so much on who chairs the Board or MPC, but the degree of autonomy that it enjoys in the formulation and execution of its policies without undue influence of external parties.

An analysis of the current legislation (RBZ Act) shows that the Central Bank’s autonomy is severely curtailed hence the problems we have faced over the years. The Minister of Finance’s powers in the current Act are too overbearing and militate against the autonomy of the Central Bank.

While it has grown to become fashionable to blame Governors whenever the economy takes a knock, a more objective analysis should critically assess the latitude a mere Governor of the RBZ has in deciding national questions, including of a macroeconomic or monetary nature.

Having taken time to carry out this objective analysis, I have no doubt that even the great Ben Bernanke, or Allan Greenspan would fail dismally as Governor under Zimbabwe’s defective economic governance framework.

With some of the country’s best economic and banking minds at its disposal,  some of whom are acclaimed regional and international experts in their areas of expertise, the RBZ is undoubtedly technically sound to deliver a fine service to Zimbabwe. The fact on the ground, however, is that Zimbabweans currently have very little for which to celebrate in terms of outcomes from their apex bank.

This in essence – applying the law of limiting factors tells us that something beyond technical competence is constraining the quality of decisions at the RBZ; that something is evidently remiss with the country’s system of economic governance in general or the RBZ Act in particular.

Just like the effect of governance framework on the RBZ, some of the criticisms over the judiciary are basically linked to the level of autonomy that the bench enjoys. In the United States, Judges and justices serve no fixed term – they serve until their death, retirement, or conviction by the Senate.

By design, this insulates them from the temporary passions of the public, and allows them to apply the law with only justice in mind, and not electoral or political concerns.

I might also add, the job security brought about by the governance framework allows the holders of such positions to perform their jobs effectively. It would, therefore be insane to expect Chief Justice Luke Malaba to have ruled against the Executive in the election petition filed by the MDC-A in August last year and even imagine him to release the judgment outside the wishes of the powerful Executive.

Such levels of autonomy and security are critical for Executives at all government institutions so that their performance can be judged objectively.

Ministers in Zimbabwe are allowed to provide “directions as may be considered necessary” to institutions under their purview, while at the same time the Executives do not have job security as they can easily be dismissed. This is why Executives at Government parastatals, Central Bank included, face challenges in the execution of their duties.

It is public knowledge that Parastatals have been directed to buy vehicles, provide travel allowances and fuel to Ministers and Ministry staff, among others. It is again in the public domain that it has been the behaviour of Government to request the RBZ to make payments on its behalf.

In most instances, government has not done its duty to honestly own up and claim the payments as part of total expenditure but conveniently allowed the Central Bank to be accused of engaging in disruptive quasi fiscal activities.

Governors, due to their non-executive ranks within Zimbabwe’s economic governance framework almost always end up being the fall guys while everybody else flaunts themselves as clean.

It is a known fact that Treasury does not budget for some known and easily forecastable exigencies such as grain purchases by the Grain Marketing Board, payments for Treasury Bills (TB) maturities and grain imports and yet these expenditures end up being met by the RBZ and this include the now famous US$366 million worth of Treasury Bills issued by the Ministry of Finance for Command Agriculture to Sakunda Holdings.

Section 64 of the RBZ Act, for example, gives the Minister of Finance unfettered powers to instruct and regulate the Central Bank without even seeking parliamentary approval.
In terms of the Act, the Minister is basically allowed to prescribe “anything”.

As I mentioned earlier on, the tragedy of our defective framework of economic governance is not unique to the functioning of the office of the Governor of the Central Bank but also to accounting officers commonly referred to as permanent secretaries.

Permanent secretaries are supposed to be technical people appointed to run Ministries objectively and in accordance with law. Today, however, this important role has been whittled down to not more than that of over glorified clerks while Ministers are reportedly now making most of the decisions in Ministries, including basic administrative ones.
Resultantly, we have seen technocrats, including permanent secretaries and directors appearing before Parliament and having to be humiliated and appear incompetent and ignorant so as to save their jobs and families.

Only patently naïve individuals would even for a second imagine that senior officials in the Ministry of Finance, for example, can be ignorant of what the Ministry paid for and to whom when such payments cannot go through without their authorisation.

To some extent, parliamentary committees are wasting taxpayers’ resources by bringing the wrong people before them. Why not invite the Ministers to explain the happenings under their watch rather than officials who are just pawns in this game and whose names are being tarnished and careers destroyed in the process?

At the time of writing, the Accountant General has since lost his job. Deals to resuscitate parastatals are being compromised more by political decisions that take advantage of the lopsided economic governance framework. The Zimbabwe Iron and Steel Company (Zisco) deal and that involving the National Railways of Zimbabwe (NRZ) are examples that immediately come to mind.

How many years does it take to restart operations at Zisco? Who should negotiate and conclude deals? What powers should Ministers have? Why not advertise the invitations for partners, publicise the applicants and their offers as well as the final decision?

Our analysts and the Tendai Biti-led Public Accounts Committee have been making noise calling for the RBZ Governor’s head due to the growth in money supply which they know arose from financing of known government projects. How can a mere Governor stop a government programme which Treasury and Cabinet would have failed to stop? It’s the Minister who should be called to account for his action and not the Governor. He issued the Treasury Bills that increased money supply, period.

In 2016, Treasury through the Debt Management Office issued an advisory note in which it expressed reservations over the funding model for Command Agriculture. No action was taken notwithstanding the programme’s publicly known negative effects on macroeconomic stability. It is also important to distinguish between Treasury Bills issued by Treasury, through the central bank to resolve temporarily insufficient budget and those issued by the Central Bank as part of its normal open market operations.

In conclusion, Ministers of Finance have come and gone, Governors have come and gone but the economy continues to be afflicted by the same imbalances as yesteryear.

Similarly, parastatal heads have been changed but with no change in the fortunes of government entities. Examples include Zesa Holdings, Hwange, NRZ and yet the institutions continue to struggle.

As a way of relieving pressure, politicians have almost always found a convenient scapegoat in dismissing parastatal management so that the gullible masses, including armchair pundits find something dry for which to celebrate, an individual to blame for their economic challenges and a new individual to pin their new hopes on.

Meanwhile, the system of economic governance which is the real edifice that churns out corruption, poverty and all economic vices remains unaddressed. This all comes from the lack of focus by the Executive and the furtherance of self-interests at the expense of national interests.

Without necessarily seeking to condone incompetence and bad decisions at parastatals and government related entities, the real solution lies in addressing the governance framework that guides their operations.

They need to be insulated from undue political influence and thereafter become more transparent and accountable in the operations.

In this regard, heads of institutions can be brought to task regarding their actions.

Dr Nathan Matemera is a corporate governance expert who has done a lot of research on countries in the sub-region. He can be contacted at