Reserve Bank of Zimbabwe Governor, John Mangudya


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.

Starting point

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

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 programme despite its monumental failure to address food
security and its negative implications for monetary and price stability in the

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.

Objective analysis

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.

Autonomy and security

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

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 nonexecutive 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.

Whittled down

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

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 Bitiled
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.

Economic imbalances

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

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