The RBZ governor, Dr John Panonetsa Mangudya sat down for an interview with Trevor Ncube. We talked about what was said in the first part of the interview here. Now, we continue with the story and get to the meat of the interview, in my opinion.
I feel I must warn you that if you didn’t like what he had to say in the first part, you are going to hate this a wee bit more.
The independence of the RBZ governor
The interviewer, Trevor Ncube, told Dr Mangudya that he interviewed the former governor, Dr Gideon Gono in the past. Dr Gono expressed that he wished he had fought for his independence from the Ministry of Finance and from the president. So Ncube asked the current governor what he thought about his autonomy.
Dr Mangudya was sly in his answer, almost like a seasoned politician. He talked about independence being an abstract concept that can only be subjectively measured. He went on to talk about how even in independence, one can never survive as an island. Therefore, cooperation is the wise course of action.
He was slick. So, he was asked whether he has ever disagreed with President Mnangagwa or Dr Mthuli Ncube. The concerning answer was an emphatic ‘no.’ He has never disagreed with the president or finance minister in all his years as governor. How that happens in an economy where tough decisions have to be made regularly is beyond me.
The secret to his pacifier success is that he engages his principals on all monetary matters. Apparently, they are all peas in the same pod and tend to agree on courses of action pretty much every time.
SI 127 and its devastating consequences
If you remember, Statutory Instrument 127 (SI 127) prohibited businesses from; quoting prices at an exchange rate higher than the auction rate, giving buyers a discount for paying in USD and so on. This SI was a bad move and prices of goods shot up and have never fallen since. Dr Mangudya, on the SI, said,
SI 127 was not as bad as people want it to be
Dr Mangudya
So, he definitely agrees it was bad. However, he thinks we exaggerate how bad it was, and is, but we think he downplays its effect. He says those of us who think SI 127 was the worst, are malevolent (i.e evil-minded or spiteful) and are actually sadists (getting pleasure or sexual gratification from the pain/ humiliation of others).
He feels we put him in a ‘damned if you do, damned if you don’t’ situation. After all, we are the ones who complained that businesses were continually increasing prices. Yet, we were the first to complain when the RBZ addressed that using SI 127.
I’m lost here guys. He expected us to congratulate the RBZ for an SI that achieved the opposite of what it intended to? Should we have been impressed that they did something about the price increases when their solution led to even steeper price increases?
I know people love complaining, sometimes we grumble when there is nothing to grumble about, it’s human nature I suppose. However, in this case, we are 100% justified in expressing our frustrations, even if we are labeled sadists for it. SI 127 was ill-advised and it backfired, period.
The reinterpretation of SI 127
After the spectacular failure of SI 127, it was then revealed that actually, we had misinterpreted it. It was meant to apply only to those who were abusing the forex auction. It is only those businesses that were getting 100% of their forex needs from the forex auction that were the target of SI 127.
All other businesses were then asked to revert back to their pre-SI 127 prices and they were not interested in that. After all, SI 127 was not repealed and so it was not wise to obey these reinterpretations. The language in the SI was clear and a business could face litigation for thinking that law did not apply to them.
Dr Mangudya then said the SI also targeted those who were manipulating the currency to increase their profits from arbitration. In addition, it was meant to aid in the fight against money laundering and terrorism financing.
Forcibly liquidating people’s forex
We discussed how 40% of receipts by exporters are forcibly converted into Zimdollars at the auction rate. For the rest of us, of the forex we bank, 20% is forcibly converted into Zimdollars at the auction rate.
Mr Mangudya says it is their job to ‘find a home’ for those Zimdollars they force unto those who had earned their forex fair and square. He means making sure we can pay our taxes and other similar services which are priced using the same auction rate. Rather than having to use those Zimdollars we never wanted in the first place in the market where prices are quoted using the parallel market rate.
He says what they are doing here will help improve the value of the Zimdollars. So, do not expect this forced liquidation to stop. The message to the RBZ though is, don’t expect us to bank our forex if we can help it. Honestly. Dr Mangudya talked about promoting the use of banks but as long as these forced liquidations and arbitrary policies remain, most of our forex won’t enter the official banking system.
Banks sitting on US$1.7 billion
We have demonised banks for having US$1.7 billion in their vaults and not lending it out. The RBZ governor says about 25% of that has been deployed into the market. In his eyes, that is okay under the circumstances.
He says exporters and those importers who do earn forex locally and can then pay back the USD loans are the ones benefiting.
We have talked about some of the challenges banks are facing here. In short, there is no interbank collaboration. Also, Zim banks no longer have relationships with foreign banks (correspondence banks) where they had overdraft facilities. Hence the extreme caution.
RBZ ‘guarantees’ survival of banks
I now get why Zim banks are able to get away with a lot of shenanigans. The exorbitant charges, poor service delivery, low lending practice and the like will not be addressed with any enthusiasm. Dr Mangudya says,
The closing of a bank, it sends the wrong signal also to the market
Dr Mangudya
This means that of the banks that fail to meet the US$30 million capital requirement by year end will get an extension. The RBZ boss said so. It also means their golden goose, high bank charges, will not be plucked or slaughtered. The high charges are necessary for most of these banks to remain profitable. Without them, some banks would fold and that would send the wrong signal to the market.
Financial inclusion
Dr Mangudya hails technology for improving financial inclusion in the country. He says mobile banking / mobile money has allowed the formerly unbanked to get access to financial services. He mentions the farmers getting loans through their phones as an example.
I find it funny when he talks about people having mobile wallets which give them access to financial services. That’s because his RBZ has been working overtime to kill the most important mobile money service provider, EcoCash.
In the same breath, the govt reintroduced tax on the importation of the mobile phones that allow for that financial inclusion. In addition, for the phones that avoided paying that tax, a new US$50 levy is in the works. These measures make for expensive mobile phones, thereby derailing or delaying our financial inclusion efforts.
Don’t hold your breath for crypto legalisation
As a central bank we don’t believe in cryptocurrencies, we don’t believe in these bitcoins. We believe in central bank digital currencies.
Dr Mangudya
Despite that ominous statement, he goes on to say now is not the right time to introduce cryptos. He does not rule them out completely.
For now, our prayer is that we work on a central bank digital currency, before we go this other route of cryptocurrencies.
Dr Mangudya
I know the crypto enthusiast is thinking,
Technically, it appears there is a chance but I’d caution you against holding your breath.
We talked about central bank digital currencies here. Find out why they won’t help much in Zimbabwe. The new information on this is that apparently we have made progress in our central bank digital currency journey. He says we are almost there, as progress has been swift, as they have been working with a fintech company to assist in the research. We believe we know the fintech company they are working with, in due time we shall all find out.
Blockchain unlawfully used to create money in Zimbabwe?
What concerns me are the RBZ governor’s thoughts about blockchain and mobile money. He continues with the narrative that people were creating money on EcoCash. And apparently he thinks they were using blockchain technology to do that. Maybe he misspoke. But that is what blockchain and bitcoin remind him of, people creating money out of thin air.
Bitcoins, or blockchain like you said it. You see, it reminds some of with what happened to mobile banking [mobile money] transactions in Zimbabwe. Whereby some people were just creating money from blockchain, and creating money supply in the economy.
Dr Mangudya
I think I missed that period in time when people were using blockchain technology to create money through mobile money wallets. If you know what he is talking about here, please let me know in the comments. If he’s mistaken, which I think he is, it may be why his RBZ is unjustifiably hostile towards blockchains.
The RBZ governor’s resignation
You remember how he said he would resign if bond notes did not succeed. We talked about how they succeeded in his mind here. That’s all in the past but fast approaching is the end of Dr Mangudya’s tenure as RBZ governor. He began his reign in May 2014 and he leaves office in 2024.
If you don’t like him, it’s only about 2 and a half years before he is gone, console yourself with that. The bad news is that you probably won’t like his replacement. After all, you hated his predecessor, Dr Gideon Gono even more.
In closing
This was a long article but now we are done with all that was revealed in the interview. I know you have thoughts on all this, feel free to share in the comments section below.
19 comments
He himself may not fully understand crypto-currencies, but I’m sure one of his “savvy” subordinates is the one that peddled him the Bitcoin – Ecocash explanation. Perhaps someone was offering Ecocash in exchange for Bitcoin (or vice versa) and as the information crawled up the unsavvy hierarchy it lost its original essence.
I think it’s people who didn’t understand his explanation here more than that he mistaken
Could you help us then. What did he mean? His words say one thing but you say they mean something else. Could you educate us?
That makes sense. A very real possibility. It is apparent he has memorised the slogan, ‘central banks don’t believe in cryptos.’ But because he doesn’t quite understand it, he says ‘we don’t believe in blockchain’ even as they are looking to use blockchain tech in their CBDC.
I think you’re right. Whatever the report was from the FIU juniors, completely lost its meaning by the time it got to the big man.
I think this is plausible. Mangudya is not a well spoken person and has always struggled to explain his ideas. This coupled with his lack of understanding of cryptos might be the reason why he uttered such a seemingly ignorant statement.
He is clueless. He only understands how the printer prints money and where the ink and paper are bought
Lamont LOL 😆😆😆 what of the time we heard these guys spent USD150m to print bond notes hahahah
Mr Govner,you must not block,cryptocurrency,and bitcoin,,let the people feel free to make their own money.The world is moving faster,in this digital world.I think you must introduce it,like what has been done,in Cameroon and Nigeria
Either these guys don’t understand cryptocurrency at all or they just prefer currencies they can manipulate easily. Either way, we not getting it today nor are we a thousand days later. How blockchain was/is being used on Ecocash requires me on an alternate universe.
The real reason why Zim is now in these murkywaters is because of dull minds like Pwagwa. We continue travelling on the gonoconimics and pagwaconomics trajectories hence we have missed our targets for the past decade.
Economics and politics are two sides of the state coin. When torse your state coin high, you either have it land on the political side or on the
He was referring to the MMM systems.
When Eddie Cross was interviewed, he insinuated that the Ecocash platform had been compromised somehow so RBZ had to step in ,which sounds more plausible.
This crypto excuse being peddled makes the RBZ look really dumb. I guess he is trying to tarnish both cryptos and Ecocash at the same time by linking them (even if they are not linked). Two birds one stone. Still, really dumb.
Hello Techzim. In my opinion, the Zimbabwean problem is the appreciation of resourses so they can decide whether to yoke the ox alongside the cart, after the cart, or, before the cart. This, as I see, is the first and last port of call, it will save time, improve productivity and place all in our rightful places. The government is a resource, the Reserve Bank is, so is the nation. I think, none of the resources is an economic power, single handedly brandishing the answers to the problem.
Unfortunately, only one of those set policy. Because of that, no matter what combination of ox and cart you try, they will always make sure sure they are the ones riding the cart and cracking the whip.
Mangudya is correct that Ecocash was creating money. It may not have been through blockchain but, as I suspect, extending floats that were not supported by actual funds. The steps taken against Ecocash were spot on. The immediate results on the parallel market rates at that time says it all. Regarding independence on the central bank, I think he presented well the realistic nature of the relationship between the central banks, Ministry of Finance, and the Executive. Collaboration between these entities is inevitable and necessary. It does not mean that the Executive of Ministry of Finance dictates the operations of the central bank. Neither does it mean that the governor cannot present his view freely even if they contradict those of the Executive or Ministry of Finance. The suggestion that he was being sleek in his response is misplaced. It is naive for anyone to believe that central banks anywhere in the world work completely independent of central governments. The suggestion here that the RBZ will not close any banks regardless of any delinquencies is equally lost. That is not the import of his statement. I agree with him that central banks need not be trigger happy, which is what he meant. That in no way implies that if any bank conducts itself in a grossly improper manner corrective action which includes closure will not be taken. The behaviour of Gono in the mi-2000s against some banks was not only bad for local depositors who lost their hard earned funds, but also dented the image of the financial services sector of the country at that time. The blame falls squarely on Gono’s RBZ for lack of active supervision and corrective action before the situation deteriorated. The suggestion that the RBZ is woring against financial inclusion by killing Ecocash is similarly lost. Ecocash was never killed during the mid-2021 corrective action. Killing Ecocash was never the intention. I need not repeat the rightful purpose of that action. I understand Mangudya’s apprehension about cryptocurrencies. He is being a responsible central bank leader. The country cannot introduce as legal tender and trading currency a digital currency that is not yet fully understood in most parts of the world, and whose origins remains a mystery to this day. That said, it does not mean that he is right on everything. I agreed with the negative views on SI127, the forced surrender of 40% of export proceeds and 20% of ordinary forex deposits. Readers must be objective in their analyses and not be negative about everything whilst being influenced by political affiliation. Learn to acknowledged good actions and good intentions and give credit where it is due.
And if no credit is due? What do we give, fake applause to stroke their egos, political claptrap or cheap waffle? When an adult says they agree with other adults ALL the time, they can’t be speaking the truth. Honesty is rare in politicians anyway but being naive in accepting BS is a very weak form of “analysis”. I lost faith in all the Zimbabwean banks way back around 1998. My kid’s savings were eaten up through “Royal” bank (nothing regal here) and I know bank staff were rewarded with cars and houses and f*ck the account holders. Time bank met the same fate, There was another fraud through “Access to Capital” and, of course, the current finance minister drove Barbican Bank into the ground. CBZ, where a couple of governors started their careers used to be Bank of Credit and Commerce run by some unscrupulous Pakis. A friend of mine had an account there, some bank book entries were in pencil, yes, pencil not ink. All the crappy banks in Zimbabwe make huge profits year in and year out. They don’t even pay their staff great salaries, neither do they pay meaningful interest on savings or rather any credit balance. There is nothing to rejoice about this state of affairs unless you are one of the architects of this dystopia.
This from the RBZ governor? That’s quite scary but not surprising. If RBZ had a modicum of sense for the prevailing economics of Zim they would understand that blockchain can unlock some of the blockages being experienced. As far as the creation of value is concerned, that’s the whole point! These statements just show why Zimbo’s are still under the yoke of a government hell bent on controlling the populace.
I am sure he knows what he’s talking about. There’s no debate nor doubt about the presence of ‘unofficial money’ being created. And crypto’s are not as foolproof as some would want to believe and therequirements is possibilities of interfacing crypto to mobile money. Let’s not peddle what we read as hard facts. ANYTHING IS POSSIBLE WITH TECHNOLOGY. And obviously those who did it are not likely to brag about it or make it public knowledge like the author is seemingly suggesting. So I think at the right time crypto will be allowed if they are really necessary for public day to day transactioning aso opposed to supporting speculative behaviour
Even if they do not embrace crypto yet a new platform is coming soon that will help Zimbabweans to spend their cryptos with ease.