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advErtising supplement to the Zimbabwe independent april 11 to 17, 2014

Congratulatory Supplement On the appointment of

Dr John Mangudya as RBZ Governor

The new man at the helm of RBZ

INCOMING Reserve Bank of Zimbabwe (RBZ) governor and current CBZ Holdings (Pvt) Ltd chief executive Dr John Panonetsa Mangudya was born in Chimanimani in 1963 and has 27 years of banking experience. He began his career in 1986 as an economist with the RBZ until 1996 when he left at the level of principal economist. Mangudya then joined the African Export-Import Bank (Afreximbank), an international bank based in Egypt, as the regional manager in charge of Southern Africa based in Harare. During his stint at the bank, he executed a number of financial structures for the region. He also had a nine-month stint with ZimTrade at the level of assistant chief executive where he managed to change the complexion and status of the organisation. Mangudya joined CBZ Bank in 2000 as the general manager in charge of international banking. He rose to become the executive director in charge of corporate and merchant banking in 2004. In 2006, he became the managing director of CBZ Bank subsequently becoming its chief executive in 2009 when the bank became a group after its purchase of Datvest and Beverly Building Society. It was during this period, in 2009, that he was elected the Bankers Association of Zimbabwe president. This was also the time the multi-currency system was introduced. Mangudya is credited for having successfully put in place and implemented a voucher payment system for national payments before the introduction of the US dollar-based Real Time Gross Settlement (RTGS) system. In 2012, he became the CBZ Holdings group chief executive officer. Under his stewardship, the group managed to grow and consolidated its position under what he termed “One CBZ business model�. He is a moderate Keynesian economist who believes in discretionary fiscal and monetary policies and in rational expectations hypothesis. Mangudya is the board chairperson of both the Industrial Development Corporation and the Agricultural Marketing Authority of Zimbabwe. He is also a board member of Afreximbank and Africa University as well as an ordinary member of the Institute of Directors of Zimbabwe. He is married to Tapiwa and the couple has three children: Farai, Rutendo and Anesu.

Money matters ... The RBZ Building along Samora Machel Avenue in Harare.



advertising supplement to the Zimbabwe independent april 11 to 17, 2014


Mangudya’s work cut out for him Owen Gagare

NEW Reserve Bank of Zimbabwe (RBZ) governor Dr John Mangudya, whose term of office starts on May 1, will begin his tenure in unique circumstances being the only governor in the history of Zimbabwe to be appointed to run the central bank at a time the country does not have a currency of its own. The Zimbabwean dollar was abandoned in 2009 when the multi-currency regime was introduced in the aftermath of a decade-long economic meltdown characterised by hyperinflation which eroded the Zimdollar’s value. Apart from dealing with monetary policy is-

sues, Mangudya will have to confront a myriad of challenges which include the current liquidity crunch, banking sector vulnerabilities and general economic problems. Even though he does not deal with fiscal policy issues in his normal line of duty, he will be expected to be part and parcel of a government team grappling with the prevailing economic problems the country is facing. However, the most unique situation of his appointment is taking over the reins when Zimbabwe does not have a currency of its own. The Zimdollar was the official currency from 1980 to April 2009. Its predecessor was the Rhodesian dollar which was equal to half of a pound

sterling when it was adopted during the decimalisation of 1970, the same practice which was used in other Commonwealth countries such as South Africa, Australia and New Zealand. The first Zimdollar was introduced in 1980 and replaced the Rhodesian dollar at par. The RBZ issued regular bank notes between 1980 and 2003, but as hyperinflation developed from 2003, it issued short-lived emergency travellers’ cheques, which were then quickly superseded by time-limited

bearer cheques, in denominations ranging from Z$5 000 to Z$20 000 in 2003, then up to Z$100 000 by early-2006. At the time of its introduction in 1980, the Zimdollar was worth more than the US dollar on the official exchange market, with a dollar being equal to US$ 1,47. However, many felt the value of the Zimdollar did not reflect reality resulting in the currency’s value depreciating over the years. The first redenomination of the Zimbabwean dollar occurred on August 1, 2006. The dollar was redenominated to the second dollar at the rate of one revalued second dollar being equivalent to 1 000 old first dollars. Under an operation code-named Sunrise, former RBZ governor Gideon Gono also announced the Zimdollar had been devalued by 60% against the US dollar. The revaluation campaign was completed on August 21 2006. Despite the revaluation, the currency soon lost value because of hyperinflation forcing the RBZ to devalue its currency again. On September 6 2007, the Zimdollar was devalued by 92%, giving an official exchange rate of Z$30 000 to US$1, although the black market exchange rate was estimated to be Z$600 000 to US$1. Gono on July 30 2008, announced that the Zimdollar would be redenominated again. And with effect from August 1 2008, nine zeros were knocked off the currency, which meant Z$10 billion was worth Z$1 of the new currency. Coins valued at Z$5, Z$10 and Z$25 and banknotes worth Z$5, Z$10, Z$20, Z$100 and Z$500 were introduced. The Zimdollar, however, continued to be rendered worthless by the runaway inflation forcing the RBZ to print higher denomination notes. At this time, many Zimbabweans were now buying goods and accessing services using foreign currency whose trade was thriving on the black market. The official use of foreign currency began in September 2008 when the government allowed selected shops to sell groceries and goods in foreign currency. In January 2009, acting finance minister Patrick Chinamasa announced that Zimbabweans would be allowed to freely trade using foreign currency, giving relief to the majority, who were already using the multi-currency regime although it was illegal to do so. On 2 February 2009, the RBZ announced that a further 12 zeros were to be taken off the currency, with Z$1 000 000 000 000 being exchanged for $1. New bank notes were introduced with a face value of Z$1, Z$5, Z$10, Z$20, Z$50, Z$100 and Z$500. The bank notes of the fourth dollar circulated alongside the third dollar, which remained legal tender until June 30 2009. By then, most Zimbabweans had already stopped using the local currency though. The local unit was effectively abandoned as an official currency on April 12 2009 when then economic planning minister Elton Mangoma announced the suspension of the national currency for at least a year, but exchange rates with the Zimbabwean dollar were maintained for up to a year afterwards. Under the multi-currency system, the government approved the use of the Botswana pula, British pound sterling, euro, South African rand and the US dollar. In January this year, the RBZ approved domestic trading in the Chinese yuan, Indian rupee, Japanese yen and Australian dollar, in a move that made the currencies legal tender in Zimbabwe although the currencies are not circulating widely.

advErtising supplement to the Zimbabwe independent april 11 to 17, 2014



Govt team heads for IMF Spring Meetings

International Monetary Fund Heaquarters in Washington DC, United States

Finance minister Patrick Chinamasa

The Zimbabwe National Chamber of Commerce congratulates Dr. John Mangudya on his appointment as the Reserve Bank of Zimbabwe Governor. We believe the appointment is based on his expertise, experience and impeccable track record which will be useful in leading the country's apex bank. We look forward to a close working relationship that strengthens cooperation between our esteemed institutions.


FINANCE minister Patrick Chinamasa will lead a delegation to attend the annual International Monetary Fund (IMF) and World Bank Spring Meetings scheduled to begin today to continue discussions with the international financial institutions. The IMF in its report after a recent visit to Zimbabwe said the authorities and the mission made progress when they came into the country last month and held discussions towards an understanding on a package of policy measures and reforms to be monitored in the context of the Staff Monitoring Programme (SMP) through June 2014. The SMP is an informal arrangement between a country’s government and the IMF to monitor the implementation of the government’s economic programmes. The IMF said that discussions on these policies and reforms with Chinamasa will continue on the sidelines of the annual spring meetings which will end on Sunday. “The authorities remain committed to work on the outstanding deliverables under the programme with the goal of completing the review of the SMP,” the IMF said. “Consideration of the Article IV Staff Report by the IMF executive board is scheduled for mid-June 2014, when the mission team will also update the board on the implementation of policies under the SMP”. The IMF delegation, led by Alfredo Cuevas, was impressed with meetings they held in Harare with high-ranking officials which they described as “frank”. “The IMF team held discussions with Zimbabwe’s chief secretary in the office of the President and Cabinet, Misheck Sibanda, Finance Minister Patrick Chinamasa, Mines minister Walter Chidhakwa, Indigenisation minister Francis Nhema, (Health)adviser to the President Timothy Stamps, acting Governor of the Reserve Bank of Zimbabwe (RBZ) Charity Dhliwayo, and other senior government officials,” said the Breton Woods institution. “The mission team expresses its gratitude to the Zimbabwean authorities for the frank and high-quality discussions during this visit” It noted that there was a need to engage the country’s creditors to find ways of addressing the country’s debt burden. “It will also be necessary to engage with the country’s creditors to work towards a solution to the long-standing debt arrears problem,” it said adding, “Downside risks to the outlook include the possibility of further weakening of export prices, a tightening of external financing conditions, as well as risks related to policy implementation delays. Should these risks materialise, they would adversely impact output growth and fiscal revenue. To mitigate these risks, it is important to strengthen fiscal policy, identify potential sources of domestic and foreign financing and address financial sector vulnerabilities. “The IMF is committed to supporting the Zimbabwean authorities’ efforts to implement stronger macro-economic policies, including through targeted technical assistance and capacity building activities. In order to enhance its interactions with Zimbabwe, the IMF intends to place a resident representative in Harare in the coming months.”





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Time to draw line in the sand Tony Hawkins

EIGHT months after being swept back into office in a landslide election victory, President Robert Mugabe’s administration is under siege. Hopes that the European Union would lift economic sanctions on Zimbabwe were disappointed when Brussels in February announced a meaningless reduction in the number of targeted individuals. Both the US — whose sanctions are far and away the most effective — and the UK said they had no intention of easing their restrictions. Government officials have been forced to admit that the Treasury does not have the money

to pay an (unbudgeted) pay hike to public servants promised by Mugabe during the election campaign. And the media, spearheaded by a normally lapdog state media, published a series of embarrassing revelations of gross financial abuse by parastatal heads. The detail and accuracy of the revelations left no doubt that someone in a position of authority was leaking the numbers. Unsurprisingly, the public outcry against the vastly inflated salaries and allowances top parastatal managers and boards are paying themselves quickly degenerated into yet another row between the two factions within Zanu PF vying to succeed the 90-year-old Mugabe.

Premier Service Medical Aid Society head offices ... The “salarygate” scandal that rocked the public enterprise illustrates just how most parastatals are rotten. The perceived front-runner, Vice-President Joice Mujuru, blundered when she attacked the media for causing dissension in the country by publicising the “salarygate” scandal. The media, even those controlled by the state, turned angrily

on her, much to the glee of the rival faction led by Justice minister Emmerson Mnangagwa. Opposition MP Eddie Cross — a voice crying in the wilderness if ever there was one — says: “Every ministry, every state enterprise is rotten to the core, packed with people appointed not for their capacity and ability, but for patronage purposes.” That is an exaggeration — there are some principled, honourable, parastatal executives and board members — but salarygate illustrates just how widespread the problem now is. It does not help that, according to media reports, US$1 million was spent on Mugabe’s 90th birthday celebrations in a country where, according to World Bank data, the average family is poorer than it was 50 years ago. “As a country, we have lost our moral compass,” laments Cross, while admitting that his own party, the Movement for Democratic Change, is in a mess, led by a man, Morgan Tsvangirai, with a disconcerting track record of failure yet determined to hang on to his job at all costs. During the ill-fated four-year national unity government (2009-2013), decision-making was invariably undermined by partisan splits within the three-party government. In 2014, though a single party is in power, decision-making remains just as partisan as the two factions vie for public support ahead of the succession vote at Zanu PF’s next congress in December this year. As the president flew out to Malaysia recently for yet another eye cataract operation, according to officials, rumours and reports of his fading health resurfaced. All but a diminishing circle of Mugabe loyalists agree that protracted uncertainty over the succession is hurting the country as ministers in the two factions jostle for positions in the next administration. While the politicians fiddle, Zimbabwe burns. As hopes for any sort of deal with the International Monetary Fund (IMF) recede, so Zimbabwe is becoming increasingly reliant on a handful of friends, especially China. Finance minister Patrick Chinamasa says he hopes to tie up a comprehensive financing (rescue) package with China within the next three months. Perhaps this time China will rescue Zimbabwe; in the past it has flattered only to deceive. Whether the financial support comes from China or Russia (in a mooted platinum base metals refinery) matters little so long as it takes the form of borrowed finance — not equity — thrusting Zimbabwe more deeply into foreign debt (115% of GDP and rising rapidly). Without an IMF deal leading to eventual debt forgiveness, economic growth will continue to be hamstrung, not by economic sanctions, as ministers and many businesspeople claim, but by an unsustainable debt burden. Just as something will have to give politically — the current “factioneering” will further undermine governance, vividly illustrated by salarygate — so too economically. If the Chinese do not come to the party soon and in a big way, the current economic malaise will deepen. Growth at 3,5% in 2013 was the slowest since dollarisation five years ago. Unemployment, already well over 50% of the workforce, will rise inexorably, the brain drain will intensify and living standards fall further. The difficult economic decisions that should have been made over the past five years are not going to go away. Nor are they likely to be taken while ministers and officials, in fear of losing their jobs, squabble over the succession. It is time to draw a line in the sand and move on. l This article first appeared in the Financial Mail. Professor Hawkins is a prominent economist and lecturer at the University of Zimbabwe.

RBZ Supplement 11 April 2014