Mangudya faces troubled executives
RESERVE Bank of Zimbabwe (RBZ) governor, John Mangudya, yesterday came face to face with business executives and entrepreneurs disturbed by plans to introduce bond notes in the country.
The bond notes, meant to be used as an incentive to exporters, are seen as a backdoor attempt by government to bring back the Zimbabwe dollar.
Scores of company executives and business owners told the RBZ governor at a no holds barred breakfast meeting in Harare that he had to shelve the plans for bond notes.
There has been unprecedented public loathing over any form of domestic currency in Zimbabwe since the country ditched its free-falling unit in 2009, after it had been eroded by hyperinflation, which reached 500 billion percent at the end of 2008.
A week after Mangudya said he would introduce ZW$200 million bond notes, backed by a US$200 million facility from the African Development Bank, business executives took an opportunity presented by a Zimbabwe National Chamber of Commerce (ZNCC) meeting to express their disdain for the proposal.
Business warned that this would trigger a fresh wave of quantitative easing, or money printing, one of the problems blamed for the near collapse of the economy in 2008.
Instead, business rallied behind proposals by economists that the RBZ should introduce a levy on imports to fund the export incentives.
The RBZ sees the export incentive as the cornerstone for rebuilding exports to resolve trade imbalances, highlighted by trade deficits of about US$3 billion per annum.
The country is importing more goods than it is exporting.
Economists warned that Mangudya would be forced by government to print more bond notes in order to fund a myriad of commitments that have been giving the State headaches.
These include foreign travel and a bloated civil service.
If the country takes that route again, it would be sowing the seeds for another economic catastrophe, the central bank boss was warned.
At the core of the crisis that has paralysed Zimbabwe have been substantial cash shortages in banks.
Consumers have been limited to US$100 maximum withdrawals by most banks as the financial system grapples to cope with dwindling currency stocks blamed on externalisation.
This week, a top banker was hauled before the courts over allegations of externalising US$320 million.
A Chinese diamond mining firm, Jinan, was said to have siphoned US$500 million to foreign accounts, sparking resentment in a country estimated to be losing between US$1,8 billion and US$2,3 billion per annum through illicit financial outflows.
Mangudya revealed yesterday that there had been controls over importation of cash into Zimbabwe.
Correspondent banks had questioned the reason behind a sudden spike in demand, amid fears of potential money laundering in the country.
“The bond note is not the way to go,” said Ashok Chakravach, one of the officials helping government with ease of doing business reforms in Zimbabwe.
“We can put a three percent import levy across the board and raise US$2 billion for export incentives. I believe the bond notes are not necessary,” he said, to overwhelming response by company representatives.
“Countries have to compete for relevance,” said Brains Muchemwa, chief executive officer at Oxlink Capital.
“The bond notes must not be imposed,” he said.
“We must not print any money before we agree that this is the right time to do,” said Mukonitronics director, Lovemore Mukono.
The RBZ boss said industries were not in the right shape for an import levy, while duty evasion by importers made it difficult to raise enough funding.
The country risked facing a fresh round of price hikes if such a levy is introduced and the cost of doing business would rise, he said.
It is a vicious cycle for the economy, which slipped back into slow growth in 2012 after growing by double digits between 2009 and 2010.
An import levy would reduce the flow of cheap foreign products and spur domestic production.
Mangudya said at the core of the crisis were cash leakages by foreigners.
“They are not coming here because they love us,” Mangudya said. “They are coming to grab and go.”
He said he has received a report that foreign firms had moved US$20 million in bags through the country’s porous borders.
President Robert Mugabe recently said about US$15 billion was stolen from diamonds mines in Chiadzwa.
“There is much externalisation in this economy. These unscrupulous businesspeople are taking money. We are feeding the looters. You take money from a poor country to a rich country,” Mangudya said
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