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Mangudya’s Last Chance To Do Right His Wrongs


When news of the Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya’s contract extension spanning over the next five years came in, it was no surprise that the development would divide opinion given the controversy that characterised his maiden tenure.

Love him or hate him, we must appreciate the man has done a great deal of a job in schooling the majority of Zimbabweans with some sophisticated economics theories juxtaposed with superfluous monetary jargon, all in the exercise of selling his policy ideas to the nation.

To this effect, economics lingo from, “liquidity” to “Nostro Accounts” or even more complex abbreviations such as RTGS previously known to bankers and economists, can now pop-up at a vegetable market discussion among laymen, thanks to the good Governor.

But it is the impact his policies have had on the economic state of affairs of the ordinary person, more than anything else since replacing an equally controversial, Gideon Gono as the Central Bank Chief in 2014 that define his legacy.

Upon his ascendance into office, Mangudya hit the ground running with key focus on sanitising the country’s banking sector which at this juncture was reeling from low levels of investments and thickening Non-Performing Loans (NPLs).

These were red flags pointing to a potential crush of the banking sector.

Most Banks had issued out massive loan volumes since dollarization in 2009 and of the US$ 4.05 billion total bank loans in 2014, close to US$ 800 million were defaulting, translating to over 20 percent NPLs.

This had weakened the banking sector‘s capacity to lend hence productive sectors where choked of capital to produce.

To avert a potential financial catastrophe, this demanded serious soul-searching on the part of authorities and the Central Bank thought of establishing a special purpose vehicle, the Zimbabwe Asset Management Corporation (ZAMCO) with the aim of buying out NPLs from distressed banks and clean-up banks’ balance sheets.

Financial experts were sceptical, with fears that the move would perpetuate market indiscipline on the part of debtors to these NPLs, and the new Finance Minister, Mthuli Ncube in his maiden Budget Statement would call for its disbandment.

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By 2017, NPLs had slipped to 8.63 percent from 20.5 percent in 2014, though despite this tremendous clean up, critics blamed the Governor for using public funds to clear the burden of a few bad debtors.

To date, 1 160 NPLs have been bought at a value of $ 1.13 billion, and this is public money that should have been channelled towards development.

Up next was the bond notes currency, which set the hallmark of Dr Mangudya’s tenure in office.

Initially, Dr Mangudya told the nation that the Bank had secured a US$ 200 million facility from the Cairo-based Afrexim Bank to improve liquidity on the market which would back the bond note currency and give it a 1:1 valuation with the American Dollar.

He went on to assure the nation that unlike his predecessor, he would not frequent the money printing machine beyond the $ 200 million.

For a little while it worked, but as the remaining USD currency further disappeared just as economic experts has earlier warned, another US$ 300 million worth of bond notes were printed and more followed.

Economic experts had earlier warned of the Gresham’s law, a concept where bad money (bond notes) drives out good money (USD) in an economy, to which Dr Mangudya in defense of his currency invention said, “If the bond notes fail, I will resign,”

Among other shortcomings, Dr Mangudya has been criticised for contracting debt for the Bank of close to US$ 2 billion from external creditors without seeking Parliamentary approval.

While the Reserve Bank Act states that the Governor through the Minister of Finance’s consent can secure lines of credit from external financiers on behalf of the RBZ, the Act remains subservient to the Constitution of Zimbabwe, which states that any external borrowing should get consent from Parliament.

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While it is easy to criticise Dr Mangudya, it can only be fair to note that his is a difficult mandate, with a razor-thin margin between operating within the confines of a technocrat and finding yourself scatting on political territory.

Unlike like his predecessor, Dr Mangudya has managed to contain himself well, sticking to what he knows best, the economics.

Dr Mangudya remains one of the true patriots left, and in his execution of duty he shows a poignant approach to issues bedevilling this economy.

Before the new administration of President Emmerson Mnangagwa came in and gave a three month moratorium to all those suspected of having externalised funds from the market, Dr Mangudya had long warned of this sad development as early as 2014.

“We see huge sums of money being wired on a daily basis from our systems at the Central Bank. You wonder what business is being conducted here,’ he said back then.

As it later turned political, post November 2017, externalisation was real but needed political will from higher offices than his to deal with the scourge.

Dr Mangudya begins his second tenure with much sophisticated problems.

The country’s foreign reserves are depleted, inflation is sky-rocketing, fuel challenges and a huge confidence deficiency in the economy.

One of his major forte is that Dr Mangudya is a defiant man, who sticks to his guns until he achieves what he set out to do just as he sanitised the banking sector of NPLs in the face of criticism to introducing the bond note currency which has managed to sustain this economy ever since the greenback disappeared from the market.

With analysts saying focus should be shifted towards building foreign reserves to sustain the transition to the new RTGS Currency, and also tackle the foreign exchange conundrum, the verdict has been cast, and Mangudya has a chance to do right his past wrongs.

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