HARARE – Reserve Bank of Zimbabwe (RBZ) governor John Mangudya (JM) is really not amused by his countrymen’s inclination towards inflicting harm on themselves; he is adamant that there is no need for the panic buying that rattled markets in recent weeks and advises consumers not to buy from shops that are bent on fleecing them of their hard-earned income.
The Daily News’ Farai Machamire (FM) spoke to Mangudya on these and other issues. Excerpts:
FM: What is your view of the current state of Zimbabwe’s economy?
JM: The truth of the matter is that economic indicators are improving. The economy is growing on account of agriculture and mining sectors that are doing well. Tourism is also performing well; there is an improvement in tourist arrivals. It’s evidence-based.
Sometimes I feel I am not in the same country as others because when I go through magazines and newspapers, I read that certain companies are retrenching or that some are closing. (But) to the contrary, we have seen a net increase in employment in Zimbabwe.
I can give you a number of firms, as examples. The clothing employed 1 000 people about a year ago; now it employs 6 000. The depressing reports could be that Zimbabweans want to spend time on the negative side. I know in life there are always two sides hence it’s natural sometimes to get these things.
But as far as we are concerned, the economy is expanding and what we are going through are the side effects of a growing economy. What are the downside risks of this growth?
The economy is growing at a much faster rate than we are generating foreign exchange required to sustain that growth. Why?
Because we are a net importer, Zimbabwe’s import dependency in general is about 40 percent. For our industry, the average is 50 percent. Other companies are at 70 percent. Foreign exchange is therefore a critical function of production in Zimbabwe.
FM: So, if things are improving, why is the market pregnant with scepticism?
JM: Zimbabweans are so divided as individuals. We are so polarised as a society. We have no unity of purpose. So, you find that what is in the papers mirrors what we are at the end of the day also? So, I never blame the newspapers when they write their stories: What they are simply doing is to mirror our society, depending on who they ask.
Some people are now trying to take advantage of what happened in the past years, by trying to create the 2008 crisis this time for personal interests and not necessarily because of fundamentals.
FM: Prices have continued to increase; what is the antidote to this?
JM: There is need for consumer resistance. There is a lot of rent-seeking behaviour in our society. Some unscrupulous businesspeople keep increasing prices because there is demand for their products, never mind the extortionate prices.
What should actually be happening is that businesses should be reducing their prices as we don’t expect them to remain high given that they are getting foreign currency from the banking system.
If we did not have the foreign currency to support their requirements, it could have been a veld fire. That’s why I say the answer is that we need foreign exchange to dampen all these premiums on the parallel market. If prices are high, consumers should shun those retailers. Don’t buy cooking oil at $5.
At times some of our people are difficult to understand. They want to fix Mangudya and government by engaging in some of these reckless behaviours. Well, go and buy at those prices if you have the money . . . you are basically fixing yourself.
But at the end of the day, some will come back and say they want a salary increase when they are shooting themselves in the foot. Forget it, there is not going to be any salary increase whatsoever. Just don’t buy. That’s consumer resistance. We need to show we are unhappy. People should not take advantage of the unsuspecting public.
FM: We have seen wads of new bond notes being traded on the streets by illegal traders. Who is funnelling this money onto the parallel market?
JM: The RBZ does not participate in that. All the money from the RBZ goes through the normal banking system. What we know is that there are cartels wherein the retailers when they collect cash they take it onto the streets.
Instead of banking the cash, they make an RTGS to the RBZ and give the physical cash to these guys (black market dealers). We have also been investigating all those social media pictures (of people with wads of bond notes) and we are making good inroads.
My guys go office by office, but we are spending more time on unproductive work. This is not my job, but as the governor, I can’t sleep when people are playing with our resources. I should be spending time looking for foreign currency and not going from volt by volt. It’s not right.
FM: What are you doing to clamp-down on the existing three-tier pricing system?
JM: Those premiums are an indicator that something is wrong. The three-tier system is a reflection of the foreign currency shortages. Zimbabwe is earning substantial foreign currency and if we were using it efficiently, there wasn’t going to be any such problem.
(In fact), during the month of January to end of September, this economy earned $4 billion in foreign currency from exports, Diaspora remittances and other inflows, which is not small money. But, how it is being utilised (is the issue).
Some of it is being taken out of the economy by importing things that are useless. Some are keeping it in their houses due to lack of confidence. We need to have a national approach to business.
So, we don’t clamp down on the three-tier pricing system, what we are doing is to look at way of increasing foreign currency earnings to eradicate it. As long as there is a gap between demand and supply, this will continue happening. Even if we arrest every Zimbabwean, that will not bring foreign exchange into the economy.
FM: How has been the uptake of the bureaux de change licences?
JM: To date, we have licensed 13 bureaux de change agents. We can have as many bureaux de changes as possible. Go and sell your money in a licensed bureaux de change.
FM: Since you started clamping down on illegal traders, how much have you managed to recover?
JM: All I can say is that so far 20 people who were doing that have been nabbed. The funds have been taken from them and by last night there were still counting the money. If they were still counting by yesterday, I think it must have been a large amount although I don’t have the exact figure right now.
FM: The bond notes have been seen as a complete failure by many; from your perspective, is the export incentive scheme working?
JM: If you ask me today whether the export incentive scheme is working, I will say yes it is working. Unfortunately, because of different narratives, either deliberately or ignorantly or both, you see someone spending more time on debating about bond notes than working. The export incentive is assisting companies to go and export and bring in foreign currency.
FM: Where do you see the rate of inflation in Zimbabwe going in the coming months?
JM: We are in a positive low inflation level. We need to maintain low level inflation. Businesses should, however, be responsible in their pricing. I am in retail myself and I look at prices in my shop, which are lower than those of my competitors and yet we are buying from the same producers. I ask myself; what is wrong with us?
Like what Michael Jackson said in his song The Man in the Mirror, let’s look at ourselves critically. Let’s sow the seed of love in one another. That’s what is missing in this country. As Jesus said, I leave you with one great commandment, love one another. And if we love one another, you cannot increase cooking oil price to $5 when you have bought it at $3,10.
FM: Are we going to see the adoption of the South African rand?
JM: I have been saying this over and over again. I don’t know why you believe in social media over what I am telling you. I said the rand is part of our multi-currency system. No one is refusing to use the rand in this country.
Number two, the rand is foreign currency you need to export to get. Number three, you cannot export gold or tobacco with US dollars and then sell our US dollars at the Reserve Bank of South Africa to get rands; does that make sense? . . . What I am saying is that this was a question for 2009 when we dollarised the economy. That is when the issue should have been discussed.
Secondly, if we don’t have a facility from South Africa, a loan facility, how do we get the rand? So it means you need someone to give you the loan facility. And during the GNU, my understanding was that there was going to be a $1 billion facility from South Africa, that’s what I thought; that’s what I heard but we did not get that facility.
But if today there is a facility, it means the money will be in the market. And also, if we are now use the rand, it means we need to change US dollar accounts and if I am to change, people will get a currency with a lower value.
Imagine you are an exporter and tomorrow I change your money and give you rand. Do you think that is normal? Ahh no guys. Even yourself, your personal accounts from US into rand? Hamundirove? (Wouldn’t you beat me?)
The answer in simple terms is that the multi-currency system is remaining in Zimbabwe. That’s government’s position and that’s not changing. If that was true don’t you think I would have sent out a statement? Haa this fake news ka ichakunetsai (this fake news will create problems for you).
FM: Despite your assurances, many still panic and have their own perceptions of the economy. Is there any need to panic?
JM: There is no need to panic. I am happy the economy has been responding positively to our policy interventions. We have availed facilities to ensure that foreign currency for basic commodities that include electricity, cooking oil, medicinal pharmaceuticals, fuel, is available. There is no need to panic in this country. Manufacturers should continue to produce.
Yes, resources are limited. There is no country in the world with unlimited resources. That’s why we need to allocate them to the best of our ability. After everything is said and done, we need to remain as one. I always go to my favourite scripture Nehemiah; let’s build Zimbabwe as a team.