RBZ’s $389m headache

Source: RBZ’s $389m headache | The Herald

RBZ’s $389m headache
Reserve Bank of Zimbabwe Governor Dr John Mangudya

Zvamaida Murwira-Senior Reporter

The Reserve Bank of Zimbabwe (RBZ) will today disburse $66 million owed to cotton farmers with bank accounts for the crop delivered to Cottco last season, followed by $436,6 million to be paid via mobile banking, but has a headache over $389 million due to farmers with neither bank nor mobile money details.

The preferred solution was for the affected farmers to open low-cost bank accounts, which can be done easily, and the RBZ has ruled out printing cash for the payments, and in any case wants something more than a name on a list when making a payment.

RBZ Governor Dr John Mangudya yesterday said paying $389 million outside the financial system was a challenge given the need to comply with the principle of transparency and accountability, and the RBZ could find itself in breach of money laundering laws through settlement to unverified beneficiaries.

Dr Mangudya told the Parliamentary Portfolio Committee on Lands and Agriculture, which had invited officials from the ministries of Lands, Agriculture, Fisheries, Water and Rural Resettlement and Finance and Economic Development, that the farmers would be paid, but there were challenges with the unbanked lot.

The committee, chaired by Gokwe Nembudziya legislator Cde Justice Mayor Wadyajena (Zanu PF), wanted an update on the settlement of $1,5 billion owed to farmers for cotton delivered last season.

Dr Mangudya said the schedule from Cottco showed $436,6 million that ought to be paid through mobile banking platforms while $66,6 million was for those with bank accounts and $389,5 had no banking details.

The RBZ will start payments today for the $66 million for those with banking details while pursuing solutions on how to settle payments for those without bank accounts. He ruled out printing money to settle that amount.

“In this day and age, we definitely need banking details. How do we validate that? The question is, is the money going to people who are known or unknown because a list of names will always be a list?” asked Dr Mangudya.

He said one way of going round the problem was to direct that farmers open low-cost bank accounts and they could be assisted to do so on the strength of letters from village heads or community leaders if they did not have national identity cards.

“We are not comfortable as a bank to hear that in this country, there are people with no bank accounts. We spoke to six banks last year who were able and willing to open low-cost accounts. One of our jobs is to have financial inclusion so that all producers are included, to bank the unbanked,” he said. 

“In terms of accountability and transparency, it is not good. We need to have a spirit of Zimbabwean farmers to have bank accounts for traceability. This is the reason why $1,5 billion was taking long to be settled. How can it be released when we do not know where it is going? My job is to protect the Government coffers at all costs. If we had all the banking details, the money would have been released. One day I will be called by the Public Accounts Committee to explain where the money would have gone.”

In response, Cottco managing director Mr Pious Manamike said a blitz they held to have farmers open bank accounts was resisted for various reasons.

Some farmers expressed concern over the withdrawal limit and the distance they sometimes have to walk to the nearest financial institution, while others stay in areas with no mobile network for them to use mobile banking platforms, among others.

Mr Manamike said they have since approached the RBZ for guarantee for them to borrow money to pay farmers for this season, which started last week.

Going forward, Dr Mangudya said there was need to capacitate Cottco, pay farmers according to grades of their produce instead of a uniform price and that Government should raise its equity in Cottco from 37 percent for it to effectively assist farmers.

He said there were no huge problems at the Grain Marketing Board because Government owns 100 percent while its stake in Cottco was low.

Cabinet has since agreed that Government should raise its stake in Cottco to 51 percent.