Five “mysteries” in Zimbabwe’s deepening crisis

via Five “mysteries” in Zim’s deepening crisis 27/03/2014 by Irene Madongo FT.com NewZimbabwe

ZIMBABWE is suffering from capital flight, a liquidity crunch, regular power outages, falling commodity prices and other manifestations of an economic crisis.

But beyond these well-documented woes, there are several “mysteries” that throw up searching governance questions for the regime of Robert Mugabe, the 90-year-old president.

The first mystery is how some CEOs have managed to pay themselves so much.Ordinary government workers can earn as little as $300 a month, but the CEOs of some government-linked companies have earned elephantine salaries.

Cuthbert Dube, former CEO of the Premier Service Medical Aid Society (PSMAS), a state enterprise, earned a basic monthly salary of US$230,000 in 2012, according to The Herald, a state-owned newspaper, quoting documents it recently obtained.

This was in spite of the fact that his company owed some $38m in unpaid bills for medical services at the end of last year. This salary level would mean that Dube was earning more in a month than, say, David Cameron, UK prime minister, earns in a year.

His was not the only large salary. The CEOs of NetOne (US$43,693 monthly) and the Zimbabwe Broadcasting Corporation (ZBC) head (US$37,050 monthly) also have high pay and benefits packages.

Acting to curb such largesse, Patrick Chinamasa, finance minister, said last week that a salary cap of US$6,000 per month is to be imposed, though it was unclear if Harare could make the new rule stick.

Asked to comment, a ZBC spokesman said it is “not appropriate” for him to comment on the salary of the CEO, but said changes had been made at the corporation including appointing a new board of directors.

He added that it is “important that the remuneration levels be competitive but falling within the restrictions of our levels of income/revenue.” PSMAS and Net One did not respond to requests for confirmation of the salary figures by the time of publication.

The second mystery is how a state that produces so many diamonds can collect so little in dividends and taxes from diamond companies.

This week, former finance minister Tendai Biti told beyondbrics that by the time he stepped down last year, the Treasury had received less than US$5m from diamond companies between January and July 2013.This was down from the $247m that Biti said they paid in 2010 – even though 2013 was a bumper year for diamond production, according to government officials.

In 2013, a parliamentary committee report highlighted “serious discrepancies” between what the government receives from the sector and what the diamond mining companies claim to have remitted to Treasury.

Meagre gold reserves

Zimbabwe produced 13 tonnes of gold in 2013 worth US$622m, but it holds gold coins valued at just $501,390 as its only reserves – enough to buy only 1,400 tonnes of maize, Reuters quoted the finance ministry as saying this month.

The new central bank governor’s PhD

John Mangudya, appointed this month to be governor of the Reserve Bank of Zimbabwe (the central bank), is identified by the state-owned Sunday Mail as having a Doctorate from Washington International University (WIU).

However, this “university” has not sought formal accreditation in the US and several US authorities – including the Oregon Office of Degree Authorization, the Michigan Civil Service Commission and the Texas Higher Education Coordinating Board – have warned that its “degrees” are not recognised.

On its own website, WIU mentions that it is a ‘cyberuniversity’ with ‘no classrooms’ and ‘no deadlines’, and its doctorates can be obtained after just one year of study.

One country, 10 currencies

In January, four new currencies – the Australian dollar, the Chinese renminbi, the Indian rupee and the Japanese yen – were added to the five already regarded as legal tender – the Botswana pula, the British pound, the euro, the South African rand and the US dollar.

One answer is obvious; the Zimbabwe dollar’s value has been so ravaged by hyperinflation that dollarisation tends to add economic stability. But are nine legal currencies really necessary to achieve dollarisation, and don’t people using all nine find it a bit confusing dealing between them all?

 

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