Stick to RBZ mandate, Mangudya told

via Stick to RBZ mandate, Mangudya told – DailyNews Live  26 MARCH 2014

Newly-appointed Reserve Bank of Zimbabwe (RBZ) governor John Mangudya must stick to central bank’s advisory role to government and regulation of the financial sector, economists say.

They said apart from facing a tall order in bringing stability and restoring confidence in the banking sector amid a biting liquidity crisis, he may encounter government interference, particularly in policy formulation and implementation.

Mangudya — taking over from Gideon Gono whose 10-year tenure expired four months ago — is set to assume office on May 1.

“He has an advisory role, period. He should avoid a professional bomb which Gono committed by naively expecting to turn around the economy,” said Takunda Mugaga, an independent economist.

“He should not even get into that office thinking he will turn around the economy,” he added.

Mangudya, an economist and currently chief executive of CBZ Holdings — Zimbabwe’s largest bank by assets, takes helm of the apex bank at a time it is facing numerous challenges.

Although his appointment coincides with the injection of $100 million by Afrexim Bank to facilitate interbank trading, the RBZ remains grossly undercapitalised.

The institution has no capacity to perform the lender-of-last-resort role and has accumulated debt exceeding $1, 1 billion mainly as a result of quasi-fiscal activities and non-core business ventured into during Gono’s era.

The obligations include $452,6 million sovereign debt, $439 million of domestic dues, non-resident institutional debt of $110 million and credit lines amounting to $80,2 million.

Kipson Gundani, Zimbabwe National Chamber of Commerce’s chief economist, added that Mangudya will also face another challenge in conducting his duties.

“It is unlikely government will implement all the policies he needs to. It is a possibility that government will interfere when they feel their political ambition threatened but that interference is a very unlikely possibility,” Gundani said.

Gundani noted that Mangudya will have to ignore politics and be pragmatic.

“Painful as that may be, pragmatic actions will achieve dividend in the long term,” he said.

Economic commentator, Issis Mwale, also said the governor “should dodge politics and stick to his responsibilities”.

“Yes the governor cannot operate in isolation, he serves a government. So he should advise the government and not vice-versa,” she said.

“He should restructure the financial services (sector) by introducing measures which promote mergers and acquisitions, protect the banking sector from the indigenisation law and intensively work towards deal structuring,” said Mwale.

She warned that the newly-appointed RBZ governor will not be a “miracle worker to Zimbabwe’s economic plight”.

“Mangudya will not bring a magic wand into the office to rid the nation of its economic troubles. If government leaves him to do his job, he will definitely achieve some of the objectives he’s saddled with,” said Mwale.

Renowned economist Tony Hawkins told Bloomberg that Mangudya will also face limitations in terms of regulation because Zimbabwe doesn’t have its own currency.

“There’s very little he can do in a country that has dollarised, so his focus has to be on regulation rather than monetary controls,” said Hawkins, also an RBZ board member.

Zimbabwe ditched its currency ravaged by hyperinflation topping 231 million percent to adopt a multi-currency system, dominated by the US dollar.

“Mangudya is a substantial figure and well-trained with lots of experience, but the governor’s job is seriously constrained by the dollar economy,” he said, adding “Money supply is obviously out of the bank’s control, as are interest rates.”



  • comment-avatar
    Roving Ambassador 8 years ago

    Much ado about nothing.

  • comment-avatar
    John Thomas 8 years ago

    If he was of any use at all he would not have been appointed. If he had even a shred of integrity he would not have been appointed nor would he have accepted. This simply another ZANU stooge in the Gono mode.

  • comment-avatar
    Dread Rass 8 years ago

    Another ZANU PF rambai makashinga minded stooge . we are tired of these people they destroyed our country