Taxpayers expected to rescue Zimbabwe's Reserve Bank
In his drama-filled 10 years as the governor of the Reserve Bank of Zimbabwe (RBZ), Gideon Gono routinely parcelled out everything from cheap cash for struggling large firms to scotch carts for peasant farmers.
The largesse was at the centre of President Robert Mugabe’s patronage system and made Gono one of Zimbabwe’s most powerful men. The overspending bankrupted the central bank, leaving it with a debt of close to $1.3-billion.
Now the government wants taxpayers to pick up the bill, and resistance to the proposal is rising.
The Reserve Bank of Zimbabwe (Debt Assumption) Bill, which the government has tabled in Parliament, will allow it to take over debts racked up by the RBZ under Gono’s tenure.
Freeing the bank
The bank is currently flooded by lawsuits as creditors demand their money back, but there would be no legal action taken against RBZ for debts assumed by the state – should the law be passed.
The government says taking over the debt will free the bank to return to its normal role, breaking from the “quasi-fiscal” activities it concentrated on under Gono.
“To be able to discharge our functions well, we should have no debt,” RBZ governor John Mangudya said.
Over the past 10 years, the RBZ routinely raided the private accounts of foreign aid agencies, large companies and individuals, purportedly to fund state operations at a time the government had run dry.
In addition, the RBZ doled out large amounts of cash to struggling firms, many of them badly run state enterprises.
The money was never paid back.
RBZ also frequently purchased farm implements – anything from tractors, seed and ox-drawn ploughs – for donation to farmers. The handovers were routinely made to beneficiaries at grand occasions presided over by Mugabe.
Gono has previously insisted that his controversial policies were necessary during the economic crisis, but close to a year after his term came to an end, taxpayers are now being asked to pick up the tab.
At public meetings held on the proposed Bill across the country, angry taxpayers are demanding a full audit before any debt is placed on their shoulders, a demand unlikely to be agreed to by the government. It is a demand unlikely to be agreed to by the government, which looks set to railroad the bill through Parliament.
“Tell us who benefitted from all the money first,” one man in Harare told the parliamentary committee holding the public hearings. Hearings end this week.
With many of the beneficiaries being the political elite, the RBZ and the government are refusing to release a full schedule of those who benefitted from Gono’s largesse.
Activists say the public must resist the Bill until a full audit is made.
“There is a need to know the beneficiaries and the extent to which they have benefited. In the schedule attached to the Bill, a list of debts to be assumed by the government of Zimbabwe has been given.
“However, this information is not enough as it is void on who actually benefited in terms of sectors,” says Janet Zhou of the Zimbabwe Coalition on Debt and Development, which campaigns against excessive public debt.
David Chapfika, head of the parliamentary finance committee hosting the public meetings, said it was inevitable the taxpayer would be asked to take the burden. “The government does not run a business and the only source of income for the government is through taxes,” said Chapfika, who was Deputy Finance Minister during much of Gono’s stay at RBZ.
Chapfika and Gono had a public fallout over interpretation of the indigenisation policy, and there have been suggestions that Chapfika is using the public hearings to get back at Gono. Chapfika denies the charge.
“I am doing this in my capacity as chairman; it’s not Chapfika who is doing these public hearings, it is the committee,” he says.
Among some of the large firms RBZ owes are Zimplats, the local unit of Impala Platinum and Meikles, one of the country’s largest retail and hotel groups.
A schedule seen by the Mail & Guardian also shows a debt of $4-million owed to South African company Metallon, which runs gold mines in Zimbabwe.
Under Gono, the RBZ’s monetary policy role was set aside as the bank focused more on ploughing cash into struggling industries and farms.
The RBZ racked up a string of “interventions”, which were sources of cheap income for those that could access them.
Among these were: the Productive Sector Finance Facility, a fund for failing firms to help them raise production; the Agriculture Sector Productivity Enhancement Facility, which gave cheap credit to selected farmers; the Parastatals and Local Authorities Re-orientation Programme, which put money into loss-making state enterprises; and the Basic Commodities Supply Side Intervention, which supported the supply of cheap basics.