Inside the Gono dossier

In a damning 59-page catalogue of policy advice to the Zimbabwean government, Reserve Bank Governor Gideon Gono spells out his repeated attempts to persuade the government to change course and save the country from imminent economic collapse and ruin. The Mail & Guardian is in possession of the document.

Zimbabwe is heading for a meltdown as top state officials, businesses and the Reserve Bank clash over the economic crisis gripping the former breadbasket of the subcontinent.

Gono has slammed the government for not taking his advice to do away with price controls. He claims he has called repeatedly for foreign investments to be protected and for property rights to be upheld, but his advice has fallen on deaf ears.

His disgruntlement comes at a time when government policies are becoming increasingly incoherent following the arrest of business executives for defying government orders to lower prices.

An analyst who does not want to be named says Zanu-PF currently has no clue about how to resolve these issues.

”You are dealing with a regime that is reacting in an irrational manner,” says the analyst. ”He [Gono] is the person tasked with resolving these issues for the government and he is finding it impossible to do his job.”

In a letter, of which the M&G has a copy, to Minister without Portfolio Elliot Manyika, who is tasked with enforcing price controls, Gono complains that a raft of advice he has given the government in the past three years has not been heeded.

”It is our strongest conviction that only through a holistic framework can we stabilise prices, without inducing shortages in the market,” he writes.

Gono’s shopping list of measures to be taken to stabilise the economy ranges from agriculture to tackling corruption. He has called on the government to:

• stop land invasions and the criminality that has affected conservancies, including poaching and cutting down trees;

• protect private property;

• rationalise external trade tariffs to enhance producer viability;

• exercise restraint in setting prices;

• respect existing and future investment protection agreements;

• privatise key parastatals;

• engage business in a social contract;

• stamp out corruption;

• provide subsidies for actual production as opposed to pre-production free handouts; and

• build an environment free of disruptive policy inconsistencies and enhance the viability of business.

The invasions, Gono asserts, have led to ”land degradation, loss of potential foreign currency earnings, erosion of confidence and lack of security [thus] scaring investors”.

On government plans to force foreign companies to cede 51% stakes to locals, Gono calls for transparency in the ”indigenisation and empowerment programmes” as they have created anxiety among potential and existing investors.

Gono criticises ministries for living beyond their means. This has fuelled ”money supply growth and inflation”. He bemoans the growth of money supply that is not matched by productive economic activity and has spurred inflation.

To generate foreign currency, which has been in short supply since the land invasions began, Gono suggests that bonds be issued. He notes the response has been lukewarm because of ”perceived country risk”. His attempts to encourage ”Zimbabweans in the diaspora” to invest in local companies and property have not been successful.

The ”social contract” that was meant to control the spiking of prices is stillborn and ”prices continue to increase because of a lack of commitment” from labour, business and the government.

Sidelined

Zimbabwean economist John Robertson says that the very structured social contract that Gono is trying to put in place has been thrown out by the government.

”He has been sidelined in this process,” says Robertson. ”The Zimbabwean government has short-circuited the whole process by imposing retroactive price controls, a much harsher approach.”

He says the price controls are a failure and are causing food and fuel shortages, which have led to a massive transport crisis, with many Zimbabweans unable to get to work.

”Retailers have been forced to reduce prices and, at these new prices, they cannot afford to restock,” he says. The government is hoping that the Zimbabwean population will buy its version of events that taints retailers as the exploiters and that the price cuts are what they deserve.

The analyst says that already retailers are refusing to accept the Zimbabwean dollar and this is sure to lead to economic collapse.

”Government is printing huge amounts of money. It is in circulation and there is nowhere for it to go,” says Robertson.

Michael Spicer, head of Business Leadership South Africa, says it is quite clear that the Zimbabwean economy is in a state of free-fall. ”It is self-evident that the price cuts are completely untenable and unsustainable.”

It is imperative that politicians, civil society and business from within Zimbabwe and the greater southern African region come together to rebuild the Zimbabwean economy and society, says Spicer.

Robertson says the hope is that someone with the courage and organisational capacity to offer leadership will come forward. Perhaps Gono’s criticism of the government should be viewed in the context of his political future.

”I think he might be looking out for his future; he might believe he is one of the contenders for a top job when change comes,” says Robertson. ”He is probably working on his monetary policy statement due in the course of this month, but I am sure, at this stage, he wouldn’t know what to put in it.”

Another analyst, who wants to remain anonymous, agrees that Gono may be looking out for his political future.

Mining, corruption, nationalisation

Gono points out in his letter that corruption remains rife and it is ”adversely affecting economic activity”.

The central bank urges the government to realign mining legislation, including speeding up diamond mining regulation. This is to ensure the optimal use of the country’s mineral resources, but ”uncertainties about the amendments to the mining legislation negatively affect investor confidence”.

Similarly, he urges the regime to institute greater surveillance at the mines, where smuggling of gold and other minerals is prevalent.

In a direct challenge to Mugabe’s strategy on nationalisation and unfettered state support, Gono calls for the privatisation of the country’s parastatals and the removal of subsidies, to reduce the budget deficit. Parastatals ”remain a major drain on the fiscus”.

His pleas to insurance and pension funds to support the country’s ailing construction industry have not been heeded. As a result the ”construction industry is declining”.

The backbone of the economy has been agriculture, which has suffered the most since the land invasions in 2000. His attempts to get banks to give loans to newly resettled farmers have not been heeded, as banks keep their distance ”due to risk factors”.

The bank’s intervention in providing funds for buying goods, marketing and tillage programmes, have not been able to shake up the ”lethargy” in agriculture.

Land invasions have disrupted attempts to revive farming activities. Gono urges the government to place a moratorium on further invasions.

Challenging Gono’s remarks, a top government official is reported to have said that technocrats have failed to make politicians understand their ”demagoguery”, which cannot be a substitute for policy.

The rebellion in Zanu-PF might well have started. As a Mugabe appointee and friend, Gono’s move could well be interpreted as a step towards a different political future.

Arrested businesspeople