The Sunday Mail
Dr John Mangudya —
My prayer to Zimbabweans is that we trust one another. First and foremost, confidence comes as a result of trust. If you don’t trust me, you will have no confidence in me. It’s as simple as that. So, we need to trust one another as a starting point. I trust that what we are doing is good for the economy. Trust takes two people; you, therefore, also have to trust that what we have said as the Reserve Bank of Zimbabwe is what we are going to do.
We have gone out of our way to secure foreign exchange for this economy because we trust the money is going to be used in the manner that it is expected to be used. For us to be here, it is because of foreign currency. We get foreign currency through borrowed funds and loans and, most importantly, through exports.
Everyday, I keep asking: “Most of those who want cash in United States dollars are not exporters; where do they think the dollars come from?” Yes, you have the legal entitlement to the money when you go to withdraw it from the bank, but where did that money come from? People should always ask that question. The answer is that it is money that has been made by someone else, an exporter. The queues at banks only entail payslips — virtual money that we are monetising.
The company you work for is not exporting, yet you ask for cash. Banks become dispensing machines. When a company banks, it mainly does transfers. These are assets that we are converting into the US dollar. The Diaspora are the only people who can tell me that they have exclusive rights to the money because they earned it. Most of us only have payslips, but we are not like exporters who have earned this money.
If we don’t have bond notes backed by the African Export-Import Bank facility, there will be inflation. What concerns me is that people are being paid in foreign currency, but there is a mismatch in the amounts we are earning and the quality of work we are putting in. We want to have a value of preservation so that we preserve money. People in Zimbabwe do not know how to preserve money.
If you are earning in foreign currency, don’t put in work that is for the Zim dollar currency. I can give you an example of someone who is getting US$400 as a cleaner. That person is making the money, but not earning it. Someone who earns the equivalent of US$400 in another country does much more sophisticated work than here.
There is a mismatch between the amounts we are earning as a country and the amounts we are producing. It is a mismatch that means we need to change the way we are doing things. As Zimbabweans, we need to understand where the money is coming from. We are now addicted to holding US dollars. We have billionaires from America, but you hardly see them with cash.
You hear people say, “We want our money.” But what money (are you talking about) when you have not earned it? Cash is not the only way of doing business. Zimbabweans should understand that the definition of making money is not having cash in your pocket. The purpose of business is not to have cash only, but to do business.
This is why we still have people who are still used to the Road Port days of the hyperinflationary era when they used to make money by selling money. This time I have drawn my line to say that if you do that, you will go where you belong (to prison). The legal process is work in progress. The Constitutional Court has made its determination that you can’t make a legal challenge against the bond notes when you are injured.
You should also understand that the RBZ is apolitical. I believe we should not (involve) politics in money issues. I also believe that as monetary authorities, we should be honest and sincere with the people of Zimbabwe. Bond notes will be disbursed gradually. The maximum is US$200 million, and it will take us to 2017.
In terms of the question of us switching to the rand, we tried to put in place a policy to have a ratio of 50:40:10 (US dollar, rand and other currencies).
We had good intentions, but if a currency is losing value, am I to force people to hold it? Bond notes are going to be a short-term measure until the economy becomes investor-friendly. We are in transformation mode.
Publicity campaigns for bond notes will start on Monday October 31, 2016. We did not want to start these campaigns without the necessary legal instruments as it was a question of timing. We need to have a “business unusual” approach. If you want to earn foreign currency, you should make it before you earn it.
We should not undermine the impact of sanctions. We are as strong as the weakest in the chain. If, for example, you have four people on sanctions, other people who are not on sanctions are affected when they make financial transactions because those who imposed the sanctions are always hunting for sanctions-busters.
So, even if you are not on the sanctions list, your transactions will also be under threat because you will be under constant surveillance to trace your links with those under sanctions.
I have evidence to prove this. These are high-value notes, and those in the business of money-laundering and other illegal activities target them. Although they are cheaper to import than smaller notes, we have said that since people are taking money out of Zimbabwe; we are importing less value notes such as US$20, US$10 and US$5.
It’s contingency liability. We are reviewing our position on the incentives issued as bond notes. We are considering awarding them to other earners of foreign currency such as non-governmental organisations. We already have incentives for those receiving money from abroad and have also come up with an incentive for the Diaspora.
Recipients of the money are now getting three percent as an incentive. This is to encourage Diasporans to send money home. Let’s pray to have a strong and viable economy; to increase fiscal space, create employment and boost export earnings. I implore the people of Zimbabwe not to judge us by our history, but by looking at where we are going.
Dr John Mangudya is the Governor of the Reserve Bank of Zimbabwe. These excerpts were taken from his presentation at the Zimbabwe National Chamber of Commerce Breakfast Meeting in Harare last week. Transcription by The Sunday Mail Chief Reporter Kuda Bwititi.