His Excellency President Robert Gabriel Mugabe
President of the
Republic of Zimbabwe
Cde. R. G. Mugabe
Munhumutapa Building
Samora Machel Avenue
HARARE
ZIMBABWE
Your Excellency President R. G Mugabe
RE ; GOVERNOR GIDEON GONO , ENG CAPITAL AND RESERVE BANK OF ZIMBABWE REFORM
Firstly Your Excellency I would like to congratulate and thank you for agreeing to and implementing the Inclusive Government (I.G) . You have shown encouraging leadership by demonstrating that you can indeed work with members of the opposition even though challenges remain. The I.G offers our nation hope for revival and future prosperity if it can be fully implemented .
The purpose of my letter is to clarify a few issues which you may not have been accurately briefed on .
My name is Gilbert Muponda. I hope you remember me, since in several public statements you were quoted to have mentioned both my Company ENG CAPITAL and my name. As you may recall during the Financial crisis of 2003- 2004 I was made the poster boy for all things that had gone wrong with Zimbabwe’s Economy. At one funeral you even mentioned me by name and you said “ hameno kuti vabereki vaMuponda vanoti kudii mwana wavo zva auraya nyika kudai”. The then crusade was that once Zimbabwe closed firms and businesses such as ENG CAPITAL the economy would recover and people would have a better standard of living . The exchange rate between the Zimbabwe dollar and the US$ then was 1500 is to 1. The rate of inflation was 450% . But by early this year 5 years after the closure of ENG inflation had risen to around 500 million percent .One US$ was trading for several trillion Zimbabwe dollars. The situation worsened until the Zimbabwe dollar was suspended and replaced by foreign currency to a point that Zimbabwe has lost monetary policy sovereignty . Zimbabwe’s monetary Policy is now being determined from South Africa ,Washington and other Western Capitals because Dr Gono was reckless in managing the country’s economy as he indulged himself in excessive money printing without devising other strategies such as those employed by Ian Smith’s regime which allowed the Rhodesia Front to carry on for 15 years despite sanctions .
Your Excellency when the Defense Forces Chiefs are forced to make various announcements and statements to insist that Governor Gono will remain it undermines Your Office, the Defense forces and the credibility of the Reserve Bank . The hiring and firing of the Reserve Bank Governor is not a matter for the Army to publicly stand behind a certain individual. This scares investors and other international partners.
Dr Gono has done his level best and as such he should now be allowed to rest and be gracefully retired to make way for another Governor to guide the Economy forward .An inaccurate impression is being created that there are malicious people who are trying to have Dr Gono dismissed for personal or vindictive reasons . The correct position is that Dr Gono is being asked to gracefully retire for several clear reasons related to how he has mismanaged the country’s monetary policy, its currency and the economy in general . The reasons are not personal but National in terms of importance as his departure will unlock resources that remain elusive due to the way the Governor Has conducted himself over the last 5 years .This is not about MDC against ZANU-PF .I am sure MDC could agree with ZANU PF providing an acceptable replacement for Governor Gono. The problem is Governor Gono is seriously compromised and his stay at the Central Bank is endangering the chances of Economic recovery .
According to a report carried by the respectable AFP news agency of 25 May 2009 Cde President it appeared you were responding to my letter to the Prime Minister and were quoted as having said the following about Governor Gono ;
"He is not a thief, he has done no wrong. Prove the wrong he has done, That's the crime he is alleged to have committed -- that he stood by this man Robert Mugabe, who must collapse so that there is regime change."
Governor Gono’s alleged crime is not that he supported or stood by you. His real crime is economic sabotage , this is why he has been referred to as an Economic terrorist . He is ruining the country’s economy through various ill-thought out policies and devising unjust self enrichment schemes which drained investor confidence whilst milking national coffers at the same time . The major problem with his unjust self enrichment schemes is that he has been randomly mentioning that he does this with the approval of his “Principal”. This Your Excellence is undesirable for a man of your stature and standing to let your name and reputation be tainted as the one who is facilitating and allowing such unjust self enrichment and self aggrandizement schemes.
I will briefly describe for you one specific example about what I mean by unjust self enrichment schemes .I am sure you were told that ENG CAPITAL had many cars, and these cars were the only assets that ENG had. The correct and accurate facts are that ENG was a Group of Companies which Companies had Directors, Managers and employees and the cars were for the use of these members of staff who ran the various companies which made up ENG CAPITAL.
ENG Capital group had a market value of US$ 175 million, just before the RBZ descended on the Institution.
Below is a brief ENG Group Structure ;
ENG HOLDINGS GROUP STRUCTURE
- SUBSIDIARIES
- ENG CAPITAL INVESTMENTS PVT LTD
- ENG ASSET MANAGEMENT PVT LTD
- ENG REAL ESTATE
- ENG NOMINEES PVT LTD
- ENG PRIVATE EQUITY (PVT) LTD
- ENG CAPITAL ADVISORY SERVICES
- ENG STRUCTURED FINANCE
ADDITIONAL MAJOR ASSETS OWNED
- Century Bank Holdings (now CFX bank)
- Leasing Company of Zimbabwe, Century Asset Managers)
- Century Discount House
- Hybri Micro-Finance Institution
- Care Insurance PVT LTD
- RestCel Insurance PVT LTD
- Amalgamated Health Services ? (Harare West Hospital )
- 15% of OK Zimbabwe Limited
- 15% of Zimplow Holdings Limited
- 20% Medtech Holdings Limited
- Hornet Re-Insurance PVT LTD
- Pearl Pension Fund Management
- 25 % Clan Holdings Limited
- 25 % Zimbabwe News Papers Group - Zimpapers Limited
- Allied Conveyor Belts PVT LTD
- River Drilling PVT LTD
- Real Estate including (Anastasia Court, Belgravia House, Thaine Building)
- Various Listed ZSE Listed shares
- Treasury Bills
- GMB Bills
- Cargill Commercial Paper
- $ 4 billion - Alliance Capital Debenture (representing 123 million First Mutual Life shares)
- 23 Million First Mutual Life shares
ENG Group was liquidated and managed to repay its creditors.
Using the Anti-Graft mantra Governor Gono devised an unjust self enrichment scheme targeting business leaders arresting,harassing,intimidating,exiling and black mailing entrepreneurs .
ENG assets above included a parcel of more than 600 million Century Financial Holdings ( Now CFX BANK) of these 600 million we were able to track 309 Million Shares sold to Network Investments and Kwangwari Enterprises which are investment vehicles in which Gono reportedly has interests. The 309 Century Financial Holdings Limited Million shares in question were sold through Fidelity Stock brokers on or around May 13, 2004. Within the same week an announcement was then made that CFX Bank was taking over Century Holdings. The shares were sold to Gono’s reported consortium for Z$2,9 billion when ENG had spent $35 billion to accumulate the shares, thereby prejudicing ENG, Creditors, Investors and contributories of at least Z$32,1 billion.
As ENG contributory and shareholder, I wrote to the Zimbabwe Stock Exchange Chief Executive Mr Emmanuel Munyukwi asking for an investigation because we had agreed with the majority of creditors that the shares should not be sold but rather swapped with creditors and investors instead of selling them at an unreasonable price. But the 309 Century /CFX Financial Holdings million shares were somehow clandestinely sold and that transaction enabled CFX Bank to take over Century Holdings Limited.
This allowed the reverse listing of CFX Bank on to the Zimbabwe Stock Exchange. Without those 309 Century Holdings Limited million shares owned by ENG the CFX/Century merger would have never happened. Gono and his proxies became the new controlling shareholder of the new merged bank. Is this by design or accident?Gono then forced out the Mr Sean Maloney who had helped to put together the transaction. Mr Sean Maloney had to leave the country under unclear circumstances . Part of the same shares snatched From ENG were later transferred to Premier Bank Financial Holdings which is reportedly owned by Governor Gono .
ENG directors and contributories asked the high court to set aside the sale of the shares and the matter action is still before the courts in Harare. We asked Zimbabwe Stock Exchange Committee to investigate. They refused. We asked the brokers for the identity of the buyer of our shares. They refused. The brokers indicated they were under serious pressure from individuals they couldn’t identify to maintain total secrecy on the identity of the buyer. Within a few days of raising the challenge of the CFX/Century shares Justice Minister Patrick Chinamasa specified me without affording me a hearing or an enquiry as required by the Constitution of Zimbabwe . The was specification at the instigation of Governor Gono .The specification was meant to harass, cow, intimidate and silence me from raising further complaint and challenges regarding ENG assets specifically these 309 million shares in CFX Financial Holdings.
Since the ENG shares in Century /CFX Bank Financial Holdings were irregularly transferred the Bank ownership remains in dispute. The ENG shareholders and contributories filed and sought a high court order to stop the transfer of the shares until the dispute had been resolved . The shares were still clandestinely transferred despite the pending high court application to resolve the dispute . After filing for this order My Lawyer the late Oscar Ziweni was also specified by the Minister of Justice and threatened ,harassed and intimidated until he went into hiding. However the point remains ENG shareholders and contributories still lay claim to these shares and stake in Century/ CFX BANK which were looted by Governor Gono .
A few individuals directly involved in the illegal sale of the ENG shares in Century later confessed that the beneficiary of the transaction was Governor Gono. Cde President the description of the actions above constitutes unacceptable behavior by the Governor of the Reserve Bank . The transactions clearly show corrupt behavior which when repeated at a massive scale as done by Governor Gono can bring down a country’s Economy. This is a significant part of what killed Zimbabwe’s Economy. I am sure other business people will have their stories to tell and many will have common features with what I have described above . This will be difficult to prove without a forensic audit of Independent Commission of Enquiry .And this will only be possible if Governor Gono is gracefully asked to recuse himself or go on paid leave whilst this is done. As a scholar of modern corporate Governance practices I believe the Governor will find this acceptable.
As you may probably recall Barbican Bank, Trust Bank and Royal Bank experienced a liquidity crisis similar to what Century /CFX Bank experienced during the same period . Barbican Bank, Trust Bank and Royal bank were then taken over and amalgamated to form Zimbabwe Amalgamated Bank ( ZABG) . Even though Century /CFX Bank faced the same situation it was not merged into ZABG. The reason was that Governor Gono was now the new controlling Shareholder and he was protecting his self interests. Century /CFX Bank was placed into temporary curatorship only to reopen a few months with RBZ pumping huge amounts of money to protect Governor Gono’s “ new investment”. Your Excellency this is corruption. This is how the country goes down the drain.
ENG case was not in isolation . Many people lost jobs, businesses and careers whilst Governor Gono was hiding behind anti-graft campaign just like today he is hiding behind the sanctions busting myth as if he is the one who invented sanction busting techniques. Businesses destroyed or taken over Royal Bank, Intermarket, Barbican, Intermarket, Rapid, Sagit, Africa Resources, Century Bank, Trust Bank. And this all happened within a space of less than 6 months. Jobs were lost. Business people were intimidated, scandalized, arrested or haunted out of the country. This Your Excellency is what ruined the Economy. Even a strong Economy can not with stand such massive brain drain where highly experienced and skilled business people and bankers are dismissed, exiled or jailed all at the same time. The Economy and investor confidence suffers. Capital Flight will result and factories and businesses will relocate into neighboring countries whilst foreign investors avoid the country after witnessing how local investors and entrepreneurs have been treated. This is what ruins the country’s economy .
Your Excellency as you may be aware CUBA and North Korea have been under sanctions for longer periods than Zimbabwe. Cuba has been under a serious sanctions for more than 50 years , yet inflation in CUBA has never reached 1000% . The Cuban currency has never been to levels witnessed by Zimbabwe dollar. It is therefore clear that Zimbabwe’s Economic decline has more to do with ruinous policies as devised and implemented primarily by Governor Gono .
The list of victimized businesspeople is rather long but it includes such luminaries as Dr Makoni, Mutumwa Mawere, James Mushore, Emmanuel Fundira, Otto Chekeche, Godfrey Jowa, Norman Sachikonye, Victor Chando, Durajadi Simba, Jeffrey Muzwimbi, William Nyemba, Nicholas Vingirai, Mthuli Ncube , Francis Zimuto , James Makamba, David Butau, Minister Chris Kuruneri, Nyevero Hlupo, Chris Goromonzi,John Moxon and many more. Mr President all these men above are true patriots who chose to set up businesses in their own country instead of neighboring countries where they had similar opportunities and incentives. Is this normal to see a whole generation of entrepreneurs scandalized and lose all credibility and all at the same time all based on accusations raised and directed by one man? A lot of these individuals have been forced to settle in other countries where they are working, creating jobs and help build neighboring economies whilst Zimbabwe is in desperate need for such skills and services .
This list includes some of the most gifted Bankers and Business people of our lifetime. It includes The Founders of the first Indigenous Merchant Bank, It Includes the founders of the first Discount House, It includes the first Black Entrepreneurs to form and list their own Financial Institution in Zimbabwe . All these men Your Excellency have been haunted out of the country , embarrassed and disgraced due to the vindictiveness of Governor Gono as he pursued long discredited economic policies. When such experienced and skilled business people are haunted out of their businesses and out of the country the impact is long term . Factories close, production is reduced ,shortages become widespread and prices keep rising till hyper inflation becomes order of the day .
During the 1980s and 1990s the Government ran the much vaunted Education for All campaign. That campaign produced millions of graduates .Including me. It is sad today that a majority of those products are today working and serving other nations whilst Zimbabwe is in desperate need of their skills and services. More than 80% of my former classmates at National University of Science and Technology are now based outside Zimbabwe.
Cde President other countries protect and support their business people and entrepreneurs. They give them incentives to remain ,stay and be based in their country of birth. In the USA there are individuals like Warren Buffet, Steve Jobs, Bill Gates and many others. They live in America and if they were to re-locate else where I am certain the American Government will do everything it can to re-attract them .They do this because they know Entrepreneurs create jobs ,provide services and make the economy prosper . In 2006 The richest Chinese man was the then 37 year old Wong Kwong Yu of Gome Appliances. Wong Kwong Yu has an estimated $2.3 billion US dollars in assets according to the Forbes business magazine. China has 108 other billionaires. And they all live in and operate from China. These are some of the people who have helped China become such an Economic powerhouse . The world over its rare for any country to be developed by foreigners in the absence of a vibrant local entrepreneurial community .Whilst Zimbabwe may look east its also important that it looks inside for its own business people and entrepreneurs . Under the direction of Governor Gono Zimbabwe lost too many talented individuals who are needed to revive the Economy . It is therefore imperative that the RBZ be reformed and Governor Gono be re-deployed away from the Central Bank which must play .
The Media and those close to you tried to create impressions that ENG was brief case company premised on Financial Engineering and Financial gymnastics and creating money from thin air without real economic activity. This is false . I will clarify this by bringing to your attention 2 companies which were part of the ENG Capital Group. ENG included River Drilling PVT LTD specialized in locating under ground rivers and water bodies. Its main activity was to locate such water bodies and bore hole drilling through out the country .This included drilling boreholes for schools and rural district councils. Allied Conveyor Belts was involved in manufacturing ,servicing and installation of conveyor belts and elevators .At the time of ENG ‘s closure the Company was in the process of negotiating the refurbishment of all the Conveyor belts and systems at Hwange Colliery Company Limited . In addition it was finalizing an conveyor belt system export order worth US $ 2.8 million from an Angolan firm .It is clear a misleading impression was created that ENG specialized in cars or non-economic activities and these businesses I am highlighting were ignored and downplayed to try and create justification for the closure of ENG CAPITAL whilst ENG assets were stripped and looted as earlier described above.
I hope the above will give an indication of why the RBZ must be reformed and during that reform individuals like Governor Gono must gracefully be retired or redeployed . The above case about the ENG shares in Century / CFX Financial Holdings show how corrupt the Governor is .Your Excellency your reputation and legacy is on the line. Cde President you can not be seen to be defending and protecting a corrupt man like Governor Gono. I am sure other cases of his corrupt behavior will be brought to your attention since you have asked people to show you the Governor’s criminal and corrupt deeds .
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Facebook ;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Sunday, May 31, 2009
Sunday, May 24, 2009
RBZ reform necessary and urgent
The Rt. Hon. Prime Minister of the
Republic of Zimbabwe
Mr. M. R. Tsvangirai
Munhumutapa Building
Samora Machel Avenue
HARARE
ZIMBABWE
Rt. Hon. Prime Minister, Sir,
RE: GOVERNOR GONO, MINISTER BITI and CENTRAL BANK REFORM
I refer to the above .
My name is Gilbert Muponda , I am a Zimbabwean born Entrepreneur currently living in exile. You may have never heard of me so I will give you some brief back ground .I was the first person arrested in the 2003-2004 so-called anti graft campaign by Gideon Gono immediately after he took over at the RBZ on allegations of fraud ,money laundering and externalization similar charges to what today the Governor is alleging against Honorable Minister Biti .
What followed my arrest was later to become the single most transformation period as the RBZ replaced the ZRP and the RBZ Governor replaced the ZRP Commissioner in directing who should be arrested and which charges must be preferred against those arrested .This is relevant since the Governor is clearly threatening Minister Biti with arrest ,court action at a time the Minister has asked for the RBZ to be reformed. The struggle between Gono and Minster Biti is not personal as Governor Gono is alleging. The matter is between Governor Gono against the Zimbabwe Economy.
Under Dr Gono’s leadership the RBZ reputation, standards and standing has been ruined. The local currency was eroded to the point that it had to be replaced by currencies from countries which Governor alleges are hostile to Zimbabwe. Governor Gono led the closure of Banks, arrest of individuals. As it is the international community is refusing to deal directly with the RBZ for as long as Governor Gono remains there. It is for these reasons which demand that Governor Gono be encouraged into retirement and gracefully allows a replacement to be named. Again his issue is not about MDC against ZANU its beyond that. Even ZANU people have experienced the vindictiveness and shallowness of his policies as this letter will later show .
As back ground information I describe my former business for you ,hopefully this will help you understand how Governor Gono single handedly destroyed the Financial sector leading to reduced Economic activity which in turn fast tracked the economic decline .
ENG Capital group had a market value of US$ 175 million, just before the RBZ descended on the Institution.
Below is a brief ENG Group Structure ;
ENG HOLDINGS GROUP STRUCTURE
- SUBSIDIARIES
- ENG CAPITAL INVESTMENTS PVT LTD
- ENG ASSET MANAGEMENT PVT LTD
- ENG REAL ESTATE
- ENG NOMINEES PVT LTD
- ENG PRIVATE EQUITY (PVT) LTD
- ENG CAPITAL ADVISORY SERVICES
- ENG STRUCTURED FINANCE
ADDITIONAL MAJOR ASSETS OWNED
- Century Bank Holdings (now CFX bank)
- Leasing Company of Zimbabwe, Century Asset Managers)
- Century Discount House
- Hybri Micro-Finance Institution
- Care Insurance PVT LTD
- RestCel Insurance PVT LTD
- Amalgamated Health Services ? (Harare West Hospital )
- 15% of OK Zimbabwe Limited
- 15% of Zimplow Holdings Limited
- 20% Medtech Holdings Limited
- Hornet Re-Insurance PVT LTD
- Pearl Pension Fund Management
- 25 % Clan Holdings Limited
- 25 % Zimbabwe News Papers Group - Zimpapers Limited
- Allied Conveyor Belts PVT LTD
- Real Estate including (Anastasia Court, Belgravia House, Thaine Building)
- Various Listed ZSE Listed shares
- Treasury Bills
- GMB Bills
- Cargill Commercial Paper
- $ 4 billion - Alliance Capital Debenture (representing 123 million First Mutual Life shares)
- 23 Million First Mutual Life shares
ENG Group was liquidated and managed to repay its creditors.
Using the Anti-Graft mantra Governor Gono devised an unjust self enrichment scheme targeting business leaders arresting,harassing,intimidating,exiling and black mailing entrepreneurs . I would like to clarify the point about unjust enrichment using a real life example.
ENG assets included a parcel of 309 million Century Holdings ( Now CFX BANK) Shares sold to Network Investments and Kwangwari Enterprises which are investment vehicles in which Gono reportedly has interests. The 309 Century Holdings Limited Million shares in question were sold on or around May 13, 2004. Within the same week an announcement was then made that CFX Bank was taking over Century Holdings. The shares were sold to Gono’s reported consortium for Z$2,9 billion when ENG had spent $35 billion to accumulate the shares, thereby prejudicing ENG, Creditors, Investors and contributories of at least Z$32,1 billion.
As ENG contributory and shareholder, I wrote to the Zimbabwe Stock Exchange asking for an investigation because we had agreed with the majority of creditors that the shares should not be sold but rather swapped with creditors and investors instead of selling them at an unreasonable price. But the 309 million shares were somehow clandestinely sold and that transaction enabled CFX Bank to take over Century Holdings Limited.
This allowed the reverse listing of CFX Bank on to the Zimbabwe Stock Exchange. Without those 309 Century Holdings Limited million shares owned by ENG the CFX/Century merger would have never happened. Gono and his proxies became the new controlling shareholder of the new merged bank. Is this by design or accident?Gono then forced out the Mr Sean Maloney who had helped to put together the transaction. Part of the same shares snatched From ENG were later transferred to Premier Bank which is reportedly owned by Governor Gono .
ENG directors and contributories asked the high court to set aside the sale of the shares and the matter action is still before the courts in Harare. We asked the ZSE to investigate. They refused. We asked the brokers for the identity of the buyer of our shares. They refused. The brokers indicated they were under serious pressure from individuals they couldn’t identify to maintain total secrecy on the identity of the buyer. A few individuals directly involved in the illegal sale of the ENG shares in Century later confessed that the beneficiary of the transaction was Governor Gono. This will be difficult to prove without a forensic audit of Independent Commission of Enquiry .And this will only be possible is Governor Gono is gracefully asked to recuse himself or go on paid leave whilst this is done. As a scholar of modern corporate Governance practices I believe the Governor will find this acceptable.
The purpose of my letter is not to seek vengeance or to be vindictive. It is to give you and others other facts which people may now be forgetting since the last 6 years have been very eventful for Zimbabwe.
ENG case was not in isolation . Many people lost jobs, businesses and careers whilst Governor Gono was hiding behind anti-graft campaign . Businesses destroyed or taken over Royal Bank, Intermarket, Barbican, Intermarket, Rapid, Sagit, Africa Resources, Century Bank, Trust Bank. And this all happened within a space of less than 6 months. Jobs were lost. Business people were scandalized, arrested or haunted out of the country.
The list is rather long but it includes such luminaries as Dr Makoni, Mutumwa Mawere, James Mushore, Emmanuel Fundira, Otto Chekeche, Godfrey Jowa, Norman Sachikonye, Victor Chando, Durajadi Simba, Jeffrey Muzwimbi, William Nyemba,Nicholas Vingirai, Francis Zimuto , James Makamba, David Butau,Minister Chris Kuruneri,Nyevero Hlupo, Chris Goromonzi,John Moxon. Mr Prime Minister all these men above a true patriots who chose to set up businesses in their own country instead of neighboring countries where they had similar opportunities and incentives. Is this normal to see a whole generation of entrepreneurs scandalized and lose all credibility and all at the same time all based on accusations raised and directed by one man?
The names of these individuals have been ruined way beyond what the Governor is suggesting about his name or standing in society. When will the Governor step up and offer apologies to those he has wrongly accused in the process destroying businesses and jobs. Whilst for the sake of progress we must let by gones be bygones this remains impossible if the Governor seeks to raise false and malicious charges against a Minister who is simply trying to do his job.
A few years ago Governor Gono rushed to President Mugabe to protect him from the then Minister of Finance Herbert Murerwa. As you may recall Minister Murerwa’s crime was that he simply suggested that Zimbabwe required more than removing zeros from the Zimbabwe Dollar if the Economy was to recover. Governor Gono won the power struggle then and Minister Murerwa was sacked. And Governor Gono continued to print money and removing zeroes every six months . The result of such policy is clear for all to see, Zimbabwe does not have a national currency ,which is limiting the country’s ability to implement a credible economic recovery plan .
Mr Prime Minister you may recall at the instigation of Governor Gono Barbican Bank ,Royal Bank and Trust Bank were expropriated under a cloud of confidence with no compensation paid to its owners. This may now be in a process of being reversed but the damage to the nation’s reputation and impact on entrepreneurial development is long term. Zimbabwe needs to send a strong signal to the International community that Property rights will be protected .A starting point would be to reform the RBZ as a confidence building measure and the retirement of Governor Gono will go a long way in building confidence .
A few weeks ago Governor Gono admitted and confessing to raiding private foreign currency accounts belonging to various individuals and organizations .In particular he admitted to taking without permission US$ 7 million belonging to the Global Aids Fund .Now when the Governor of such a respectable institution admits to dipping his fingers in the till the International Community will be predictably reluctant to donate, finance or assist such a Central Bank .The way to start rebuilding confidence of such an institution is to retire or re-deploy those responsible for the reputation destruction .
What are the implications on foreign investor sentiment when they see such hostility to local investors? These are respectable and pioneer first generation entrepreneurs who find themselves scandalized and somehow classified criminal even though there is no clear evidence against them. The reform of RBZ and departure of Governor Gono is not a personal matter but rather national matter that’s long overdue if Zimbabwe’s Economic recovery is going to be realized.
Governor Gono used the exact same tactic and its modified versions to justify looting NGO fore accounts , arrest business people and grab companies and assets whilst blaming the business people of corruption and externalization. Externalization is Gono’s favorite but exhausted suppression tool which he has used for self enrichment whilst victimizing rivals or those holding independent and divergent views.
Not too long ago Governor Gono accused former Guruve North Member of Parliament had to flee Zimbabwe after Governor Gono had mis-directed the Police to arrest the Honorable Member .Recently Butau was cleared by the courts . It is important to note Butau’s troubles began when he tried to investigate Governor Gono’s conduct of the Quasi Fiscal Activities which had replaced normal parliamentary approved Government spending.
It must be noted that David Butau was facing similar charges to what the Governor now alleges against Minister Biti.This pattern of behavior is disturbing to say the least. Why is it that when Governor Gono is facing an investigation or probe those trying to carry out the reform, probe immediately become suspects and the Police is invited by Governor Gono? Is Governor Gono hiding something? If he is not as I suggested earlier he should go on a paid leave whilst the RBZ is probed ,investigated or audited.
A different but related point Mr Prime Minister please may you mention the contents of this letter when you meet His Excellence President Mugabe . It is important that His Excellence be made aware directly of some of these happenings as a lot of the unjust self enrichment schemes are being done in his name. It is therefore imperative that His Excellence be briefed and advised on the risk of trying to protect Governor Gono to hold on to the post of Governor . Any action to protect Governor Gono at this juncture will only be interpreted to give credibility to the claims that Governor Gonos’ unjust self enrichment schemes were designed for the benefit of His Excellence a point which I believe The President may not be aware of.
Mr Prime Minister this matter is not personal nor is it a vendetta against Governor Gono. It is a matter of national survival and revival. Currently Zimbabwe can not even re-introduce the Zimbabwe dollar for the fear that the Governor will again indulge himself and ruin the currency by excessive printing .The Governor being the Patriot that he claims to be must surely see that its not wise or fair to hold the whole nation to ransom just because he wishes to cling on to the Governors’ office .As a confidence building measure you could even allow your GNU partners in ZANU PF to name an acceptable individual to replace the Governor.
Gilbert Muponda
Cc ; HE President Mugabe
Hon TL Biti
Governor Gono
Republic of Zimbabwe
Mr. M. R. Tsvangirai
Munhumutapa Building
Samora Machel Avenue
HARARE
ZIMBABWE
Rt. Hon. Prime Minister, Sir,
RE: GOVERNOR GONO, MINISTER BITI and CENTRAL BANK REFORM
I refer to the above .
My name is Gilbert Muponda , I am a Zimbabwean born Entrepreneur currently living in exile. You may have never heard of me so I will give you some brief back ground .I was the first person arrested in the 2003-2004 so-called anti graft campaign by Gideon Gono immediately after he took over at the RBZ on allegations of fraud ,money laundering and externalization similar charges to what today the Governor is alleging against Honorable Minister Biti .
What followed my arrest was later to become the single most transformation period as the RBZ replaced the ZRP and the RBZ Governor replaced the ZRP Commissioner in directing who should be arrested and which charges must be preferred against those arrested .This is relevant since the Governor is clearly threatening Minister Biti with arrest ,court action at a time the Minister has asked for the RBZ to be reformed. The struggle between Gono and Minster Biti is not personal as Governor Gono is alleging. The matter is between Governor Gono against the Zimbabwe Economy.
Under Dr Gono’s leadership the RBZ reputation, standards and standing has been ruined. The local currency was eroded to the point that it had to be replaced by currencies from countries which Governor alleges are hostile to Zimbabwe. Governor Gono led the closure of Banks, arrest of individuals. As it is the international community is refusing to deal directly with the RBZ for as long as Governor Gono remains there. It is for these reasons which demand that Governor Gono be encouraged into retirement and gracefully allows a replacement to be named. Again his issue is not about MDC against ZANU its beyond that. Even ZANU people have experienced the vindictiveness and shallowness of his policies as this letter will later show .
As back ground information I describe my former business for you ,hopefully this will help you understand how Governor Gono single handedly destroyed the Financial sector leading to reduced Economic activity which in turn fast tracked the economic decline .
ENG Capital group had a market value of US$ 175 million, just before the RBZ descended on the Institution.
Below is a brief ENG Group Structure ;
ENG HOLDINGS GROUP STRUCTURE
- SUBSIDIARIES
- ENG CAPITAL INVESTMENTS PVT LTD
- ENG ASSET MANAGEMENT PVT LTD
- ENG REAL ESTATE
- ENG NOMINEES PVT LTD
- ENG PRIVATE EQUITY (PVT) LTD
- ENG CAPITAL ADVISORY SERVICES
- ENG STRUCTURED FINANCE
ADDITIONAL MAJOR ASSETS OWNED
- Century Bank Holdings (now CFX bank)
- Leasing Company of Zimbabwe, Century Asset Managers)
- Century Discount House
- Hybri Micro-Finance Institution
- Care Insurance PVT LTD
- RestCel Insurance PVT LTD
- Amalgamated Health Services ? (Harare West Hospital )
- 15% of OK Zimbabwe Limited
- 15% of Zimplow Holdings Limited
- 20% Medtech Holdings Limited
- Hornet Re-Insurance PVT LTD
- Pearl Pension Fund Management
- 25 % Clan Holdings Limited
- 25 % Zimbabwe News Papers Group - Zimpapers Limited
- Allied Conveyor Belts PVT LTD
- Real Estate including (Anastasia Court, Belgravia House, Thaine Building)
- Various Listed ZSE Listed shares
- Treasury Bills
- GMB Bills
- Cargill Commercial Paper
- $ 4 billion - Alliance Capital Debenture (representing 123 million First Mutual Life shares)
- 23 Million First Mutual Life shares
ENG Group was liquidated and managed to repay its creditors.
Using the Anti-Graft mantra Governor Gono devised an unjust self enrichment scheme targeting business leaders arresting,harassing,intimidating,exiling and black mailing entrepreneurs . I would like to clarify the point about unjust enrichment using a real life example.
ENG assets included a parcel of 309 million Century Holdings ( Now CFX BANK) Shares sold to Network Investments and Kwangwari Enterprises which are investment vehicles in which Gono reportedly has interests. The 309 Century Holdings Limited Million shares in question were sold on or around May 13, 2004. Within the same week an announcement was then made that CFX Bank was taking over Century Holdings. The shares were sold to Gono’s reported consortium for Z$2,9 billion when ENG had spent $35 billion to accumulate the shares, thereby prejudicing ENG, Creditors, Investors and contributories of at least Z$32,1 billion.
As ENG contributory and shareholder, I wrote to the Zimbabwe Stock Exchange asking for an investigation because we had agreed with the majority of creditors that the shares should not be sold but rather swapped with creditors and investors instead of selling them at an unreasonable price. But the 309 million shares were somehow clandestinely sold and that transaction enabled CFX Bank to take over Century Holdings Limited.
This allowed the reverse listing of CFX Bank on to the Zimbabwe Stock Exchange. Without those 309 Century Holdings Limited million shares owned by ENG the CFX/Century merger would have never happened. Gono and his proxies became the new controlling shareholder of the new merged bank. Is this by design or accident?Gono then forced out the Mr Sean Maloney who had helped to put together the transaction. Part of the same shares snatched From ENG were later transferred to Premier Bank which is reportedly owned by Governor Gono .
ENG directors and contributories asked the high court to set aside the sale of the shares and the matter action is still before the courts in Harare. We asked the ZSE to investigate. They refused. We asked the brokers for the identity of the buyer of our shares. They refused. The brokers indicated they were under serious pressure from individuals they couldn’t identify to maintain total secrecy on the identity of the buyer. A few individuals directly involved in the illegal sale of the ENG shares in Century later confessed that the beneficiary of the transaction was Governor Gono. This will be difficult to prove without a forensic audit of Independent Commission of Enquiry .And this will only be possible is Governor Gono is gracefully asked to recuse himself or go on paid leave whilst this is done. As a scholar of modern corporate Governance practices I believe the Governor will find this acceptable.
The purpose of my letter is not to seek vengeance or to be vindictive. It is to give you and others other facts which people may now be forgetting since the last 6 years have been very eventful for Zimbabwe.
ENG case was not in isolation . Many people lost jobs, businesses and careers whilst Governor Gono was hiding behind anti-graft campaign . Businesses destroyed or taken over Royal Bank, Intermarket, Barbican, Intermarket, Rapid, Sagit, Africa Resources, Century Bank, Trust Bank. And this all happened within a space of less than 6 months. Jobs were lost. Business people were scandalized, arrested or haunted out of the country.
The list is rather long but it includes such luminaries as Dr Makoni, Mutumwa Mawere, James Mushore, Emmanuel Fundira, Otto Chekeche, Godfrey Jowa, Norman Sachikonye, Victor Chando, Durajadi Simba, Jeffrey Muzwimbi, William Nyemba,Nicholas Vingirai, Francis Zimuto , James Makamba, David Butau,Minister Chris Kuruneri,Nyevero Hlupo, Chris Goromonzi,John Moxon. Mr Prime Minister all these men above a true patriots who chose to set up businesses in their own country instead of neighboring countries where they had similar opportunities and incentives. Is this normal to see a whole generation of entrepreneurs scandalized and lose all credibility and all at the same time all based on accusations raised and directed by one man?
The names of these individuals have been ruined way beyond what the Governor is suggesting about his name or standing in society. When will the Governor step up and offer apologies to those he has wrongly accused in the process destroying businesses and jobs. Whilst for the sake of progress we must let by gones be bygones this remains impossible if the Governor seeks to raise false and malicious charges against a Minister who is simply trying to do his job.
A few years ago Governor Gono rushed to President Mugabe to protect him from the then Minister of Finance Herbert Murerwa. As you may recall Minister Murerwa’s crime was that he simply suggested that Zimbabwe required more than removing zeros from the Zimbabwe Dollar if the Economy was to recover. Governor Gono won the power struggle then and Minister Murerwa was sacked. And Governor Gono continued to print money and removing zeroes every six months . The result of such policy is clear for all to see, Zimbabwe does not have a national currency ,which is limiting the country’s ability to implement a credible economic recovery plan .
Mr Prime Minister you may recall at the instigation of Governor Gono Barbican Bank ,Royal Bank and Trust Bank were expropriated under a cloud of confidence with no compensation paid to its owners. This may now be in a process of being reversed but the damage to the nation’s reputation and impact on entrepreneurial development is long term. Zimbabwe needs to send a strong signal to the International community that Property rights will be protected .A starting point would be to reform the RBZ as a confidence building measure and the retirement of Governor Gono will go a long way in building confidence .
A few weeks ago Governor Gono admitted and confessing to raiding private foreign currency accounts belonging to various individuals and organizations .In particular he admitted to taking without permission US$ 7 million belonging to the Global Aids Fund .Now when the Governor of such a respectable institution admits to dipping his fingers in the till the International Community will be predictably reluctant to donate, finance or assist such a Central Bank .The way to start rebuilding confidence of such an institution is to retire or re-deploy those responsible for the reputation destruction .
What are the implications on foreign investor sentiment when they see such hostility to local investors? These are respectable and pioneer first generation entrepreneurs who find themselves scandalized and somehow classified criminal even though there is no clear evidence against them. The reform of RBZ and departure of Governor Gono is not a personal matter but rather national matter that’s long overdue if Zimbabwe’s Economic recovery is going to be realized.
Governor Gono used the exact same tactic and its modified versions to justify looting NGO fore accounts , arrest business people and grab companies and assets whilst blaming the business people of corruption and externalization. Externalization is Gono’s favorite but exhausted suppression tool which he has used for self enrichment whilst victimizing rivals or those holding independent and divergent views.
Not too long ago Governor Gono accused former Guruve North Member of Parliament had to flee Zimbabwe after Governor Gono had mis-directed the Police to arrest the Honorable Member .Recently Butau was cleared by the courts . It is important to note Butau’s troubles began when he tried to investigate Governor Gono’s conduct of the Quasi Fiscal Activities which had replaced normal parliamentary approved Government spending.
It must be noted that David Butau was facing similar charges to what the Governor now alleges against Minister Biti.This pattern of behavior is disturbing to say the least. Why is it that when Governor Gono is facing an investigation or probe those trying to carry out the reform, probe immediately become suspects and the Police is invited by Governor Gono? Is Governor Gono hiding something? If he is not as I suggested earlier he should go on a paid leave whilst the RBZ is probed ,investigated or audited.
A different but related point Mr Prime Minister please may you mention the contents of this letter when you meet His Excellence President Mugabe . It is important that His Excellence be made aware directly of some of these happenings as a lot of the unjust self enrichment schemes are being done in his name. It is therefore imperative that His Excellence be briefed and advised on the risk of trying to protect Governor Gono to hold on to the post of Governor . Any action to protect Governor Gono at this juncture will only be interpreted to give credibility to the claims that Governor Gonos’ unjust self enrichment schemes were designed for the benefit of His Excellence a point which I believe The President may not be aware of.
Mr Prime Minister this matter is not personal nor is it a vendetta against Governor Gono. It is a matter of national survival and revival. Currently Zimbabwe can not even re-introduce the Zimbabwe dollar for the fear that the Governor will again indulge himself and ruin the currency by excessive printing .The Governor being the Patriot that he claims to be must surely see that its not wise or fair to hold the whole nation to ransom just because he wishes to cling on to the Governors’ office .As a confidence building measure you could even allow your GNU partners in ZANU PF to name an acceptable individual to replace the Governor.
Gilbert Muponda
Cc ; HE President Mugabe
Hon TL Biti
Governor Gono
Monday, May 18, 2009
Zimbabwe needs to stick to the basics of Public Finance
The Government of Zimbabwe is currently engaged in efforts to raise funding to restore basic services .It is critical that these services be restored and maintained to prevent the country from falling into a totally failed state. One of the key measures of a failed state is the state’s ability to provide basic services such health care, maintain law and order and provision of other social services .The maintenance of such social services is hinged and linked to Public Finance, a subject which has not been clearly defined in the current Zimbabwean transitional phase . An analysis of the proper role of government provides a starting point for the analysis of public finance . Once Zimbabwean Public Finance is clearly define it may assist the key players on how to proceed in restoring normalcy to the Country
Public finance is a field of economics concerned with the payment for social or government activities, and with the administration and design of those activities. The field is easily simplified by divided into areas of what the government or collective organizations should do or are doing, and defining the means and ways on how to pay for the activities.
Governments normally pay for their expenditure by borrowing . In this instance borrowing is a method of distributing tax burdens through time lines rather than a replacement for taxes since the Government later repays the loans through funds raised from Taxes. A government budget deficit is the difference between government spending and government revenues. The accumulation of deficits over time is then referred to as total public debt. Whilst many Governments and Economists try to push for surplus or balanced budget ( we eat what we gather) ,Budget Deficit finance allows governments to smooth tax burdens over time, and gives governments an critical fiscal policy tool.
The use of budget deficit allows the Government to carry out its responsibilities even when the current revenues do not allow . It is important to understand that Government Finance is not structured or functions like a normal household or person. An individual person normally looks at how much income they make per year and then budget how to use that income. The Government Financing is rather the opposite of that in sequence of events. The Government first looks at its responsibilities and how much it will cost to finance those activities.
Once the expected expenditure has been compiled , the Government then looks at various ways to fund its responsibilities. This is how most governments end up spending more than what they are generating as revenue or expecting as income from various sources.
Any Public finance system is closely connected to issues of income distribution and social equity which brings national stability . Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently.
Government financing can be achieved by income and corporate taxes, government borrowing, asset sales (privatizations), or printing and trading local currency commonly called seigniorage. All these options are available to the Government of Zimbabwe, except seignior age .Zimbabwe’s lack of its own currency immediately creates a massive funding gap since the Government lacks the power to print currency in the times of need such as the current period .
When a Government fails to pay for civil servants salaries and has to rely on donors that situation is not sustainable and will lead to instability as it becomes clear that the Government is not actually the Government .As part of Public Finance field the use of local currency is key and cornerstone of the system .When Governments are said to be financing operations through overdraft normally what they are doing is printing additional local currency to temporarily cover a funding gap with the hope to drain the excess liquidity later through various mechanisms including Open Market Operations (OMO) which are executed through the Central Bank. As such the integrity of the Central Bank is critical for any proper functioning of the Public Finance system.
Under Public Finance theories and practice the money that can be printed or injected in the financial system is predetermined by various pre-agreed formulas including using a certain percentage of expected Government revenue in the next 12 months. This allows the use of local currency printing (seigniorage) without eroding public confidence in the local currency
Since Public finance is both a name for government finance - the way governments secure and the way manage their revenues it also encompasses Public Financial Management, Expenditure Policy, and Revenue Policy and Administration of public resources. The whole system only remains credible once it is transparent and follows pre-determined rules of engagement. Any ad hoc and hap hazard changing of some of the rules will undermine the system and normally results in the Government failing to raise adequate resources due to lack of confidence and system leakages normally fuelled by corruption .
It is important to correctly have a credible and robust Public Finance system as it has a direct link to the economic multiplier effect . That is in simple terms, comparative statics calculates how much one or more endogenous variables change in the long run, given a permanent change in one or more exogenous variables . Simplified this measures how much a single dollar spent by the Government can have other spin offs and benefits in the Economy. So when the Government does not spend as much as it should it has a negative impact on the Country’s economy. In Zimbabwe’s case the failure by the Government to pay civil servants adequately has a direct impact on reducing aggregate demand in the economy as the civil servants can not afford to pay for basics. This in turn creates a stagnant economic environment due to weak demand and investment levels remain low
As a simplified illustration is if an increase in Zimbabwe Government spending by Z$1000, with no change in related taxes, causes Zimbabwean GDP to increase by Z$1500, then the spending multiplier is 1.5. Various other types of fiscal multipliers related to Public Finance expenditure can also be measured, like multipliers that describe the effects of changing income and corporate taxes. This is the basics of how Economic Stimulus packages are designed and implemented . But since Zimbabwe does not have a local currency to supplement international resources the country can not use such packages or tools .
The above assessment measures how Government activity or lack of it can impact the Economy. So when the Zimbabwe Government suspends the Zimbabwe dollar and ends up unable to pay the civil servants in the process this will have a long term negative impact on the economic recovery. The Government needs the use of seigniorage as part of the Public Finance system for it to effectively carry out its responsibilities.
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Public finance is a field of economics concerned with the payment for social or government activities, and with the administration and design of those activities. The field is easily simplified by divided into areas of what the government or collective organizations should do or are doing, and defining the means and ways on how to pay for the activities.
Governments normally pay for their expenditure by borrowing . In this instance borrowing is a method of distributing tax burdens through time lines rather than a replacement for taxes since the Government later repays the loans through funds raised from Taxes. A government budget deficit is the difference between government spending and government revenues. The accumulation of deficits over time is then referred to as total public debt. Whilst many Governments and Economists try to push for surplus or balanced budget ( we eat what we gather) ,Budget Deficit finance allows governments to smooth tax burdens over time, and gives governments an critical fiscal policy tool.
The use of budget deficit allows the Government to carry out its responsibilities even when the current revenues do not allow . It is important to understand that Government Finance is not structured or functions like a normal household or person. An individual person normally looks at how much income they make per year and then budget how to use that income. The Government Financing is rather the opposite of that in sequence of events. The Government first looks at its responsibilities and how much it will cost to finance those activities.
Once the expected expenditure has been compiled , the Government then looks at various ways to fund its responsibilities. This is how most governments end up spending more than what they are generating as revenue or expecting as income from various sources.
Any Public finance system is closely connected to issues of income distribution and social equity which brings national stability . Governments can reallocate income through transfer payments or by designing tax systems that treat high-income and low-income households differently.
Government financing can be achieved by income and corporate taxes, government borrowing, asset sales (privatizations), or printing and trading local currency commonly called seigniorage. All these options are available to the Government of Zimbabwe, except seignior age .Zimbabwe’s lack of its own currency immediately creates a massive funding gap since the Government lacks the power to print currency in the times of need such as the current period .
When a Government fails to pay for civil servants salaries and has to rely on donors that situation is not sustainable and will lead to instability as it becomes clear that the Government is not actually the Government .As part of Public Finance field the use of local currency is key and cornerstone of the system .When Governments are said to be financing operations through overdraft normally what they are doing is printing additional local currency to temporarily cover a funding gap with the hope to drain the excess liquidity later through various mechanisms including Open Market Operations (OMO) which are executed through the Central Bank. As such the integrity of the Central Bank is critical for any proper functioning of the Public Finance system.
Under Public Finance theories and practice the money that can be printed or injected in the financial system is predetermined by various pre-agreed formulas including using a certain percentage of expected Government revenue in the next 12 months. This allows the use of local currency printing (seigniorage) without eroding public confidence in the local currency
Since Public finance is both a name for government finance - the way governments secure and the way manage their revenues it also encompasses Public Financial Management, Expenditure Policy, and Revenue Policy and Administration of public resources. The whole system only remains credible once it is transparent and follows pre-determined rules of engagement. Any ad hoc and hap hazard changing of some of the rules will undermine the system and normally results in the Government failing to raise adequate resources due to lack of confidence and system leakages normally fuelled by corruption .
It is important to correctly have a credible and robust Public Finance system as it has a direct link to the economic multiplier effect . That is in simple terms, comparative statics calculates how much one or more endogenous variables change in the long run, given a permanent change in one or more exogenous variables . Simplified this measures how much a single dollar spent by the Government can have other spin offs and benefits in the Economy. So when the Government does not spend as much as it should it has a negative impact on the Country’s economy. In Zimbabwe’s case the failure by the Government to pay civil servants adequately has a direct impact on reducing aggregate demand in the economy as the civil servants can not afford to pay for basics. This in turn creates a stagnant economic environment due to weak demand and investment levels remain low
As a simplified illustration is if an increase in Zimbabwe Government spending by Z$1000, with no change in related taxes, causes Zimbabwean GDP to increase by Z$1500, then the spending multiplier is 1.5. Various other types of fiscal multipliers related to Public Finance expenditure can also be measured, like multipliers that describe the effects of changing income and corporate taxes. This is the basics of how Economic Stimulus packages are designed and implemented . But since Zimbabwe does not have a local currency to supplement international resources the country can not use such packages or tools .
The above assessment measures how Government activity or lack of it can impact the Economy. So when the Zimbabwe Government suspends the Zimbabwe dollar and ends up unable to pay the civil servants in the process this will have a long term negative impact on the economic recovery. The Government needs the use of seigniorage as part of the Public Finance system for it to effectively carry out its responsibilities.
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Thursday, May 14, 2009
Victoria Falls presents a unique country branding opportunity
Zimbabwe is home to one of the seven natural travel wonders the Victoria falls in the Matabeleland North Province. Due to the political and economic instability over the last 10 years the country has not been able to fully exploit the benefits of being home to such a magnificent place. As part of branding the country as an investment and tourist destination the Victoria Falls provides a unique opportunity as a branding theme .As highlighted in the previous article a country can be successfully be branded based on its high quality products, services or a skill acquired by its people, a place like Jamaica is popularly associated with Reggae music, Bob Marley and other related themes.
Over the years Zimbabwe hasn’t done enough to be identified with the Victoria Falls . The Victoria Falls or Mosi-oa-Tunya (the Smoke that Thunders) is a unique and spectacular waterfall situated in southern Africa on the Zambezi River between the countries of Zambia and Zimbabwe. The falls are some of the largest in the world. It is clear South Africa has no direct physical link with the Victoria Falls.
However the South African country branding effort has been successful in linking the Victoria falls to South Africa such that many overseas tourist have the impression that Victoria Falls is in South Africa. Such is the power of an effectively packaged country branding strategy .Zimbabwe and Zambia despite being the true and actual owners of the Victoria falls are less identified with their own natural heritage which is a clear competitive advantage
The world famous Victoria Falls is one of the Seven Natural Wonders of the World. Victoria Falls was so named by Scottish explorer David Livingstone, and this is the name in use in Zimbabwe. The older, local name of Mosi-oa-Tunya is the name in official use in Zambia. The World Heritage List recognizes both names as official names for the falls. While it is neither the highest nor the widest waterfall in the world, it is widely believed to be the largest. This claim is based on a width of 1.7 kilometers and height of 108 meters , forming the largest sheet of falling water in the world. These are unique and amazing features which can be featured prominently in the effort to differentiate Zimbabwe from the rest of the SADC region and attract both tourists and foreign direct investment .
The most widely accepted Natural travel wonders of the world include the following.
Serengeti Migration
Galápagos Islands
Grand Canyon
Amazon Rainforest
Ngorongoro Crater
Great Barrier Reef
Victoria Falls ,
It is a clear advantage when branding the country to have such an undisputable position in the world of travel. However just being home to the place doesn’t mean much for as long as there is no clear marketing strategy to lure visitors, tourists and foreign direct investment. These attributes have to be clearly highlighted and exposed to the world and directly link Zimbabwe’s image to its natural beauty as demonstrated by the Victoria falls and many other amazing places in the country .
A marketing and branding strategy focused on the Victoria falls is ideal as it forces the world to acknowledge a natural wonder which no-one can replace or duplicate. This is clearly a Zimbabwean advantage and should be embodied in the Zimbabwean experience such that when someone thinks about Zimbabwe Victoria falls with all its splendor comes to mind. If Zimbabwe doesn’t market and brand Victoria falls as truly Zimbabwean then some of the neighbors will only be too glade to do it and cash in on that .
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Over the years Zimbabwe hasn’t done enough to be identified with the Victoria Falls . The Victoria Falls or Mosi-oa-Tunya (the Smoke that Thunders) is a unique and spectacular waterfall situated in southern Africa on the Zambezi River between the countries of Zambia and Zimbabwe. The falls are some of the largest in the world. It is clear South Africa has no direct physical link with the Victoria Falls.
However the South African country branding effort has been successful in linking the Victoria falls to South Africa such that many overseas tourist have the impression that Victoria Falls is in South Africa. Such is the power of an effectively packaged country branding strategy .Zimbabwe and Zambia despite being the true and actual owners of the Victoria falls are less identified with their own natural heritage which is a clear competitive advantage
The world famous Victoria Falls is one of the Seven Natural Wonders of the World. Victoria Falls was so named by Scottish explorer David Livingstone, and this is the name in use in Zimbabwe. The older, local name of Mosi-oa-Tunya is the name in official use in Zambia. The World Heritage List recognizes both names as official names for the falls. While it is neither the highest nor the widest waterfall in the world, it is widely believed to be the largest. This claim is based on a width of 1.7 kilometers and height of 108 meters , forming the largest sheet of falling water in the world. These are unique and amazing features which can be featured prominently in the effort to differentiate Zimbabwe from the rest of the SADC region and attract both tourists and foreign direct investment .
The most widely accepted Natural travel wonders of the world include the following.
Serengeti Migration
Galápagos Islands
Grand Canyon
Amazon Rainforest
Ngorongoro Crater
Great Barrier Reef
Victoria Falls ,
It is a clear advantage when branding the country to have such an undisputable position in the world of travel. However just being home to the place doesn’t mean much for as long as there is no clear marketing strategy to lure visitors, tourists and foreign direct investment. These attributes have to be clearly highlighted and exposed to the world and directly link Zimbabwe’s image to its natural beauty as demonstrated by the Victoria falls and many other amazing places in the country .
A marketing and branding strategy focused on the Victoria falls is ideal as it forces the world to acknowledge a natural wonder which no-one can replace or duplicate. This is clearly a Zimbabwean advantage and should be embodied in the Zimbabwean experience such that when someone thinks about Zimbabwe Victoria falls with all its splendor comes to mind. If Zimbabwe doesn’t market and brand Victoria falls as truly Zimbabwean then some of the neighbors will only be too glade to do it and cash in on that .
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Tuesday, May 12, 2009
Country branding critical for Zimbabwe’s economic recovery
A brand is usually defined as a collection of experiences and associations connected with a product ,service, a person or any other uniquely identifiable entity. A country such a Brazil may be well known for its well defined footballing style and flavor, whilst Germany may be well known for unrivalled motor engineering which produces brands such as BMW, Mercedes and Porsche .In the community of nations its critical for any country to establish a brand which can create a competitive advantage in the economic arena. The starting point being to identify key strengths and unique features. Zimbabwe at this stage of economic revival has to develop a well structured branding strategy which will assist in attracting investors, tourists and capital .
A widely held and accepted view is that creating a branding program for a country demands an integration of policy and message that most countries find very hard to develop. Normally this is developed over a very long period of time .The branding strategy is underpinned by the ability to act and speak in a coordinated and repetitive way about themes that are the most motivating and differentiating a country can make. Normally this has to be done by the political leaders and other leading citizens including celebrities and business leaders who have some influence .Currently is very difficult to tell which brand is Zimbabwe trying to develop as there seems to be no clear and consistent theme coming from the Country’s leadership in a unified way .
Effective branding serves a purpose in the global marketplace through attracting capital, investments and skilled and networked labourforce. It is therefore critical for a nation to have a well defined brand and theme which is repeatedly communicated to the wider world until the country is well known and associated with some thing that differentiates it from its neighbors and the region .
Successfully out-branding competitors is a continuous battle for the hearts and minds of potential tourists, investors and skilled workers and entrepreneurs. The proposition any serious brand strategy makes must be very compelling, attractive and unique among competitive offers which are always available to the target market. The branding theme proposition must also be consistently reinforced throughout all phases of communication as part of a wider nation building effort .This is critical for an emerging market like Zimbabwe given the fierce competition currently being experienced within the emerging market arena .
Whether countries admit it or not ,they already have a brand, and outsiders and insiders are having a “brand experience” when they interact with the country or its leadership , whether it be with citizens and leaders or the exports from the country. This experience is part of the branding effort which is why leaders must always speak respectfully to other world leaders despite serious policy differences . In addition good products can do wonders in building the “country brand” . The famous Zhing-Zhong comes to mind when one thinks how some products from China are viewed in Zimbabwe. This can be contrasted to the impact on Japan’s reputation such brands as Lexus and Sony have had on Japan’s standing as a place where high quality products are expected .
Such trends are what force many governments to pay heavy subsidies to assist exporters since successful exports not only earn forex but they also enhance the country brand which will have long term benefits as goodwill will be generated and reputation enhanced .
In marketing theory and practice building on the inherent values of a brand should be the core of any branding strategy .Every Country creates a distinct identity in the minds of potential tourists, businesses travelers, traders, importers ,consumers and entrepreneurs. As the number of tourist arrivals and business travelers continues to rise worldwide, countries must increase their share of the economic cake by building strong top-of-mind awareness to attract more business, capital and opportunities to their country.
The ordinary principles of company or business branding apply in equal measure to countries as they do to corporations. The methods are however different. Most Countries will compete daily with neighbors or block regions for tourism, inward investment and export sales. In SADC its clear other countries were benefiting from Zimbabwe’s economic meltdown as skilled labor fled into Zimbabwe’s neighbors. This is part of how a damaged brand can result in economic ruin .However as a trading block SADC may have suffered as other investors sought to avoid the SADC region due to Zimbabwe’s problems. This leads to the possibility of mutual benefits if Zimbabwe manages to rebrand and assist in attracting investors who will view the SADC region as investor friendly .There’s only so much business that can go around.
Most nations that start with an unknown or poor reputation will be limited or marginalized. They cannot easily boost their commercial success in terms of attracting serious investment, tourists, skilled labor and entrepreneurs. As Zimbabwe seeks to re-establish its status as an investor friendly destination there is need to structure an effective branding strategy which is consistently and effectively communicated by the country’s leadership .
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
A widely held and accepted view is that creating a branding program for a country demands an integration of policy and message that most countries find very hard to develop. Normally this is developed over a very long period of time .The branding strategy is underpinned by the ability to act and speak in a coordinated and repetitive way about themes that are the most motivating and differentiating a country can make. Normally this has to be done by the political leaders and other leading citizens including celebrities and business leaders who have some influence .Currently is very difficult to tell which brand is Zimbabwe trying to develop as there seems to be no clear and consistent theme coming from the Country’s leadership in a unified way .
Effective branding serves a purpose in the global marketplace through attracting capital, investments and skilled and networked labourforce. It is therefore critical for a nation to have a well defined brand and theme which is repeatedly communicated to the wider world until the country is well known and associated with some thing that differentiates it from its neighbors and the region .
Successfully out-branding competitors is a continuous battle for the hearts and minds of potential tourists, investors and skilled workers and entrepreneurs. The proposition any serious brand strategy makes must be very compelling, attractive and unique among competitive offers which are always available to the target market. The branding theme proposition must also be consistently reinforced throughout all phases of communication as part of a wider nation building effort .This is critical for an emerging market like Zimbabwe given the fierce competition currently being experienced within the emerging market arena .
Whether countries admit it or not ,they already have a brand, and outsiders and insiders are having a “brand experience” when they interact with the country or its leadership , whether it be with citizens and leaders or the exports from the country. This experience is part of the branding effort which is why leaders must always speak respectfully to other world leaders despite serious policy differences . In addition good products can do wonders in building the “country brand” . The famous Zhing-Zhong comes to mind when one thinks how some products from China are viewed in Zimbabwe. This can be contrasted to the impact on Japan’s reputation such brands as Lexus and Sony have had on Japan’s standing as a place where high quality products are expected .
Such trends are what force many governments to pay heavy subsidies to assist exporters since successful exports not only earn forex but they also enhance the country brand which will have long term benefits as goodwill will be generated and reputation enhanced .
In marketing theory and practice building on the inherent values of a brand should be the core of any branding strategy .Every Country creates a distinct identity in the minds of potential tourists, businesses travelers, traders, importers ,consumers and entrepreneurs. As the number of tourist arrivals and business travelers continues to rise worldwide, countries must increase their share of the economic cake by building strong top-of-mind awareness to attract more business, capital and opportunities to their country.
The ordinary principles of company or business branding apply in equal measure to countries as they do to corporations. The methods are however different. Most Countries will compete daily with neighbors or block regions for tourism, inward investment and export sales. In SADC its clear other countries were benefiting from Zimbabwe’s economic meltdown as skilled labor fled into Zimbabwe’s neighbors. This is part of how a damaged brand can result in economic ruin .However as a trading block SADC may have suffered as other investors sought to avoid the SADC region due to Zimbabwe’s problems. This leads to the possibility of mutual benefits if Zimbabwe manages to rebrand and assist in attracting investors who will view the SADC region as investor friendly .There’s only so much business that can go around.
Most nations that start with an unknown or poor reputation will be limited or marginalized. They cannot easily boost their commercial success in terms of attracting serious investment, tourists, skilled labor and entrepreneurs. As Zimbabwe seeks to re-establish its status as an investor friendly destination there is need to structure an effective branding strategy which is consistently and effectively communicated by the country’s leadership .
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
About time to define the Zimbabwean dream
As Zimbabwe undergoes the current transition it is important that the national destination be defined .The definition of what Zimbabweans seek can easily be defined as the Zimbabwean dream borrowing from the world famous American dream . The American dream has been shortened to cover a life where one has a decent house, car, secure job and a happy family . However the full Dream includes the opportunity for one's children to grow up and receive an education and its consequent career opportunities. It is also includes the opportunity to make individual choices without the restrictions of class, caste, religion, race, or ethnic group. Now may be the time to define the Zimbabwean dream .I writing this article a looked at my personal self development as part of defining the Zimbabwean dream.
The recent trends especially on Zimbabwe’s education system and prospects to get a decent job make defining this dream important. This is particularly important to the “born free” generation -those born after 1980 who may not have had an opportunity to experience a normal Zimbabwe in their adult life. For that reason I will look at how things were slightly over a decade ago when I completed my University Education and started my career as a Trainee Corporate Finance officer at the then National Merchant Bank of Zimbabwe ( Now NMB Bank Ltd).
This is important in as far as it can show how an independent Zimbabwe was actually able to offer hope and a decent career for almost any focused young person who worked hard and managed to acquire some University Education.
In the mid 1990s getting a University place was almost a sure ticket to a decent life and the right step into starting on the corporate ladder. Once one was admitted to the University it was cause of big celebration as it was well known in advance that you will secure a Job which would not only pay a decent salary but possibly that came with a Company car even for recent University Graduates.
I was not one of the lucky ones who got a Company car but was still very content because my job offer included a provision that I would qualify for a car loan almost immediately and a housing loan once I proved to be competent .This was the market trends and it was normal. This is what kept many youngsters focused on going to school and believe in education .I secured my first Job whilst waiting for my results that was in May by graduation time in October I was driving my own car and within 12 months had my first property thanks to a housing loan from my employer NMB Bank .
There are clear lessons in this in that I wasn’t alone or an isolated case in terms of getting a decent job, car and house all within one year of completing my first degree. This was the Zimbabwean dream. The dream was based on the simple premise that you go to school , pass and you secure a job which would allow you to access opportunities and live a normal and decent life. This was well within range for most Zimbabweans since the opportunities existed and a clear incentive was well defined. This is not so long ago its slightly a decade back.
The Zimbabwe of today seems devoid of such clear incentives for the youngsters to hold on to the dream and seriously pursue education as a sure way to escape poverty and despair. As Zimbabwe seeks to redefine and re-brand itself it is important that the Zimbabwean dream be re-defined is such simple and clear terms and make it within reach for any Zimbabwean who has the will within themselves to improve their life.
America has been viewed as a land in which a person’s prospects in life are limited by one's talents and energy rather than by one's family wealth or political connections. Whilst there maybe certain limitations in reality it is important for any serious nation to have such visions be defined as a guiding light for its citizens .Its clear America has been challenged in various areas in terms of fairness but it remains critical and important that being an American one knows what the American dream is and when its lacking people can easily see it and then fight to correct that. A developing nation like Zimbabwe equally deserves such a well defined dream which will act as a guiding light for school kids till they reach adulthood .
Whilst the politicians focus on power sharing there is need for them to remember helping shape a national vision as defined by the Zimbabwean dream. This does not need to be anything fancy but a simple list of “ must have” for every hard working Zimbabwean.
As part of defining the Zimbabwean dream meritocracy must the central theme. Under a meritocracy society is supposed to reward (by wealth , social status and recognition) those who show skill, talent and competence as demonstrated by past actions or by competition and will to succeed and work hard.
There is need for defining the Zimbabwean dream which allows someone coming from socially - low origins, against all odds, to breaks out of the inherited social position, climbs up the social ladder and creates a new identity for himself. The critical factors in this rise must be hard work and a solid moral foundation. This needs to be a well defined national dream embodied in a national vision which will act as a guiding light for the country’s young citizens as they seek to establish their own identity.
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
The recent trends especially on Zimbabwe’s education system and prospects to get a decent job make defining this dream important. This is particularly important to the “born free” generation -those born after 1980 who may not have had an opportunity to experience a normal Zimbabwe in their adult life. For that reason I will look at how things were slightly over a decade ago when I completed my University Education and started my career as a Trainee Corporate Finance officer at the then National Merchant Bank of Zimbabwe ( Now NMB Bank Ltd).
This is important in as far as it can show how an independent Zimbabwe was actually able to offer hope and a decent career for almost any focused young person who worked hard and managed to acquire some University Education.
In the mid 1990s getting a University place was almost a sure ticket to a decent life and the right step into starting on the corporate ladder. Once one was admitted to the University it was cause of big celebration as it was well known in advance that you will secure a Job which would not only pay a decent salary but possibly that came with a Company car even for recent University Graduates.
I was not one of the lucky ones who got a Company car but was still very content because my job offer included a provision that I would qualify for a car loan almost immediately and a housing loan once I proved to be competent .This was the market trends and it was normal. This is what kept many youngsters focused on going to school and believe in education .I secured my first Job whilst waiting for my results that was in May by graduation time in October I was driving my own car and within 12 months had my first property thanks to a housing loan from my employer NMB Bank .
There are clear lessons in this in that I wasn’t alone or an isolated case in terms of getting a decent job, car and house all within one year of completing my first degree. This was the Zimbabwean dream. The dream was based on the simple premise that you go to school , pass and you secure a job which would allow you to access opportunities and live a normal and decent life. This was well within range for most Zimbabweans since the opportunities existed and a clear incentive was well defined. This is not so long ago its slightly a decade back.
The Zimbabwe of today seems devoid of such clear incentives for the youngsters to hold on to the dream and seriously pursue education as a sure way to escape poverty and despair. As Zimbabwe seeks to redefine and re-brand itself it is important that the Zimbabwean dream be re-defined is such simple and clear terms and make it within reach for any Zimbabwean who has the will within themselves to improve their life.
America has been viewed as a land in which a person’s prospects in life are limited by one's talents and energy rather than by one's family wealth or political connections. Whilst there maybe certain limitations in reality it is important for any serious nation to have such visions be defined as a guiding light for its citizens .Its clear America has been challenged in various areas in terms of fairness but it remains critical and important that being an American one knows what the American dream is and when its lacking people can easily see it and then fight to correct that. A developing nation like Zimbabwe equally deserves such a well defined dream which will act as a guiding light for school kids till they reach adulthood .
Whilst the politicians focus on power sharing there is need for them to remember helping shape a national vision as defined by the Zimbabwean dream. This does not need to be anything fancy but a simple list of “ must have” for every hard working Zimbabwean.
As part of defining the Zimbabwean dream meritocracy must the central theme. Under a meritocracy society is supposed to reward (by wealth , social status and recognition) those who show skill, talent and competence as demonstrated by past actions or by competition and will to succeed and work hard.
There is need for defining the Zimbabwean dream which allows someone coming from socially - low origins, against all odds, to breaks out of the inherited social position, climbs up the social ladder and creates a new identity for himself. The critical factors in this rise must be hard work and a solid moral foundation. This needs to be a well defined national dream embodied in a national vision which will act as a guiding light for the country’s young citizens as they seek to establish their own identity.
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Wednesday, May 6, 2009
Re-introduction of Zimbabwe dollar will provide Economic stimulus
Normally when Zimbabwe or any other nation has a serious problem there has to be a scapegoat or a fall guy to take all the blame for the crisis. In Zimbabwe’s case the economic decline is some how being blamed on the Zimbabwe dollar. And for that reason the Zimbabwe dollar was scraped. This argument totally misses the point that the Zimbabwe dollar previously functioned perfectly up to about 2004 .The dollar collapsed when the RBZ changed course and was transformed into a whole sale mega commercial bank and re-branded “ a developmental institution”. What was needed was to remove the person or people who caused the currency and not to remove or suspend the currency. In short this is equivalent of abandoning your house because you have just discovered that its infested with bed bugs. You don’t abandon the house you have to find ways to remove the bugs .
There is need to clarify various aspects around money, inflation and economic growth .When governments produce money more rapidly than economic growth, the money supply overtakes economic value. Therefore, the excessive money supply eventually leads to depreciation of the market value of all money issued. This is called inflation. If the inflation rate approaches 50% per month that’s hyper inflation which is what Zimbabwe experienced. The cause of inflation is clearly excessive money supply and printing without a matched increased production .And to tame such inflation you stop printing more money what ever in circulation can be left in circulation with its value though low it will stabilize .If the economy and other factors improve then the currency will appreciate .
Zimbabwe can introduce a new currency any day. This doesn’t have to wait for any assumed formula .The assumption that there is no sufficient economic activity to hold the value is misplaced since Zimbabwe is not using the Gold Standard .The gold standard is a monetary system in which a country’s medium of exchange are currency coins and notes that are can readily be convertible into pre-set, fixed quantities of gold. The gold amount is actually available and locked in a vault or some safe place .The gold standard is not currently used by any government, having been replaced completely by fiat currency which refers to legal tender made effective currency by an Act of Government or some legal authority.
Zimbabwe’s inflation was not caused by having a local currency. Zimbabwe once had a local currency which had a steady value over a long period of time. Even though it remained a soft currency it was predictable and did not collapse . It was caused by excessive printing of the Zimbabwe dollar. So inflation could have been tamed by simply stopping the excessive currency printing. This would have partially stabilized the Zimbabwe dollar even though it would have remained weak due to a precarious balance of payment position .
The argument provided that the Zimbabwe dollar was worthless because it lacked something to back it up would only have been correct and accurate if Zimbabwe was sticking to the Gold standard . This practice, before World War I, had been to link it to the sum of bullion held by the treasury the so-called 'gold standard. It meant the Governments can only print enough money backed by actual /real gold reserves they held. But this was long abandoned by most countries including the USA which dumped the Gold standard around 1973 adopting the “FIAT MONEY”
Money is normally defined as anything that is generally accepted as payment for goods and services and repayment of debts. This is why Zimbabwe has been operating over the last 5 or so years with no proper currency or money. Instead there was the bearer cheques .The main uses of money are as a medium of exchange, a unit of account, and a store of value. The bearer cheques were not backed by any gold or any reserves whatsoever. But still for close to 5 years they allowed trade to take place.
The currency went into a free fall after it became clear that the Central Bank was now printing money and directly feeding the black market without any record or trace of how much money had been printed. Instances such as Flat Water Investments when Z$ 7.5 trillion was released to a shelf company without any proper record or legal agreement served to confirm that the Zimbabwe dollar was now a Mickey mouse currency not to be trusted.
The key here is a credible record of how much currency is being printed and is it being injected into the financial system through established international standards. If the Central Bank of any country including USA decide to clandestinely print money and hap-hazardly inject that money into the financial system then that currency will join the Zimbabwe dollar in the grave yard. Note the problem is not the currency. The problem is those who manage or rather mis manage it. Its more like having some salt in your vegetables. Its healthy to have some salt but too much of it is not good or healthy. So just because somebody has put too much salt in vegetables it doesn’t mean salt is bad or vegetables are bad. it’s the same thing with the Zimbabwe dollar. People meant to safe guard the Zimbabwe dollar abused the currency, this doesn’t make the currency bad or the trouble causer. Its clear who or what the problem is.
There is need to highlight that Zimbabwe like all nations was using Fiat Money .Fiat money is any money whose value is determined by legal means. The terms fiat currency and fiat money relate to types of currency or money whose usefulness results not from any intrinsic value or guarantee that it can be converted into gold or another currency, but instead from a government's order (fiat) that it must be accepted as a means of payment. Therefore this money has not direct link with economic value. It derives its value from legal power and enforceability at law as accepted method to settle debts.
Fiat money is created when a type of credit money typically notes from a central bank, such as the Federal Reserve System in the U.S.) is declared by a government act to be acceptable and officially-recognized payment for all debts, both public and private. The current unconfirmed reports claim Zimbabwe’s economy is functioning at 20% of it capacity. And Zimbabwe dollar will be re-introduced when the economy reaches around 60% of capacity .
It is clear that it will take a very long time to have the economy recover without injection of out side capital. Or some form of internal stimulus supported by external funding and an improvement in sentiment and currency management.
A look at the current Economic downturn will clarify the point why Zimbabwe needs the Zimbabwe dollar as a matter of urgency .There is a basic need to understand how part of an Economic Stimulus package works . In short the Government prints its own money. This money is not backed by gold or any real tangible reserve except that particular Government’s Taxing power as a way to make good of any debts created as part of the Stimulus package .Looking at the USA stimulus package will help .
The American Recovery and Reinvestment Act of 2009 is an economic stimulus package enacted by the United States Congress and signed into law by President Barrack Obama on February 17, 2009. The Act of Congress was based largely on proposals made by President Obama and is intended to provide a stimulus to the U.S. economy in the wake of the economic downturn. The measures are nominally worth $787 billion.
We cant say the same about the various Quasi Fiscal Activities which were the cover up to print excessive Zimbabwe dollars. No independent body Government or private can verify how much was printed and for that reason the old Zimbabwe dollar could not be valued because for u to value something u need to know the quantity that’s available otherwise no credible valuation can be done of that currency. So the GNU needs to introduce a new Zimbabwe Dollar which is backed by credible systems in terms of how much is printed and how its injected in the system. This will assist the GNU to have some breathing space whilst long term measures are being developed and implemented. This will slowly result in that currency stabilizing and appreciating as exports pick up.
What is clear from the USA Stimulus package is that its clear on several things . The amount is known, congress was involved, senate was involved, the President had to make a proposal and fight hard to have it approved .The Congressional Budget Office was involved. The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government. It is a government agency that provides economic data to Congress. The involvement of all these various entities serves to lend credibility to the whole process and the currency remains respectable as everyone knows how much was printed ,for what and how it will be injected in the financial system. A country that does not have its own currency can not effect such a stimulus package. And for this reason the recovery of the Zimbabwean economy is in fact not in the hands of Zimbabweans directly.
A practical example can illustrate the effect that a re-introduced Zimbabwe Dollar will have on Government functions .Assuming the GNU re-introduces a new Zimbabwe dollar and prints sufficient quantity to pay all civil servants for a period of 6 months ( salaries paid monthly of course).These employees have some basic but critical needs that can be paid for using the re-introduced Zimbabwe dollar. Examples include payments for school fees at Government Schools,ZESA bills,ZINWA bills, City council rate bills and any other Government service including payment of income and corporate tax .This should ideally have been introduced when the GNU was sworn in. Because everyone was euphoric and hopeful the currency would have been easily accepted as people believed the GNU had potential and capacity to deliver service plus attract additional funds. Even though its late the same measure can still be taken with a bit of raising public awareness that the currency is no longer under the management of the previous individuals who molested the national currency in the name of sanctions busting .
The introduction of such a stimulus package in form of currency re-introduction to pay civil servants is good policy in as far as allows the GNU to deliver service plus pay for actual work done whilst other resources are being sought. Right now it appears the game plan is limited to begging the international community. Whilst this is necessary it is critical that more dynamic options be placed on the table and be explored .
The re-introduced Zimbabwe dollar to pay civil servants would then need to be properly packaged as a Stimulus package. Because it is. In the recovery of the Economy Zimbabwe Government will have to contribute something beyond the normal sloganeering. That contribution can be in the form of the Civil Service salaries package as outlined above or a modified version thereof. It definitely doesn’t help to keep going around begging without a plan to be doing something on the ground to show that Zimbabweans themselves are determined to succeed. Whilst people have a good reason to be skeptical about a local currency there is need to be able to separate the fact that the currency was sacrificed for political correctness leaving the people at the Reserve Bank who systematically destroyed the currency .These are the people who should have been suspended not the Zimbabwe dollar.
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
There is need to clarify various aspects around money, inflation and economic growth .When governments produce money more rapidly than economic growth, the money supply overtakes economic value. Therefore, the excessive money supply eventually leads to depreciation of the market value of all money issued. This is called inflation. If the inflation rate approaches 50% per month that’s hyper inflation which is what Zimbabwe experienced. The cause of inflation is clearly excessive money supply and printing without a matched increased production .And to tame such inflation you stop printing more money what ever in circulation can be left in circulation with its value though low it will stabilize .If the economy and other factors improve then the currency will appreciate .
Zimbabwe can introduce a new currency any day. This doesn’t have to wait for any assumed formula .The assumption that there is no sufficient economic activity to hold the value is misplaced since Zimbabwe is not using the Gold Standard .The gold standard is a monetary system in which a country’s medium of exchange are currency coins and notes that are can readily be convertible into pre-set, fixed quantities of gold. The gold amount is actually available and locked in a vault or some safe place .The gold standard is not currently used by any government, having been replaced completely by fiat currency which refers to legal tender made effective currency by an Act of Government or some legal authority.
Zimbabwe’s inflation was not caused by having a local currency. Zimbabwe once had a local currency which had a steady value over a long period of time. Even though it remained a soft currency it was predictable and did not collapse . It was caused by excessive printing of the Zimbabwe dollar. So inflation could have been tamed by simply stopping the excessive currency printing. This would have partially stabilized the Zimbabwe dollar even though it would have remained weak due to a precarious balance of payment position .
The argument provided that the Zimbabwe dollar was worthless because it lacked something to back it up would only have been correct and accurate if Zimbabwe was sticking to the Gold standard . This practice, before World War I, had been to link it to the sum of bullion held by the treasury the so-called 'gold standard. It meant the Governments can only print enough money backed by actual /real gold reserves they held. But this was long abandoned by most countries including the USA which dumped the Gold standard around 1973 adopting the “FIAT MONEY”
Money is normally defined as anything that is generally accepted as payment for goods and services and repayment of debts. This is why Zimbabwe has been operating over the last 5 or so years with no proper currency or money. Instead there was the bearer cheques .The main uses of money are as a medium of exchange, a unit of account, and a store of value. The bearer cheques were not backed by any gold or any reserves whatsoever. But still for close to 5 years they allowed trade to take place.
The currency went into a free fall after it became clear that the Central Bank was now printing money and directly feeding the black market without any record or trace of how much money had been printed. Instances such as Flat Water Investments when Z$ 7.5 trillion was released to a shelf company without any proper record or legal agreement served to confirm that the Zimbabwe dollar was now a Mickey mouse currency not to be trusted.
The key here is a credible record of how much currency is being printed and is it being injected into the financial system through established international standards. If the Central Bank of any country including USA decide to clandestinely print money and hap-hazardly inject that money into the financial system then that currency will join the Zimbabwe dollar in the grave yard. Note the problem is not the currency. The problem is those who manage or rather mis manage it. Its more like having some salt in your vegetables. Its healthy to have some salt but too much of it is not good or healthy. So just because somebody has put too much salt in vegetables it doesn’t mean salt is bad or vegetables are bad. it’s the same thing with the Zimbabwe dollar. People meant to safe guard the Zimbabwe dollar abused the currency, this doesn’t make the currency bad or the trouble causer. Its clear who or what the problem is.
There is need to highlight that Zimbabwe like all nations was using Fiat Money .Fiat money is any money whose value is determined by legal means. The terms fiat currency and fiat money relate to types of currency or money whose usefulness results not from any intrinsic value or guarantee that it can be converted into gold or another currency, but instead from a government's order (fiat) that it must be accepted as a means of payment. Therefore this money has not direct link with economic value. It derives its value from legal power and enforceability at law as accepted method to settle debts.
Fiat money is created when a type of credit money typically notes from a central bank, such as the Federal Reserve System in the U.S.) is declared by a government act to be acceptable and officially-recognized payment for all debts, both public and private. The current unconfirmed reports claim Zimbabwe’s economy is functioning at 20% of it capacity. And Zimbabwe dollar will be re-introduced when the economy reaches around 60% of capacity .
It is clear that it will take a very long time to have the economy recover without injection of out side capital. Or some form of internal stimulus supported by external funding and an improvement in sentiment and currency management.
A look at the current Economic downturn will clarify the point why Zimbabwe needs the Zimbabwe dollar as a matter of urgency .There is a basic need to understand how part of an Economic Stimulus package works . In short the Government prints its own money. This money is not backed by gold or any real tangible reserve except that particular Government’s Taxing power as a way to make good of any debts created as part of the Stimulus package .Looking at the USA stimulus package will help .
The American Recovery and Reinvestment Act of 2009 is an economic stimulus package enacted by the United States Congress and signed into law by President Barrack Obama on February 17, 2009. The Act of Congress was based largely on proposals made by President Obama and is intended to provide a stimulus to the U.S. economy in the wake of the economic downturn. The measures are nominally worth $787 billion.
We cant say the same about the various Quasi Fiscal Activities which were the cover up to print excessive Zimbabwe dollars. No independent body Government or private can verify how much was printed and for that reason the old Zimbabwe dollar could not be valued because for u to value something u need to know the quantity that’s available otherwise no credible valuation can be done of that currency. So the GNU needs to introduce a new Zimbabwe Dollar which is backed by credible systems in terms of how much is printed and how its injected in the system. This will assist the GNU to have some breathing space whilst long term measures are being developed and implemented. This will slowly result in that currency stabilizing and appreciating as exports pick up.
What is clear from the USA Stimulus package is that its clear on several things . The amount is known, congress was involved, senate was involved, the President had to make a proposal and fight hard to have it approved .The Congressional Budget Office was involved. The Congressional Budget Office (CBO) is a federal agency within the legislative branch of the United States government. It is a government agency that provides economic data to Congress. The involvement of all these various entities serves to lend credibility to the whole process and the currency remains respectable as everyone knows how much was printed ,for what and how it will be injected in the financial system. A country that does not have its own currency can not effect such a stimulus package. And for this reason the recovery of the Zimbabwean economy is in fact not in the hands of Zimbabweans directly.
A practical example can illustrate the effect that a re-introduced Zimbabwe Dollar will have on Government functions .Assuming the GNU re-introduces a new Zimbabwe dollar and prints sufficient quantity to pay all civil servants for a period of 6 months ( salaries paid monthly of course).These employees have some basic but critical needs that can be paid for using the re-introduced Zimbabwe dollar. Examples include payments for school fees at Government Schools,ZESA bills,ZINWA bills, City council rate bills and any other Government service including payment of income and corporate tax .This should ideally have been introduced when the GNU was sworn in. Because everyone was euphoric and hopeful the currency would have been easily accepted as people believed the GNU had potential and capacity to deliver service plus attract additional funds. Even though its late the same measure can still be taken with a bit of raising public awareness that the currency is no longer under the management of the previous individuals who molested the national currency in the name of sanctions busting .
The introduction of such a stimulus package in form of currency re-introduction to pay civil servants is good policy in as far as allows the GNU to deliver service plus pay for actual work done whilst other resources are being sought. Right now it appears the game plan is limited to begging the international community. Whilst this is necessary it is critical that more dynamic options be placed on the table and be explored .
The re-introduced Zimbabwe dollar to pay civil servants would then need to be properly packaged as a Stimulus package. Because it is. In the recovery of the Economy Zimbabwe Government will have to contribute something beyond the normal sloganeering. That contribution can be in the form of the Civil Service salaries package as outlined above or a modified version thereof. It definitely doesn’t help to keep going around begging without a plan to be doing something on the ground to show that Zimbabweans themselves are determined to succeed. Whilst people have a good reason to be skeptical about a local currency there is need to be able to separate the fact that the currency was sacrificed for political correctness leaving the people at the Reserve Bank who systematically destroyed the currency .These are the people who should have been suspended not the Zimbabwe dollar.
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Tuesday, May 5, 2009
GNU must re-introduce Zimbabwe dollar to survive
Since the publication of the first article entitled “ Zimbabwe dollar suspension unhelpful” I have received interesting and amusing comments about the subject . The purpose of the article was not to criticize any body or support any particular group. The idea is to freely share ideas and thoughts on how the Zimbabwe Economy can recover under very difficult credit and financial market conditions. The much anticipated aid or financial assistance from either SADC or the Western nations is unlikely to come. If it comes it will be highly unlikely that Zimbabwe will get adequate amounts . Therefore it is imperative for Zimbabwe to be pro-active and not over expect others to bank roll the recovery programme.
It is clear some wings had to be clipped with regards to the Quasi Fiscal Activities and currency management. Especially on those who had privatized currency printing and converted it into a hobby meant to fill up their petty cash boxes at the expense of the national currency .The source of Zimbabwe’s inflation has been certified as the excessive printing of the Zimbabwe dollar. That lesson has been learnt and systems and measures should have been developed to protect the national currency from such sabotage and irresponsible behavior by those entrusted to safe guard the national currency .
If the intention of the GNU was to serve the people, then it will be very hard to serve the people without the use of a local currency to assist in facilitating trade and normal functions of a Government .
At this stage its advisable for the GNU to do a quick policy shift and re-introduce the Zimbabwe dollar at least enough to pay for some of the basic government needs. This currency will then circulate alongside the other major currencies .There are various critical services which directly do not require the use of foreign currency .The GNU quickly needs to come up with some funds or else it will soon fail to deliver and all participants will have to share some blame of failure and non-deliverance .
The removal of the local currency means Zimbabwe has no monetary policy of its own .This in turn impacts the GNU’s ability to fund its operations .One of the key requirements of the Public Finance system is the ability of the Government to borrow and raise funds including by reasonably printing its own money. The key here is to ensure that printing currency is not converted into a private self enrichment venture. If the GNU is a Government in any form or sense of the word then it should surely have capacity to monitor and restrain wild currency printing. Failure to do that clearly points to a view that Zimbabwe does not currently have a properly constituted Government .
The suspension of the Zimbabwe dollar was Politically correct but economically hard to justify in a situation where the Government finds itself starved of lines of credit and any balance of payment support . It was politically correct sending a clear signal that Zimbabwe had a new Sheriff and things would be done differently. And this message has been heard , now the second phase is the Sheriff would need some tools to deliver real change. One of those tools required is the Zimbabwe dollar.
There was a run on the Zimbabwe dollar very similar to a run that can affect a bank in terms of people losing confidence in a bank or banking system. This loss of confidence didn’t happen overnite.It was a long drawn out process over a relatively long period .This is the path which the re-building of the confidence in the currency will take or should take. There cant be a sudden return of confidence in the Zimbabwe dollar but that journey has to start somewhere.
At the agreement of the implementation of the Government of National Unity signified by the swearing in of the GNU cabinet and the Prime Minister that’s when a new Zimbabwe dollar should have been immediately introduced under the new “ sheriff” .Obviously that currency would have still remained weak and under pressure due to lack of exports and balance of payment support .How ever the same new currency would have been more stable than the previous one if the new team refrained from excessive currency printing unmatched by any productivity.
After the swearing in of the new Government it appears there was a huge mis-calculation that the International Community will pour in huge amounts of Money and the new Government would slowly find its feet whilst being on life support from the international community.
This miscalculation would still have resulted in limited benefits in the lack of a local currency. A simple analysis of currency valuations, appreciation and depreciation shows that it would have been a better option to have a very weak currency (as opposed to suspended) in circulation ahead of any injection of international community funds. An injection would have somehow helped to stabilize and possibly prop up the weak currency. But the total lack of that currency due to the currency suspension means
A currency measures confidence in the Economy and in government policies. The lack of a local currency eliminates that vital measurement tool which is required as a form of remote assessment of how the GNU is performing.
It is unfortunate that any idea that doesn’t seem to support some GNU policies is somehow dimly viewed. Zimbabwe is in its current form due to certain know it all individuals who refused to listen to divergent views. This was all done in the name of the people ,patriotism and sanctions busting. As Zimbabwe seeks to rebuild and re-brand there is need for a proper inclusive approach and increased tolerance on divergent views when it comes to policy formulation. As things currently stands the GNU needs to urgently re-introduce the Zimbabwe dollar and retain some semblance of being seen to try and deliver service to the Zimbabwean people.
Gilbert Muponda is an Entrepreneur based in Canada. He is CEO and Co-Founder of 3MG MEDIA Limited. He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
It is clear some wings had to be clipped with regards to the Quasi Fiscal Activities and currency management. Especially on those who had privatized currency printing and converted it into a hobby meant to fill up their petty cash boxes at the expense of the national currency .The source of Zimbabwe’s inflation has been certified as the excessive printing of the Zimbabwe dollar. That lesson has been learnt and systems and measures should have been developed to protect the national currency from such sabotage and irresponsible behavior by those entrusted to safe guard the national currency .
If the intention of the GNU was to serve the people, then it will be very hard to serve the people without the use of a local currency to assist in facilitating trade and normal functions of a Government .
At this stage its advisable for the GNU to do a quick policy shift and re-introduce the Zimbabwe dollar at least enough to pay for some of the basic government needs. This currency will then circulate alongside the other major currencies .There are various critical services which directly do not require the use of foreign currency .The GNU quickly needs to come up with some funds or else it will soon fail to deliver and all participants will have to share some blame of failure and non-deliverance .
The removal of the local currency means Zimbabwe has no monetary policy of its own .This in turn impacts the GNU’s ability to fund its operations .One of the key requirements of the Public Finance system is the ability of the Government to borrow and raise funds including by reasonably printing its own money. The key here is to ensure that printing currency is not converted into a private self enrichment venture. If the GNU is a Government in any form or sense of the word then it should surely have capacity to monitor and restrain wild currency printing. Failure to do that clearly points to a view that Zimbabwe does not currently have a properly constituted Government .
The suspension of the Zimbabwe dollar was Politically correct but economically hard to justify in a situation where the Government finds itself starved of lines of credit and any balance of payment support . It was politically correct sending a clear signal that Zimbabwe had a new Sheriff and things would be done differently. And this message has been heard , now the second phase is the Sheriff would need some tools to deliver real change. One of those tools required is the Zimbabwe dollar.
There was a run on the Zimbabwe dollar very similar to a run that can affect a bank in terms of people losing confidence in a bank or banking system. This loss of confidence didn’t happen overnite.It was a long drawn out process over a relatively long period .This is the path which the re-building of the confidence in the currency will take or should take. There cant be a sudden return of confidence in the Zimbabwe dollar but that journey has to start somewhere.
At the agreement of the implementation of the Government of National Unity signified by the swearing in of the GNU cabinet and the Prime Minister that’s when a new Zimbabwe dollar should have been immediately introduced under the new “ sheriff” .Obviously that currency would have still remained weak and under pressure due to lack of exports and balance of payment support .How ever the same new currency would have been more stable than the previous one if the new team refrained from excessive currency printing unmatched by any productivity.
After the swearing in of the new Government it appears there was a huge mis-calculation that the International Community will pour in huge amounts of Money and the new Government would slowly find its feet whilst being on life support from the international community.
This miscalculation would still have resulted in limited benefits in the lack of a local currency. A simple analysis of currency valuations, appreciation and depreciation shows that it would have been a better option to have a very weak currency (as opposed to suspended) in circulation ahead of any injection of international community funds. An injection would have somehow helped to stabilize and possibly prop up the weak currency. But the total lack of that currency due to the currency suspension means
A currency measures confidence in the Economy and in government policies. The lack of a local currency eliminates that vital measurement tool which is required as a form of remote assessment of how the GNU is performing.
It is unfortunate that any idea that doesn’t seem to support some GNU policies is somehow dimly viewed. Zimbabwe is in its current form due to certain know it all individuals who refused to listen to divergent views. This was all done in the name of the people ,patriotism and sanctions busting. As Zimbabwe seeks to rebuild and re-brand there is need for a proper inclusive approach and increased tolerance on divergent views when it comes to policy formulation. As things currently stands the GNU needs to urgently re-introduce the Zimbabwe dollar and retain some semblance of being seen to try and deliver service to the Zimbabwean people.
Gilbert Muponda is an Entrepreneur based in Canada. He is CEO and Co-Founder of 3MG MEDIA Limited. He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Monday, May 4, 2009
Suspension of the Zimbabwe dollar unhelpful
Zimbabwe recently announced the official suspension of the Zimbabwe dollar for at least one year .The reason cited was that the currency was worthless and there was nothing to back up it value. In the same announcement there were indications that the currency may be re-introduced once the economy reaches about 60% of its capacity. However a full analysis of what led to the Zimbabwe dollar collapse and how the economy can recover shows that suspending the Zimbabwe dollar was in fact not the right thing to do. The Zimbabwe dollar should have been left in circulation alongside other major currencies . In terms of Economic recovery the currency suspension make sit harder for the economy to recover but politically it may have served another purpose for the various- in fighting parties in the inclusive Government. Therefore the currency suspension move was more of a political tactic meant to starve off funding to one section of the government instead of aiding the economic recovery process .
Zimbabwe’s inflation was not caused by having a local currency. It was caused by excessive printing of the Zimbabwe dollar. So inflation could have been tamed by simply stopping the excessive currency printing. This would have partially stabilized the Zimbabwe dollar even though it would have remained weak due to a precarious balance of payment position .
The argument provided that the Zimbabwe dollar was worthless because it lacked something to back it up would only have been correct and accurate if Zimbabwe was sticking to the Gold standard . This practice, before World War I, had been to link it to the sum of bullion held by the treasury (the so-called 'gold standard'). It meant the Governments can only print enough money backed by actual /real gold reserves they held. But this was long abandoned by most countries including the USA which dumped the Gold standard around 1973 adopting the “FIAT MONEY” .
Fiat money is paper or otherwise money declared by a government to be legal tender making it an acceptable medium to settle debts. The name comes from the Latin language fiat, meaning "let it be done". Fiat or paper currency achieves value because a government accepts it in payment of taxes and says it can be used within the country as a "tender" (offering) to pay all debts . For this basic reason the circulation of the Zimbabwe dollar would have allowed the smooth functioning of the Government whilst the economy stabilizes .
The valuation of any currency has numerous variables which impact of the currency’s value and exchange rate .The value of a currency is affected by exports, imports, foreign currency reserves, balance of payment position ,economic activity and many other factors .The market value of asset such as money is largely a reflection of supply and demand for that asset. And thus, when looking at assessing the value of a currency, we should try to gauge the supply of and demand for that particular currency. This directly answers Zimbabwe’s decline and its possible route out of the decline.
The money must not be printed and injected into the financial system haz-hazardly. If a certain quantity is printed and circulated without further unreasonable additional printing then that currency can be used as a medium to transact and allow the Government to function normally. The currency will most likely remain weak but will not collapse like the previous currency if excessive printing is avoided. Once this is done other measures such as attracting foreign direct investments, privatizations and public sector investment programmes can be used to help bring additional stability to the currency. Over time confidence and economic productivity will pick up providing the necessary support which will result in currency appreciation .
As it is the government is failing to pay most civil servants which is kind of a self made problem partly from the suspension of the Zimbabwe dollar . Zimbabwe government workers can be paid in Zimbabwe dollars which they can use to pay for services from other Zimbabwe Government owned entities such as ZESA, NRZ ,TEL-ONE and others. This way slowly the Government can function providing a stimulus for economic activity .
The is need to simplify money supply concept to clarify the points above, it is crucial to note that under current monetary policy, money is created out of debt. This happens in two ways:
Firstly money is created when governments need to borrow, and central banks then print money and sell treasury bills and at times long term bonds. The key here is to make sure the central bank is accountable for the money printed through parliament and Treasury. Ensure currency integrity by making sure there isn’t clandestine currency printing .
Secondly through the fractional reserve system the money supply is then expanded again when banks loan money; banks are allowed to loan out amounts beyond what they actually hold in deposits and shareholder equity ( this is controlled through statutory reserves - lower statutory reserves means the banks can create more money) the money they have in deposits, and thus expand the money supply when they loan.
In recent weeks the prices in Zimbabwe have stabilized ,with some reports that prices are going down in certain products and commodities. The price stabilization coincided with official dollarization which was followed by the suspension of the Zimbabwe dollar. Hyperinflation in 2007 and 2008 made Zimbabwe's currency virtually worthless despite the introduction of bigger and bigger notes, including a 10 trillion dollar bill which is possibly a world record.
Prices have stabilized or fallen since the government legalized the use of other currencies including the U.S. dollar in January. Supplies have improved for basics this is mainly due to the fact that all businesses are now allowed to use any major currency. However the removal of the Zimbabwe dollar does not serve any particular purpose .Instead it makes the Government lose a vital tool and resource to deliver service and help kick start economic activity.
Whilst some rough guidelines have been set on when the currency suspension can be lifted its clear that the Government has tied its own hands and curtailed its capacity to restore critical services .Therefore the currency suspension must be lifted sooner rather than later and allow the Government to properly function and deliver service to the people of Zimbabwe. Obviously there is need to put adequate controls and restrictions to ensure that the people who were responsible for excessive currency printing may not get a second chance to ruin the currency again.
Gilbert Muponda is an Entrepreneur based in Canada. He is CEO and Co-Founder of 3MG MEDIA Limited. He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Zimbabwe’s inflation was not caused by having a local currency. It was caused by excessive printing of the Zimbabwe dollar. So inflation could have been tamed by simply stopping the excessive currency printing. This would have partially stabilized the Zimbabwe dollar even though it would have remained weak due to a precarious balance of payment position .
The argument provided that the Zimbabwe dollar was worthless because it lacked something to back it up would only have been correct and accurate if Zimbabwe was sticking to the Gold standard . This practice, before World War I, had been to link it to the sum of bullion held by the treasury (the so-called 'gold standard'). It meant the Governments can only print enough money backed by actual /real gold reserves they held. But this was long abandoned by most countries including the USA which dumped the Gold standard around 1973 adopting the “FIAT MONEY” .
Fiat money is paper or otherwise money declared by a government to be legal tender making it an acceptable medium to settle debts. The name comes from the Latin language fiat, meaning "let it be done". Fiat or paper currency achieves value because a government accepts it in payment of taxes and says it can be used within the country as a "tender" (offering) to pay all debts . For this basic reason the circulation of the Zimbabwe dollar would have allowed the smooth functioning of the Government whilst the economy stabilizes .
The valuation of any currency has numerous variables which impact of the currency’s value and exchange rate .The value of a currency is affected by exports, imports, foreign currency reserves, balance of payment position ,economic activity and many other factors .The market value of asset such as money is largely a reflection of supply and demand for that asset. And thus, when looking at assessing the value of a currency, we should try to gauge the supply of and demand for that particular currency. This directly answers Zimbabwe’s decline and its possible route out of the decline.
The money must not be printed and injected into the financial system haz-hazardly. If a certain quantity is printed and circulated without further unreasonable additional printing then that currency can be used as a medium to transact and allow the Government to function normally. The currency will most likely remain weak but will not collapse like the previous currency if excessive printing is avoided. Once this is done other measures such as attracting foreign direct investments, privatizations and public sector investment programmes can be used to help bring additional stability to the currency. Over time confidence and economic productivity will pick up providing the necessary support which will result in currency appreciation .
As it is the government is failing to pay most civil servants which is kind of a self made problem partly from the suspension of the Zimbabwe dollar . Zimbabwe government workers can be paid in Zimbabwe dollars which they can use to pay for services from other Zimbabwe Government owned entities such as ZESA, NRZ ,TEL-ONE and others. This way slowly the Government can function providing a stimulus for economic activity .
The is need to simplify money supply concept to clarify the points above, it is crucial to note that under current monetary policy, money is created out of debt. This happens in two ways:
Firstly money is created when governments need to borrow, and central banks then print money and sell treasury bills and at times long term bonds. The key here is to make sure the central bank is accountable for the money printed through parliament and Treasury. Ensure currency integrity by making sure there isn’t clandestine currency printing .
Secondly through the fractional reserve system the money supply is then expanded again when banks loan money; banks are allowed to loan out amounts beyond what they actually hold in deposits and shareholder equity ( this is controlled through statutory reserves - lower statutory reserves means the banks can create more money) the money they have in deposits, and thus expand the money supply when they loan.
In recent weeks the prices in Zimbabwe have stabilized ,with some reports that prices are going down in certain products and commodities. The price stabilization coincided with official dollarization which was followed by the suspension of the Zimbabwe dollar. Hyperinflation in 2007 and 2008 made Zimbabwe's currency virtually worthless despite the introduction of bigger and bigger notes, including a 10 trillion dollar bill which is possibly a world record.
Prices have stabilized or fallen since the government legalized the use of other currencies including the U.S. dollar in January. Supplies have improved for basics this is mainly due to the fact that all businesses are now allowed to use any major currency. However the removal of the Zimbabwe dollar does not serve any particular purpose .Instead it makes the Government lose a vital tool and resource to deliver service and help kick start economic activity.
Whilst some rough guidelines have been set on when the currency suspension can be lifted its clear that the Government has tied its own hands and curtailed its capacity to restore critical services .Therefore the currency suspension must be lifted sooner rather than later and allow the Government to properly function and deliver service to the people of Zimbabwe. Obviously there is need to put adequate controls and restrictions to ensure that the people who were responsible for excessive currency printing may not get a second chance to ruin the currency again.
Gilbert Muponda is an Entrepreneur based in Canada. He is CEO and Co-Founder of 3MG MEDIA Limited. He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Saturday, May 2, 2009
Zimbabwe economic recovery requires a blueprint
Zimbabwe's economy has consistently shrunk since 2000, in an atmosphere of political turmoil, sanctions, capital flight ,corruption, mismanagement and brain drain. Various reasons have been given for the decline from sanctions to corruption . Zimbabwe currently has the lowest GDP real growth rate in an independent country and 3rd in total (behind Palestinian territories.)This is not an acceptable position for a promising nation such as Zimbabwe with all its natural resources and hard working people. Zimbabwe deserves more and can be more and can deliver more to its citizens .
Zimbabwe’s economic potential can not be reached by accident or by chance. There is need to properly identify key areas of the Economy which can be used to anchor the economic recovery effort . A hap hazard approach just calling for resumption of aid and other international forms of assistance is not sound policy in the absence of a clear national vision centered on key sectors of the economy.
The economy of Zimbabwe has been collapsing under the weight of economic mismanagement, resulting in 94% unemployment and spiraling hyperinflation. Zimbabwe’s economy poorly transitioned in recent years, deteriorating from one of Africa's strongest economies to the world's worst over a relatively short period. In light of that its important that all key players re-focus themselves in seeking to turn around the nations fortunes.
Zimbabwe Government spending is currently estimated to be close to 60% of GDP. This ratio is to high by any standard. Given that the GDP is still declining this means the ratio is deteriorating further if no urgent steps are taken .
Between 2000 and December 2007, the national economy contracted by as much as an estimated 45%; inflation vaulted to into millions, and there were persistent shortages of foreign exchange, local currency, fuel, medicine, and food. GDP per capita dropped by 40%, agricultural output dropped by 51% and industrial production dropped by 47%. All these statistics have a story to tell about where the country was headed and could still worsen if nothing comprehensive is done .There is a clear need to come up with a National Economic Vision which seeks to restore Zimbabwe as a leading economy in Southern Africa and Africa
As of February 2004 Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the International Monetary Fund (IMF). Early on Zimbabwe’s government promoted socialism or related policies, partially relying on international aid. Since this aid is no longer available there is need to find alternative sources of funding and investment. An opportunity exists for Zimbabwe to re-draw its economic model and rely on local and foreign based Zimbabweans to access and attract resources into the Economy .
Africa is the world's poorest inhabited continent despite holding some of the worlds largest mineral resource deposits. A key cause of this is lack of political will and absence of cohesive economic blue prints which consistently guide the nations. Most African nations including Zimbabwe have been adopting ad-hoc and haphazard policies to suit the day and the moment without proper institutional systems being developed to support and sustain such policies.
Important National Institutions such as National Investment Trust, Zimbabwe Investment Authority, Zimbabwe Stock Exchange, Zimtrade and others continue to take a back seat in the current economic revival effort .This clearly shows the lack of National Vision on the Economy. Whilst everyone is calling for the Economy to recover there is no-one laying out a blue print or road map to co-ordinate these various Government bodies to take ownership of the Economic recovery
much of Africa has stagnated and even regressed in terms of foreign trade, investment, per capita income, and other economic growth measures.
Many international investors including sovereign wealth funds are gaining increasing interest in emerging modernizing African economies, especially as Africa continues to maintain high economic growth despite current global economic recession. This presents a unique opportunity for Zimbabwe given its infrastructure and educated labor force
Gilbert Muponda is an Entrepreneur based in Canada. He is CEO and Founder of GMRI CAPITAL . He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Zimbabwe’s economic potential can not be reached by accident or by chance. There is need to properly identify key areas of the Economy which can be used to anchor the economic recovery effort . A hap hazard approach just calling for resumption of aid and other international forms of assistance is not sound policy in the absence of a clear national vision centered on key sectors of the economy.
The economy of Zimbabwe has been collapsing under the weight of economic mismanagement, resulting in 94% unemployment and spiraling hyperinflation. Zimbabwe’s economy poorly transitioned in recent years, deteriorating from one of Africa's strongest economies to the world's worst over a relatively short period. In light of that its important that all key players re-focus themselves in seeking to turn around the nations fortunes.
Zimbabwe Government spending is currently estimated to be close to 60% of GDP. This ratio is to high by any standard. Given that the GDP is still declining this means the ratio is deteriorating further if no urgent steps are taken .
Between 2000 and December 2007, the national economy contracted by as much as an estimated 45%; inflation vaulted to into millions, and there were persistent shortages of foreign exchange, local currency, fuel, medicine, and food. GDP per capita dropped by 40%, agricultural output dropped by 51% and industrial production dropped by 47%. All these statistics have a story to tell about where the country was headed and could still worsen if nothing comprehensive is done .There is a clear need to come up with a National Economic Vision which seeks to restore Zimbabwe as a leading economy in Southern Africa and Africa
As of February 2004 Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the International Monetary Fund (IMF). Early on Zimbabwe’s government promoted socialism or related policies, partially relying on international aid. Since this aid is no longer available there is need to find alternative sources of funding and investment. An opportunity exists for Zimbabwe to re-draw its economic model and rely on local and foreign based Zimbabweans to access and attract resources into the Economy .
Africa is the world's poorest inhabited continent despite holding some of the worlds largest mineral resource deposits. A key cause of this is lack of political will and absence of cohesive economic blue prints which consistently guide the nations. Most African nations including Zimbabwe have been adopting ad-hoc and haphazard policies to suit the day and the moment without proper institutional systems being developed to support and sustain such policies.
Important National Institutions such as National Investment Trust, Zimbabwe Investment Authority, Zimbabwe Stock Exchange, Zimtrade and others continue to take a back seat in the current economic revival effort .This clearly shows the lack of National Vision on the Economy. Whilst everyone is calling for the Economy to recover there is no-one laying out a blue print or road map to co-ordinate these various Government bodies to take ownership of the Economic recovery
much of Africa has stagnated and even regressed in terms of foreign trade, investment, per capita income, and other economic growth measures.
Many international investors including sovereign wealth funds are gaining increasing interest in emerging modernizing African economies, especially as Africa continues to maintain high economic growth despite current global economic recession. This presents a unique opportunity for Zimbabwe given its infrastructure and educated labor force
Gilbert Muponda is an Entrepreneur based in Canada. He is CEO and Founder of GMRI CAPITAL . He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Friday, May 1, 2009
Zimbabwe must embrace indigenization for Economic recovery
It seems the International community is unlikely to loosen the purse strings anytime soon .This presents an opportunity for some of the Government’s much vaunted programmes to be tested. One such area is the indigenization programme which should now be put to true test with the Government harnessing skill, expertise and resources of Zimbabweans across the world in its quest to revive Zimbabwe‘s economy. The indigenization agenda as of now appears to have taken the back seat when it should be part of the key drivers of the economic revival effort. This just serves to confirm that previous calls for indigenization were merely opportunistic and meant to re-enforce a patronage system.
Instead of the politicians globe trotting on their own seeking donations ,aid and other freebies it would be advisable to include local business leaders to lead some of those foreign trips seeking potential business partners as part of the general economic recovery vision. The on and off calling for indigenization ahead of elections is unwise as it damages what could other wise be a very effective way to mobilize foreign direct investments. As an example a local entrepreneur holding platinum mining rights has a higher chance of success in attracting additional Foreign direct investment than just sending a politician to try to convince other politicians to send their tax payers funds to revive Zimbabwe’s Economy.
The truth of the matter is Zimbabwe and her problems do not rank highly during this Global economic recession . As a direct result not much money should be expected from any source in form of donations , aid or other normal third world freebies. The only way to attract meaningful capital into Zimbabwe is making the country attractive as an investment destination. In the process indigenous business people must play a meaningful role in attracting this investment and attracting suitable investment partners. This means the Government must make deliberate effort to include local entrepreneurs from the initial stages rather than to appear to short change foreign investors when they are already in the country by changing rules of the game mid-way during the game.
The Indigenization and Economic Empowerment Act came into law in Zimbabwe in March 2008 under much fanfare and protest form other quarters. In essence The Act, seeks to create an enabling environment to improve the indigenous population’s participation in economic activities of the country and allow economic prosperity to be shared more equitably. The passage of the law is just but one step in a long process. There is need to educate the country’s citizenry about the benefits of such a process in manner that will generate credibility for the process. Previous efforts have been tainted and clouded by corruption and nepotism due to the lack of clear guidelines on who and how one qualifies to benefit from such a noble programme.
The often repeated allegation is that the same individuals seem to qualify and benefit in the indigenization or empowerment process. This has resulted in the process losing its appeal and being frowned upon. These issues could be addressed by the Government of National Unity if the process is opened to debate and clear guidelines and qualification parameters are set and clearly communicated As part of the national vision and Economic recovery effort the indigenization of the economy should be a central theme as it will in the long run make Zimbabwe a stable economy with internal capacity to resist externally induced shock.
The Ministry of Youth Development, Indigenization and Empowerment was created specifically as a government ministry, responsible for youth issues and economic empowerment in Zimbabwe. One of its key functions is supposed to be actively assisting young entrepreneurs to access resources necessary to enter and succeed in business. This ministry surprisingly has been rather missing in action in terms of playing a leading role in mobilizing resources for the Economic recovery process. The ministry could do more in terms of educating the nation and attracting experienced Zimbabweans abroad who could assist in developing effective resource mobilization programmes.
In both South Africa and Zimbabwe, the perceived need to anchor new policies in socially acceptable contexts has become a prominent feature of post-transition politics with Governments paying mostly lip service to the programme. ‘Third Chimurenga’ in Zimbabwe and Black Economic Empowerment (BEE) in the socio-cultural context of ubuntu in South Africa have resulted in over politicization of an economic programme that is critical yet explosive if not properly structured and branded . The process must be branded and packaged as an economic programme and not political sloganeering .
It has to be noted that coercive redistribution of wealth is not a solution for enriching historically disadvantaged indigenous people as it does not directly create new wealth. Entrepreneurship ability, traits and experience are critical in success of any venture discovering or re-allocating assets does not guarantee that the assets will be put to good use or that beneficiaries will improve their standards of living. What is required is a stable economic environment that allows those who are ready to work hard for their wealth not to ululate after being awarded grabbed enterprises or assets. This environment is created by laying out clear policies ,educating the people about them which will instill confidence in investors ( local and foreign).
As the GNU seeks to stabilize the economy there is need to embrace indigenization in a transparent and deliberate manner .This must be well communicated to ensure that investors know all the rules of engagement. Such an approach will ensure that opportunists can not hijack the noble process and use it as a self enrichment scheme which in the long run will damage the current efforts to re-brand the nation as a friendly investment and tourist destination .
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
Instead of the politicians globe trotting on their own seeking donations ,aid and other freebies it would be advisable to include local business leaders to lead some of those foreign trips seeking potential business partners as part of the general economic recovery vision. The on and off calling for indigenization ahead of elections is unwise as it damages what could other wise be a very effective way to mobilize foreign direct investments. As an example a local entrepreneur holding platinum mining rights has a higher chance of success in attracting additional Foreign direct investment than just sending a politician to try to convince other politicians to send their tax payers funds to revive Zimbabwe’s Economy.
The truth of the matter is Zimbabwe and her problems do not rank highly during this Global economic recession . As a direct result not much money should be expected from any source in form of donations , aid or other normal third world freebies. The only way to attract meaningful capital into Zimbabwe is making the country attractive as an investment destination. In the process indigenous business people must play a meaningful role in attracting this investment and attracting suitable investment partners. This means the Government must make deliberate effort to include local entrepreneurs from the initial stages rather than to appear to short change foreign investors when they are already in the country by changing rules of the game mid-way during the game.
The Indigenization and Economic Empowerment Act came into law in Zimbabwe in March 2008 under much fanfare and protest form other quarters. In essence The Act, seeks to create an enabling environment to improve the indigenous population’s participation in economic activities of the country and allow economic prosperity to be shared more equitably. The passage of the law is just but one step in a long process. There is need to educate the country’s citizenry about the benefits of such a process in manner that will generate credibility for the process. Previous efforts have been tainted and clouded by corruption and nepotism due to the lack of clear guidelines on who and how one qualifies to benefit from such a noble programme.
The often repeated allegation is that the same individuals seem to qualify and benefit in the indigenization or empowerment process. This has resulted in the process losing its appeal and being frowned upon. These issues could be addressed by the Government of National Unity if the process is opened to debate and clear guidelines and qualification parameters are set and clearly communicated As part of the national vision and Economic recovery effort the indigenization of the economy should be a central theme as it will in the long run make Zimbabwe a stable economy with internal capacity to resist externally induced shock.
The Ministry of Youth Development, Indigenization and Empowerment was created specifically as a government ministry, responsible for youth issues and economic empowerment in Zimbabwe. One of its key functions is supposed to be actively assisting young entrepreneurs to access resources necessary to enter and succeed in business. This ministry surprisingly has been rather missing in action in terms of playing a leading role in mobilizing resources for the Economic recovery process. The ministry could do more in terms of educating the nation and attracting experienced Zimbabweans abroad who could assist in developing effective resource mobilization programmes.
In both South Africa and Zimbabwe, the perceived need to anchor new policies in socially acceptable contexts has become a prominent feature of post-transition politics with Governments paying mostly lip service to the programme. ‘Third Chimurenga’ in Zimbabwe and Black Economic Empowerment (BEE) in the socio-cultural context of ubuntu in South Africa have resulted in over politicization of an economic programme that is critical yet explosive if not properly structured and branded . The process must be branded and packaged as an economic programme and not political sloganeering .
It has to be noted that coercive redistribution of wealth is not a solution for enriching historically disadvantaged indigenous people as it does not directly create new wealth. Entrepreneurship ability, traits and experience are critical in success of any venture discovering or re-allocating assets does not guarantee that the assets will be put to good use or that beneficiaries will improve their standards of living. What is required is a stable economic environment that allows those who are ready to work hard for their wealth not to ululate after being awarded grabbed enterprises or assets. This environment is created by laying out clear policies ,educating the people about them which will instill confidence in investors ( local and foreign).
As the GNU seeks to stabilize the economy there is need to embrace indigenization in a transparent and deliberate manner .This must be well communicated to ensure that investors know all the rules of engagement. Such an approach will ensure that opportunists can not hijack the noble process and use it as a self enrichment scheme which in the long run will damage the current efforts to re-brand the nation as a friendly investment and tourist destination .
Gilbert Muponda is an Entrepreneur based in Canada.
He is Founder of GMRI Capital He can be reached at;
Email: gilbert@gilbertmuponda.com Skype ID: gilbert.Muponda
Twitter ; http://twitter.com/gmricapital
Phone: 1-416-841-5542
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