Placing the Zimbabwe of Zimbabwe under curatorship long over due

The Reserve Bank of Zimbabwe has been grabbing news headlines for all the wrong reasons with its assets being seized and sold off at an alarming rate. At the centre of the crisis are debts accumulated during the now infamous Quasi Fiscal activities when the Reserve Bank was transformed into some mega-distributor of all things to all people as long as they fit into a particular political patronage network. In the process the Central bank accumulated massive debts exceeding US$ 1 billion with little to show for it. The challenge now is how to pay off this debt and allow the Central Bank to focus on its core mandate of stabilizing Financial markets and keeping inflation under check.

The Minister of Finance has suggested the placing of the Reserve Bank of Zimbabwe under curatorship as a way to help resolve the situation. This is a noble idea which should be pursued or modified versions of it being adopted. After some serious research we couldn’t get a precedent of where a Central Bank has been placed under curatorship. It is normally supposed to be the other way round with the Central Bank placing private Banks and Financial Companies under curatorship .But being Zimbabwe stranger things have happened and continue to happen so this world first doesn’t come as a surprise. It should be expected when the Central Bank is entrusted to individuals based on political patronage and not proven competence.

Whilst the RBZ situation looks bad and hopeless it must be noted that the RBZ has debts and it has assets which include debtors who owe huge sums of money to the RBZ. The challenge is to trace all these debtors ,who they are and how they came to owe the RBZ ( which normally should not deal directly with the public or private entities except through banks).

Placing the RBZ under curatorship will allow a proper assessment of its true financial position reflecting the realistic balance sheet ,cashflow, income statement and other measures which allow the Government to properly make an informed decision. The curator will be able to document all the liabilities and all the assets. Such an audit will assist in developing a turn around plan to clear these debts which are ruining the RBZ reputation and in the process making it almost impossible for the Central Bank to perform its legal obligations under the RBZ Act.
The unfortunate situation is that the RBZ has been politicized over the years and has lost focus which brought about these massive debts.

Given Zimbabwe’s political environment its unlikely a local curator will have the clout, muscle and expertise to do a proper job given how the RBZ was now converted into a mega wholesale competing with the likes of Jaggers and Mahomed Mussah wholesalers. This calls for the appointment of an International firm of either lawyers or accountants or an Investment Bank of international standing to perform an Audit ,Due diligence and prepare all necessary reports to prepare for the curatorship. Local firms may not have the resources or expertise required to carry out the task as political pressure maybe brought to bear during the requisite investigations and assessments.

The immediate challenge would be to compile the list of RBZ debtors who are mostly believed to be senior political figures or businesses linked to them. These debtors must be encouraged and forced to come forward with plans or proposals on how they intend to settle their debts to the Central Bank.

This article appears as courtesy of GMRI Capital ( http://www.gmricapital.com ) prepared for 3MG MEDIA

Gilbert Muponda is a Founder and CEO of GMRI Capital ( http://www.gmricapital.com ). He can be reached at;

Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda

Twitter ; http://twitter.com/gmricapital

Facebook ; http://www.facebook.com/muponda

Zimbabwe Dollar return maybe the only way out

Zimbabwe has been operating without a national currency for more than a year now. Since the formation of the Government of National Unit the Zimbabwe dollar (Zimdollar) was replaced by a multi currency system which has somehow brought about stability in addition to a liquidity crunch that has affected all sections of the Economy. Whilst many Zimbabweans still emotionally feel the Zimdollar should remain banished Economic reality and facts on the ground indicate that the Zimbabwe dollar maybe one of the few options that the country has considering the lack of donor and other international funds.

The Zimdollar collapsed dramatically after extended periods of excessive currency printing. In short there was a run on the currency after the Reserve Bank became father Christmas before during and after Christmas by funding any activity by printing money. This indicates that there maybe a need for personnel change at the Central Bank before a new Zimdollar is re-introduced. It is a bit far fetched to expect the new currency to survive when its essentially under the same custodians.
Whilst the multi-currency system has brought about price stability it has brought a serious liquidity and credit crunch that has slowed down economic recovery.

The absence of a local currency means Zimbabwe does not have a monetary policy of its own. This is worsened by the fact that the basket of multiple currencies are from Economies whose fundamentals are markedly different from Zimbabwe .This in economic terms is tantamount to artificially inflating a currency when you do not has sufficient reserve4s to defend the currency. The net effect is lack of liquidity and depressed economic activity as business and the economy is deprived of necessary c4edit to fund operations.

Zimbabwe’s Economy is approaching emerging market status and is best driven by exports due to abundant natural resources. Such a strategy requires Zimbabwe to use a soft currency which can be depreciated in a managed way to remain competitive in the export markets.

The use of a basket of multiple currencies totally eliminates the potential of using the weak and soft currency as a tool to encourage exports. This is so because the exporters can not use a cheap local cost base to manufacture and add value to exports with hope of getting hard currency which can then be exchanged for local currency. In short the incentive of exporting is eliminated from most activities and local producers are forced to compete with other producers all over the world without the benefit of a local currency which is managed to their advantage.

This is the current source of some friction between the USA and China with the Americans demanding that China floats its Yuan with the hope that the Chinese currency will end up firming thereby making China’ exports less attractive to Americans.


A weak and soft currency normally favours the exporting nation as its exports are relatively cheap and fuel production as producers seek to earn more hard currency. This what Zimbabwe is missing out on. The use of multiple hard currencies is eliminating this route for Zimbabwe thereby slowing down the economic recovery.
Obviously the IMF ,World Bank and Friends will be only too happy for Zimbabwe to keep using the multiple currencies whilst calling for more reforms but failing to deliver and meaningful funding. The way out for Zimbabwe is to de-politicize the Reserve Bank of Zimbabwe and start re-building confidence in the Central Bank ahead of re-introducing the Zimdollar.

This article appears as courtesy of GMRI Capital ( http://www.gmricapital.com ) prepared for 3MG MEDIA

Gilbert Muponda is a Founder and CEO of GMRI Capital ( http://www.gmricapital.com ). He can be reached at;

Email: gilbert@gilbertmuponda.com . Skype ID: gilbert.Muponda

Twitter ; http://twitter.com/gmricapital

Facebook ; http://www.facebook.com/muponda