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BSR: The regime’s self-serving attacks on business

A few months ago, the BSR examined the ambiguous approach of the Zimbabwean government towards business. One the one hand, it wants to present a progressive face using the mantra that "Zimbabwe is open for business". However, this rhetoric is not matched by the policies and conduct of public affairs.

Hence the other face is reactionary and typically anti-business. This much is evident in the content and diction of the President's speeches at political gatherings. Take the recent public boast at how the government handled EcoCash, the country’s premier mobile money company. “Ndokutora tsvimbo ndokurova!” (We took a knobkerrie and beat them up thoroughly).

The President’s defenders will say it’s just an innocent metaphor. But there can be no denying that it is also a metaphor of violence. It has a disturbing consistency with President Mnangagwa’s choice of macabre metaphors. He has previously said glowingly of a morgue that was built in a small town a few years ago. At the opening ceremony, he offered a prize to the first family to bring a corpse to the mortuary.

In this case, Mnangagwa was telling a gathering of party officials that his regime had dealt decisively with EcoCash, which he accuses of fueling economic irregularities including promoting the currency black market.

Curiously, this political rhetoric is not matched by regulatory action. EcoCash and other mobile money companies carry out regulated businesses. The regulator is the Reserve Bank of Zimbabwe (RBZ). There is no evidence that the RBZ has taken any regulatory action against EcoCash and/or its executives or agents. If they had committed offenses, one would expect regulators to have taken action. But there are just political judgments from the politicians, nothing from the regulatory authorities.

The blanket bans on mobile money agents or the very low limits imposed on mobile money transactions apply to all mobile money businesses. If there was any wrong that EcoCash or its executives had done, one would expect regulatory authorities to have taken specific action against them. The absence of any such regulatory action suggests that the political rhetoric is just political gamesmanship presented as policy. It also suggests that regulatory authorities are not in sync with the political authorities when it comes to the real problems and the sources of it.

Of course, suggestions by Mnangagwa and Finance Minister Professor Mthuli Ncube that EcoCash created "phantom money" which was beyond the control of the monetary authorities are only meant to deflect attention to the government's wrong doing and to hoodwink the gullible. If anyone created "phantom money" it was the government itself, via the RBZ. It is the the government and the RBZ after all which have the monopoly to print money. They do so with increasing regularity made easier by technology.

They are the ones who have been generating billions of “phantom money” otherwise referred to as RTGS balances, which they decreed to be a currency in 2019. This had been happening for years. That is why they paid US dollar wages but when people went to collect their money, there was none in the banks. The government just printed the US dollar wages with nothing to back them, until they conjured up the trick of printing their phantom dollars which they called bond notes. This was all part of the deception, but someone was going to have to pay for it.

Indeed, whenever the authorities have wanted to source foreign currency from the markets, they have simply printed money by generating new RTGS balances. In the 2019 budget Professor Mthuli Ncube reported that financing the budget deficit through the issuance of Treasury Bills had cost US$1,27 billion. When the Mnangagwa regime took over in November 2017, it went on a massive spending spree. In the same budget statement, the Finance Minister reported that between January and September 2018 the Government had borrowed US$1,11 billion from the RBZ using the "overdraft window". Someone had to pay for this. But the regime does not want to take responsibility for this recklessness. Instead, it points a finger at EcoCash.

Consider also the Treasury Bills which the RBZ issued to pay banks in return for the non-performing loans (NPLs) that were bought by the Zimbabwe Asset Management Company (ZAMCO). ZAMCO is a creation of the RBZ. It was designed to mop up the mess of huge loans given to political elites and their businesses by banks, which they never paid back. Between 2014 and 2018, NPLs worth US$1,1 billion were bought by ZAMCO from these banks using TBs. CBZ Bank alone sold US$698 million worth of NPLs, representing 61,64% of all NPLs bought by ZAMCO. This money which was used to rescue banks and heavily-indebted political elites came from somewhere. The regime created "phantom money" to fund these transactions. In short, the government printed money to pay for these NPLs. But it wants to blame EcoCash.

Then there is the disastrous Command Agriculture, which gobbled up more than US$3 billion. Where was this money coming from? Here are more examples. In 2010, a subsidiary of ZESA paid US$4.9 million to Pito Investments for the delivery of transformers. 10 years later, Pito Investments has never delivered the transformers. In 2017, a company called Solution Motors got two contracts worth US$1,5 million from the Department of Irrigation. It got a cash advance from the government but only delivered less than half the value of goods. Where does all this money go? And where does the regime get the money when it is broke?

Apart from confiscating foreign currency from exporters, the government has resorted to the printing machine. Only a small fraction of the printed money is represented in physical currency. The bulk of it is RTGS balances that sit in bank accounts.

The long and short of it is that if anyone is guilty of creating “phantom money”, it is the government through the RBZ. However, the regime is fond of deflection and deception, which is why it’s easy for it to point fingers at mobile money companies. If the companies had done as political rhetoric suggests, it would be a very serious matter which would not only result in regulatory sanctions against the mobile money companies and executives but also criminal prosecutions. There is none of that because the regime simply doesn’t have the proof. It’s all political gobbledygook. Therefore, the messages are communicated at political gatherings, to a pliant and captured audience, not on regulatory platforms where serious authorities would conduct business following proper procedures.

It’s hardly worth repeating, but it is this type of aggressive but empty political rhetoric that hurts the business environment. Investors look at the statements coming from the head of government and adopt a coy approach where there is little consistency between the political and the regulatory systems.

The government creates problems for the market when it should be solving them. As it is, the ZWL$5,000 upper limit for mobile money transactions is absurd. This is about US$50. In other countries, like Kenya the maximum daily limit is 300,000 Kenya Shillings (around US$2,500). Before the current mess, Zimbabwe was doing very well among mobile money markets. The current daily upper limit is inconvenient and costly both for merchants and customers. When a payment method becomes inconvenient and costly, the market looks for alternative ways. It’s not surprising that most of the market is turning to the US dollar. The purpose of a payment system is to facilitate transactions, not to stifle them.

The odd thing is that the clampdown on mobile money payments came at a time when the world was reeling under the COVID19 pandemic, which resulted in extensive lockdowns. Almost all countries are encouraging the use of electronic money as part of the measures to prevent the spread of the virus. This is the moment that the Zimbabwean political authorities chose to clamp down on mobile money systems, using largely false justifications.

What is happening to EcoCash is no different from what the government did to Old Mutual and the Zimbabwe Stock Exchange (ZSE) a few months ago. They too were the victims of rampant politically motivated accusations. Zimbabwe’s economic challenges are not caused by these business organizations. The crisis in Zimbabwe is manufactured by corrupt and inept political hands.

It is embarrassing that a President declares publicly that his regime had access to servers of a business without any due process of law. He even pronounced a verdict and punishment of business without allowing it to be heard, let alone to defend itself. If the government is so confident of its findings, why doesn’t it subject them to the legal and regulatory processes?

The government specializes in denialism, deflection, and scapegoating. It even denies that there is a crisis in Zimbabwe, despite abundant evidence to the contrary. When allies try to assist, they are rudely interrupted and shouted at. This is what the ANC, South Africa’s ruling party is now experiencing. They too are now seen as a problem by the regime which refuses to take responsibility and sees everyone else who does not agree with it as an enemy.

The regime has blamed the West. It has blamed the opposition parties. It has blamed civil society organisations. It has also created the fiction of a “Third Force”, all to deny responsibility for the abduction and torture of citizens. It persecutes the tortured, like Joana Mamombe while turning a blind eye to the abductors and torturers of Tawanda Muchehiwa. It blames and persecutes the country’s most successful businesses like EcoCash and Old Mutual. It has attacked Julius Malema and the EFF because they dared to call it to order. And now the ANC is the latest target.

It’s the behaviour of a government and a ruling party on a suicide mission. The tragedy is that it wants to take the millions of Zimbabweans down with it. The sooner South Africa and the ANC realise that they are dealing with a rogue regime and a reactionary organisation, not a “sister revolutionary party” the better. Otherwise, they will keep going around in circles, unable to make good use of their leverage to influence and promote reform and stability in Zimbabwe. And now that the borders are open, the deluge of refugees and informal traders will start again across the Limpopo, along with the challenges and pressures the exodus brings

WaMagaisa

wamagaisa@yahoo.co.uk

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