Bond notes to raise export earnings: Mangudya

HARARE - Reserve Bank of Zimbabwe (RBZ) governor John Mangudya clocked three years at the helm of the apex bank in March this year.

Our Business Editor, John Kachembere, spoke to the central bank chief who is at the cusp of concluding talks with the Afreximbank for a loan facility to back an increase in the amount of bond notes in circulation as part of his plan to increase foreign currency earnings.

Below are excerpts of the interview.
Q: It’s been three years now since you assumed the hot seat at the RBZ. How has been the journey so far?  

A: We are pushing on with the transformation agenda for the this country, it’s good.  I am quite aware of Zimbabwe’s challenges and I know what needs to be done.

It’s very clear. Our devil in Zimbabwe is in the detail of implementation. We have got very good policies but they lack implementation.

The elephant in the room is implementation, implementation, and implementation.

If we implement those measures approved by Cabinet and government, we can increase production in this country. And we also need to be consistent in our approach. 

If we look at land, for example, government has approved that there should be bankable 99-year leases and it’s critical that land is given its value and people use those leases as security in banks, but it’s still being finalised.

If you look at the Joint Venture Bill it was approved as a policy so that government can put some of the State-owned enterprises and parastatals to be under joint ventures with willing partners, but its implementation is still outstanding. 

If you look at the commercialisation of some of the State enterprises such as Cold Storage Company (CSC), National Railways of Zimbabwe (NRZ) and Zisco, it’s still work in progress.

We need to be aggressive in our approach for the betterment of the economy.

Q: Are you going to push for the implementation of these policies within the first term of your tenure?

A: From the RBZ perspective, we have done quite a lot of things, but again it’s a lack of entrepreneurship in Zimbabwe that is a problem.

We want the Zimbabwean society to embrace plastic money so that we preserve foreign currency so that we don’t use foreign currency cash as much as we are doing right now.

We want to move away from the current cash economy to a cash-lite economy, which means we need plastic money.

We are working hard on that and we are happy that at least 75 percent of the retail  transactions are conducted using Point-of-Sale Machines (Pos) in the formal retail outlets, which is quite an achievement and we are going to continue to enforce that so that most firms and traders have Pos Machines so that we can preserve foreign currency for foreign payments, not for domestic payments.

We are also working on the financial inclusion. We launched the financial inclusion national policy last year and we are quite happy with the thematic groups that we have put in place.

Financial inclusion, as you know, is about banking the unbanked.

We want the majority of Zimbabweans to be financially included.

We have seen that the number of people using banks and mobile banking is quite high now. That’s encouraging.

We have also put in place a number of facilities to encourage production and exports from women empowerment fund, youth empowerment fund, export finance facility, to business linkage facilities, cross border facility, value addition and the gold development fund to help artisanal miners.

All the funds are now in place to increase production and exports.

We are quite happy with gold production which reached 10 tonnes in the six months to June this year from a growth of 9,5 tonnes last year.

Things are moving, but it’s only that the pace might not be as fast as people would like but definitely the economy is rebounding, albeit at a rate which is lower than some people’s expectation.

It’s a process from where we are coming from. We need to continue to be resilient. We need to build Zimbabwe together. It’s doable.

We have agriculture which has moved very well this year, thanks to God, the rains fell and also together with the government facilities — the Presidential Input Scheme, Command Agriculture Scheme — and also other independent agriculture producers, the contractors. So at the end of the day, it would be a good year.

And mining is recovering because of the stabilisation of gold prices, ferrochrome prices went up and now they are down again, platinum prices are stable, and these are the areas where we get foreign currency.

Tourism is rebounding definitely. I was in Victoria Falls recently and most of the hotels’ occupancy is  high.

What we just need to do is to guard jealously our foreign currency.

Let’s not be used as a conduit by those people who come and take our hard-earned foreign currency.

It seems Zimbabweans like to encourage people to take away our money. Because when you export goods like tobacco and platinum, the money belongs to Zimbabweans.

Foreign exchange is therefore a national product for Zimbabweans.

I was reading in one of the papers recently that foreign currency belongs to exporters. No, foreign currency belongs to Zimbabweans.

We  have raw materials underground like platinum which belongs to Zimbabweans and when someone exports platinum, for example, it doesn’t only belong to Zimplats, and must benefit Zimbabweans.

Otherwise, how are we going to import fuel, electricity, raw materials required by industry as feedstock?

Q: You recently indicated that the central bank has given out close to $180 million in export incentives since November last year and we are almost exhausting the $200 million facility backing bond notes. What is the next step for Zimbabwe?

A: We are currently in negotiations with the Afreximbank for an enhancement of the facility to back the export incentive scheme.

We have to ensure that whatever we issue as bond notes need to be secured by a foreign currency facility and we will continue with our drip-feeding mechanism to guard against inflation.

Q: How much are we looking at this time?

A: I cannot say the figure because we are still negotiating and we will come back to you when we finalise the deliberations?

Q: Are you happy with the performance of the bond notes since they were introduced almost eight months ago?

A: We are very happy with the way the bond notes have been operating because they are working indeed as an export incentive that is required in this economy to enhance export  competitiveness.

This export incentive scheme is basically working as part of internal devaluation to restore competitiveness.

The incentive is funded or monetised by bond notes to encourage the export of goods and services with an upside or trickle-down effect of increasing cash in circulation.

Bond notes are a medium of exchange and one of the fundamental characteristic of a medium of exchange is that it should be acceptable, store of value and all those qualities have been exhibited in the market. 

Where we are only concerned is that money is not circulating. Apart from the issue of fiscal deficit, if money was circulating in this economy it would be sufficient.

The United States dollars, the bond notes are not circulating because people are taking them as a store of value and not as a medium of exchange and also because of rent-seeking behaviour, which is indiscipline. People should deposit their money in banks to encourage circulation, not to sell money to make money.

Q: What do you think is the best for us to get out of the current cash crisis and improve our foreign currency receipts?

A: We need to deal with the structural reforms that include fiscal consolidation, ease and cost of doing business reforms, promoting law and order, enhance production and productivity across all the sectors of the economy and reforming the State-owned enterprises.

Zimbabwe is a financially  isolated country, with minimum access to foreign finance but yet it uses foreign finance as its medium of exchange. That’s a great paradox.

We only have very few banks throughout the whole world that can provide us lines of credit. The rest see Zimbabwe as a high risk country.

As a result, our access to foreign currency is so minimal.

Other countries have access to foreign finance but Zimbabwe cannot access because of  geological considerations that include sanctions and debt overhang.

This is a fact. Between 2008 and to date, the country lost more than 50 corresponding banking relationships because of compliance issues, sanctions and other geopolitical challenges.

The contradiction is we are using other countries’ currencies but have limited access to foreign finance, so it means we need to generate it, we need to make it ourselves through increased exports of goods and services.

Q: What would you want to say to the country?

A: All what we require in Zimbabwe is to be a disciplined society.

We want to bring Zimbabwe together as Team Zimbabwe that is jealous of its resources. Guard them jealously.

Let us make sure that whatever we do, we do it in compliant to good corporate governance, shun indiscipline, which erodes confidence.

Let’s complete all the structural reforms that promote the welfare of Zimbabweans.

We are by ourselves and owe it to ourselves to do the right things for transformation of our beloved country. We need to enhance consumer and business confidence as Team Zimbabwe.

Indiscipline breeds lack of confidence and once confidence is eroded, strong and resolute policy measures are required to restore it. While confidence is not tangible, it is easily felt  when it’s lacking and we want to build on that.  

Let’s rise up to build Zimbabwe together.


Comments (5)

The elephants in the room are you, the thieving cabinet and the Boss of this country. Chete. No one else and nothing more. The rest of the interview is all lies and ZanuPF propaganda.

Homo Erectus - 19 July 2017

magudya mapolicies ako akadhakwa

uth maitano - 20 July 2017

Keep on dreaming, mate. Nothing you do will help this country out of the current mess as long as Zanu pf is still in power.

Richard Freemantle - 20 July 2017

Its very unfortunate. People's reluctance to bank money was triggered by your own banks. Banks like NMB do not even disburse US$s anymore. What message does this send to all its multitudes of customers? At all the other banks you can get the US$ e.g Stan Chart, Barclays and Ecobank. Who regulates NMB?

Andrei Mafeso - 20 July 2017

Even Strongman Comrade Robert Mugabe does not deposit his own money into Zimbabwe banks - he said this while being interviewed on his birthday recently - hold onto your US dollars at all times Comrades

biggus dikkus - 20 July 2017

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