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Gono juggles Zanu PF fiction and brutal reality
Dianna Games
October 31, 2005

http://www.businessday.co.za/articles/article.aspx?ID=BD4A107445

SOUTH African Reserve Bank governor Tito Mboweni would not want to swap jobs with his struggling counterpart across the border for all the money in… well, Zimbabwe anyway.

Gideon Gono, Zimbabwe’s central bank boss, is on a weird roller coaster ride, which, if he survives it, is not likely to be over until at least 2008 — the earliest anyone can expect President Robert Mugabe to step down.

As point man on the economy, who has to keep the wheels turning so the ruling party can keep the wolf from its door, Gono must sometimes wonder whether he will be able to restore his integrity when it is all over.

Desperate times call for desperate measures, and he has a considerable bag of tricks — which is commonly known as a monetary policy statement.

Business awaits Gono’s policy statements with bated breath. Companies now know that such pronouncements, usually coming with little warning and having immediate effect, usually herald turbulent waters of the kind that can make or break a company.

And so it was with the latest one just over a week ago in which he announced a brand new foreign-exchange regime. This effectively opened up the ailing currency, tightly controlled by the government for many years, to market forces. Within hours, the currency started heading from Z$26000 to $1 towards the Z$90000:$1 that the black market had been offering lately.

Many people thought Gono’s previous policy statement, issued in July, was a bold move. In it, he devalued the currency from about Z$6000 to the dollar to Z$17500 for a range of transactions. Within weeks it had sunk to Z$26000, where it remained until the recent liberalisation.

And even with this new wind of change blowing through the currency market, the story is that the Reserve Bank, alarmed by the speed of devaluation into the Z$90000 zone, has instructed banks to maintain the currency at around Z$60000 to the dollar.

It will obviously take a while for government officials to get the hang of this liberalisation thing. After all, it was not that long ago that the president considered any suggestion of devaluing the currency a treasonable offence.

The rumour mill has attributed the change of heart to interventions by Mboweni and Finance Minister Trevor Manuel, which, relative to some loan conditions the SA government allegedly put on the table, seemed quite palatable to Mugabe.

The liberalisation is a desperate move to bring hard currency into the formal economy from the more lucrative informal trading market. There are those who will gain, such as exporters who are now allowed to keep 70% of their foreign exchange earnings in hard currency for 30 days, up from 50%. But the effect on inflation is likely to be dramatic.

Gono’s statement acknowledged this. He climbed down from his official prediction of year-end inflation of 80% and single digits by 2007, conceding that it was more likely to be around 300% by December. Given that it doubled from 164% in June to 360% in September, and that the year end is almost upon us, he doesn’t have a choice but to concede the point.

While Gono battles it out, trying to juggle reality and Zanu (PF) fiction for his countrymen’s consumption, the president has other fish to fry. And no, those fish are not the country’s fuel shortage, the fact that millions face starvation, the plight of the hundreds of thousands he has made homeless, massive unemployment and a sinking economy.

The far more pressing issue for Mugabe is the elections for his new 66-member senate — for which he forced the hapless finance ministry to find funding in the midst of the economic misery.

Preparations for November’s elections are in full swing. The central bank is busy printing money for campaigning and electoral officials are tinkering with the constituencies to ensure they reflect a positive Zanu (PF) result. Of course, a lot of money could be saved if the opposition Movement for Democratic Change followed its leader Morgan Tsvangirai in boycotting the election.

With three years (at least) to go before there is any prospect of a change of leadership, Mugabe, faced with the possibility that the fallout of the crumbling economy might somehow topple him from power, needs another bulwark against dissenters in his midst. The senate is his vehicle of choice and he even gets to appoint 15 of its members, including 10 chiefs.

As in Malawi, where politicians have been focused on opposition attempts to impeach the president rather than on how to feed an estimated five million Malawians facing starvation, it is a case of fiddling while Rome/Lilongwe/Harare burns.

*Games is director of Africa @ Work, a publishing and research company.

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