Gono disappoints exporters but….


Central bank governor Gideon Gono did not devalue the Zimdollar to boost exports as had been anticipated but even the United States embassy admitted that he had made tremendous strides in the five months that he had been at the helm of the Reserve Bank of Zimbabwe.

He had enhanced transparency at the RBZ and his policing of banks and asset management companies, a responsibility ignored by his predecessors, was restoring investor credibility.

He was applying noticeable pressure on ministries and parastatals to live within their means and budgets.

He had reduced money supply growth from around 500 to 250 percent.

He had curbed runaway inflation from 33.6 percent in November 2003 to 5.9 percent in March 2004.


Full cable:


Viewing cable 04HARARE690, Only Modest Exporter Relief in RBZ Statement

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Reference ID






2004-04-22 14:27

2011-08-30 01:44


Embassy Harare

This record is a partial extract of the original cable. The full text of the original cable is not available.












E. O. 12958: N/A


SUBJECT: Only Modest Exporter Relief in RBZ Statement


1. Summary: Reserve Bank (RBZ) Governor Gideon Gono’s

second policy statement disappointed much of the business

community. While he took credit for more restrictive

money supply, lower inflation and more realistic interest

rates, Gono did not relieve exporters of a large de facto

revenue tax. He also suggested the GOZ would continue

selective “witch hunts” on persons who traded on the

parallel currency market. End Summary.


Not Much For Exporters


2. The flamboyant Gono spoke on April 22 for the second

time since taking control of the RBZ last December 1.

Expectations were high that he would eliminate or begin

to phase out the requirement that exporters remit 25

percent of earnings at Z$824:US$, about one-sixth the

going rate. Coupled with an overvalued auction rate,

this mandatory conversion has rendered many exporters

uncompetitive. The Embassy has heard dozens of

disgruntled sagas from once-competitive exporters. Even

members of Gono’s handpicked advisory board told us they

anticipated the RBZ governor would announce an end or

phase out of the Z$824:US$ rate.


3. As for the twice-weekly forex auctions, Gono failed to

assure exporters the RBZ would accept the principle that

the high bid wins, in accordance with its own guidelines.

The RBZ has manipulated the auction rate not only by

setting a minimum-acceptable bid, but by rejecting higher

bids under the pretext that they are not for priority

imports. We know of at least one case when the RBZ asked

a bidder to lower his submission, assuring he would

secure forex for fewer zimdollars. Finally, Gono did not

grant exporters the right to reject bids, as many had



4. Gono did offer two modest new advantages for

exporters. First, they will not have to accept a rate

lower than Z$5,200:US$. While he indicated this rate

would be “reviewed periodically,” he did not say whether

it would keep up with the auction rate or inflation.

Second, exporters that advance export proceeds to the RBZ

may retain 80 percent in forex and exchange the other 20

percent at the auction rate, relieving them of the

mandatory Z$824:US$ requirement. It is not clear how

many exporters can take advantage of this arrangement.

In any event, it favors large companies and

multinationals – which may be able to front the forex

several months before payment – over emerging or small



Positive Aspects


5. In fairness, Gono has reached several important

milestones during his five-month tenure. Through his

televised addresses and follow-up question & answer

sessions, he has enhanced transparency at the RBZ. His

policing of banks and asset management companies, a

responsibility ignored by his predecessors at RBZ and the

Finance Ministry, is restoring investor credibility. He

is applying noticeable pressure on ministries and

parastatals to live within means and budgets. In keeping

with lower inflation, he seems to have reduced money

supply growth from around 500 to 250 percent since he

took office (statistics are not yet out). Other than a

30 percent loan facility to the “productive sector,” Gono

has generally defended positive interest rates as an

important tool for reducing inflation.


6. On inflation, Gono congratulates himself for

“burst[ing] the bubble of runaway inflation” and claims

to have scaled back inflation from 33.6 percent in

November 2003 to 5.9 percent in March 2004. This may be

slightly gratuitous. March 2003 inflation – the

conventional comparator – was only 8.8 percent.

Zimbabwean inflation typically peaks at year-end.


Other Notes


7. In addition, Gono:


– offered Zimbabweans abroad the advantageous Z$5200:US$

rate for transfers to relatives. But again, he gave no

objective criteria for readjusting this rate.


– decided to leave negative interest productive sector

loans in tact, though the rate will rise from 30 to 50

percent on July 1. While he wants to make the facility

revolving, high inflation will rapidly eat away at

available funds. During its March visit, the IMF urged

Gono to end this speculator’s haven.


– declined to support amnesty for parallel market

traders. Aggressive GOZ prosecution for an offense

practiced by all but the poorest Zimbabweans has become a

quasi-witch hunt under the guise of anti-corruption.

(Gono’s own bank was an ambitious parallel market

trader.) The RBZ’s pursuit of these traders has dampened

parallel market activity, sort of a shotgun approach to

currency stabilization. At a minimum, many Zimbabweans

hoped Gono would support amnesty for trading prior to his

taking office.


– repeated GOZ distortions that foreign tourist arrivals

increased from 739,284 in 2002 to 1,089,256 in 2003. As

Zimbabwe Tourist Authority president Shingi Munyeza has

told us, foreign tourist arrivals have decreased each

year since 2000 and are off about 80 percent in total.

The Government is probably including multiple trips by

cross-border traders. (Tourism revenue has dropped from

US$140 to 44 million and hotel occupancy from 65-70 to 40

percent since 1999.) Gono realizes foreign tourists are

not returning to Zimbabwe but likely wants to pressure

the sector to remit forex earnings.


– found it “disheartening” that banks had not acceded to

his wish that they begin to work Wednesday afternoons

(known in banking circles as golfing afternoons). He

seems to believe it is the RBZ governor’s right to

dictate opening hours to private banks.




8. For whatever reason, Gono does not appreciate the woes

of exporters and the harm an overvalued currency does to

export-driven growth. This is unfortunate, since

Zimbabwe’s four top sectors – agriculture, mining,

manufacturing and tourism – all have heavy export

components. In his speech, Gono devoted several minutes

to Japan’s post-World War II economic boom powered by

exports. But he failed to note the role that a fairly

valued (or undervalued) currency played in Japan’s

ascent. Like governments in several other developing

countries, Zimbabwe’s relies excessively on the exchange

rate as a determinant of economic health. It will be a

tough habit to break.





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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.


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