Gono: wolf in sheep’s clothing?

New United States ambassador to Zimbabwe Christopher Dell described central bank governor Gideon Gono as a wolf in sheep’s clothing who had hounded out his enemies while building his own empire.

In a cable released by Wikileaks, Dell said at first blush, Gono was like an anomaly among President Robert Mugabe’s officials.

He courted Western embassies and the International Monetary Fund, had accommodated people like Eric Bloch and Tony Hawkins once regarded by the government as enemies and was even seen in the company of Commercial Farmers Union president Douglas Taylor-Freeme but he had imprisoned, marginalised or exiled nearly everyone of his rivals.

He had forced into exile “the country’s most revered indigenous banker” Mthuli Ncube who was the main contender for the central bank post and chief executive of Barbican Bank. He had driven out Intermarket boss Nicolas Vingirai.

The government had neutralised the Ministry of Finance’s two most powerful policymakers, jailing Minister Chris Kuruneri and offering permanent secretary Nicholas Ncube a largely ceremonial appointment as one of three Reserve Bank of Zimbabwe deputy governors.

“We cannot state for certain what Gono’s role has been in the demise of each rival, but find it telling that so many rivals have fallen from power since Gono’s rise, that he has taken no action to halt this process and that he has benefitted personally and professionally from their demise,” Dell said.

“With a rotation of cabinet officials overseeing the Finance Ministry (while Kuruneri awaits trial from behind bars) and powerless David Chapfika serving as the new deputy Minister, Gono now controls nearly every economic policy function.”

Full cable:

Viewing cable 04HARARE1495, CENTRAL BANK GOVERNOR GONO: WOLF IN SHEEP,S

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

C O N F I D E N T I A L SECTION 01 OF 02 HARARE 001495

SIPDIS

AF/S FOR BNEULING

NSC FOR SENIOR AFRICA DIRECTOR C. COURVELLE, D. TEITELBAUM

USDOC FOR AMANDA HILLIGAS, TREASURY FOR OREN WYCHE-SHAW,

PASS USTR FOR FLORIZELLE LISER, STATE PASS USAID FOR

MARJORIE COPSON

E.O. 12958: DECL: 12/31/2009

TAGS: ECON ETRD PGOV ZI EINV

SUBJECT: CENTRAL BANK GOVERNOR GONO: WOLF IN SHEEP,S

CLOTHING?

Classified By: Ambassador Christopher Dell.

Reason: 1.5 d

——-

Summary

——-

¶1. (C) We are disturbed that Reserve Bank (RBZ) Governor

Gideon Gono’s expanding hegemony spells more trouble for

Zimbabwe’s flagging economy. Although he is an ideological

moderate by GOZ and Zanu-PF standards, preaching an

uncharacteristic fervor for Western and International

Monetary Fund (IMF) reengagement, recent RBZ policies reach

far beyond conventional central bank parameters. Most

worrisome, it is becoming increasingly difficult for firms to

survive without lobbying for and obtaining personal

concessions from Gono. His personal corruption is a source

of concern for the country,s economic future.

—————————————

Moderate in Tone, Machiavellian in Deed

—————————————

¶2. (C) At first blush, Gono seems like an anomaly among

Robert Mugabe’s officials. Unlike many, Gono has never

misrepresented Western sanctions as the cause of the

country’s economic decline. He courts Western embassies and

the IMF. He has personally rehabilitated many out-of-favor

white Zimbabweans. (Note: Before Gono took over at the RBZ

in December, for example, outspoken Bulawayo accountant Erich

Bloch was subject to recurring arbitrary detention; now he

heads the RBZ’s most important advisory committee. Gono is

similarly happy to be seen in the company of Commercial

Farmers Union President Douglas Taylor-Freeme and University

of Zimbabwe MBA department chair Tony Hawkins ) whom the

GOZ’s Herald often portrayed as enemies of the State.) Gono

has called for transferable 99-year leases for land

redistribution beneficiaries, the most market-friendly

position on land reform of any prominent Zanu-PF spokesman.

In private talks, he derides the GOZ’s estimate of a 2.4

million ton maize harvest and land-grabs by prominent

ministers.

¶3. (C) However, since Gono took office, the GOZ has

imprisoned, marginalized, or exiled nearly every one of his

rivals, often through allegations of investment abroad

(“externalization of foreign exchange”), a serious crime in

Zimbabwe. Authorities have chased into London exile Gono’s

main contender for the RBZ post – Barbican CEO Mtuli Ncube –

as well as the country’s most revered indigenous banker )

Intermarket CEO Nicolas Vingirai. The GOZ has neutralized

the Ministry of Finance’s two most powerful policymakers,

jailing Minister Chris Kuruneri and offering Permanent

Secretary Nick Ncube a largely ceremonial appointment as one

SIPDIS

of three RBZ deputy governors. (Ncube now complains to us

about his shrunken workload.) We cannot state for certain

what Gono’s role has been in the demise of each rival, but

find it telling that so many rivals have fallen from power

since Gono’s rise, that he has taken no action to halt this

process and that he has benefited personally and

professionally from their demise. With a rotation of cabinet

officials overseeing the Finance Ministry (while Kuruneri

awaits trial from behind bars) and powerless David Chapfika

serving as the new deputy Minister, Gono now controls nearly

every economic policy function.

—————————–

Central Bank Gains New Powers

—————————–

¶4. (U) Gono has shifted many responsibilities from the

Finance Ministry to the RBZ, such as the registration of

investment firms and screening of bank executives. The

central bank also now not only reviews/approves

qualifications of CEO/CFOs, as the Finance Ministry used to,

it requires banks to forward the curriculum vitae of

applicants for every managerial position down to department

head, a source of resentment in the banking sector. Gono has

also dictated to private banks that they may no longer close

for Wednesday afternoons (a Zimbabwean tradition).

¶5. (U) By establishing the GOZ’s forex auctions in January,

Gono also established a mechanism for the RBZ to set the

country’s official exchange rate. Previously, this required

a cabinet decision, as when the rate moved from Z$55 to

824:US$ in late 2002. However, Gono’s commitment to an

overvalued rate has dashed initial hopes he would use his new

authority to keep the rate at realistic levels. He may be

the undisputed master of Zimbabwe,s economic policies, but

he has been unable or unwilling to change those policies for

the better.

————————————-

Gono Determines Who Gets Loans, Forex

————————————-

¶6. (C) Gono’s greatest power lies in determining which firms

succeed and which fail. He has final say over who can tap

attractive low-interest productive sector loans (presently

carrying a 50 percent rate, versus approximately 200 percent

on the open market ) a rent-seekers haven). The RBZ

Governor also decides how to allocate the auctions’ meager

forex. Favored importers buy it at a 28 percent discount to

the parallel market, widening their profit margin over

competing importers. The key to auction success is often an

audience with Gono, something many importers never obtain.

¶7. (C) Finally, Gono maintains his own business empire,

including Jewel Bank and growing media interests. He is

publisher of the Financial Gazette, Zimbabwe’s main business

weekly, which toes the RBZ policy line. He is taking over

the daily and Sunday Mirror, a potential rival to the

Ministry of Information’s daily Herald.

———–

Bottom Line

———–

¶8. (C) Since he says so many things that contradict customary

GOZ rhetoric, Gono makes for a refreshing interlocutor. In

fact, he seems to have spellbound many visitors. The local

IMF office put out a 2005 forecast of 5 percent growth

(published on the IMF website, but since withdrawn) after

meeting with Gono earlier this year. However, we do not

believe Gono is either taking or advocating the decisions

that will lead to an economic turnaround. He continues to

expand money supply at an alarming clip (year-to-year M3 is

up roughly 400 percent through April, the latest available

statistic), while reining in inflation through an enforced

official (auction) exchange rate. As a result, exports )

the engine of the economy – appear to be dropping (there are

no useful official statistics). Foreign direct investment is

negligible.

¶9. (C) Gono has also failed to use his three policy

statements to make the case for devaluation (as Finance

Minister Simba Makoni did in 2001-02). Nor has he advocated

an end to the GOZ’s selective “witch-hunts” for investments

abroad. This is a crime every Zimbabwean of the middle-class

and above has committed, often ) as in the case of Finance

Minister Kuruneri ) facilitated by Gono’s Jewel Bank. In

the final analysis, Gono appears to see no conflict of

interest in the RBZ Governor owning one of the most prominent

indigenous commercial banks and much of the financial press.

Gono may be a moderate, but presently only by GOZ standards,

and his personal corruption poses its own threat to

Zimbabwe,s economic future.

Dell

(214 VIEWS)