Gono’s clampdown bearing fruit


The clampdown on the financial sector, which is part of central bank governor Gideon Gono’s new monetary policy announced on December 18, is bearing fruit.

Speculators, who had literally taken over the economy, have gone underground.

Sales of properties and luxury cars, which were mostly for speculative purposes, have plummeted.

The market is in a quandary as people are not sure whether the prices of cars and property will go up or down.

Some speculators are losing billions of Zimbabwe dollars as their speculative ventures are crumbling.

Market analysts say investors and speculators are playing a waiting game, to see how sustainable Gono’s policies are. They are giving him until next month to get a clear direction.

One observer, however, said Gono was really turning around the economy and there was no going back.

“The nation is in a state of denial, just as they are denying that thousands of people are dying of AIDS. Gono is really turning things around,” the observer said.

Gono’s clampdown started with banks when he hiked their reserve requirements from 20 to 30 percent and also raised the minimum capital requirements. A number of banks were threatened with liquidity problems and were ordered to rectify this.

He also clamped down on bank credit because some of the credit was funding what he termed nefarious activities, which, he said, had gobbled $132 billion.

Gono then garnered on asset management companies. He raised the minimum capital requirements from $10million to $500 million and said 40 percent of their capital should be used in the productive sector.

Though Gono said there were approximately 30 asset management companies, 140 had applied for registration when applications for new licences closed at the end of January.

The new requirements saw the collapse of the first asset management company, ENG, after it failed to pay depositors resulting in two directors being arrested for fraud involving $61 billion.

Gono is now going for micro finance and money-lending institutions, which he says, should all be registered.

Applicants are required to pay a non-refundable fee of $2 million for a micro-finance licence and $1 million for a money-lending licence. The minimum capital for money-lending institutions is now $10 million and that for micro-finance institutions is $50 million.

Observers say, once this exercise is complete, Gono will, be in an exact position to know how much money is in circulation as things had gone out of hand. Zimbabwe ran short of cash between March and September last year largely because people had taken the money out of the formal banking system.

Though things now appear to be at a standstill, the economy is beginning to improve. Already inflation has gone down from nearly 620 percent to 600 percent.

The price of petrol, which had soared to $5 200 a litre is now down to $2 500 a litre. There are now 60 registered fuel importers and companies are slashing prices to get customers.

The Zimbabwe dollar which was down to $6 000 to the greenback has firmed to around $3 500 following the introduction of the auction system which is held twice a week, on Mondays and Thursdays.

Gono is now talking about paying back the country’s debt and arrears and is scheduled to visit Washington this month. This could get the country back onto the good books of donors and thereby improve its foreign currency inflows.

Commodities such as sugar, mealie meal and bread that were once scarce are now available in abundance. The price of bread has gone down from $3000 a loaf to $2 200 but that of sugar and maize meal has gone up, in some cases by as much as 100 percent.

While the Consumer Council of Zimbabwe says most people can no longer afford these commodities, some people say it is better to have them in shops than not to have them at all.

But while the turnaround may be good news for Zimbabwean consumers, it is a blow to those who have been calling for Mugabe to go. They had hoped the economic crisis would force him to step down.


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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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