We are stealing from ourselves – Cuthbert Dube not alone

The PSMAS Cuthbert Dube saga reveals a very interesting dimension to the architecture of our economy, our financial value system and our psyche as Zimbabweans.

We are outraged, nay even angry that Dube awarded himself or was awarded an outrageously large salary in an impoverished country where the average man earns $400.

We are so angry at Dube and we righteously pontificate on how morally wrong this is as if we have an objective moral benchmark, and we vicariously compare his salary with that of President Mugabe or President Obama to justify our point, conveniently forgetting that there is absolutely no basis for comparing a presidential salary against the salary of the CEO of a medical aid society.

Some claim that the medical aid society in question is heavily indebted as if it borrowed money and when in fact what they mean is that the society has a large outstanding claims liability, a very normal and indeed expected situation given the nature of the business that they run.

Deep in your heart, you feel sorry for poor members of a medical aid society fleeced for the umpteenth time by a vernal immoral so-called businessman, with dubious multiple international awards and a doctorate neatly catalogued to hoodwink the gullible. .

Of boards that are the CEO’s rubber stamp……

In between all this, you are left wondering what law Dube broke in awarding himself or in being awarded such an outrageous salary.

When a full board of a company does not know what their chief executive earns or when that board unwittingly awards a CEO such an outrageous salary, is it the chief executive’s fault?

Surely the buck should stop with the board and their attempt to pass responsibility to Dube is a futile attempt to side step what should be their basic responsibility.

The focus on Dube detracts from the responsibilities of the board and the vernality and decadence that bred the conditions for CEO’s to manipulate boards and get away with murder.

When there is no law, there is no crime……

Indeed if there is no law preventing such excesses, should we even be complaining?.

The Dube saga is a very straight forward “hands in the till”case, crude and unsophisticated and yet to date we are grappling from pillar to post, wondering what law he broke if any and trying to create a crime where there is no law.

You are left to ponder what safeguards are in place to prevent the looting of public funds, insurance and pension funds by more sophisticated smooth operators who unlike the hapless Dube will never be caught with their hands in the till.

It is quite clear that despite our conviction that Dube has done a great wrong, we are still struggling to name the crime never mind the commensurate punishment.

We have no legally binding definition of corruption and as a result Dube will remain a free man no matter what vehement expletives the impoverished members he stole from mutter into their gruel.

When copying without improving leads to disaster…..

Britain from which we inherited our financial and education system does not have a constitution. It means that errors of legal codification cannot confound the financial system and the pound unlike the Zimbabwe dollar has existed without revaluation for centuries.

Notwithstanding this major difference between us and Britain, a constitution which necessitates the need for codification of all financial laws and rights, we have blindly walked into the British financial systems we inherited at independence without much thought regarding their applicability to our circumstances.

In any case Britain is a very bad example of a country to emulate; it has been in economic decline since World War II with its manufacturing industry melting down in the same way that Zimbabwe’s has melted, albeit more slowly, with no sign of reprieve in sight.

On the other hand, the financial engine that Roosevelt built with the New Deal made America
the biggest economy in the world. Such has been America’s financial development since World War II; it is difficult to imagine that at one time America and Argentina were comparable economically.

There are disturbing similarities between Argentina and Zimbabwe, overzealous misguided patriotism underpinned by empty rhetoric, the glorification of land and farming and its rustic aristocracy, the dominance of the military in politics and the economy and enmity with Britain over the Falklands (Ours is over the land issues).

When the centre collapses, things fall apart…..

I read with some interest, the fact that in her policy statement, the new acting reserve bank governor now prohibits directors of banks from borrowing from banks on whose board they sit.

It would be amusing, if it were not tragic to note that this statement comes in the wake of at least one bank failure every year over the last decade, all of them caused by non-performing loans, some of them, if not most of them to directors.

One is left wondering how effective this belated policy statement is, given that the reserve bank is not parliament and there are no penalties for such a transgression anyway. Are we as a country looking to the reserve bank monetary policy statements to be a substitute for sound financial law?

How amazing that Gono in all his eloquence and grandiose grandstanding never mentioned something as obvious as that. Are we seriously expecting crooks to heed this call without any law properly codifying what is and what is not a crime and what punishment is prescribed
for what crime?

The greatest indictment of our Reserve Bank comes from the abandonment of the Zimbabwean dollar, itself the most vehement symbol of our value system and sovereignty.

To abandon the Zimbabwe dollar was an acknowledgement that our national financial value system in which the Reserve Bank of Zimbabwe sits at the nerve centre as the steward and custodian was thoroughly compromised and incapable of adding value to the life of the common man.

One does not need to uphold Munyaradzi Kereke’s bizarre accusations against the former reserve bank governor, strange as that accusation may seem to come to that conclusion

The Reserve Bank of Zimbabwe, it now emerges mysteriously created a liability of $1.35 billion which the honourable Chinamasa now wants the government to take over without a forensic audit, Munyaradzi Kereke’s accusations notwithstanding.

Put in another way, what the honourable Chinamasa is proposing to do is to take nearly two years’ salary from every Zimbabwean ‘s pocket, in a country where National GDP is $600 without explaining how this liability was created and who benefited from the creation of that liability.

When a whole government cannot write a promissory note (for that is what money is!) that the common man can accept as legal tender, then it’s time to accept that as a nation we have failed ourselves miserably and the only place worth going to is the drawing board.

A looter continua

Even more interesting is the case of the hapless Insurance and Pension Commission. In 2009 when the country dollarized we watched in amazement as insurance and pensions money was looted with impunity by those in position to do so.

Tendai Biti with the usual pomp and bluster promised a full investigation and retribution except that the heavily conflicted Elisha Mushayakarara board could not have been expected to investigate itself, something so obvious, it boggles the mind how the minister missed it.

One just needs to go to the website of the commission to get a glimpse into how our insurance and pensions industry are operating post –dollarization.

In their “Fourth quarter report on self-Administered Funds” in 2012, on page 10 ,the Insurance and Pensions Commission publish the following figures under the table 4 – Income and Expenditure per standalone fund for the 4th quarter :

Fund            Contributions received ($000)       Expenses paid ($000)  Expenses/Contributions

Catering Pension Fund      2 368                        1 815                             77%
Clothing Pension Fund      1 661                        1 135                             68%
Construction Industries    4 560                        2 052                             45%

The significance of these numbers, I hope is not lost on the literate Zimbabwean population. For every dollar contributed to the Catering Pension Fund, 77 cents goes to pay expenses. In other words to pay the Cuthbert Dube like salaries of the officers of the Fund.

In other words, the looting of the insurance and pension industries continues and the Insurance and Pensions Commission knows about it and is doing nothing about it.

It is not only the banking industry which has been compromised by a corrupt value system, our Insurance and Pensions systems are incapable of delivering value to the member in the long term.

No investment genius can replace the 77% that the Catering Pension Fund takes from the member as expenses. One shudders to think that the Catering Pension Fund at one time shared a chairman with the biggest financial services organization in the country.

When Economic Recovery Remains an Illusion…..

Zimbabwe is an agricultural country and one would have expected that we have a grasp of the agricultural cycle, nay the economic cycle. You plant a crop. You weed and get rid of parasites. You harvest. You store wealth in the granary.

You especially understand that the back breaking work and real value is not in planting, however onerous, not in the harvesting however difficult, the real back breaking value is in weeding, kusakura, nekudzinga horwe nemakudo.

If you do not weed, your crop will be overrun by weeds or be eaten by parasites and you
will not harvest. And yet we allow weeds, ala Cuthbert Dube to take over the crop, to siphon the better part of a medical aid’s contributions with impunity.

What harvest are we expecting from a field overgrown with weeds?

A farmer who does not understand the importance of the family granary (“dura”) in the economic value chain is not worth his salt. It is for this reason that historically, primitive wars targeted the wealth store, the granary and the Shona, an agricultural people built in stone or chose mountain hide-outs.

It would seem therefore that the Zimbabwe of today has forgotten the back-breaking need to weed diligently and the strategic value of the family wealth store the granary – or in modern parlance the need for rigorous governance and strategic capital accumulation in the form of a viable financial services industry.

It is against this background that one looks at ZIMASSET with a pinch of salt. When a country’s economic blue print fails to acknowledge the obvious, to recognize the centrality and vital role of the financial services industry in pricing risk and driving the national economic value system, is it any wonder that we have no consistent financial value system?

A simplified economic model

An economy can be very complicated but there are simple models that one can use to check whether we have a sound economy or not.

First we have national savings, the granary, dura renyika represented by the insurance and pensions industries mostly. Do we have structures that maximize national savings? Clearly the answer is no.

Even the little that is being saved is being looted, as can be seen with the information from the Insurance and Pensions commission, and the leading looters in the pensions industry it would seem are the Catering Pension Fund, chaired by a former Harare mayor and chairman of the biggest financial services company in the country.

What is not looted is being invested speculatively, not in production. Kange mbewu kurima kwandikona!. We are not investing any capital into production. An economy is driven by cycles of investing capital in production and harvesting the resulting return, in the same way that agriculture is driven by planting, weeding and harvesting.

Zimbabwe can accumulate some home grown capital, but the Minister of Finance is more interested in engaging the indifferent international banks and financiers than appointing a competent board at the Insurance and Pensions Commission or putting into place laws that protect people’s medical aid, insurance and pensions money from the Cuthbert Dubes of this world.

Indeed the zeal with which the minister is trying to regularise the Reserve Bank debt contrasts very sharply with the lackadaisical attitude towards the rebuilding of Zimbabwe’s battered savings and capital formation.

Biti’s self-serving noises about financial illiteracy in the government ring true but are undermined by his failure to see through the investigation into the dollarization of the insurance and pensions industry and his acceptance of the mandate to defend Gono given the $1.35 billion Reserve Bank debt which we all thought he knows nothing about.

Zimbabweans are farmers; they should understand weeding better than most, they should know the back breaking work that is weeding, kusakura nekudzinga horwe nemakudo!.

It is therefore astonishing that they have a lackadaisical attitude towards governance, efficiency and financial soundness and savings and capital formation.

Good governance and financial soundness are the backbone of any sound institution and no economy can grow without capital.

If Zimbabwean will not invest in their own economy, nobody will.

Stealing from ourselves

An economy is the common money that we are allowing the Cuthbert Dubes of this world to fleece and abuse with impunity. It is the common man who buys medical aid or insurance or saving for his pension and it is this process which makes capital available for investment in production so that there is a long term sustainable return underpinned by a sound economy.

The economy is the output facilitated by the injection of this capital into production of useful goods that create jobs and increase the savings pool. Zimbabwe’s long term savers are currently trapped in a speculative bubble, speculative investment underpinned by a financially unsound economic bubble.

Expressing outrage at Dube’s salary however merited does nothing to address the structural weakness of the entire Zimbabwean financial services industry

By Mukosi Tambu- Tambu is a financial services expert

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