When financial illiteracy trips a President…..


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When one searches for the word “Zuma” on YouTube, there is a video which comes out on top. It is by far the most popular video of the South African President ever posted on YouTube with more than half a million views in less than a month.

The video has also made the rounds in cyber space through smart phone videos. The South African President is trying to say R939 300 600 and he says: “Nine hundred and thirty nine million, three hundred thousand and six thousand”.

One South African comments on the website that “Ah, this is how Nkandla ended up costing so much!”

Nkandla is the rural presidential home whose security upgrade is said to have cost hundreds of millions, figures that could easily trip the presidential tongue. If one puts one stone in my backyard, I would notice yet amazingly the President proclaims he knew nothing about such a huge project in his backyard.

Ditto Air Zimbabwe. The goings on at the national airline reminds one of the Coleman Andrews debacles in South Africa.

Between 1998 and 2001, Andrews pocketed a cool R232-million from the grateful and unsuspecting South African taxpayer for 20 months’ work as South African airways CEO.

That’s a cool US1.1 million a month. Even Cuthbert Dube’s greedy mouth would dribble with envy!

What had Andrews done to deserve so much in a land where the black majority is impoverished?

Well, actually nothing! Mr Andrews you see knew something that his employers did not and that is all it took for him to fleece his employers and the South African tax payer.

And he did it much more neatly and legally than our own hapless Cuthbert Dube, winner of dubious multiple international business awards.

The first thing that Andrews knew was that his employers had no grasp of either finance or numbers. He then proceeded to negotiate a generous profit share for himself, something his employers were happy to give since he peddled himself as a turnaround specialist and SAA was not exactly making the kind of profits expected of it.

The rest was easy. A combination of creative accounting and asset stripping saw Andrews home before his employers even blinked. Andrews sold anything that could be sold and accounted for this systematic plunder as “profits”, a situation that created fat bonuses for himself as a turnaround specialist.

Without a precise legal definition of how he was supposed to generate profits, SAA was forced to pay Coleman Andrews the profit-based bonuses it had contracted for. So much for Bantu education….

Gideon Gono’s “miracle” and the Zimbabwean false dawn…

Gideon Gono, the born again Christian governor of the Reserve Bank Zimbabwe who started his term with a miraculous “turnaround” of the Zimbabwean economy and ended it with a bizarre press conference with “miracle money” prophets Makandiwa and Angel is another case in point.

When he got appointed governor, he “tamed” inflation, arrested errant bankers and asset managers, tried to get asset managers to be regulated by him and many other things, a situation that led to the creation of the term “Gonomics” in praise of the bombastic governor, only for inflation to bounce back with even greater force in subsequent years.

But what many will never know is how he actually “tamed” inflation. That story may never be told in full and Zimbabwe risks a repeat of that episode. Those who claim to know, say Gono was an asset stripper just like Coleman Andrews and his target was the Zimbabwean Pensions and Insurance Industry.

It is alleged that by issuing Zimbabwe dollar denominated bonds which yielded much less than inflation, and forcing insurance companies and pension funds to buy, Gono systematically transferred money from insurance companies and pension funds into the coffers of the Reserve Bank of Zimbabwe. But such a dubious strategy can only work in the short term.

The Zimbabwean Insurance and Pensions Industry have been systematically looted to the ground while Gono moves on to the new role of Buhera senator. Thankfully his campaign to become the country’s finance minister failed.

His stewardship of the Zimbabwe dollar was so inept, even the two “miracle money” prophets saw an opportunity to imitate his brand of quackery, albeit with the more valuable US dollar.
Amazing that anyone can make the kind of allegations Kereke is making against Gono. If Gono’s Reserve Bank of Zimbabwe was so porous and lacking in controls and those allegations are even plausible, then I rest my case.

When failed politicians masquerade as economists…….

Tendai Biti is a man of great charisma and vision except when he is drowning in dark shadows of pain and disbelief or trying to “kiya kiya” a financially unsound economy

In between representing Gideon Gono in his case in the constitutional court, Biti finds the time to convene press conferences at which he not only masquerades as a great economist but he also is wont to use financial issues for politicking.

The government is full of economic illiterates, he ventures. This is the man who as finance minister failed to investigate Gono’s shenanigans at the Reserve Bank of Zimbabwe, failed to get Gono to account for the $1.35 billion which Chinamasa is now loading onto us and for good measure hypocritically set up a fake investigation into the dollarization of the insurance and pensions industries. What he succeeded in achieving in his tenure as finance Minister was to be-friend Gono enough to become his lawyer.

If Biti was a great economist, he would have long convened a press conference to talk about the looting of the Zimbabwean insurance and pensions industry at the time when he was the Minister of Finance, something which his client Gono might know a lot more about than he is letting on.

Biti goes further to say the economy needs $4 billion. This is the same Biti who thinks nothing of the looting of the Zimbabwean financial services industry, presumably because he has rich friends now belatedly realizing the need for capital. Great economists who understand the need for capital also understand the need for a financially sound financial services industry.

But Biti like Gono, indeed like Coleman Andrews, knows something that is slowly only dawning on the unsuspecting Zimbabwean public, which is that Zimbabwe’s financial laws are as porous as the proverbial sieve. Criminals routinely take advantage of the lack of a sound financial framework to loot.

Of gluttonous mayors and chairmen of multiple conflicted boards……

Spare a thought for the poor clients of one of the biggest insurance company in the country. Their Chairman was a Mayor when the same council allocated their insurance company municipal stands, so one hopes they do benefit from corruption.

Never mind the fact that he is also the Chairman of a large construction company which is probably set to fleece the poor policyholders by being awarded the inflated tender for construction of the said houses and Chairman of a Pension Fund where almost all of the contributions go to pay for “expenses” with nothing left for poor unsuspecting members.

Cheap money from the Post Office in Fourth Street…..

In the crisis days in 2008,when interest rates were capped, and the inflation was running rampant many would have noticed the booming forex trade in Fourth Street. Few would have imagined that a contributor to this undesirable boom was an insurance company which was borrowing billions cheaply from the post office and flogging them on the parallel market. It hard to imagine the connection between high street Zimbabwean finance and the black market.

When a Zimbabwean renaissance fizzles in a bubble of theft…

There is a sense of achievement, when a black man purchases an insurance company. In a country obsessed with empowerment and indigenization such as ours, we give each other high fives and pat each other on the back for a job well done.

It is sad when that entire venture was a ploy to steal from policyholders. It’s even sadder when scum like that are allowed to get away with it because our justice system does not have an adequate framework within which such crimes can be prosecuted.

There is a lot that is going wrong in Zimbabwe right now, but the biggest wrong is continuing to rely on a financial system that is not financially sound and the complete lack of corporate governance and financial controls.

The financial services industry is the life blood of any economy and when it does not function well, then the country goes into the equivalent of a cardiac arrest. Tinkering on the fringes is not going to fix a derailed train.

By Mukosi Tambu- Tambu is a financial services expert

(20 VIEWS)

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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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