Zimbabwe bond notes- counting the cost of a bad name

Worldwide, central banks are an exercise in conservatism and, in a good way, tedium. Central banks make the extra effort to be boring. You would think, when they look for governors, they go out and just pick out the most boring nerd in the crowd and give them the job.

In contrast, we had a central bank that was all rock’n’roll. Over a bloody few years, it ran around the banking sector with a hatchet. Workers turned up at their banks on payday to see an RBZ foreclosure notice pasted on shuttered doors. Confidence in banks has never returned since.

And so, this week, as Mangudya announced the arrival of bond notes, the latest in a string of desperate government measures to deal with a liquidity crisis.  The reaction from the public, like in 2014, was predictable. Bearer cheques all over again! Grief all over social media, politicians telling people to run for the hills, and economists yet again predicting doom.

Again, as he did back in 2014, Mangudya was making some plausible arguments. He answered reporters’ questions openly. This was a crisis, he suggested, and something had to be done while we worked on fixing the underlying issues.

Mangudya used the word “dysfunctional” to describe a multicurrency system that had looked so successful political parties fought to be credited for it. The economy, the governor said, was suffering from the dominance of the US dollar in the market.

Mangudya urged “education and awareness” campaigns to encourage adoption of the new measures and to get people using electronic money. But, without decisions that actually restore the economy, no amount of PR can restore public trust. To use plastic money is to keep money in the bank, but the scars of the hatchet period are still fresh.

The lack of public trust in the RBZ is a reflection of the distrust Zimbabweans have for state institutions. Few trust government to do the right thing, a fact Finance Minister Patrick Chinamasa has alluded to on several occasions. Zimbabweans live in a state of perpetual panic. There is always that feeling of a new crisis around the corner.

There is that fear that someone can say the magic words “with immediate effect” and all their savings will vanish.  Who can forget how pensions, insurance policies and life savings vanished with the words “with immediate effect” as the Zimdollar was ditched overnight?

Nobody is reintroducing the Zimdollar, of course. Apart from the occasional ZBC-grade economic analyst, nobody in government wants the Zimdollar back. Not Finance Minister Chinamasa, and certainly not Mangudya himself. And yet, despite Mangudya’s best efforts, the public just refuses to believe anything he says.

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