Monetary statement:- A tale of two strange bedfellows

I was flattered when followers of my writings suggested that the latest monetary statement issued by the Reserve Bank of Zimbabwe bore a striking resemblance to my last instalment in this column of the Sunday News last June.

They queried the coincidence of it all but to be honest, that is all there is to it, just coincidence. I have not met Dr Gideon Gono in person and certainly did not represent my employers at this year's Winter Banking School.

That said, it should be clear, therefore, there is no way I could have known what he was planning to say ahead of the publication of his monetary statement.

In fact, there are many things in that monetary statement that I do not agree with. For instance, whereas the need for increased minimum capital requirements for banks is clear, setting the level at US$100 million was a bit of an overkill.

Banking sector reforms require a calm but firm approach that is free from drama and politics. To the extent that this is true, the setting of capital requirements must be guided by cold statistics and facts.

It will be difficult to defend the new minimum capital requirements considering that South Africa, itself a much stronger economy than us, set its capital threshold at US$34 million.

I insist that we needed a calm approach because it is now likely that elections will be held within the next 12 months and it is often the case that risk-averse foreign investors will put their investment decisions on ice until possibly six months after the elections.

Where will the US$100 million come from? Besides, Dr Gono has put up a spirited fight against the indigenisation of foreign owned banks premised on the view that the sector is sufficiently indigenised as is.

Now, will that defence argument hold if locally owned institutions get wiped out within the next 16 months?

Why was the Zambian two-tier capital requirement model not adopted? By the Governor's own admission, all things being held equal, his reign as governor will come to an end in about 16 months as well. What then will his successor inherit?

It has been argued that people are keeping money outside the banking system because of the "exorbitant charges" being levied by the banks. It is a convenient argument because someone must carry the can eventually.

What is closer to the truth, however, is that firstly, our people lost their Zimbabwe dollar balances in banks to the currency conversion of 2009 and to be fair, the governor alluded to this fact as well.

However, you may recall that in that same year,  Finance Minister, Tendai Biti, assured the nation that compensation would be made within a few months of his assuming office yet, to this flipping day we are still yet to be compensated. Trust is not something you can buy from the shop.

Secondly and a point left out of the monetary statement, the central bank owes many FCA holders a lot of money that was "used in the national interest". I will submit that if the Reserve Bank were a commercial bank it would have long been placed under curatorship. And so verily, verily I say unto you, it will be easier for a camel to go through a needle's eye than for any one to trust a banking system where money can disappear with neither trace nor recourse to anyone.

Thirdly and more tellingly, the money thought to be outside the banking system is not even in the country. It does not require a university graduate to understand that daily, upwards of 10 buses leave for South Africa carrying an average of 40 passengers.

Assuming that each passenger carries 2 000 rand on him per trip, the total "rand exports" amount to about 292 million rand annually. We all know that this is just about a conservative estimate.

The largest employer in the country is government and it defies logic how we expect civil servants to save something every month from their meagre resources.

We are being insincere when we choose not to understand why lending to individuals has "been rising exponentially from 8,6 percent of total credit in June 2011, to 18 percent in June 2012". An adult who attained 25 years of age in year 2000 is 37 years old today and probably has nothing to show for it.

It is such a painful waste. It is clear that people are borrowing simply because their current earnings cannot meet their daily obligations.

We all grew up with lofty expectations; a good job, big house, children in good schools, nice car and a beautiful virtuous wife on the left seat. We never signed up for this minimalistic existence.

Dr Gono and Minister Biti have been careful not to contradict each other in public which is a good thing to see. Economics students will tell you that a nation's fiscal and monetary policies must push or pull in the same direction if a sustained national economic growth rate is to be achieved.

They will therefore be forgiven to think that this understanding ends in class because for some time now the two men have spoken passionately about restoring the RBZ's lender of last resort function and yet their feet have remained rooted behind the starting line they drew in 2008.

They share the same bedroom in public but in reality one of them sleeps on the floor. If that is not so then they are certainly strange bed fellows.

Were we in an era of mutual trust, it would have been a viable option to ask all banking players to contribute towards the lender of last resort facility in proportion to their  balance sheet sizes or such other agreed formula.

It is nigh impossible for that to happen now given the scramble for survival that will soon engulf the banking sector.

There are many reasons why the new capital requirement may not see the light of day in its current form.

Bank mergers are likely to result in massive lay-offs and politicians are not known to want this to happen ahead of an election. What this means is that this matter may in fact, be decided upon outside the economic boardrooms.

Also, a corporate merger is not a romantic process and cannot be consummated in the little time that the RBZ has given.

Government for instance, is broke and it is difficult to fathom how it will handle the capitalisation of the banks it owns. US$100 million is certainly not small change considering that we could not raise the US$20 million needed for the ill-fated bail-out fund for Bulawayo industries.

The problem with our academic system is that it has created men and women who can put together brilliant action plans but almost always coming short on implementation.

Gono calls it policy inconsistencies but in truth it is just that we are mediocre. We deploy goalkeepers as strikers and our star players are relegated to mere spectators.

It was Robert Elliot who said that "It's important not to run on the fast track, but on YOUR track". To do this successfully you will need to know which one is your track and which direction will lead you towards your goal.

It has not helped us to see that both our governor and finance minister have remained on the starting line while facing opposite directions. No matter how fast they choose to run they will still meet exactly where they started - on the starting line.