I HAVE been following developments around the proposed reforms of the Reserve Bank of Zimbabwe, the country’s central bank. Having spent a few years at a financial regulator, the subject of the central bank is one that interests me greatly. It is also a subject that often occupies me a lot in my day job at the university.
The Reserve Bank of Zimbabwe Bill, i.e. the proposed law to reform the central bank, was passed by the House of Assembly on Wednesday. This was, according to the reports, after a last minute deal between the main political parties that form the government of national unity, i.e. Zanu PF and the MDC. Apparently, the Bill had been ‘watered down’ although it is not at present quite clear how much ‘water’ was added to dilute the effect of the original Bill.
Whilst the passage of the Bill by the House of Assembly is a significant step, it is by no means the end of the legislative process. In the life cycle of a Bill, it now has to go to the Senate after which it will have to be signed into law by the President, a consequence of the executive powers that he holds under the constitution. Masimba acho akawanda (The President has very wide powers).
But given that the Bill is a product of Cabinet deliberations, of which President Mugabe is the chair, one would imagine that he will not have problems with it.
But why has there has been inter-party tension over the Bill, as reported in the media, given that it is essentially a product of Cabinet discussions and consensus meaning that both Zanu PF and the two MDCs have agreed on it at the highest levels?
Could it be that this is an indication of Parliament (in this case the House of Assembly) showing its independence from the Executive (cabinet) and therefore flexing its muscle to scrutinise every bill before it is passed into law? If that is so, then there is much to be commended because that is exactly what citizens expect Parliament to do.
End of ‘Outstanding Issues’?
Yet somehow, I do not think it is some new found independence on the part of Parliament that is behind this challenge. Instead, the Bill has become a factor in the negotiation of that old and notorious ‘outstanding factor’, i.e. the matter of Governor Gono’s position at the summit of the RBZ.
It is a plain fact that the position of the RBZ Governor has been one of the most contentious issues between the MDC and Zanu PF since the signing of the Global Political Agreement (GPA) in September 2008. The MDC does not like Gono. But Zanu PF likes him. The MDC’s efforts to relieve Gono of his position have been in vain. The gentleman continues to enjoy the pleasures of his station courtesy of Zanu PF’s religious backing.
The Bill represents the MDC’s attempt to gain some foothold in its tussle with Zanu PF over this ‘outstanding issue’. Now that the MDC seems to have had its way in respect of the Bill, albeit having to accept some ‘watering down’, what effect does this have on the ‘outstanding issue’ of Governor Gono’s position?
To my mind, the MDC have accepted that ‘’Your Governor’ will not be going anywhere yet. He is there to stay, a semi-permanent fixture at that grand building along Samora Machel Street.
On the other hand, Zanu PF is saying, ‘Look guys, tabvuma wani kuti mudzore masimba ake, Chamuchada chii? (We have accepted your Bill which reduces Gono’s powers. What else do you want?).
Zanu PF were never going to accept the humiliation of being seen to be climbing down which would be the case if they were to agree to Gono’s exit at this stage. So this seems to me to be the best that the MDC have accepted they can get as far as this ‘outstanding issue’ is concerned.
With the Governor’s office now firmly under the control of the Minister of Finance, room for Gono to dabble in quasi-fiscal activities will now be severely circumscribed.
The only possibility would be that if the Governor is a man who truly believes in and values his professional integrity and personal dignity, there is no point of him staying in a position where as Governor he has become little more than a titular head of the central bank.
Having enjoyed the pleasures of exercising so much power in the last six years, all of which he justified on the basis of the law, the reduction in his powers represents a real smack in the face. Munhu anenyadzi anotuta twake oenda (Anyone who has pride and dignity will not stay longer). But plainly, that is like thinking the desert will suddenly transform into a tropical rainforest. The man is likely to stay on.
It is likely that when Comrade Zuma comes to town, Zanu PF’s position will be that the RBZ Governorship is no longer an ‘outstanding issue’. Comrade Zuma is then likely to turn to the MDC and say, ‘Boys, why don’t you accept and move on to other things? Inga vabvuma wani? (They have accepted to limit his powers, haven’t they?). And that will be the end of the matter as an ‘outstanding issue’. But it is unlikely to be the end of the tensions around the central bank.
All this, of course, is very regrettable because it detracts from an otherwise noble mission to regularise relations between the central bank as the monetary authority and the ministry of finance (treasury) as the fiscal authority. I cannot possibly see how a country in which the fiscal and monetary authorities that are at loggerheads can succeed in its mission to reconstruct the economy.
A government with parties struggling for power, and therefore fighting over the key sources of power, cannot possibly find long lasting solutions because at every turn they are keen to outdo each other as opposed to formulating national solutions.
The politicisation of the matter has compromised the central equation that should define matters at the country’s central bank. It is regrettable because it adversely affects the critical equation that is necessary in the work of the central bank and its relations with those who appoint it. This equation consists of two aspects: independence and accountability of the central bank.
Independence
The independence aspect is essential for the professional and efficient execution of the bank’s mandate. Ideally, the power to perform the central bank’s functions rests with the people. But they do not have the expertise to do it, so they elect representatives (politicians) to Parliament. The representatives do not necessarily have the expertise either, so they appoint an authority to do it on their behalf and consequently, on behalf of the people. That authority, which is set up under a law made by Parliament, is the central bank.
For the job to be done properly, the politicians ideally acknowledge that they need to confer independence to the central bank. This allows the experts to do the job efficiently outside party political interests, which are often limited, partisan and populist. If politicians chose to do it themselves or if they interfered too much, the risk is that there would be too many populist policies that would not properly deal with the task at hand. That is why the independence of the RBZ must be maintained at all costs.
Some people have argued, wrongly in my view, that the RBZ engaged in quasi-fiscal activities and behaved recklessly because it was too independent. This misses the point. It is precisely the lack of independence that caused the RBZ to dabble in quasi-fiscal activities – it became difficult to separate the RBZ from the government or indeed, to distinguish the RBZ from other political structures of the then ruling party.
The authors of the RBZ policies saw themselves as performing heroic exploits oblivious of the fact that they had become political agents. It became difficult to distinguish the expert central banker from the politician and the populist policies that followed proved in the end to be disastrous.
If anything, therefore, the current reforms of the central bank must have tried to enhance the independence of the RBZ so that never again should it be beholden to or pander to the whims of politicians or political interests. Sadly, the Bill seems to try to tackle the waywardness of the central bank by placing under yet more control of politicians.
Accountability
The other part of the equation is of course ‘accountability’. Independence does not mean being unaccountable. You have to be accountable to those who appoint you, in this case, Parliament and the people. The trouble is that for the past six years it has seemed as if the Governor was only accountable to one authority, the office of the President.
The RBZ went beyond the remit set by the law because authors of its work thought they were performing a national service. Parliament itself did not do a good job of making the RBZ accountable and they let their electors down. Any reforms should have ensured that Parliament strengthens the tools it has to hold the RBZ accountable.
As things stand, the equation between independence and accountability is unlikely to balance. Haisi kubalancer. In the past six years, the central bank has been too dependent on the government of the day – pursuing populist policies and causing hyperinflationary effects. It has not been properly accountable for its actions because Parliament has been weak.
The pursuit of accountability should not undermine independence just as independence should not compromise accountability. There must be a balance. In all this, we have to remember that neither Biti nor Gono are permanent fixtures in Zimbabwe’s political and financial architecture. One day, they will depart but the institutions will and should outlive them.
Alex Magaisa is based at the Kent Law School, University of Kent. He can be contacted at wamagaisa@yahoo.co.uk