Institute for War and Peace Reporting | Giving Voice, Driving Change

End of Road for Reserve Bank Governor?

Gono likely to either resign or face the sack after his withering criticism of the president’s price-slashing move.
By Norman Chitapi
Reserve Bank governor Gideon Gono may not be in his post for much longer after apparently falling out with his patron, President Robert Mugabe.

In a withering attack on the government’s June 26 decision to slash prices of basic goods by 50 per cent, Gono publicly warned last week of a boomerang effect, with companies shutting down because of losses.

He painted a grim future of empty shops “leading us to needlessly draw spears against each other” as people run out of basic necessities.

Mugabe has so far not commented on the statement by Gono, who is also the president’s personal banker. However, it is the first direct attack by a senior government official on Mugabe’s policies. And analysts say Gono’s remarks mean he is unlikely to remain in government much longer.

“We are seeing the beginning of the end for Gono’s roadshow,” said an official from the pressure group Crisis Coalition of Zimbabwe in Harare this week. The official spoke in his personal capacity and refused to be named, lest his stance be confused with that of the coalition.

“Gono’s options are very limited indeed,” said the official. “He can either resign or stay on and be fired. Mugabe and his colleagues are concerned with political survival. An economic recovery in the near future, which is very unlikely, would for them be only a bonus.”

When Gono took over in December 2003 as governor of the Reserve Bank of Zimbabwe, he famously declared “failure is not an option” when questioned about his capacity to resolve the country’s seemingly intractable problems. Last week, he all but accused Mugabe’s government of stabbing him in the back when it launched a blitz on businesses for alleged “profiteering”.

The Crisis Coalition official said Gono felt gravely betrayed by the government after he came in “as the knight in shining armour” to get the country out of an eight-year downward spiral.

When Mugabe appointed Gono as Reserve Bank governor in 2003, he also attacked Gomo’s precedessor, Leonard Tsumba, for following textbook economics by refusing to print money as and when it was needed. Mugabe said he wanted somebody who understood the country’s unique situation in the face of western sanctions which he claimed were being orchestrated by the former colonial power, Britain.

Gono had so far been complying with Mugabe’s brand of economics, but the latest crisis has seen battle lines drawn between himself and his patron.

Gono said attacks on businesses and blanket price controls imposed by government on June 26 and enforced by state security agencies were “ruinous”.

“It is critical that urgent steps be taken to deal with the supply side imperatives without which, or failure of which, will leave the country in a worse off situation,” said Gono in a letter addressed to Mugabe, which was leaked to the press.

He accused government of not having a plan of how to maintain production at the prices it was forcing businessmen to maintain. “We need to define clearly at what point we will exit from the current blitz,” he said.

A senior ZANU-PF official opposed to Mugabe’s latest assault on business said Gono and Mugabe had never before been so sharply divided.

“Gono has been Mugabe’s personal banker and financial advisor for many years - since he was chief executive officer at the Commercial Bank of Zimbabwe,” said the official, who asked to remain anonymous. “He is perhaps the only person who knows and fully understands the nature of Mugabe’s finances, but now they are sharply divided on national policy.”

If Mugabe fires Gono, he faces a backlash from his colleagues in the Southern African Development Community - however, that is unlikely to stop him, continued the official.

“In terms of national policy, they are worlds apart. The time has almost come for them to part ways if Gono wants to save some modicum of credibility as a professional,” he said. “In political terms, he will have to look for sanctuary in one of the factions ¬- either in the divided opposition or those in ZANU-PF who believe in the efficacy of his policy recommendations.”

ZANU-PF is divided into three major factions. One supports Mugabe’s sole candidature in the presidential election next year; the other two are fighting each other to replace the party’s 83-year-old leader. Gono is said to be aligned to the faction led by Politburo member and Rural Housing Minister Emmerson Mnangagwa, against that led by retired army commander General Solomon Mujuru, the husband of Vice-President Joice Mujuru. Both Mnangagwa and Mujuru accuse Mugabe of ruining their business interests.

The ZANU-PF politician said Gono had wanted to build his future political career on the back of a successful economic revival programme.

“Reducing inflation to a single digit as he had set out to do at the beginning would have been a good entry point [into politics],” he said. “This would have put him ahead of competition in ZANU-PF and in the [opposition] Movement for Democratic Change as well. Now he realises that his political ambitions are being ruined before he has made them public.”

Gono’s litany of complaints about the government, which were leaked to the public, could be an attempt to regain some credibility ahead of ZANU-PF’s special congress in December.

In his letter to Mugabe, Gono said there was need to respect private property and for policy consistency to attract foreign investment, which would generate much needed foreign currency. He attacked state-sanctioned land invasions, which he said disrupted the nation’s economic backbone, the commercial agricultural sector. It was a criticism he had been making publicly since 2005, five years after the land invasions began, and when most of the land had been parcelled out, either to government officials or to landless “war veterans”.

Gono also attacked government spending, the huge budget deficit and corruption, all of which frustrated the battle against inflation. He has long favoured a free exchange rate for the local currency, which is pegged at 250 Zimbabwe dollars, ZWD, to one US dollar. This is against the more realistic black market rate of more than 100,000 ZWD to one US dollar. Gono said government’s unrealistic rate had caused “pricing distortions and instability” in the market.

Over the past three weeks, police have arrested some 1,700 company representatives for failure to comply with its decree on prices. Shops have been looted while most fuel service stations are dry.

Opposition leaders and captains of industry have accused Mugabe of adopting populist policies to win over voters ahead of next year’s first joint presidential and parliamentary elections. The MDC has threatened to boycott the ballot if there are insufficient electoral law reforms to ensure free and fair voting.

The leader of the main faction of the MDC, Morgan Tsvangirai, called the price cuts an “election gimmick” to buy votes - but Mugabe sees the recent daily price increases as business’s attempt to engage in the politics of regime change.

Mugabe has in the past accused business of sponsoring the MDC. Now, analysts say, he has found an opportunity to hit them where it hurts most - the pocket. But, the analysts say, Mugabe might have shot himself in the foot, for the resulting shortages will hurt him and his party in the elections next year.

Norman Chitapi is the pseudonym of an IWPR journalist in Zimbabwe.