…President now fully in charge
THE predictable appointment of FBC Holdings chief executive John Mushayavanhu as the incoming Reserve Bank of Zimbabwe (RBZ) governor has completed President Emmerson Mnangagwa’s critical post-election deployments to fix the broken nation, especially the economy.
Having consolidated power and taken control of the levers of the state, Mnangagwa recently appointed a new cabinet and senior bureaucrats, securing a free rein to implement his policies, programmes and reforms in his last constitutional term.
New impetus is needed to revive the comatose economy and rescue some decent legacy from his messy and blotted record.
Mushayavanhu will take over from his namesake John Mangudya whose term expires on 30 April 2024. Mangudya has been re-assigned to the Mutapa Investment Fund, formerly the Sovereign Wealth Fund.
A quiet veteran banker who likes operating in the shadows, like the President himself, Mushayavanhu is Mnangagwa’s close business and personal associate for a long time.
They have worked together behind the scenes on private sector deals, Zanu PF business networks, including the formation of FBC which was initiated by the ruling party, and in the Democratic Republic of Congo (DRC) through the bank on which they were both directors for the Great Lakes country’s operation.
An insider told The NewsHawks Mushayavanhu is considered the final piece of the puzzle by Mnangagwa.
“As far as the President is concerned, Mushayavanhu is the best guy to run the central bank and monetary policy; offering new energy and direction. He is part of the bigger solution, the final piece of the puzzle in his team,” the insider said.
“Their business network is big and wide, and includes the Joshi family (Manharlal Chiunilal and Jayant Chiunilal Joshi) that Mnangagwa worked with at Zanu PF when he was still party treasurer and secretary for administration. Mushayavanhu worked with the Joshi family at the bank and on the Zuva Petroleum deal when it acquired assets worth over US$29 million from Masawara plc. Masawara had bought the assets from BP & Shell in Zimbabwe.
“So Mashayavanhu is part of the network, but he needs to forge good working relations with Finance minister Mthuli Ncube, his deputy Kudakwashe David Mnangagwa and permanent secretary George Guvamatanga. Mangudya struggled with that team.”
Mnangagwa’s record of economic management is not impressive. He has not changed anything meaningful since he took charge in 2017. More worryingly, he presided over the collapse of the Zanu PF business empire when he was party treasurer-general and secretary for administration.
That backdrop makes his new appointments, including that of Mushayavanhu, unlikely to change anything, especially without a political solution and successful international re-engagement.
Zanu PF business empire collapse
In 2004, a high-profile Zanu PF politburo committee appointed by the late former president Robert Mugabe to investigate the state of the party’s business empire learnt that its companies — supervised by Mnangagwa as administration secretary — were a shambles due to gross mismanagement and corruption.
A Zanu PF Report of the Committee on Party Investments, exclusively obtained at the time by the Zimbabwe Independent news editor, now The NewsHawks managing editor, revealed that the companies were riddled with managerial incompetence and corruption which prejudiced the ruling party of billions of dollars and assets.
The report said some of the companies had virtually collapsed, while others had not been audited for years and their financial accounts were a complete mess.
A ZW$650 million Tregers Holdings cheque for dividend declared on 18 February 2003 for the year ended 31 December 2002 could not be accounted for.
The report said it was “inconceivable” that Tregers, in which Zanu PF had 41.96% shareholding, managed to declare a ZW$1.2 billion dividend in four years when its annual turnover was about ZW$150 billion.
There were further queries over the murky investment of ZW$120 million in the portfolio investment company M&S Investments by Zanu PF’s wholly-owned investment arm, M&S Syndicate (Pvt) Ltd.
Zanu PF had interests in public and private companies held through M&S Syndicate (Pvt) Ltd. The ruling party has invested in Treger Holdings, Mike Appel, Catercraft, Fibrolite, closed last December, Zidlee, which failed to take over Delta in 1989 and now runs duty-free shops, Southern African Re-Insurance Company (Sare), Zidco Holdings and First Bank, whose Democratic Republic of Congo (DRC) investment collapsed.
Mnangagwa and Mushayavanhu were directors in the collapsed DRC investment.
Another company, NamZim, was “closed due to mismanagement and the property was looted by unknown people”, the report said.
Zanu PF also had interests in National Blankets, Woolworths and Ottawa Building, which were disposed of in unclear circumstances.
Furthermore, Zanu PF separately owns Jongwe Printing & Publishing Company, as well as Jongwe and Nyadzonya farms.
Some companies’ books, for instance those of Catercraft, had not been audited for at least four years and there have been no board meetings for two years.
Mnangagwa, who was interviewed twice by the probe committee because he holds sway over the party’s network of companies, confirmed the chaos in the businesses by admitting most of the companies have no records.
“He (Mnangagwa) said that in most of these arrangements there were no written agreements on the formation of the companies and most of these agreements were done verbally between parties,” the report said.
“Neither was there an agreement for payment of management fees to the Joshi brothers as these companies were operating as one.”
Mnangagwa, who sat on nearly all companies’ boards, supervised M& SSyndicate with Manharlal Chiunilal and Jayant Chiunilal Joshi. The two were linked to Zanu PF by the party’s external secretary Didymus Mutasa and former secretary-general, the late Edgar Tekere in 1979.
However, the Joshi brothers and Dipak Pandya fled the country in April shortly after the probe began in 2004. Several Zanu PF officials were quizzed about their escape.
Mutasa said at the time the three ran way from being arrested and were in regular contact with him. He said Jayant was believed to be in Dubai, while Manharlal was in Manchester, England.
Some of the Zanu PF investments such as in Bindura Nickel Mine were also unclear. Zanu PF had 23% equity in Bindura through the Reserve Bank of Zimbabwe.
Further inquiries into this investment were recommended. There are also fears that companies like Tregers could have externalised funds.
As a result, the report recommended that “police/law enforcement agents should go into further investigations in order establish any prejudice in terms of revenue to the party on its investments”.
More investigations were required into the shady M&S ZW$120 million investment, Fibrolite and Catercraft operations, the unaccounted for ZW$650 million Tregers dividend and other dividends declared without audited accounts, as well as Mike Appel’s dividend declarations.
The report said it is surprising Mike Appel declared a ZW$31 million dividend in 2003, but ZW$250 million that year. Sare and shelf companies like M&S Investments, Segmented Investments through which Zanu PF had a 27% interest in First Bank (now FBC), and Smoothnest Investments, Hutsonville and Amelia Properties, the report said, should also be further investigated.
There were also calls for the committee to find out if Zanu PF has interests in Africa Resources, Banco Nationale of Mozambique, DRC Bank and Shabanie and Mashaba Mines.
Mushayavanhu faces uphill task
Insiders say Mushayavanhu has his work cut out.
“The first thing is win the President’s confidence, which he already has. The second thing is win the confidence of Ncube, Kudakwashe Mnangagwa and Guvamatanga,” a source said.
“While the economy will record growth of around 4.8% this year and 3.5% next year, Mushayavanhu needs to focus on macro-economic stabilisation and transformational structural reforms.”
The perennial issue of currency reform and stability will be one of the biggest challenges he will face.
Local-currency inflation and exchange rate pressures have abated in recent months, following significant price increases and exchange rate depreciation in the second quarter of 2023, and volatility is still high.
“Will he go further than stabilising the foreign exchange market and lowering inflation through the tightening of liquidity conditions, which is what Mangudya is doing? What will he do to narrow the parallel foreign currency exchange market premium, which is above 30%, and lower inflation which remains high? The fiscal deficit, excluding quasi-fiscal operations (QFOs), is projected at 2.3% of GDP in 2023,” the source said.
“It will be important for Mushayavanhu to comprehensively address the RBZ’s quasi-fiscal operations; that remains imperative to mitigate liquidity pressures and thus re-anchor inflation expectations. He needs an enhanced liquidity management framework, including through the use of appropriate interest-bearing instruments by the RBZ to mop up excess liquidity.
“Second, the consolidated fiscal stance, including QFOs, should be aligned with the short-term stabilisation objectives. Third, there is an urgent need to accelerate the foreign exchange market reform, by allowing more flexibility in the official exchange rate through a more transparent and market-driven price discovery; removing the restrictions on the exchange rate at which banks, authorised dealers, and businesses can transact; and further minimising export surrender requirements.
“Structural reforms aimed at improving the business climate and reducing governance vulnerabilities are key for promoting sustained and inclusive growth and would bode well for supporting Zimbabwe’s development agenda.
“Will Mushayavanhu address the resolution of debt overhang, revenue mobilisation, expenditure control, financial supervision, debt management, economic governance, and macro-economic issues?”
Government under pressure
Zimbabwe is currently under pressure from the International Monetary Fund (IMF), World Bank and African Development Bank (AfDB) to address reforms and debt issues.
An IMF staff team led by Wojciech Maliszewski visited in Harare from 18–25 October to discuss recent economic developments and the economic outlook.
More recently, on 1 December, IMF director of the African department Abebe Aemro Selassie and the World Bank’s country director for Malawi, Tanzania, Zambia and Zimbabwe, Nathan Belete, were in Harare for meetings with Mnangagwa, Ncube and Mangudya, as well as other officials to discuss the economic situation, reforms and debt issues.