(TALKZIMBABWE) Interview: Gono on Farm Mechanisation Audit

Interview: Gono on Farm Mechanisation Audit
Sun, 15 Mar 2009 21:31:00 +0000

BELOW is the full transcript of Dr. Gideon Gono's interview with the Sunday Mail's Political Editor, Munyaradzi Huni. Dr. Gono talks about the Anti Corruption Commission which is auditing the Farm Mechanisation Program and the visit of an IMF team to Zimbabwe, among other issues.

MH: Dr Gono, let’s get straight to the point. A lot is being said about the Farm Mechanisation Programme, with some saying that the RBZ is currently under probe by the Anti-Corruption Commission. What is going on?

GG: Firstly, I want to once again thank you for this opportunity to interface with your readers and the public in general. Indeed, it is true that a lot of things are being said about the Reserve Bank and Dr Gono in particular, but of course, as you will appreciate, I am bound by the ethics of my profession, as well as the Oath of Confidentiality not to publicly respond to every allegation as would be flying about in the rumour mill.

Coming to the specific issue you raise about the Farm Mechanisation Programme, please take note that on the 23rd of February 2009 the Reserve Bank gave notice to the public that it was embarking on a comprehensive nationwide audit of the Farm Mechanisation Programme.

Please take note that this audit has not come about as an imposition from external quarters, but a routine logical exercise the Reserve Bank voluntarily embarked upon as part of the annual audits to its activities and books of accounts.

The macro-size and national nature of this programme has also naturally impelled the RBZ to self-introspect and to follow through on all beneficiaries so as to certify that this programme is serving the productive purpose for which it was introduced.

In terms of how the audit is progressing, I am very pleased to report that our teams are making headway in the follow-ups, covering all provinces and districts in the country. As I did announce to the nation on the launch of this audit, the Reserve Bank is working closely with the Anti-Corruption Commission, together with all the other relevant law enforcement arms of Government as and when their expertise is required.

MH: We also hear that one of your senior members of staff ran away soon after your announcement of the audit. Can you shed light on this?

This audit will not spare anyone found as having ran in contravention of the normal central bank procurement/internal risk management and audit control systems. This impartiality shall apply to any other stakeholder out there who would have violated either the law or other procedural requirements in the national programmes the Reserve Bank implemented.

In respect of the alleged running away of the Reserve Bank official, this is an internal matter that our Human Resources Division is dealing with, making reference to facts on the ground as the said official had actually applied for leave which had been granted at the time he is alleged to have run away.

MH: But, Dr Gono, some are saying the audit process is targeting the "small fish" leaving the "big fish" out there. What is your comment?

GG: This audit and verification exercise is being done with the greatest level of impartiality and no big fish or small fish will evade the net where irregularities are found.

MH: Seeing the irregularities that are being unearthed now, do you think it was wise for the central bank to embark on the Farm Mechanisation Programme?

GG: In any programme that is of a pioneering nature there are bound to be combinations of internal constraints from non-believers; technical hitches, characteristic of any learning curve process and genuine implementation constraints emanating from limited resources, among several other unexpected eventualities.

It is precisely for this reason that the Reserve Bank saw it fit to put the Farm Mechanisation Programme under the microscope of an intense audit and follow-up process. The identification of one or two anomalies does not and should not necessarily be construed to negate the broad virtues of the programme.

Certainly, the bulk of farmers who prior to the programme were literally scraping their pieces of land with bare hands are now actively productive, thanks to the Mechanisation Programme.

We must not run into the pitfall of mixing the adverse effects of droughts, inadequate skills and unavailability of critical inputs as they hamper agriculture with the evaluation of the Farm Mechanisation Programme. We must therefore be able to isolate these genuine negatives and constraints to farmers in a manner that recognises that with vast tracts of land, no farmer can dream to be productive if he or she does not have physical tillage capacity, among other logistical requirements.

MH: Governor, could you clarify something here. Is the audit targeting those who got farming equipment through irregular means only? How wide is the net?

GG: You may be pleased to know that as monetary authorities, we are very happy with the progress so far on this audit and as a matter of fact, this weekend the audit team led by the RBZ will be conducting some recoveries in areas where under-utilisation or abuse of equipment has been noted and we will implement these recoveries with no apologies whatsoever as the original issuance was done with strict conditionalities on productivity.

It may be of interest to your readers that as Governor of the Reserve Bank, I have formally written to the Clerk of Parliament seeking an opportunity to carry out extensive workshops with legislators (both Lower and Upper Houses) to expose honourable members to the operations of the central bank over the past five years.

If granted, these workshops will cover full disclosure of all the foreign exchange the Reserve Bank handled between December 1 2003 and March 2009, covering which ministry or parastatal got what and where that money came from. Issues to do with the Mechanisation Programme, ASPEF and various other extraordinary measures that the central bank undertook will also be presented to honourable legislators. I am hopeful that Parliament will grant us this opportunity at their earliest possible convenience so that we do the needful.

My team and I therefore, have the clearest of conscience in respect of why, what, and how we did what we did over the past five years.

Exposing such matters to our legislators, unprecedented as the case would be, is in my view the highest level of transparency to the people of Zimbabwe.

MH: The 2008 general elections did come and go. We understand that the central bank also played a major role in ensuring that the elections could be held. Can you tell the nation how much was spent and how this was funded?

GG: Generally, the competent body to talk about electoral matters is the Zimbabwe Electoral Commission (ZEC). What I can say to you is that successful holding of elections requires that the whole array of logistical preparations be put in place, covering tents for the polling booths, voting inks, roads for accessibility of polling stations, ballot boxes, standby power generators, printing of ballot papers, vehicles for transportation of voting materials and polling officers, communication systems for the ZRP, among several other unavoidable requirements.

As the central bank and in fulfilment of our statutory mandate, we spent no less than US$88 million in foreign exchange to make the 2008 elections a reality.

All this money was spent at a time Zimbabwe was on its own and it is pleasing that our exporters, gold producers, tobacco producers and some FCA depositors came to the rescue of the nation.

So when we hear some quarters calling for the probe of Gono and his team, I just wish they knew what had to be done for this country to barely escape complete collapse in the face of the on-going sanctions. Fortunately, they say in strategy sincerity is subject to proof and my team and I are ready.

As I said earlier, all these matters will hopefully be laid before parliamentarians for the benefit of their constituencies and the nation at large.

MH: Coming to the current visit by the IMF, the World Bank and the African Development Bank, do you think Zimbabwe is going to receive funding, particularly given the recent published position by the USA government to prolong sanctions against Zimbabwe?

GG: Firstly, I want to say that it would be both unprocedural and premature for me to make or extrapolate directional or quantitative conclusions on the current visit by the trinity of multilateral institutions you mentioned in your question to me.

For those who may not know the procedures on how these vital multilateral institutions work, let me shed some modest light on one or two points.

Firstly on the IMF, every member is subjected to routine annual Article IV consultations which are primarily done to update the IMF system with a country’s latest policy decisions and intentions in the near future. These annual routine consultations are also done to exchange contemporary advisory notes and knowledge on the global economic and financial developments.

The current visit by the IMF is meant to do exactly this routine work. Typically what happens is that upon completion of their Article IV tour of duty, the IMF team would issue what is called a "Mission Concluding Statement" which would basically be a summarised Press release on their general findings. Upon return to their offices in Washington DC, the IMF team would prepare what is called a "Staff Report" which would present their detailed findings and recommendations to the IMF board on the way forward.

Preparation of the Staff Report normally takes two to three weeks. The Staff Report is then normally circulated to the IMF board for a gestation period of two weeks after which the board would sit to deliberate on it. In the wisdom of the IMF board, they would then decide on the way forward.

In the case of Zimbabwe, it is important to note that we would need to do a lot in terms of fully repaying what we owe the IMF, the World Bank and the African Development Bank. We would also need to closely restore good financial relations with the Paris Club of lenders and all the other donors and financiers whom we owe money.

Quite clearly, these procedural matters, as well as the need for a demonstrable track record for consistent and comprehensive macroeconomic policies, should be pivotal ingredients in shaping our collective expectations matrix on the current consultations and the expected outcomes.

We should, therefore, as a nation be very careful not to inadvertently or overzealously inflate misinformed expectations, as this may needlessly damage the current positive mood for a better Zimbabwe. A robust future has to emerge through deeper co-operation among us as Zimbabweans as we work in harmony with each other to steadfastly implement coherent and internally consistent sets of macroeconomic policies.

Quite surely, as a country, like any other developing nation, we cannot go it alone. We need the material, financial and technical assistance from the community of global nations to bridge our short to medium-term resource gaps to support our developmental programmes.

It is for this reason that as monetary authorities we welcome the presence of the IMF, the World Bank and the African Development Bank in our country, giving us the opportunity to deliberate on the current and future state of our economy and Government’s policy intentions.

I am positive that these deliberations would yield favourable results at some stage in the future. How much and when is, however, not a call I am competent to make.

MH: Governor, you talk about Zimbabwe owing these multilateral institutions, the Paris Club and other financiers. Can you quantify how much we owe to these lenders?

GG: Our total stock of arrears as at the end of 2008 was about US$4 billion. About US$1,1 billion to the multilateral institutions like the IMF, WB and the African Development Bank. We owe the Paris Club another US$1,1 billion while to the non-Paris Club we owe about US$69 million while our parastatals under the long-term debt and suppliers’ credit owe about US$1,1 billion also. We also have recent obligations for importing grain that amount to around US$220 million.

MH: Dr Gono, still on foreign currency but back home, some exporters are crying foul, accusing you personally for "killing" them through the 7,5 percent "surrender" level. What do you have to say about this?

GG: Firstly, I want to agree that the so-called "surrender" ratio is an inevitable explicit tax to exporters.

Secondly, I, however, want to underscore a few more points around this issue. On this, the first point I want to make is that as a nation, we must always analyse our present circumstances in context to our historical past and the distance we have covered in the journey of reforming our economic policies. As far back as 2002, well before I became Governor, the so-called surrender ratios were as high as 50%. Those who keep records will attest that in June 2001, this ratio was 40%, which was increased to 50% by June 2002 by those that were running the central bank’s affairs at that time.

When I came into office on December 1 2003, what I have committed to doing and which I have done is to progressively reduce this surrender ratio from the 50% to 45% to 40%, to 35%, to 30%, to 25%, to 15% and now down to 7,5%. Quite clearly, it should be apparent to any fair-minded person that considerable efforts have been made to meet the requirements of exporters.

It is unfortunate that almost just like the case with kids who sometimes become hysterical in the presence of visitors in the house, some of our exporters represent incomplete stories to visitors or to new decision-makers, without honestly acknowledging the truth about where we would have come from in progressive policy reforms.

The second and perhaps more fundamental point I want to make is that Zimbabwe is under sanctions and until there is assistance through direct resource injections from external sources, there is very limited room for Government to raise strategic reserves for the country. Yes, fiscal revenues are being raised in foreign exchange, but the fact again is that this same national budget is programmed to run a deficit, meaning no scope for reserves accumulation.

It is for this reason that the central bank has no choice but to maintain these upfront sales ratios for now, whilst other efforts are being pursued.

I want to also mention that these policy positions are being implemented in line with the legitimate statutes as espoused in the country’s Exchange Control Act which empowers the Reserve Bank to make such determinations, among several other Exchange Control requirements.

MH: Governor, we also hear that the Reserve Bank is so broke that it cannot pay salaries for its workforce. Is the lender of the last resort broke, Governor?

GG: Stakeholders must appreciate that as a central bank, there is an intrinsic obligation that is imposed on us which is that of not doing things that would destabilise the civil service or the entire national labour market.

During the formative stages of this multiple currency system, there is, therefore, need for the central bank to synchronise its remuneration systems with the rest of the labour market so as to avoid the danger of inadvertently setting in motion hazardous demonstration/signalling effects to the wider economy in respect of salaries and wage levels.

So, yes, we are hearing these wild allegations, but there are much more deeper strategic considerations at play than what meets the eye or reaches the ear.

I must, however, emphasise that the current refocusing of the activities of the central bank will naturally bring about the inevitable need to lay off some of our now excess staff who would not have managed to secure alternative placements in other arms of Government.

But that is a bridge we will cross once we finish current internal processes through the board.

--Sunday Mail