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Zim central bank governor among the worst in Africa as SARB’s Kganyago described as 'bold' – News24

Reserve Bank of Zimbabwe (RBZ) chief John Mangudya has been classified among the worst central bank governors, according to rankings by Global Finance magazine, in sharp contrast to South Africa’s Lesetja Kganyago. Picture: Gallo Images/Ziyaad Douglas

Reserve Bank of Zimbabwe (RBZ) chief John Mangudya has been classified among the worst central bank governors, according to rankings by Global Finance magazine, in sharp contrast to South Africa’s Lesetja Kganyago. Picture: Gallo Images/Ziyaad Douglas

  • Reserve Bank of Zimbabwe chief John Mangudya has been named among the worst central bank governors according to Global Finance magazine
  • The magazine, with input from analysts, economists and financial editors, annually grades the world’s leading central bankers based on a series of metrics, including the appropriate implementation of monetary policy.
  • SA Reserve Bank governor Lesetja Kganyago, was described by Global Finance as “bold” in responding to the economic shocks that have characterised the country’s economy.

Reserve Bank of Zimbabwe (RBZ) chief John Mangudya has been classified among the worst central bank governors, according to rankings by Global Finance magazine, in sharp contrast to South Africa’s Lesetja Kganyago who has a top ranking and has been described as a “bold” central banker.

Zimbabwe has faced sustained monetary and inflationary headwinds, chief among them a runaway exchange rate, cash shortages and plummeting public confidence in the banking sector. Mangudya has not had much progress in addressing the financial mayhem characterising Zimbabwe’s monetary sector.

Industry, business and manufacturing has also been hammered by the monetary mismatches obtaining in the economy, say business leaders.

“There is no confidence in the banking sector, inflation remains problematic and the exchange rate is far divorced from the parallel market despite advice from IMF for convergence. He cannot be among the best governors with the state of the economy and monetary sector,” a Zimbabwean CEO with a large manufacturing company told Fin24.

Global Finance gave the Zimbabwean central bank governor a score of C- for 2021, signifying one of the worst scores for the African continent and only below Namibia, Mauritania and Madagascar which have scores of D. In 2020, Mangudya had a D grading.

The globally respected magazine, with input from analysts, economists and financial editors, each year grades the world’s leading central bankers on a scale of A to F, based on a series of objective and subjective metrics, including the appropriate implementation of monetary policy.

According to Oxford Economics Africa “Zimbabwe headline inflation came in at 60.7% year on year in December, which means overall inflation averaged 143% in 2021”.

This illustrates the price hikes Zimbabweans have endured, a trend that has continued into the new year with life assurance companies hiking premiums, schools steeply raising fees and prices of medicines in pharmacies going up .

Mangudya has deferred the start of the 2022 foreign exchange auction market to 18 January, courting much criticism and speculation that Zimbabwe has run out of foreign currency to allocate local producers. According to central bank data, it allocated just about $2 billion to small scale and large-scale enterprises in 2021.

“The apex bank also wants commercial banks to help the recovery by encouraging their clients to invest in government securities. The bank has launched a regulatory sandbox framework to encourage innovations in the fintechs and further liberalized the operations of bureau de change to promote financial inclusion,” noted Global Finance in its report card for Mangudya.

On Wednesday Mangudya said he was going after currency manipulators in the pharmaceutical sector and in schools.

The poor performance of Zimbabwe’s reserve bank governor is in stark contrast to Kganyago, the SA Reserve Bank (SARB) governor described by Global Finance as “bold” in responding to the economic shocks that have characterised South Africa’s economy.

Kganyago is graded A- for 2021 for a man who has marshaled the banking sector to remain sound, liquid and well capitalized “despite grappling with bad debts and low” profits. “Five banks continue to dominate, accounting for 90% of assets.”

In November, the SARB raised its rate by 25 basis points to 3.75%, the first time since March a year earlier, a decision Kganyago “contends that while [it] might ignite short term pains, in the long run it is ideal for the economy”.

The other top ranked governors in Africa are A-graded Tarek Amer of Egypt and Morocco’s Abdellatif Jouahri. Rwanda’s John Rwangombwa had a B+ ranking, while Patrick Njoroge of Kenya was given a B grade.

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Biti throws toys out of the pram on Mthuli Ncube's global award – The Zimbabwe Mail

Tendai Biti and Mthuli Ncube

FINANCE minister Mthuli Ncube came under fire at the weekend after blowing his own trumpet following a controversial award that ranked him among Africa’s top five treasury bosses.

The award by a little known francophone magazine, Financial Afrik, baffled many critics, who queried how a minister who has been presiding over a hyperinflating economy could be included in the high-fliers’ league.

After the announcement, Ncube immediately took to Twitter, hailing the magazine for its “qualitative analysis of candidates”.

There were blowbacks by a string of experts, including ex-finance minister, Tendai Biti and leading economist, Tony Hawkins, who argued current levels of economic decay spoke louder than the award.

“I find those tweets (by Ncube) so disturbing,” said Biti, one of Zimbabwe’s most successful finance ministers who presided over the ministry during the inclusive government.

“They are pathological, sycophantic. Who blows his own trumpet? The magazine in question, from Senegal, is an innocuous little publication. More than that, it is a very skewered publication. The economy does not need a spokesperson; it speaks for itself. When the economy functions the citizen is happy, buoyant and aggressive. The average Zimbabwean is battered, bitter,” Biti added.

“Of all economic indices, there is one thing that doesn’t lie; it is the exchange rate. The exchange rate tells you whether the economy is performing well, whether the stewardship of the economy is in good hands. We have one of the worst exchange rates on the African continent,” added Biti.

“You have to have a value system. Humility is so important. You have to have ubuntu. There are those who judge people. We have newspapers that say ‘this is best minister’, let them do that. We have organisations that give awards to ministers, let them do that but you don’t speak. Now, you go pick an unknown publication and say ‘look at me’ I mean it’s really sick,” Biti told Standardbusiness.

Tony Hawkins, a leading economist and former economics lecturer at the University of Zimbabwe’s Graduate School of Management, said with the second highest annual inflation rate in the world and a string of unachieved targets, there was little that Ncube could celebrate for.

“If you look at his track record, first of all, the quantitative targets in the Transitional Stabilisation Programme (TSP) were not met,” noted Hawkins.

Ncube come up with TSP when he was appointed in 2018, before it was replaced with the National Development Strategy 1 last year.

“Secondly, since he has been minister of Finance, we have had the world’s second or third highest rate of inflation. We have moved from a very low rate of inflation to a very high rate,” said Hawkins.

“Thirdly, the value of the currency when he took over was theoretically 100 US cents, that is what the Zimbabwe dollar was worth. Today, it’s worth less than one US cent. We have seen a rise in poverty, we have seen a rise in unemployment so I think the guys who decided that his policies were working either didn’t know what they were talking about or think it’s probably the truth or were making premature judgements,” Hawkins told Standardbusiness.

In the past few months, while government spin doctors have scale up a campaign claiming that the economy has been on the mend, the cost of living has rocketed, reaching $73 000 for a family of six in December 2021, from
$58 000 previously.

In contrast, firms have failed to raise wages and salaries, citing the economic crisis.

Incomes now fall way below the cost of living.

On the parallel market, the Zimbabwe dollar has plummeted from about US1:$120 in January 2021, to more than US$1:$200.

Added Biti; “In terms of poverty levels in this country, 79% of our people are living in extreme poverty. Public service has collapsed, Look at the services in health. People are dying, there are no drugs or medicines”.

In his Twitter post, Ncube said: “I am very pleased to have been voted and ranked in the top five ministers of finance in Africa in 2021 by the French publication “Financial Afrik”. This is based on a popular vote and qualitative analysis of candidates, and considered by a jury. The list of the top five Finance Ministers ranked in Financial Afrik include those of Mauritania, Benin, Nigeria, Zimbabwe and DRC. These ministers were judged to have implemented transformative economic policies with results”. – The Standard

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US planning to sanction Zimbabwean companies road constructions and repairs – The Zimbabwe Mail

LOCAL banks have raised concerns over capitalisation demands by the Reserve Bank of Zimbabwe (RBZ) compelling the financial institutions and deposit-taking micro-finance

firms to meet their targets on a cash-to-near-cash basis.

According to international benchmarks, capital requirements are regulatory standards for banks that determine how much liquid capital (easily sold assets) they must keep on hand.

This is the criteria that the RBZ uses to decrease the risk of default or bank failure while ensuring that depositors have access to funds on a needs basis.

Some local banks and some small deposit-taking financial institutions have been battling to meet the stipulated minimum capital requirements due to several challenges.

Central bank regulations demand that large commercial and foreign banks (tier 1) should have a minimum capital of US$30 million, while merchant banks, building societies, development banks, finance and discount houses (tier 2) should have a minimum capital of US$20 million.

Smaller deposit-taking microfinance banks (tier 3) are required to have at least US$5 million capital.

The Zimbabwe Independent understands that the minimum capital requirements are now an industry-wide concern. Some financial institutions are petitioning the RBZ to consider other financing models
to meet the capitalisation targets.

Analysts pointed out that there are various non-cash models that can still be used in capitalisation although some financial institutions are battling to use those systems.

Several banks that spoke to the Independent on condition of anonymity said the cash-to-near-cash demands by the RBZ were not sustainable. They suggested that monetary authorities should consider capitalisation using assets like properties among other financial instruments.

A well placed banker said there was a need for the RBZ to take into account the current economic situation, which is volatile for a cash capitalisation model.

“We believe that until the economy has stabilised, it’s advisable for the RBZ to be considerate in its demands.

“Also any intention to increase the current minimum capital requirements will be ill advised. For instance, the demand on using monetary assets on capitalisation needs to be looked at again,” said the banker.

There are also fears in the market that a number of commercial and foreign banks have been struggling to meet deadlines due to various challenges but some have remained resilient in the face of the headwinds.

In an interview, Bankers Association of Zimbabwe (BAZ) president Ralph Watungwa said the majority of banks met the capitalisation targets and any engagement happening with the central bank was on an individual basis.

“I am not aware of discussions happening on the banking sector as a whole because the majority of banks have managed to achieve the targets. But there are some individual banks that are yet to meet the requirements,” he said.

The strategies pursued by banking institutions to comply with the new minimum capital requirements towards the end of 2021 were based on organic growth and capital injection by the shareholders.

Contacted for comment, RBZ governor John Mangudya promised to check with his bank supervision unit before issuing a response.

“I will check with our team in the bank supervision unit and revert to you,” Mangudya said.
He had not responded by the time of going to print.

According to the 2021 RBZ mid-term monetary policy review , the banking sector remained adequately capitalised, with an aggregate core capital of ZW$57,54 billion (US$533 million) as at June 30, 2021, an increase of 8,09% from ZW$53,18 billion (US$492 million) as at December 31, 2020.

The banking sector average capital adequacy and tier one ratios of 35,32% and 25,05% were above the regulatory minimum of 12% and 8%, respectively.

In line with the Monetary Policy Statement of August 2020, banking institutions submitted updated capital plans to the RBZ by June 30, 2021, which were reviewed for credibility.
RBZ established that banking institutions were making significant progress towards meeting the new minimum capital requirements which were effective December 31, 2021.

Zimbabwe currently has 13 commercial banks, five building societies, one savings bank, eight deposit-taking micro-finance institutions, two development financial institutions and 178 credit-only micro-finance institutions. – Zimbabwe Independent

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Zimbabwe picks foreign firm to collect taxes from e-commerce, crypto and content creators – News24

E-commerce, cryptocurrency transactions and content creators are among new businesses included into the tax bracket in Zimbabwe.

E-commerce, cryptocurrency transactions and content creators are among new businesses included into the tax bracket in Zimbabwe.

E-commerce, cryptocurrency transactions and content creators are among new businesses included into the tax bracket in Zimbabwe.

“The Republic of Zimbabwe entered into a public-private partnership agreement with Daedalus World Limited of Tortola, British Virgin Islands, in terms of which Daedalus World Limited will assist the Republic of Zimbabwe by providing a revenue collection service through taxing qualifying companies that provide digital advertising, content, cloud computing, e-commerce [and] gambling,” reads part of a general notice published by Zimbabwean ICT Minister Jenfan Muswere on 19 January.

The notice says companies offering “betting, gaming and cryptocurrency services to persons and organisations within the territory of the Republic of Zimbabwe” will also now be subject to taxation, with the revenue set to be collected by Daedalus World.

Zimbabwe currently outlaws banks from cryptocurrency transactions. The inclusion of cryptocurrencies into the list of companies to be taxed has raised expectations that Zimbabwe could now be moving towards regulation and taxation of digital currencies such as Bitcoin, joining South Africa that already taxes such transactions.

The new tax revenue collection agreement will target content and digital advertising companies such as YouTube, Google, Facebook and others in addition to e-commerce entities.

Zimbabwe’s increasingly informal economy has witnessed a boom in e-commerce activities, with trade between Zimbabwe and South Africa as well as China and Dubai – from where most e-commerce traded goods are being sourced – increasing.

According to BDO, the global accountancy firm, there will be separate legislation for a compliance framework covering submission of returns, payment of tax and the due date for such payments, among other compliance requirements” for the new e-commerce levies.

The new e-commerce regulations will also likely encompass satellite broadcasters, adds BDO in a note on Zimbabwe’s tax framework.

The government has been seeking ways to prop up revenue collections and is levying a $50 fee on imports of smartphones for which import duty would not have been paid. Telecom and tech industry players say the new measures are a set back for e-commerce and efforts to boost the internet penetration rate in the country.

In a separate notice published 19 January, the Zimbabwe Revenue Authority directed that the “provision of data and airtime by employer to employee for use at home or outside work premises is a benefit which is taxable in the hands of the employee”.

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