THERE was a heated moment in Parliament on Monday when the Public Accounts Committee, chaired by MDC Alliance deputy chairperson Tendai Biti was hearing from Reserve Bank of Zimbabwe Governor John Mangudya.
Biti started off by creating a friendly atmosphere when he told Mangudya: “This is not going to be an adversarial inquiry. You’re someone I know, you put your country first. We’re here to help you do your job.”
Top of the agenda was the issuance of bond notes and coins as well as the Zimbabwe Asset Management Corporation (ZAMCO) (Private) Limited, a subsidiary of the Reserve Bank.
The central bank established the Zimbabwe Asset Management Company (Zamco) a few years ago to absorb non-performing loans that had reached alarming levels at over US$750 million soon after the introduction of the multi-currency regime. Zamco has also bailed out some local companies and parastatals that were teetering on the brink of collapse.
Giving his testimony today, Mangudya said ZAMCO was created to remove non-performing loans from bank balance sheets.
“The asset manager has so far acquired 1,016 loans worth $1.13bn. Of that, $260m has been repaid,” Mangudya disclosed.
“Without ZAMCO, many companies would have folded, jobs would have been lost,” Mangudya added.
Hon. Biti then asked who issued the Treasury Bills which ZAMCO used to acquire bad loans, to which Mangudya replied the bills were issued by central government.
Biti and Mangudya began sparring over the status of funds the state uses to acquire debt through ZAMCO.
“If this is a charge on the Consolidated Revenue Fund (CRF), as a committee we are greatly concerned that this has happened without central government coming to us,” Biti said. “Parliament oversees the CRF, and you (ZAMCO) have received $1.13bn, but Parliament has not been told.”
Mangudya said all the amounts given to ZAMCO have been included in successive budget statements by Treasury, to which Biti insisted that was not the case.
Mangudya said: “In the last budget, Minister Ncube told Parliament that he was capping ZAMCO at $1bn, the asset manager will no longer acquire any further loans.
“ZAMCO is not our (RBZ) creation. This went through Cabinet and Parliament. The Minister took the numbers to Parliament and no one asked questions.”
The Parliament’s Public Accounts Committee was not amused. It demanded that because there are allegations of ZAMCO treasury bills being abused to the benefit of political elites, it will request a list of all the 1,016 borrowers whose loans were taken over by ZAMCO.
Cosmas Kanhai, the ZAMCO CEO, then said ZAMCO is governed by customer confidentiality rules and will not be able to share details of beneficiaries.
Biti countered him, saying ZAMCO is not a bank bound by confidentiality rules. “We have powers as Parliament to demand that list. We are demanding it,” Biti thundered.
Kanhai said $250m of the $1.13bn loans have been paid back, adding he was confident all the funds would be paid back by 2025, when ZAMCO is scheduled to be wound up.
Biti insisted that ZAMCO should hand over customer details to the Public Accounts Committee.
Biti then posed a question to RBZ chief John Mangudya: “What do you say to people who say ZAMCO is a toxic institution, acquiring toxic assets?”
Mangudya replied: “The RBZ position is that ZAMCO has done very well for this economy, without ZAMCO, this economy would have collapsed. Cites ZAMCO’s intervention to aid RioZim, as an example.
“ZAMCO has helped save companies such as RioZim, Windmill, StarAfrica, Ariston. Maybe one of your children is even employed by one of these companies. If these companies were not saved by ZAMCO, they would have collapsed.”
Biti then said: “Your Minister of Finance (Mthuli Ncube) thinks ZAMCO should be wound down. What do you say to that?”
“When you were Minister of Finance,” Mangudya replied, “we used to talk about this. When I was at the CBZ Bank. These are old loans, companies were chocking under the burden of high interest rates, something you know about.”
On the RBZ’s foreign loans, Mangudya said these amount to US$985m contracted by the central bank. The bulk of the funding has been sourced from: AfreximBank US$641m; PTA Bank US$152m; Banco de Mozambique US$25m; AfDB US$15m; PTA Reinsurance Corp US$9m.
Biti, citing the Constitution, asked why the RBZ has been contracting loans without Parliamentary approval.
Mangudya counters, citing the RBZ Act which says only ministerial consent is required.
Biti chipped in: “Are you saying the RBZ Act is above the Constitution?”
At that point, RBZ lawyer Webster Madera, weighed in, conceding that the RBZ Act is subservient to the Constitution, but said the central bank operates in terms of the RBZ Act.
Mangudya then said: “As the Reserve Bank, we cannot ask the Minister, upon receiving his consent, to go to Parliament. We are not accountable for that.”
Biti insisted: “Those loans are illegal, they are not binding,” he said, before turning to RBZ lawyer, and saying: “Webster, you know that, I taught you law.”
Mangudya: “Chairman (referring to Biti), I thought we were communicating. I don’t sit in Parliament.”
Biti: “Governor, with respect, you don’t have a casual interest in ensuring Parliament has approved or not.”
Mangudya: “We have taken note. What we did was in the national interest, within the RBZ Act. Going forward, we will ask the Minister to advise Parliament. Chairman, when you were Minister…”
Biti interjected: “No no no, we’re not going into history…”
Mangudya would not budge: “When you were Minister, you approved some loans without Parliament.”
Biti: “I’m ruling you out of order. We are not here to discuss my tenure. When I was Minister, you were not at the Reserve Bank.”
Mangudya: “But I have the records…”
Biti: “We have to answer this question: was this non-compliance willful or due to ignorance. We need to establish this because it has a bearing on the report we will make as a committee.”
Mangudya proceeded to say the nearly US$1bn foreign loans contracted by the RBZ are secured by future export proceeds for five years. Mangudya further said foreign loans are secured by gold exports for the next five years.
Mangudya also indicated the government’s overdraft at the RBZ stood at $2.9bn as of December 31, 2018.
Biti: “So, you’ve borrowed to lend government…”
Mangudya: “Mr Chairman, money is fungible. The world over, banks lend depositors’ funds. You imply we forced people to give us money for on-lending. We used the investment in the Bank, savings bonds.”
Biti: “Governor, are you saying, under oath and as a man of God, that the central bank has not taken people’s deposits to lend to government?”
Mangudya: “The answer is no.”
On govt abusing the RBZ overdraft facility by exceeding the statutory 20% of the previous year’s revenue, Mangudya said: “We’re all culpable, why does Parly pass the budget knowing fully well about the government’s deficit? Where do you think the money comes from? As Parliament, you must also be meticulous when exercising budgetary oversight.”
Biti then asked if the RBZ had reserves as the central bank?
“We have three to four weeks’ import cover, some US$500m,” Mangudya responded.
On the issue of bond notes, Mangudya was asked about his oft-quoted vow to resign if bond notes fail.
Mangudya stuck to his guns. “Bond notes, as an export incentive scheme did not fail. Exports have gone up. Bond notes have only failed in the eyes of those who don’t understand the export incentive. The bond note did not fail.”
Biti then said: “By removing parity of the US dollar to the bond note, you admitted failure, why don’t you resign?”
To which Mangudya said: “What failed is the economy, due to excess govt expenditure. We now had excess funds in the economy and couldn’t maintain parity.”
The Parliamentary Public Accounts Committee hearing with the RBZ has been adjourned to Monday, 11 March 2019.
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