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The appointment of John Mangudya, the current chief executive officer of banking group CBZ Holdings, as governor of the Reserve Bank of Zimbabwe (RBZ) with effect from next month should surely have brought closure to the uncertainty that had gripped the markets.

Ideally, a new RBZ governor should have immediately assumed office the day former governor Gideon Gono’s term expired, but the appointment of an acting governor – something only tolerable had the outgoing governor taken leave before expiration of his term – highlighted the wrangling speculated to have been taking place behind the scenes over the appointment of a suitable candidate.

We are happy that an appointment was made eventually. We hope Mangudya’s brief will be to see Zimbabwe get out of its current economic quagmire and back into a prosperous nation again.We are cognisant of the fact that he has very little arsenal at his disposal. Ever since Zimbabwe abandoned its useless currency buffeted by hyper-inflation which daily eroded its value, the central bank has essentially been unable to control money supply in the country.

Without a currency of its own, the RBZ’s ability to influence the economy and the markets is significantly eroded. Moreover, as the RBZ gears to focus on its role as a financial markets regulator, Mangudya will realise that the central bank is severely undercapitalised. Currently, because of lack of resources, the RBZ has been unable to conduct on-site inspection of banking institutions, resulting in acts of delinquency going unnoticed only to emerge after the banks become insolvent. The RBZ has therefore ceased to be that dreaded big brother watching over the banking sector.

As a result, errant bankers — and their shareholders — have abused depositors’ funds with reckless abandon, aware that they can get away with delinquency because their regulator no longer has the capacity to monitor them. The central bank has also been unable to undertake open market operations for the same reason that it is not adequately capitalised. Currently, the central bank is also hamstrung by debts.

But, as Mangudya’s predecessor would always say, failure is not an option. The governor-designate should brace himself for the challenges that lie ahead. He should be aware of these challenges more than we do. He has the requisite qualifications and the experience to go around the situation and deliver for Zimbabwe. We are happy that slowly, government is helping the central bank take the initial steps towards playing a meaningful role in the economy.

In March, it helped structure a US$100 million facility with Afreximbank for the revival of the interbank market. Mangudya will now have to become the public face for the interface with offshore banking institutions that can possibly support Zimbabwe in its journey back to prosperity.

Source : Financial Gazette