ECONOMIC analysts said this week while fiscal and monetary authorities have come up with measures to strengthen the new Zimbabwe Gold currency (ZiG), policy missteps and inconsistency will undermine the unit.
Since ZiG was launched on April 5, authorities have been inconsistent in their messaging.
For instance, John Mushayavanhu, the governor of the Reserve Bank of Zimbabwe (RBZ), has been issuing conflicting statements about the origins of the currency.
Initially, he claimed ZiG was not the central bank's idea, but rather the brainchild of the Confederation of Zimbabwe Industries (CZI).
“We didn't invent ZiG, it was invented by CZI,” he was quoted as saying.
The governor also backed off, claiming because he did not know much about structured money, the World Bank had invented it.
Quickly after, he told the State media that “no one told us to introduce the ZiG currency. We consulted widely, yes, but ZiG is my product as the governor of the Reserve Bank and if it fails it’s my fault; it’s my brainchild”.
Such back-and-forth is detrimental to ZiG, analysts warned. It weakens public trust, which has been damaged by decades of policy inconsistencies.
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The Zimbabwe dollar, ZiG’s predecessor, suffered a similar fate. The bond notes were first presented by the government in 2016 under the guise of "export incentive scheme".
But they were then released as legal tender later, laying bare the government’s deception.
Additionally, bond notes were purportedly going to be backed by US$200 million from Afreximbank, a claim that Mushayavanhu recently refuted.
“The statements by the governor of the central bank (Mushayavanhu) are quite unfortunate. You don't say those statements and you conflict yourself as nakedly as that, you kill any little confidence remaining,” professor of economics, Gift Mugano said.
“The tragic nature of his inconsistency in terms of reporting as who, the author of the ZiG, is in that he did not even apologise to say, "I wanted to say this, but I said this. I think it didn't come out right".
“He should have withdrawn his statement and apologised. People in business and the market are very serious. They will not have any little respect for the governor.
“The office of the governor must be respected. So he is squandering the respect which must come to his office before he even started his work,” he added.
Mugano said the governor should have avoided the subject and allowed his public relations team to do the work.
“So who is going to correct him? So naturally, he was supposed to keep quiet and when he made a mistake, he was supposed to apologise,” he said.
“So this is not good for the ZiG. It will kill the confidence and it is quite unfortunate. To make things worse again, there is also a lot of inconsistency from his office when it comes to the acceptability of the currency at fuel stations.
“He is not directing fuel stations to accept ZiG. He said he is going to encourage them, but he will use the same Financial Intelligence Unit to force the retailers, but he can't enforce it on fuel businesses. That becomes a problem.”
Economist Stevenson Dhlamini said for the economy to attain an efficient equilibrium, it requires that the markets understand what the central bank is doing. The central bank is required to always explain thoroughly, transparently and coherently what it is doing, he noted.
“The conflicting statements from the RBZ governor regarding the origins of ZiG are concerning and suggest a lack of clarity and transparency around the development and rollout of this new currency,” he said.
“In my opinion, for ZiG to have any chance of success, the authorities need to take immediate steps to address these policy inconsistencies and provide clear, unified, and well-communicated guidance to the public.”
Dhlamini said the central bank should provide a clear and coherent narrative around the rationale, development, and implementation of ZiG. The authorities should speak with one voice and provide a consistent message to the public. The authorities should also develop a comprehensive public awareness and education campaign to inform citizens about the benefits, features, and use of ZiG.
“This will help build trust and encourage adoption. There is a need to demonstrate a firm commitment to the long-term success of ZiG by aligning high-level political support, for example the President, with the digital currency's implementation,"he said.
“The authorities should also consider seeking external technical and policy guidance from reputable international organisations or experts to ensure the design and rollout of ZiG is based on best practices.
“Without decisive action to address the current policy inconsistencies and lack of coordination, the long-term viability of ZiG will be severely undermined. The authorities must prioritise establishing a clear and coherent strategy to give this digital currency the best chance of success,” Dhlamini said.
Chenayimoyo Mutambasere, a development economist, said there had been a lack of clarity from both the governor and the Ministry of Finance regarding the specific asset backing ZiG. Mthuli Ncube, the minister of Finance, Economic Development and Investment Promotion, mentioned gold as the backing asset, while the governor mentioned a combination of gold, foreign currency reserves, and precious minerals at different times.
“This inconsistency raises questions about the true backing of ZiG and undermines confidence in its stability and value. In essence, without clarity on what backs ZiG, its value remains primarily transactional, lacking the assurance of being a reliable store of value,” she said.
“Consequently, once transactions are completed, ZiG may lose its worth, lacking the enduring value retention characteristic of a store of value.
“This uncertainty is exacerbated by the already diminished confidence in the Zimbabwean economy within the market, further undermining ZiG's perceived stability and utility.”
Mutambasere noted that the recent Monetary Policy Statement highlighted that foreign currency accounts for 83% of transactions in the economy.
Given this reliance on foreign currency, the emphasis on promoting the local currency seems misplaced, especially when it currently plays a minor role.
“Instead, prioritising dollarisation could provide stability and rejuvenate the economy. Monetary policies, while important, are just one aspect of governance,” Mutambasere said.
“Zimbabwe urgently requires systemic reforms that prioritise transparency and accountability to address broader economic challenges effectively.”
For ZiG to survive, economic analyst Victor Bhoroma said the central bank should end all quasi fiscal activities. It should allow market determined forex trading through a managed floating system where commercial banks are matchmakers.
“This improves forex supply on the formal market. The central bank has no place in forex allocation or rate determination. Lastly, to allow free movement of dividends and capital as that creates confidence among business persons,” he said.
“The government needs to support the above by not abusing the overdraft facility or parallel funding programmes via the central bank.”
Economists also noted that the nation's leadership was not doing much to promote use of ZiG. For instance, President Emmerson Mnangagwa was photographed giving crisp United States dollar bills to an elderly man, who was dancing with his head turned down at afamily gathering in Masvingo a fortnight ago.
Although the government may contend that Zimbabwe operates under a multicurrency system, they believed the President, in his capacity as head of state, ought to have done better.
“As our leader, he was supposed to give the ZiG as a way of encouraging acceptability and use of the ZiG. It would send a different sentiment altogether,” Mugano said.
“In any country, the three critical people, from an economic perspective, are the minister of finance, central bank governor and the president. Those people have got a say of the monetary policy of the country or currency issues.
“Whatever they are going to do from now and going forward, they should be very cautious because they can send the wrong signal.”
