Gono misses the point on Kasukuwere's Barclays, Stanchart banking indigenization ultimatum

Reserve Bank of Zimbabwe governor Gideon Gono and minister in charge of Indigenization Savior Kasukuwere both have rather large egos and both love playing to the gallery. So when they clash publicly as they have done on applying the country's controversial indigenization laws to the banking sector, fireworks are guaranteed. However, their knocking of heads is clouded by the fact that they are arguing from very different terms of reference in which both may be narrowly correct, but which show the overall policy confusion on indigenization.

Kasukuwere fired the first shot in the latest indigenization saga by issuing an ultimatum to severall multi-national companies giving them 14 days "to submit acceptable indigenization plans or risk losing their licences with the government taking over ownership."

As The Herald reported, 'the affected companies were required by law...to submit plans detailing how they intend to meet 51 percent direct equity participation by locals within five years.If the companies fail to rectify their non-compliance, the minister is empowered under the Indigenization Act to institute proceedings to cancel their licences.'

Drastic sounding, but not exactly out of the ordinary in a country where ministers and other officials often communicate with citizens through imperious-sounding 'directives.'

Among the companies given the ultimatum are Barclays and Standard Chartered banks, both with long histories in Zimbabwe and both with British origins.

Within hours of the minister's statement, central banker Gono came out fighting with his own counter-statement.

“Tendencies towards firing harmful verbal economic-gunpowder must be minimiszd by all stakeholders in the interest of the economy and the Reserve Bank of Zimbabwe Board forewarns people playing with economic gunpowder to leave the game to those well-trained in its use and safe custody, lest the unintended will happen, to everyone’s future regret.”

The statement was vintage Gono in its showy, long-winded wordiness. He said he felt compelled to issue it because Kasukuwere's ultimatum had 'caused panic in the banking sector' and therefore 'as governor I was duty-bound to set the record straight lest “misrepresentations told repeatedly become truths.”

Gono then went on to state that the RBZ, 'which is the legal authority to issue or take away banking licences' did not have any 'immediate or foreseeable' intention to do so. However, to cover his back he felt compelled to add that the central bank's position did not mean it either 'condones or encourages non-compliance with the law by any institution.'

To this extent Gono in his flowery way was merely saying what any central banker might be expected to say under the circumstances. He went on beyond this, however, to use heated, disparaging language that some felt was ungovernor-like, causing speculation about whether there was also an element of a turf battle between Gono and Kasukuwere.

Carped Gono, 'Experts in the field of banking and finance and who have had years of experience in it, including serious qualifications in relevant subjects pertaining to the sector, deserve to be listened to when they give sound advice. This is necessary inorder to avoid fly-by-night, reckless and excitable flexing of muscles and decisions that overlook certain fundamentals that could irreparably harm the nerve-centre of our recovering economy.'

Trying to read between Gono's rather pompous-sounding lines, it appears he was not just trying to reassure the banking sector as is his remit, he was also saying 'stop stepping on my toes; I know much more about banking than you do' to Kasukuwere.

This is understandable but also quite ironic coming from Gono, who for at least a couple of years from about 2006/7 was virtual prime minister of the country as RBZ governor, with the political license and the personal enthusiasm to poke his nose into all sectors of the economy. He was clearly president Robert Mugabe's golden boy, his wide-ranging powers stemming from the idea that he had special insights and abilities to solve the many deep problems that plagued the economy then, including unprecedented hyperinflation.

Ministers and many other holders of various other positions may have resented Gono's interference in matters to do with their portfolios, but had to largely suffer in silence because of the RBZ governor's power and prominence at the time. All that ended with the formation of the multi-party coalition government and the appointment of Tendai Biti, a minister of finance who made it clear he did not envision a subordinate (RBZ governor) who was more prominent and powerful than him.

There is therefore an element of Gono getting a little taste of some of his own medicine when the current Big Man in Town of the moment, Kasukuwere, muscles onto Gono's banking territory. As minister in charge of indigenization, Kasukuwere has the kind of loose, wide-ranging portfolio and presidential backing that means stepping onto others' ambit of responsibility is an unavoidable part of his job, just as was once the case for
Gono.

The excuse for the RBZ and Gono's over-arching powers at one time was that the special circumstances of the economic crisis then demanded unorthodox interventions (like printing money!). Similarly, Kasukuwere was hired for his portfolio not for his technocratic skills, but to serve as an enforcer for the issue of the moment, which is black empowerment under the name of indigenization, with special focus on the mining and banking sectors.

While Gono may be technically right in expressing the view that the tough stance with majority foreign-owned banks will 'scare investors,' in current Zimbabwean political terms that is beside the point. A certain amount of 'scaring investors' is precisely what the Mugabe government may want to do, especially if the investors in question come from or have have strong links with Britain. There have been open statements in recent months from senior government members, including the president indicating, that they were itching to get back at British interests in retaliation for its Zimbabwe sanctions and general hostility to the Mugabe government.

Barclays and Standard Chartered are entrenched banking brands in Zimbabwe. It is unlikely they would be natonalized, despite Kasukuwere's bluster. But keeping the pressure on them to force a greater local shareholding stake is very much a deliberate policy and part of Kasukuwere's marching orders. In the current poisoned atmosphere of Britain-Zimbabwe relations, hot-headed Kasukuwere is not going to lose any sleep over making British firms sweat a little before some compromise on a satisfactory new shareholding structure is reached.

Gono and Kasukuwere are essentially speaking different languages. Kasukuwere is talking in the language of the current politics, which Gono himself was once quite well versed in. 'The governor,' on the other hand, has apparently abandoned the trouble-shooting unorthodoxy which he once sold as one of his main strengths, to become a conventional conservative central banker. This clashes against the whole empowerment ethos of the Mugabe government, which takes it for granted that sectors like mining and banking will resist indigenization at every turn and have to be strong-armed to comply, which is exactly what Kasukuwere is doing.

The government's gamble is that most of the companies already heavily invested and dominant in their sectors will find Zimbabwe too lucrative presently and/or in terms of potential to want to quit because of concerns over the 51% indigenization law. The government is probably aware that the 51% may not be achievable in all sectors, even in five years, as has been shown by its willingness to make exceptions, such as the 54% that India's Essar group was allowed to acquire in iron and steel concern ZISCO. The pressure by Kasukuwere is likely to press for the best possible deal before agreeing to some compromise percentage and terms.

While it is unlikely that either Barclays or Stancdard Chartered have to really fear cancellation of their banking licenses and takeover by the government as threatened by Kasukuwere in his reply-within-14-days- or-else ultimatum, they would also be foolish to push the government into feeling that it had to make an example of one or both of them. That is because it has become quite clear, and has sometimes been openly stated, that part of the Mugabe government's efforts to 'sanction-proof' the country from its perspective is by selectively reducing the influence of western investors and favoring those from such perceived all-weather friends as China and India.

Gono may technically be right in the concerns he has raised, but he misses the point of the politics that inform Kasukuwere's seemingly hot-headed rhetoric, and he may also underestimate how thoroughly the politicians have thought through their position and accompanying public posture. Barclays and Standard Chartered will not lose their banking licenses, but neither will they be allowed to continue operating quite like before.