The Reserve Bank of Zimbabwe (RBZ)'s fight to curb distortions in the parallel market is losing momentum due to its failure to apprehend and deal decisively with the culprits amid fears of political interference.
Last week, the country woke up to the news that the central bank had frozen the bank account of a Chinese-owned construction company, China Nanchang, on suspicion of injecting millions of dollars into the parallel market to buy foreign currency.
This was not the first time the RBZ made such announcements with the general public waiting with bated breath the outcome of the investigations.In September 2019, the central bank froze the accounts of Sakunda Energy, a company owned by President Emmerson Mnangagwa's ally Kuda Tagwirei, on allegations of causing severe distortions on the parallel market through flooding the streets with local currency to purchase forex, increasing the rate sharply.
People celebrated and the market reacted, causing sharp declines in the parallel market rates. However, the excitement dissipated as the so-called clampdown turned out to be a damp squib. Even as the central bank purportedly froze his company accounts, Tagwirei was part of the entourage that accompanied Mnangagwa on a business trip to Russia shortly after the investigations. Barely a week later, the so-called freezing of accounts was reversed after no "substantial evidence was found".
Before the Sakunda saga, the RBZ indefinitely suspended four senior managers on allegations of corruption raised against them by the then chairperson of the short-lived Finance and Economic Development Communication taskforce, Acie Lumumba.
The officials, later reinstated, were Mirirai Chiremba (director of Financial Intelligence), Norman Mataruka (director of Bank Supervision), Gresham Muradzikwa (head of Security) and Azvinandawa Saburi (director of Financial Markets).
Economic analysts now say the central bank is slowly losing its credibility as it is failing to deal with the people behind the currency volatility.
Economist Gift Mugano told businessdigest on Tuesday that recent developments show that the central bank has lost its credibility and runs the risk of being embarrassed.
Mugano questioned the independence of the Reserve Bank to make its own decisions, saying it all points to political interference overriding the apex bank's decisions.
"I would say the bank should first think carefully and cautiously before making critical announcements as it is running the risk of being embarrassed. Let's go back to the days of Acie Lumumba's ranting on social media, which saw the arrest of RBZ officials who were later let go. The Sakunda issue, now this. Could it be that the special investigation unit is hitting the wrong people and companies? The bank is losing credibility. It's failing to enforce or police anyone," he said.
Late last year, the International Monetary Fund (IMF) said Zimbabwe needed an independent central bank to avert the risk of plunging into hyperinflation every 10 years as the current situation is a result of failure on the government's part to wean off the Reserve Bank.
Mugano said eventually this will have an effect on the parallel market, adding that the RBZ's failure to enforce the law is what has seen the country now effectively re-dollarising.
"Some of the things the RBZ does cannot be done in an informalised market. It's very difficult to enforce the law. We saw Zimra [Zimbabwe Revenue Authority] announcing that it will now be collecting taxes in United States dollars. It's an admission that the local currency has failed and it could be building reserves for the central bank to curb uprisings when civil servants demand real money," he said.
Economist Christopher Mugaga applauded the central bank for such a move (freezing the Chinese accompany accounts), saying it was a step in the right direction although there is a need to revisit and integrate the judicial process.
Economist Clemence Machadu is not impressed by the central bank's fight against malfeasance on the parallel market ."We have had a thriving black market which is even more organised than formal financial institutions, when it comes to forex allocation, since the beginning of the use of the bond note in 2016.
The black market players never run out of local currency and hard currencies unlike banks," Machadu said."The lackadaisical approach buy the monetary authorities to this anomaly leaves a lot to be desired and makes them complicit.
He said that: "If we are to get to the bottom of the matter, we should not just look at specific bank accounts that have created the freeze-thaw circus of accounts to give the impression that the authorities are taking action.
"We should instead look at the flaws of the entire system as it is powered by the very banking sector, through movement of large sums of electronic money and cash to the black market. Surely these can be traced back and decisive and stern action taken once and for all."
Machadu pointed out that government needed to take action to stem the rot and there should be no sacred cows.