A proud and stable currency worth more than the US dollar when Mugabe first came to power as prime minister of the newly independent state in 1980, the Zim dollar has just been effectively scrapped after runaway hyperinflation forced the central bank to release ever-increasing denominations that climaxed late last year with a Z$10bn note. From early this year, hard currencies such as the euro, US dollar and South African rand have become official tender.

Since Gono became governor in 1993, replacing economics professor Dr Leonard Tsumba, unemployment has risen steadily to 95 percent, exports have collapsed and the economy is in freefall. Last year GDP declined by 14 percent after already calamitous years of falling production. Given Gono’s record, it is hardly surprising that the new finance minister, Tendai Biti, blames the governor for the nation’s dire straits: “The Reserve Bank has totally discredited itself. We must accept that [it] is at the core of this economic decay.” A rare rational voice in the dictator’s government, Mr Biti is a member of the opposition pro-democracy party and holds his position under a shaky, power-sharing agreement brokered by South Africa and other nearby nations.

However, the real villain of the piece is of course Mugabe. A schoolteacher by profession with a multitude of degrees, some of them acquired before the universities concerned actually offered them, “Comrade Bob” is a committed Marxist and nominally espouses Maoist economics. The president turns a blind eye to Zimbabwe’s ruination, referring to his country as “the jewel of Africa”, and is driven around in an armour-plated limousine with darkened windows and powered by a V12, dual turbo engine.

How has this once-thriving economy been allowed to collapse with such devastating consequences for its people? Despite the incontrovertible evidence of the incompetence, corruption and brutality of successive Mugabe governments, most African governments hail the dictator as a champion of independence who drove out the white imperialists. According to Africa-watchers, their tolerance is explained by the shelter Mugabe gave guerrilla-fighters from neighbouring states, including South Africa, during their long fight for independence. Over the last few years, South Africa’s black leaders claim they have been working with the dictator to moderate his policies in a process they call “silent diplomacy”.

Travesty after travesty
Within Zimbabwe Mugabe has, by the universal agreement of western observers, retained power by rigging the vote in successive general elections and ordering the beating-up of supporters of opposition parties as well as rival politicians such as Morgan Tsvangirai, leader of the pro-democracy MDC-T and now the official, if nominal, prime minister. The latest elections – a run-off for the presidency in March 2008 after a supposedly tied vote – were no exception. Indeed they were deemed such a farce that Tsvangirai refused to participate, handing the top job to Mugabe once again. Meantime the power-sharing agreement that brought into government more responsible and qualified people such as finance minister Beti is already unravelling as Mugabe accuses some of the new ministers of a variety of offences against the state.

The beggaring of Zimbabwe demonstrates how quickly an economy can be destroyed. In 1980, Mugabe inherited a nation that had somehow kept its economy more or less intact despite years of guerrilla warfare. Based mainly on crop exports produced by skilled white farmers, on the mining of minerals and on tourism, it was one of the most robust in Africa. However, in 1987 Mugabe rewrote the constitution to appoint himself president and began to surround himself with loyal lieutenants, no matter how unsuitable for running a country. Although the economy continued to grow through the nineties, the rate slowed, cracks began to appear, particularly in exports and tourism as westerns turned against an increasingly unsavoury regime.

It was at the turn of the millennium that Mugabe made his biggest mistake. He embarked on a programme of forced expulsion of some 4,000 farmers, along the backbone of prosperity. Their departure left a giant vacuum in agricultural expertise and exports of mainstay crops such as tobacco began a long decline, accompanied by increasingly severe shortages of food for domestic consumption.

Gono, who had been chief executive of Jewel Bank, formerly the Commercial Bank of Zimbabwe, became governor in November 2003. Clearly acting under the instructions of Mugabe for whom he had long acted as “personal banker”, he came to the job promising to reverse the rapid slide in the nation’s prosperity. Indeed the bank’s new mission statement declared it would “become the financial cornerstone around which Zimbabwe’s economic fortunes and developmental aspirations are anchored.”

The reality turned out to be very different. According to insiders, Gono opened his first meeting as governor by telling staff that if they didn’t agree with him they were free to leave (as a chartered secretary, he has only a rudimentary knowledge of economics, his degree is honorary.)

Using the police and army as his shock troops, he soon began arresting businessmen on trumped-charges and reportedly appropriating their assets. Next, he started printing money at a breakneck pace. This was the core of the central banker’s recovery plan and he called it “Operation Sunrise”. Within three years, by August 2006, there was so much money in circulation that the central bank had to withdraw the original dollar because of its collapse in value and replace it with a currency worth 1,000 of the old.

Hyperinflation now took hold as, with increasing frequency, the central bank issued ever larger denominations. In August 2007, exactly a year after the new Zim dollar was released, a Z$200,000 denomination appeared followed by a $750,000 denomination in December, a Z$10m denomination in January 2008, a Z$50m one in April, a Z$250m one in May, and finally a Z$250bn note in July. Thus on Gono’s first five-year watch, he had run up the money supply from $45bn to $900 quadrillion. The domestic value of the notes in circulation had grown by 20 million times.

As prices rocketed into equally stratospheric numbers despite the central bank declaring inflation “illegal”, Gono berated shop-owners for charging inflation-proof prices. He even stormed into shops to threaten their proprietors. When that didn’t work, he had more businessmen arrested for failing to implement Reserve Bank-ordered price cuts (which would have forced them to sell goods at a loss). Central bank heavies were despatched to raid banks of their deposits, and several bank licences withdrawn.

God the economist
Right through Operation Sunrise, Gono put his trust in God. As inflation, the Zim dollar and the economy spiralled out of control, he concluded his reports to Parliament with the words: “In the Lord’s hands, I commit this monetary policy statement for our economic turnaround”.

The EU, Germany, IMF, World Bank and other donor organisations cut financial support from around 2003, mainly because Mugabe and his inner circle, numbering about 115, simply misappropriated it. For instance, substantial humanitarian donations for the relief of Aids, hunger and other purposes never reached their intended target. Despite frequent requests, the government simply refuses to return these sums.

By mid-2005, the fall in agricultural production was turning into a calamity. Once the mainstay of a nation known as “the breadbasket of southern Africa”, its contribution to GDP had slumped to 17 percent, with devastating consequences for the population. It was around this time that the Archbishop of Bulowayo bravely said: “I pray for Mugabe’s death.” Meantime, across the border in Zambia, the expelled farmers were producing record harvests.

Although he is a tool of Mugabe, Gono does however differ from the dictator in respect of the so-called “land reform” programme. As he once told the government-controlled paper, The Herald: “I have openly condemned such retrogressive acts of destruction as horticultural greenhouses, decimation of tobacco barns, institution of fresh farm invasions.” Despite his dislike of “farm invasions”, he is, however, the proud owner of several agricultural properties confiscated from their white owners.

Regularly accused of lining his pockets in trade deals, for instance with Malaysia, even before he became governor, Gono is probably the richest central banker in the world. He lives in a 47-bedroom home, located in the best suburb of the capital of Harare, that reportedly cost $5m.

Zimbabwe’s top banker has been on the defensive lately. In a recent interview he agreed that his measures have failed to revive the economy, but blames factors beyond his control such as lawlessness, the failure of land reform, “rampant corruption” and a breakdown in law and order. Gono, it seems, also blames the finance sector. Late last year, he froze the accounts of 20 investment companies and fired the fund managers. Most of all though, like his leader, he blames “foreign sanctions”.
 
Still, the governor continues to see himself as a man of unusual ability, even comparing himself to president Obama. In his latest report to parliament – a rambling, 71-page diatribe against his critics, Gono presented himself as the man to deliver “important corrective actions” in these highly unpredictable times. Like the IMF, US Reserve, Bank of England and other global institutions, his own institution was “grappling in the dark” against unknown forces. In these circumstances, he said, central banking was not about the “narrow spectrum” of interest and exchange rates and other mere detail. Rather, it was a strategic exercise requiring “necessary ambiguity with constructive intent”.

So saying, he compared his breakneck printing of bank notes to a policy of quantitative easing – the issuing of new debt by credit-strapped governments. And according to Gono, his methods are working. While inflation was going up in most parts of the world, “now ours is going down.” (In fact, in late April the reserve bank was quoting overnight interest rates at 10,000 percent.)

An anonymous letter-writer in the Zimbabwean Times begged to disagree. “We are starving,” he wrote. How do you expect us to survive on Z$50,000 when it doesn’t buy the smallest pack of mealie-meal?” The same letter beseeched Gono to resign and “leave us in peace”.

By January, the Zim dollar was so utterly debauched that Zimbabweans were officially allowed to buy and sell in any currency, mostly euros, US dollars and South African rand. Gono describes this latest concession as the “multiple currency system”.

A few days later, the reserve bank lopped 12 zeros off the old currency, but it was too late. The dollar has been described as “largely irrelevant” and incoming finance minister Biti declared: “The death of the Zimbabwean dollar is a reality we have to live with. Since October 2008, our national currency has become moribund.”

Like the new finance minister, the IMF lays the blame squarely on Gono-inspired hyperinflation and “quasi-fiscal activities”. In its latest report on the nation, issued in March, the IMF shows that during the governor’s six-year period in office the economy suffered a cumulative decline of 54 percent. And recently, “poverty and unemployment have risen sharply,” the report notes.

Late last year Gono was appointed to another five-year term.

The 30 - year hyperballad:

1980
When Robert Mugabe became prime minister of newly independent Zimbabwe, he inherited a robust economy built on tourism and exports of crops and minerals. The Zimbabwe dollar was a stable currency worth more than the US dollar – ZW$1 to US$1.47. The central bank had a reputation for competence and integrity. But 20 years is a long time under the thumb of a self-proclaimed Maoist.

1987
Having made himself president, “Comrade Bob” changes course. Although GDP has been growing steadily at around five percent a year, Mugabe thinks he can do better. He installs cronies in positions of power, he seizes the reins of the economy, and starts misappropriating IMF, British and other foreign aid. By the early nineties, growth is slowing to 4.3 percent and the dollar is in freefall.

1998-2003
Ignoring the advice of central bank governor Dr Leonard Tsumba, a former assistant professor of economics at Trinity College, Cambridge, Mugabe drains the national coffers by spending 100s of millions of dollars supporting revolutionaries in the Congo. Inflation is rising rapidly from an already alarming rate of 32 percent in 1998. After the eviction of 4,000 white farmers from their lands, economic growth declines rapidly, down by five percent in 2000, eight percent in 2001, 12 percent in 2002.

2003
The dictator sacks Dr Tsumba, one of the last thorns in his side, and replaces him with his “personal banker” Gideon Gono. Unlike his predecessor who has a US degree in economics and a long banking career, Gono has limited experience and an honorary degree. With Mugabe’s approval, Gono embarks on a round of arrests of businessmen on trumped-up charges and seizes their assets. In that year the economy collapses by 18 percent.

2005
Unemployment rises to 70-80 percent, inflation to 350 percent, foreign debt to $4.8bn.

2006
On August 1, Gono demonetises old bank notes and introduces hyperinflation in the form of a new currency. The Zimbabwean dollar is equivalent to 1000 of the old and is now worth Z$250,000 to US$1.

2007
On August 1, Gono launches a Z$200,000 note, then a Z$750,000 one and thereafter notes of increasingly stupendous values – Z$10m, Z$50m, Z$250m. By July, 2008, Zimbabweans are presented with the world’s first $100bn note. Under Gono’s stewardship, the money supply has shot up from $45bn in 2006 to $900 quadrillion and the IMF estimates inflation is running a 150,000 percent. Prices are doubling every 1.3 days. Mugabe appoints Gono to a second, five-year term.

2009
With unemployment at 90 percent, in February the central bank releases a Z$100trn note. New finance minister Tendai Biti from the former opposition party, now in a power-sharing agreement, accuses Gono of being “at the core of this economic decay”. Gono claims criticism of him has reached “ridiculous dimensions”. In late April, Gono admits taking hard currency from business and private accounts. He has also been running a few businesses on the side, including a second-hand car dealership. He is incredulous at suggestions he should be sacked. Also in April, the Z$ is replaced with the hard currency of other nations including the euro. Unemployment is now up to 94 percent. The cause of all Zimbabwe’s troubles, says Comrade Bob, is “sabotage” by foreign governments, particularly the EU.