60 Hexillion

PRESS STATEMENT ON THE
RAMPANT FRAUDLENT ACTIVITIES ON
THE STOCK EXCHANGE,
THE INSURANCE AND PENSION FUND INDUSTRIES
AND THE BANKING SECTOR
BY DR. G. GONO GOVERNOR RESERVE BANK OF ZIMBABWE

20 NOVEMBER, 2008

1. INTRODUCTION AND BACKGROUND
1.1 Fellow Zimbabweans, this Statement comes at a
time when the ugly heads of indiscipline,
corruption, fraudulent activities and underhand
manipulation of our money and capital markets
have reached epic proportions that are
threatening to wipe the face of our economy.
1.2 As a Nation, it is high time that we put a stop to
these vices, as the victims are the hard working
workers going for months without access to their
salaries at banks; the sick and the ill who cannot
get treatment at hospitals and clinics due to lack
of cash; the commuting public who fail to move
from one place to the other due to rampant
increases in transport costs; the school children
who are having to go to school on empty
stomachs due to the steep increases in food
prices; and all the other disadvantaged members
of society who can barely make ends meet under
the prevailing harsh economic conditions.

1.3 For a long time now, it had become fashionable
to apportion blame to the Reserve Bank as the
soft target.

1.4 Media campaigns have been mobilized to vilify
and condemn the Reserve Bank.

1.5 Others have planned smear campaigns through
fliers that argued that the Reserve Bank and
Governor Gono in his personal capacity is to
blame for the current hardships.

1.6 Indeed, others have spent hours, days, weeks and
months investing on anti-Reserve Bank
programmes meant to defeat everything that the
Central Bank stands for.

1.7 In the midst of these wide-ranging attacks, the
Central Bank remained focused and determined
to dig deep and wide in identifying the root
causes of the current difficulties and the
suffering of the majority of Zimbabweans.

1.8 Today, Ladies and gentlemen, I am pleased to
report that the invisible forces of destruction
have been unmasked, marking a turning point
chapter when the fraudulent and speculative
winds are cast into the inferno of extinction.
1.9 In this Statement, ladies and gentlemen, the
following facts will be laid bare:
(a) That the Zimbabwe Stock Exchange had become
the most devastating vehicle of economic
destruction;
(b) That some players in the banking sector had
relapsed into the retrogressive mode of lax
controls and risk management systems, leading
to their officials engaging in corrupt activities;
(c) That the current cash shortages are a combined
effect of the rogue trading on the Zimbabwe
Stock Exchange and the sanctions imposed
against the country; and
(d) That the Insurance Companies and Pension Fund
Industries have stroked the flames of financial
instability through blatant flouting of the statutes
that govern their operations.


2. ROGUE TRADING ON THE ZIMBABWE
STOCK EXCHANGE
2.1 As Monetary Authorities, our hearts are heavy
that contrary to the noble purpose for which the
ZSE was created; which is that of acting as a
progressive vehicle for the mobilization of
productive capital, the ZSE has literally galloped
astray, in the process creating obscene paper
wealth that is causing havoc in the economy.
2.2 To the doubtful, the following facts clearly
demonstrate how the Zimbabwe Stock Exchange
had become the epicenter of economic
destruction:
(a) The ZSE allowed some stock brokers to falsely
bid up share prices, when in fact the same stock
brokers had absolutely no money to pay for the
shares. The end result has been that some
counters grew by as high as 2 million percent in
a single day;
(b) Where share prices were rising at the
ridiculously bloated rates, what that effectively
meant was that someone could work up with no
penny at the bank, but end the day a multitrillionnaire.
The next morning, the false wealth
so created would show up as high demand for
cash, and all this being blamed on the Central
Bank;
(c) The Stock Exchange was deliberately indexing
the entire stock market to the spurious Old
Mutual share prices. The whole economy was
then being priced via the Old Mutual rate whose
share price movements had no relationship with
economic fundamentals, let alone actual
corporate performance of Old Mutual itself.
(d) The Zimbabwe Stock Exchange has been, and
continues to operate with no strict rules and
regulations that prohibit rogue behaviour. On
numerous occasions, company share prices rose
astronomically with absolutely no actual
volumes trading;
(e) Some stock brokers were buying shares cheap in
the morning call overs then drive up prices
before off-loading the same shares on the same
day at inflated prices; and
(f) The Stock Exchange did not rule a few
aggressive Stock Brokers out of order, when they
stampeded specific counters up with the sole
intention of amassing false wealth.

2.3 Some argued that the developments on the ZSE
were a result of excess money supply.

2.4 To this, the facts are that all the Reserve Bank’s
quasi-fiscal operations between 1 December,
2003 and 20 November, 2008 combined are
under 0,01% of the paper money created by
the Zimbabwe Stock Exchange.

3. FRAUDULENT ACTIVITIES AT SOME BANKS
3.1 As Monetary Authorities, we would like to
firstly thank and commend Stanbic Bank
Management for their vigilance, honesty and
deep spirit of cooperation with Regulators on
fighting Money Laundering and fraud.

3.2 Through our collaborative work with them, we
have managed to unearth the massive fraudulent
activities that have been taking place.

3.3 It is utterly disappointing that other banks
continue to sweep fraudulent activities under the
carpet.

3.4 Between the 10th and the 20th of November,
2008, total fraudulent cheques we intercepted in
the clearing system had risen to $60 hexillion
($60,000,000,000,000,000,000,000).

3.5 The tragic reality is that this $60 hexillion had
infact been deployed on the Zimbabwe Stock
Exchange, bidding up share prices; with some
going onto the foreign exchange parallel market.

3.6 The $60 hexillion, had, therefore, become
artificial money supply created through
fraudulent activities.

3.7 This clearly dwarfs the $1.1 hexillion making up
100% of all the quasi-fiscal operations the
Reserve Bank engaged in over the past 5 years.
3.8 Quite clearly, therefore, the fraudulent
collaboration between some banks, stock brokers
and the Zimbabwe Stock Exchange have become
the most inflationary vehicles.

4. REMEDIAL MEASURES
4.1 As the Central Bank, and in full conformity with
the mandate bestowed upon us by the Reserve
Bank Act; we have taken the following measures
to swiftly deal with these destructive forces.

The measures:
(a) The Reserve Bank shall not give unsecured
accommodation to any bank coming for
assistance. Any bank that fails to secure its
intended accommodation will be allowed to go
under. As Monetary Authorities, we have
repeatedly said that we no longer have the
appetite for curatorships.

(b) In line with (a) above, today, one commercial
bank has been ejected out of the clearing house
for failure to fund their clearing obligations. This
ejection will be followed by a full targeted
supervision to assess the bank’s overall liquidity
and solvency status, as well as the competencies
of their Management and Board of Directors;

(c) Any company or stock-broking firm which
writes cheques that are not funded will have their
accounts frozen and closed. Such company or
stock-broking entities will be automatically
blacklisted and cannot operate any bank accounts
in Zimbabwe;

BLACKLISTED NAMES
• Accordingly, as of today, the 20th of November,
2008, the following individuals and companies
had their accounts frozen and they have been
blacklisted, meaning that they cannot operate any
bank accounts in Zimbabwe with effect from 21 November, 2008:
(i) EFE Securities and the Directors of EFE
Securities
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(ii) Lynton Edwards Securities and the Directors of
Lynton Edwards Securities;
(iii) Mr. Mike Mudondo;
(iv) Winfields Investments and the Directors of
Winfields Investments;
(v) Mr. George Chimhini;
(vi) Hardon George (Pvt) Limited and the Directors
of Hardon George (Pvt) Ltd;
(vii) Sweet Africa Enterprises and the Directors of
Sweet Africa Enterprises;
(viii) Seizler Enterprises (Pvt) Ltd and the Directors of
Seizler Enterprises;
(ix) Mrs. Chiota Masiwa;
(x) Arkmate Enterprises and the Directors of
Arkmate Enterprises;
(xi) Mr. Taurai Albert Rukwata
(xii) Mrs. Batsirayi Linda Mutyambizi
(xiii) Raymate Investments (Pvt) Ltd and the Directors
of Raymate Investments (Pvt) Ltd;
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(xiv) Harvilink Enterprises and the Directors of
Harvilink Enterprises;
(xv) Luvial Enterprises and the Directors of Luvial
Enterprises;
(xvi) Dolpin Trading P/L and the Directors of Dolpin
P/L;
(xvii) Tariro Chipfuwamuti;
(xviii) Gerald M. Muvuti;
(xix) Tafadzwa Matipano
(xx) Felix Bvute
(d) All trades on the Zimbabwe Stock Exchange are
to be supported by confirmed bank balances,
signed off by each bank’s CEO;
(e) Any bank where bank cheques are fraudulently
drawn with effect from 20 November, 2008, will
automatically loose its trading licence and the
CEO charged with criminality.
(f) In cases where a bank does not report suspicious
transactions and the transactions turn out to be
fraudulent and/or money laundering proceeds,
that bank’s entire management and board of
directors will be deemed unfit and improper to
manage, oversee or preside over any banking
institution board in Zimbabwe.
(g) In line with the stipulations on the Zimbabwe
Stock Exchange, any Stock Broking company
that fails to settle its obligations on the Stock
Exchange will be stuck off the ZSE register and
will also not be allowed to operate any bank
account in Zimbabwe.

5. IMPACT AND CASUALTIES
5.1 The above measures are expected to swiftly
correct the madness that had gripped our stock
exchange market.

5.2 As Monetary Authorities, we therefore, wish to
advise the corporate sector, as well as individuals
to please tread carefully in managing their
money and capital markets asset portfolios.
5.3 Continuation of the current irrational exuberance
will be at each individual or each company’s
peril, as no doubt the chickens are coming home
to roost.

5.4 The era of financial sector fraudulent activities
and the ZSE honey moon is over.

5.5 As Monetary Authorities, we are confident that
through the restoration of discipline and zero
tolerance against fraudulent trading and
corruption in our financial markets, the current
hardships to the public in respect of cash
shortages and rampant price increases will be
normalized in the not too distant future.

5.6 The Reserve Bank is working flat out to ensure
that the cash situation is resolved ahead of the
imminent festive season.

5.7 Whilst this is being done, the Reserve Bank calls
upon all Public Utilities such as ZESA, Tel-One,
ZINWA and Local Authorities to accept cheques
as legitimate forms of payment, without
prejudice to the bill-payers.

5.8 Members of the public are called upon to report
to the Reserve Bank Public Utilities that refuse
cheques as means of payment.

5.9 As Monetary Authorities, we once again remind
the Nation that sanctions are a reality that is
affecting everyone of us through the perennial
cash queues.

5.10 The Reserve Bank cannot miraculously stretch
existing National Printing capacity beyond the
fixed physical levels that are in place over the
short term.

5.11 It is for this reason that as a Nation, we must all
speak with one voice against the illegal
sanctions.
Thank you.
DR G. GONO
GOVERNOR
RESERVE BANK OF ZIMBABWE
20 November, 2008