Friday, February 27, 2009

See how they have all become US dollar-crazy

February 25, 2009
By Sibangani Sibanda
I FIND it interesting that, just days before the Government of National Unity (GNU) is formed in Zimbabwe, a self proclaimed government whose declared and much vaunted defense of Zimbabwe’s “independence and territorial integrity” is well documented should, at the stroke of a pen, render Zimbabwe’s national currency obsolete.
In a move that appeared calculated and deliberate, a budget, presented by an acting Minister of Finance whose financial credentials are questionable, to say the least, is tabled before Parliament, effectively “dollarising” the Zimbabwean economy. After all, we are told, this is what we have wanted.
The new Prime Minister and the new Finance Minister find themselves inheriting an economy that has just been turned on its head!
Part of the rationale behind allowing every body to trade in foreign currency was that the limited licensing of wholesalers and retailers had been such a success that prices had actually started to come down. That is true. But it is also true that competition in these sectors played a major role in controlling prices. Zimbabweans, long used to buying whatever they can get, suddenly had a choice. Supermarkets that were quick to respond are doing brisk business and their new found buying power means that they can negotiate better prices with their suppliers!
Unfortunately, the new dispensation now allows even the inefficient, mismanaged and much plundered state monopolies to also trade in foreign currency in a “liberalized” environment! They have been allowed to charge what are called “economic” prices in a market in which they are the only players! There is no obligation on their part to actually provide the services that they are charging for either.
Our telephones at home, for example, have not worked for a year, but we still pay rental on the lines, fearing that failure to do so would mean that we get cut off completely and may find it difficult to get reconnected. Now we have to pay those rentals in foreign currency, although I have been told by TelOne, the service provider, that there are no immediate plans to fix our telephones!
At the office, we had the ludicrous situation of the Zimbabwe National Water Authority (ZINWA) - which I thought had ceased to exist - coming to cut our water supply off for non payment. We have not had running water for several months! In any case, our landlords advise that all bills were paid on time. The problem may be in the record keeping of our service provider!
But try telling that to a spanner wielding operative whose only mandate is to shut you down!
The enthusiasm with which these organizations are suddenly chasing payment is surprising, considering that, for years, part of their problem was that they did not collect debts effectively even at a time when they were actually providing services. Most surprising, however, are the levels of charges they are levying for their non existent services. Not only are their charges way above charges elsewhere (TelOne, I understand, is charging US$0.30 per unit); they are far beyond most Zimbabwean pockets. People who are fortunate to make a couple of hundred American dollars a month are finding themselves faced with bills of several hundred – sometimes running into over a thousand - American dollars.
At a time when most people’s life savings in Zimbabwe dollars have reverted to being the paper that Gideon Gono printed on, most Zimbabweans are now not able to afford basic services like telephones, electricity, water, medical aid and so on. Trying to pay those bills means that there will be no money for food, bus fares, school fees – teachers are demanding two thousand American dollars per month – hospital fees and so on. What are the chances that the state monopolies will be able to collect? It seems to me that in their rush to try and recover losses from years of mismanagement and theft, they have pitched their prices at levels where people will not pay not because they are protesting at the high prices (which Zimbabweans never do anyway), but because it is not possible for them to pay.
But why would a government that, for years has obsessed over price controls and affordability of services suddenly let go and liberalize even more than the Western Capitalists that they so hate? I think it is because they want to show that price controls work. They want to gain political capital from the perception that the new government has “embraced” the policies of the Movement for Democratic Change and “look how much poorer you are for it”.
I have decided not to pay those bills. I, like many others, will get cut off and Zimbabwe will go back more than a hundred years, or the parastatals will come to their senses.

Latest RBZ directive

The Reserve Bank has not quite broken its habit of trying to regulate and control everything we do. Despite some surprising and pleasing developments in respect of foreign exchange controls and the procedures for capturing real values when selling export commodities, our day-to-day activities will still have us submitting to RBZ requirements fairly regularly.

I have attached the latest set of Reserve Bank Directives (please e-mail me if you want a copy)in the hope that they will not generate too much despair. Some facets of the requirements suggest that RBZ is trying hard to avoid becoming redundant, demanding that we all accept 5% or 7,5% of the proceeds of our activities in Zimbabwe dollars that we do not want, cannot spend and cannot find anyone else who will be happy to take them. So the removal of that amount from our incomes behaves like a tax, but RBZ is not empowered to collect taxes from us, so it has to go through the pretence that it is buying the money, not simply taking it.

Our reaction to this should not be allowed to strengthen RBZ's belief in its omnipotence. My own feeling is that Zimbabwe will be able to progress much faster if the Zimbabwe dollar is abandoned completely and declared dead. To achieve this in one step, any money borrowed by Zimbabwe from abroad should be enough to be sold to the banks for their total Zimbabwe dollar balances, completely replacing these balances with hard currency at one exchange rate that applies across the country for the moment needed for the transaction, after which the Zimbabwe dollar would never be mentioned again.

Thereafter we will all have US dollars or rand in our bank accounts and we will be able to start functioning again with the benefit of all the help we need from our banks, all of which will also be able to start functioning again. After that, if we need more hard currency to achieve our goals, we will have to earn it, or borrow it, or attract it as equity from investors.

While moving in that direction we would, of course, have to display the levels of discipline needed to convince the lenders they were not throwing their money away and we would have to be as imaginative as possible about rebuilding our productive capacity and our export revenues.
Big challenges, but not beyond us. What will prove beyond us is any hope of success in attempts to breathe life back into the Zimbabwe dollar.

I hope you are impressed by this latest RBZ effort to make things look normal!
Kindest regards,

Thursday, February 26, 2009

A 25-Minute Work Week on Zimbabwe's Stock Exchange

By Jerry Guo and Alaina Varvaloucas Thursday, Feb. 26, 2009
The intensity with which the spiffily attired investment brokers of the African Banking Corporation stare at their computer screens is misleading: A closer look reveals that they're either fiddling with iTunes, or playing solitaire. Still, their boss, Seti Shumba, who moonlights as chairman of the Zimbabwe Stock Exchange, offers them smiles and pats on the back — he's just glad they showed up to work.

These men would have once spent their days barking out orders for shares on the trading floor (actually an u-shaped conference table in a nondescript downtown office) of the Harare bourse, but Zimbabwe's central bank forced the exchange to shut down last November amidst allegations of fraud and rampant speculation — allegations deemed spurious by Zimbabwe's small investment broker community. To be sure, the exchange was producing annual nominal returns of 23 sextillion percent, but Zimbabwe's inflation rate is even higher, rendering the bourse's real return close to -35%. Still, the government was taking no chances. "People took every shortcut to get instant riches," Gideon Gono, Zimbabwe's central bank governor, tells TIME. "We were protecting the innocent." (See pictures of Zimbabweans go to The polls.)
What Gono didn't mention is that the government has been one of the largest investors in the market, in which the lag between the implied currency exchange rate on the floor and the black market rate on the streets still creates opportunities for quick gains. Other big players include local investment banks and wealthy individuals. The 80 stocks listed on the exchange range from the country's most popular cellular phone carrier to Zimplow, which manufactures "animal-drawn farming implements," and includes companies producing a cross-section of commodities such as timber, wine, nickel, tobacco, even bacon.
The government's move led Munyaradzi Ruzvidzo, one of the 38 licensed stock brokers on the exchange, with little to do. Where once he enjoyed the frenetic lifestyle of a much-sought-after banker, he has spent most of the past three months working "about five minutes" a day. He would show up at the exchange to post sell orders, but there were never any buyers — the hostile political climate has scared off even the most battle-worn investors. "It's only procedural," he says. "I come into the office, and there's just nothing going on."
Still, the traders are lucky to even have jobs in a country where four out of five people are unemployed, and seven out of ten eat one meal per day or less. Governor Gono's incessant printing of Zimbabwean dollars has deepened the country's economic woes, turning what was once the breadbasket of Africa into a financial basket-case. Just last month, he unveiled a series of trillion-dollar notes. The Cato Institute estimates the country's hyperinflation, one of the worst in history, exceeds 89 sextillion percent, or roughly a doubling of prices every 24 hours. Rather than admit to economic mismanagement and corruption, government officials are scapegoating the stock exchange. "There have been attempts to blame 'speculators' and 'rogue traders' for a sharp depreciation in the Zimbabwe dollar and rising inflationary expectations," says Shumba.
Gono insists that he "had hardly printed money, yet the growth in the money supply was phenomenal," blaming stockbrokers for generating inflation. He went on to describe a covert mission last November, in which he used secret agents to buy stocks that he then demanded to be converted into cash. When the stockbrokers couldn't produce the sextillion Zimbabwean dollars, he shut down the whole thing.
Trading on Zimbabwe's volatile stock market made Wall Street's dubious derivatives look like Treasury bills. With an economy locked out of the global financial system, daring foreign hedge funds and institutional investors saw this obscure market — much like emerging investment funds in wine and fine art — as an opportunity to diversify, or seek "exotic beta" in finance parlance. Though real returns may occasionally hit the high double digits, says Shumba, investing here can seem like playing Russian roulette: the exchange is highly fickle and illiquid, with a total market capitalization that has fluctuated ten-fold in the last year, and a trading volume less than one-hundredth the size of the Johannesburg exchange (itself a modest operation by global standards). And then there's the risk that the government could simply confiscate your money. "It's one of the riskiest stock exchanges in the world," Shumba admits.
As dire as their situation has been, the brokers of the African Banking Corporation and their peers are hoping that better times are just around the corner. A new power-sharing agreement between the opposition and President Robert Mugabe's ZANU-PF party could see progress on restarting Zimbabwe's moribund economy. And, it's rumored, Gono's job may be on the chopping block. Foreign investors are eager to dive back into the fray, sensing major opportunities in an economy that will have to be rebuilt almost from scratch. One client of African Banking Corporation is ready to multiply its investments by a factor of 20 once the dire political situation stabilizes. Others remain cautious: "When we see a solid set of reform processes with realistic objectives put into play by the government, then we'll be encouraged to increase our exposure," says Jamar Evans, who manages a Chilean hedge fund with investments in the Zimbabwean exchange.
Last Thursday, the Zimbabwean exchange reopened with a massive sell-off. It remains to be seen whether the new government can restart Zimbabwe's economy, but the effects of their efforts are being felt among Harare's stockbrokers. The 25-minute working week may finally be over.

Zimbabwe Should Fix Value of Currency to the Rand, Mugabe Says

By Antony Sguazzin
Feb. 26 (Bloomberg) -- Zimbabwe should consider fixing the value of its currency to the South African rand, President Robert Mugabe said, according to the state-controlled Herald newspaper.
``Personally, I think we should revalue the Zimbabwe dollar in a manner that fixes its relationship with the rand for a while,'' he said in an interview with the Harare-based newspaper. ``We will protect it for a while, for a while as we increase production. But we should protect it.''

S. Africa’s Manuel Says Zimbabwe Seeks $2 Billion

By Antony Sguazzin
Feb. 26 (Bloomberg) -- Zimbabwe is seeking aid of $2 billion over the next 10 months to revive its economy and tackle a humanitarian crisis, Trevor Manuel, South Africa’s finance minister, said.
The country is seeking loans to help rouse its economy from a decade-long recession and repair infrastructure, the minister said in an interview with the Johannesburg-based SAFM radio station today.
Zimbabwean officials presented two plans at a meeting with finance ministers from the Southern African Development Community in Cape Town, both of which need about $1 billion in funding, Manuel said. South Africa is in talks with Zimbabwe over one of the plans to improve the economy on a “bilateral” basis, he said.
Zimbabwe’s political leaders this month ended an impasse by forming a coalition government after disputed elections last year. A failed land reform program that began in 2000 has deepened the country’s recession, left more than half of the population in need of food aid and caused the world’s highest inflation rate. More than 83,000 people have been infected in a cholera outbreak.
Zimbabwe needs as much help as it can get to tackle “this horrible, horrible scourge of cholera,” Manuel said.
To contact the reporter on this story: Antony Sguazzin in Johannesburg at

Tuesday, February 24, 2009

Urban Food Security Assessment

An Urban Food Security Assessment study dated January 2009 shows that 58% of the individuals in the sample survey had eaten only two meals on the day before participating in the study and another 18% had eaten only one meal that day. Only 22,6% of the sample had eaten three meals on that day. The figures are compared to the results of a survey carried out in November 2006, when 54,1% of those questioned had eaten three meals, 37,4% had eaten two meals and only 4,2% had only one on the day before completing the questionnaire.

Over the period, the number of households classified as "Food INsecure" had increased from an average of 24% to 33% and a breakdown of the 2008 figures by province shows Manicaland to be worst off at 47% and Matabeleland South best placed at 20%.

The basic recommendations are that employees be paid in foreign exchange, that prices should be brought down by encouraging competition among suppliers, that social protection programmes be implemented, that self-employment in the informal sector be encouraged, that urban agriculture be encouraged and that clean water, refuse collection and repairs to sewers be attended to so that the cholera epidemic can be curbed. Hopefully we can accomplish all of these, but then extend employment growth into much more promising formal sector investment-led developments.

John Robe

Monday, February 23, 2009

TelOne accounts

E-mails claiming that I advised people last week to not pay their TelOne accounts are nearly accurate, but my actual advice was to protest against the charges and my hope was that we would all become actively involved in protesting against the unfair demands being made by Zesa and the municipal offices as well as TelOne. I do not recall saying “Don’t pay”, but I do recall agreeing with a questioner that a token payment of a more reasonable figure might help avoid disconnections.
I also remember making the point that these organizations are also hoping to pay their staff in foreign currency and they were burdened by heavy maintenance as well as capital expenditure needs. However, we, the buyers of their services, could not be expected to pay as much as they needed to build new exchanges, power stations or water treatment works.
With assistance from one very concerned citizen, I have gleaned the following points that you might be able to use if you wish to throw your weight behind the protest. I have concentrated on TelOne in these observations, but perhaps the identical claims can be made about Zesa accounts. The city councils might remain a challenge, but I would be glad to hear your thoughts!
Some TelOne accounts have been charged out at a rate of US$0,30 per unit. Section 6(5) of Statutory Instrument 6 of 2009 prohibits any increase in prices when converting from the old to new currency to a level in excess of the prices that applied on the 1st February 2009. This restriction also applies to the conversion of prices to US dollars.
The termination of services for which no accounts have been sent to subscribers will be totally illegal and proceedings could be brought against TelOne to recover damages if such action were taken. TelOne operates under a licence granted by the Postal and Telecommunications Authority, which was, in turn, established in terms of Act 4/2000, Chapter 12:05. TelOne is bound by the conditions of its licence and also by the provisions of that Act.
Section 100 of that Act deals with the approval of tariffs by the Authority. Subsection (1) of that Section states that “At the time of the issue or renewal of any licence granted by the Authority, the licensee shall have its proposed tariff approved by the Authority”. Subsection (2) states that “The licensee must obtain approval from the Authority if it intends to amend or replace that tariff”. No approval has been publicised, but if one were obtained, TelOne subscribers would have a right to the details of the approved tariffs and notice of the date on which they would become effective.
As a retrospective tariff increase would not have been permitted by the Act, any attempt now to charge in US dollars for phone calls made before the yet to be established approval was or is granted will be illegal. The most recently gazetted tariff increase is contained in Statutory Instrument 319 of 2000. Section 17(1) of that Statutory Instrument states that “There shall be charged in respect of the telephone calls made by a telephone subscriber or other person, the charges set out in the Eighteenth Schedule”.
The Eighteenth Schedule sets out charges, which are in Zimbabwe dollars and not in US dollars. Those Regulations have not been repealed, so they remain in force. The Corporation is only entitled to charge the rates set out in that Schedule which are well below the proposed US$0,30 per unit, another instance of acting illegally.
TelOne services are governed by the By-Laws set out in Regulations contained in Government Notice No. 399/1973. Part VI is headed “Accounts”. Section 71 states that “The subscriber shall be responsible for the payment of all charges arising out of the use of his telephone, whether such charges have been incurred with or without his knowledge or permission”.
Section 72(1) states that “Charges for toll or trunk calls dialled direct by a subscriber shall be included on telephone call accounts under the heading of “metered calls””. Section 73(1) states, “Accounts for calls, phonograms and supplementary services shall be paid to the Corporation within 14 days of the date of the account”. Subsection (2) states that “The account rendered shall for all purpose be sufficient evidence of the amounts due by the subscriber”.
From this it is clear that the Corporation is obliged to send out an account to each subscriber and that it would not be entitled to pre-date the accounts in order to bring forward the date of payment. It is clear from this that a subscriber should be entitled to 14 days to pay his account. It is also quite clear that the Corporation is obliged to send accounts.
Subsection (3) states that “If a subscriber fails to pay his account for calls, the Corporation may summarily suspend the service”. TelOne therefore has no right to suspend the service until an account has been sent out and the subscriber has been given 14 days within which to pay.
As a parastatal organisation, TelOne’s conduct is governed by the Administrative Justice Act. In this Act, an Administrative Authority is defined as any person who is an officer, employee, member, committee, council or board of the State or local authority, or a parastatal that has the lawful authority to carry out the administrative action concerned. TelOne’s decision to charge all of its subscribers in US dollars was clearly an administrative decision, as was the decision backdate the application of the decision. No announcement has been made about this administrative decision, and there is no evidence to suggest that people with the necessary authority took the decision.
Section 3(1) of the Administrative Justice Act states that “An administrative authority, which has the responsibility or power to take any administrative action which may affect the rights, interests or legitimate expectations of any person, shall act lawfully, reasonably and in a fair manner”. The Section goes on to say that they must act timeously and that, “Where an administrative authority has taken an administrative action, it must supply written reasons within the relevant period for that administrative action”. In fewer words, every authority could be held to account. TelOne’s administration appears no longer to believe it is accountable for its actions.
Section 3(2) states that, “For an administrative action to be taken in a fair manner as required by Subsection (1) the administrative authority shall give any person who will be affected adequate notice of the nature and purpose of the proposed action and a reasonable opportunity to make adequate representations”. This TelOne has not done, so it appears that it is acting not only illegally, but unfairly as well.
Section 4 states that “Any person who is aggrieved by the failure of administrative authority to comply with Section 3 may apply to the High Court for relief”. This course of action might be expected of TelOne subscribers if they are not given notice of the intended charges and time to make representations about these charges.
Subsection (2) of Section 4 states that the High Court has the power to confirm or set aside decisions, or refer any issue back to the administrative authority for consideration. It can also give directions to achieve the administrative authority’s compliance with the requirements of Section 3. Statutory Instrument 5 of 2009, which authorises payment for services rendered by a parastatal to be made in foreign currency, also states that Zimbabwe dollars can also be used. Accordingly, payment of any account can still be made in Zimbabwe dollars.

John Robertson

Zimbabwe: Dollarisation - We All Need to Adjust

23 February 2009
Harare — ZIMBABWEANS need entirely new attitudes to pay, to pricing, to spending, to taxing, to regulating and to saving following the final dollarisation of the economy for all practical purposes over the last fortnight.
For a decade, Zimbabweans have become used to prices rising at ever accelerating rates, to pay racing ahead, to having to price goods and services at what is assumed to be next month's replacement price, with spending money as it comes in and learning how to "burn" money by arbitraging between exchange rates.
At the same time, a huge "dealer" economy arose.
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This was totally unproductive, often illegal, and fairly often corrupt. But it allowed a significant minority to ameliorate the effects of ever rising hyperinflation, although most were driven ever deeper into poverty as wealth was transferred to that minority.
As monthly inflation rose over 100 percent, tax collections, falling behind all the time, became ever more meaningless since they were collected at least a month in arrears, so accelerating the need to "print" money to fund the Government.
At the same time, the productive sector was hard hit, unable to source inputs and forced to pay what amounted to steep export taxes as a rational and reasonable system of managing export earnings became an intolerable burden.
Even when rents, goods and services were charged in hard currency, usually illegally, these prices had little relation to actual value and were usually based on what those near the apex of the "dealer" economy could afford.
All that has quite suddenly ended, and ended forever.
And for almost all Zimbabweans and for the Government, this means starting at the bottom.
The whole pricing structure has changed.
Prices for food and groceries are now falling as competition enters the market in a big way and local manufacturers come back into production. There is no longer a supply-side shortage, rather a shortage of cash in customers' wallets.
The unrealistic US dollar rents charged by the end of last year are starting to leave flats, houses and office suites empty, since people simply do not have the money and can no longer extend their earnings by manipulations. We expect rents to start falling as market forces force landlords to rethink.
But where goods or services are in short supply, unrealistic prices still pertain. Medical costs are still so high that it is cheaper to fly a patient to a South African private hospital than use a Zimbabwean private hospital.
Hardware stores are still learning. Some have started to slash prices, but it is still possible to find a US$4 plug in a shop next door to a shop where the same plug is being sold for US$1.
Pay negotiations have started, with some quite unrealistic demands in some sectors. It is now impossible to "print" money and very difficult to borrow. Every employer, from the Government and the titans of industry down to the little shop, can only afford to pay what they have earned or collected in hard cash.
Other countries have found when restarting their economies that fairly flat pay scales are the only way out when pay has to be low. In other words, the chief executive earns only a modest multiple of the pay of the man who makes his tea. Fairness can at least make poor pay less unacceptable and encourages management and workers to think seriously of ways to boost profits so all can have reasonable pay rises as the economy or business grows.
Both the Reserve Bank of Zimbabwe and the Government need to look again at the last proposed budget and monetary policy statement in light of the changes of the last couple of weeks, changes they themselves initiated with those proposals and policies, since some measures have been overtaken by events.
The RBZ must easily hold the world record for the number of years it kept large chunks of the economy going with high hyperinflation and managed liberalisation of the economy fairly smoothly over the last few months.
But now the stage has been reached where licensing of ordinary business is a tax, rather than a banking operation, and needs to be transferred to local government and Government. The rule of no taxation without representation still applies.
At the same time, the collapse of the dealer economy is probably going to put impossible strains on some banks, and that will need to be managed if the ordinary Zimbabwean is not to be hit unfairly.
Someone is going to have to manage the national debt and create the savings instruments that we all need.
For banking, too, must now change. Banks are still trying to live on high fee income for their foreign currency accounts instead of working out savings schemes so that they can go back into traditional banking and lend mobilised savings.
The Government needs to ensure that taxes are fair, are collected promptly so it can pay its bills and salaries, and encourage rather than inhibit economic growth.
Zimbabwe has entered a new era. We all, from Government through investor and business owner to the ordinary person, need to adjust.

Serious Abuse and Misuse of Public Funds: Gono should account for the forex in his custody

February 22, 2009 By Levi Mhaka ©

As a citizen, it is public knowledge that the Reserve Bank of Zimbabwe (RBZ), Gideon Gono unilaterally appropriated foreign currency belonging to corporate account holders under the pretext of using for national needs and requirements. He did so after directing all banks to hand over the FCA to the central bank in early 2008.
From September 2008, he further generated foreign currency by way of charging license fees of up to US$250,000 for manufacturers, warehousing and trading businesses. The same licensed entities were levied by ‘surrendering’ 15% of their foreign currency gross earnings to the RBZ, while the tax authorities, ZIMRA, further collected 15% in valued added tax of such licensed entities. The licensing fee and RBZ surrender levy have been reduced.
Besides such prohibitive licensing fees that have now been scrapped, the new Finance Minister should proceed to scrap double taxation in which the RBZ is looting businesses’ hard earned forex by charging a levy of one’s foreign currency earnings.
We expect full results and early closure of the ongoing or intended forensic audit the finance minister is being said to be making or intends to make of the FCAs’ that Gono raided last year and all the foreign currency generated from license fees and levies. This can no be called a witch-hunt or hatchet job. It is called public accountability.
There could be enough foreign currency at the RBZ to pay civil servants. Without independent assessment, Gono cannot claim bankruptcy.
Relatedly, Gono has just picked up a public fight with politicians, specifically the Deputy Prime Minister, Arthur Mutambara and the Finance Minister, Tendai Biti. He did so through the State-owned Herald newspaper in a blistering story written by his personal acolyte and beneficiary of his patronage, the Herald Business Editor, Victoria Ruzvidzo. Another acolyte at yet another State-owned Sunday Mail, Munyaradzi Huni, regurgitated the remarks.
Without focusing much on the relational chemistry, or lack of it, between Gono and the new Deputy Prime Minister and the Minister of Finance, there is something suspicious about Gono’s public behaviour. He seems to have something to hide by adopting scare tactics that he previously used against politicians. Gono had become so drunk with unchecked power and influence that he made very arrogant statements to try to create an impression that his policies have worked very well in the past and were bound to be useful had it not been these unthinking new politicians.
A high powered Zimbabwean delegation consisting of the Prime Minister, Morgan Tsvangirai, Minister of Finance and Minister of Foreign Affairs, Simbarashe Mumbengegwi, took their begging bowl to South Africa, where they met South African President Kgalema Motlanthe and Finance Minister, Trevor Manuel. Gono’s absence on the delegation is a story by itself; especially after his poorly thought policies are being reversed. In any case the ones being reversed and the other ones requiring immediate attention were all beyond his mandate. They were all fiscal related.
Those calling for Biti and Gono to resolve their differences should realize that Gono is stuck in the pre-coalition government era, in which he was everything financial, powerful and influential. All ministers groveled in front of him and made bee lines to his office.
He had an express route and unfettered access to the President to seek a nod on anything he wanted to do even at the point of manipulating or lying to him. Gono undermined and destoyed counterbalancing factors, offices and institutions by whatever means necessary. The President relied ONLY on him for economic an financial advice and implementation on anything monetary and fiscal after Gono had destroyed possible independent assessment of such advice and implementation.
It should tell another big story that Mutambara has not been known to target particular individuals. He did so when he said that the monetary and fiscal measures by then Acting Minister of Finance, Patrick Chinamasa and Gono, respectively, would be up for a fundamental review not reversal, as others are now alleging. Why there should be no policy reviews when there are new ministries and the RBZ Act is explicit on that.
Gono should be very humble enough to go back to the basics of his office and institution. The CORE functions of the RBZ is the responsibility for the formulation and implementation of monetary policy in its pursuit of price stability and the RBZ is required in terms of the Reserve Bank Act (Chapter 22:15), to consult the Ministry of Finance during the creation of monetary policy to achieve the objective of price stability.
When Gono “took office in December 2003, (he) fundamentally changed the functions of the RBZ. Increasingly, the Reserve Bank usurped the fiscal operations of the Ministry of Finance. In addition, it assumed some of the functions of commercial banks in that it engaged in direct lending to the private sector in a very significant manner. The central bank exhibited ‘mission creep’ as it began to undertake private sector and public sector functions outside its domain that included, among others, agricultural activities, manufacturing and retail activities… As a result, the RBZ…acquired a conglomerate structure and hence failed to focus on its core business” - UNDP Comprehensive Economic Recovery in Zimbabwe: A Discussion Document (2008). (Highly recommended for the new Minister of Finance.)
Gono should now be humble enough to admit that many, if not all of his policies have not worked when he has been central bank governor, the de facto Prime Minister, Minister of Finance and all the related economic and resource ministries. It should register in his mind that there are new princes and methods in town.
Gone are the days he could publicly and inappropriately boast that President Robert Mugabe is his friend and can afford to join him for holiday in Malaysia. On the way to the Office of the President, he now has 2 Chitungwiza “road humps” – the Offices of Prime Minister and the Finance Minister. Even if he manipulates the President, the new day-to-day ‘manager’ of government business and finances is the Prime Minister and the Finance Minister, respectively. The President will now obviously request Gono to seek the audience and express consent of the Finance Minister on what he intends to do. The RBZ Act expects him to do so, yet he is using the media to fight Biti! Gono should not be seen to undermine that new political arrangement.
The Prime Minister and the Finance Minister can with pleasure expect Gono to be in the queue to be either at the two’s offices, something that no minister was able to do before the pre-coalition era.
With this in mind, Gono should adjust and reconcile himself with the new era. Public power is a drug and its holder should be held accountable, checked and counter-balanced. Gono was used to unilateral and absolute power and influence subordinative only to that of President whom he manipulated

Saturday, February 21, 2009

Zim adopting rand 'negative'

20/02/2009 12:01 - (SA)
Johannesburg - The proposed adoption of the rand by Zimbabwe is possibly "a negative by association", Rand Merchant Bank (RMB) currency strategist John Cairns said on Friday.
This followed media reports that Zimbabwean officials were expected to request a $1bn rescue package from the South African government and the right to adopt the rand as Zimbabwe's currency.
Whether Zimbabwe would get the rescue package was uncertain, Cairns said.
Western donors had made it clear that they would not help until either Mugabe disappeared or the power-sharing deal was clearly seen to be working, he said.
"So, South Africa would have to go it alone and we are talking real money here.
"If it is agreed, the money would presumably be paid in rand and so not actually imply any foreign exchange transaction and would presumably also open up the way for Zimbabwe to formally adopt the rand."
Both the aid and the ZAR adoption were on their own mostly meaningless for the rand in a real sense, Cairns said.
"Zimbabwe, of course, will never have the ability to print anything but Zimbabwean dollars and so ultimately we should care about what happens there as much as we do about what is happening in Lesotho or Swaziland (who already use the rand), which is to say not at all."
Still, Cairns said, because the move was negative by association, the rand would probably be on the back foot on Friday.
Cairns forecast a range of 10.00 to 10.28 for the rand to the United States dollar for the day, "with risks still strongly to a break on the topside".
He noted that "the fear must be that USD1bn in aid (even if classified as a loan, South Africa was surely unlikely to ever get the money back) would be the first of many calls on our fiscal".

Econet, most attractive on Zimbabwe Stock Exchange

February 20, 2009 in
TRADE finally resumed, in United States currency, at the Zimbabwe Stock Exchange with listed mobile network services firm Econet one of the most attractive counters.
The ZSE opened for trade on Thursday at 12:00 with Econet the biggest bid at $1 followed by old Mutual at 40c.
“All the other counters had sellers with some price even below 1c. We expect thin trade to continue characterizing the market in the short term and investors should be prepared for some teething problems in the near future in trades and settlement,” added the ZSE in its market report.
Trade had halted to a standstill at the Zimbabwe bourse in line with the collapse of the formerly vibrant economy and its subsequent dollarisation that saw traders shun the stock market.
A meeting between a ZSE Committee and the new minister of Finance, Tendai Biti provided a breakthrough.
It was agreed that brokerage be set at two percent, stamp duty at half-a-percentage.
Analysts said that to boost tax revenue, it would have been more efficient to raise the stamp duty to over 0.65percent and reduce the brokerage to one percent.
ZSE Committee suggested that asset managers be brought under SEC so as to share burden with them in funding SEC and in line with international practice. The Reserve Bank of Zimbabwe will be advised of the change.
Marcus Mushonga

Friday, February 20, 2009

Cost of Living trends

John Robertson
Sent: Thursday, February 19, 2009 5:17 PM

Now that the government has started offering wages and salaries in US dollar-denominated vouchers and many of the individual employees are receiving vouchers to the value of about US$100, new attempts are being made to assess the prospects of government and other employees being content to receive such amounts if this is all their employers can afford to pay them. Some dissatisfaction has been expressed already, even though the payments of February salaries have just started, and at least one government ministry has been warned that if the offers are not improved, those public servants will either go on strike or stay on strike.

A quick glance at the attached table will show that US$100 would meet a family's basic needs for only about two weeks. If that figure becomes the average around which most employers find themselves forced to work at this stage of what will hopefully become a recovery, an existing fact will be strongly reinforced: one income per household is not enough.

Zimbabwe's need of foreign assistance will rapidly become more intense as the full extent of the economic repair work becomes more widely known, but of most importance will be the pace at which Zimbabweans are perceived to be becoming deserving of that help. At the government level a poor start appears to have been made as on the very first day the world's observers became witness to several glaring breaches of faith. We ended that day with a Deputy Minister in prison and with a cabinet that was not only bigger than the one provided for in the Constitution, it is bigger than the cabinets of many countries that are a hundred times bigger than Zimbabwe.

To become deserving of respect and of the assistance the country needs, Zimbabwe will have to get its act together very much better than it has done so far. The focus should immediately be on confidence-building measures that include the return of the rule of law and respect for property rights, but would not have any room for a partisan judiciary or legislation that offers investors the certainty that they will lose control over their business assets. Neither will confidence return while the authorities isolate themselves -- and the country -- from the behaviour patterns that would encourage those who can assist to involve themselves and their capital in the rebuilding of our health and education sectors, our power, water, communications and transport infrastructure and our extensive manufacturing, mining, agricultural, tourism and service industries sectors.

Hopefully, the events in the coming weeks will successfully place Zimbabwe onto the right path. An extensively revised Budget is needed and much more persuasive political policy changes will be needed to make the important economic concessions work. By themselves, putting an end to price controls, manipulated exchange rates and deeply negative interest rates will not be enough.

In these early months at the beginning of a very difficult journey, the needs of employees will remain powerful determinants of behaviour and productivity. It is to be hoped that many households will enjoy incomes from more than one source, whether from remittances, lodgers or a variety of informal activities. Whatever they are, they will probably make the needed difference, as they have done during most of the recent years.

Zimbabwe Stocks May Double as Exchange Reopens Using Dollars

By Janice Kew

Feb. 20 (Bloomberg) -- Zimbabwe shares, battered by the world’s highest inflation rate and a decade-long recession, may rebound after the stock exchange reopened yesterday from a three- month suspension with listings re-denominated in U.S. dollars.

While prices are bound for an initial fall as investors who were prevented from selling seek an exit, shares will probably more than double by year-end, according to the Harare-based unit of Renaissance Capital, the investment bank with brokerages in ex-Soviet and African countries. Companies are priced at a third of their breakup value on average after an 86 percent drop in the two months before the Nov. 21 shutdown, said BoE Private Clients, South Africa’s second-biggest private-client asset manager.

Zimbabwe’s central bank suspended shares as inflation estimated at 89.7 sextillion percent by the Cato Institute, a plunge in the Zimbabwe dollar to 12.6 trillion per U.S. dollar and international sanctions against President Robert Mugabe’s regime caused the economy to collapse. Reopening the exchange was one of the first steps by the coalition government formed last week as part of a power-sharing agreement between Mugabe, 84, and opposition leader Morgan Tsvangirai.

“There is an opportunity purely based on the discount to valuation of corporate assets,” said Thomas Chataika, a Zimbabwe-born fund manager who helps manage more than $6 billion at BoE in Johannesburg.

Phones, Beer

Only $30 of shares traded in the hour the exchange opened from noon yesterday. Apex Corporation of Zimbabwe, an engineering and steel manufacturing company, was the only stock that traded, with 3,026 shares bought and sold at 1 cent each, according to price lists e-mailed by Kingdom Stockbrokers.

“It wasn’t really communicated that the exchange was going to reopen and I don’t think the general public were aware,” said Chataika. “It will take about a week for the market to trade properly as the stocks still need to be re-valued in dollars.”

Chataika, who has about $3 million in Zimbabwe stocks, said he plans to buy Econet Wireless Holdings Ltd., the country’s biggest mobile-phone operator, Delta Corp., Zimbabwe’s largest beer and beverages maker, and Kingdom Meikles Africa Ltd., the Harare-based owner of TM supermarkets, the biggest retail chain.

“Everyone there is despondent, and drinking,” said Chataika, 31, who lived in Zimbabwe until 2005. “Even if it takes time for the economy to show real growth, people still communicate, eat and drink.”

Econet and Delta, both based in Harare, are also top picks for Dzika Danha, a strategist at Renaissance Capital.

“When it comes to phones, penetration is very low at about 13 percent, and so there is a lot of room for growth,” Danha said in a telephone interview from Harare yesterday.


Zimbabwe is in the grip of an economic crisis that’s left more than half of the African nation’s 11 million people in need of emergency food rations, according to the United Nations World Food Program. A quarter of the population has fled the country. The U.S. and European Union imposed sanctions including freezing government assets and travel bans to show disapproval of Mugabe’s rule.

Reserve Bank of Zimbabwe Governor Gideon Gono ordered the shutdown of the stock exchange citing allegations that some traders used fraudulent checks totaling “60 hexillion” Zimbabwe dollars to buy shares. Eleven companies and nine individuals had their accounts frozen in November.

Cost Incentives

Tsvangirai, 56, was appointed prime minister on Feb. 11, ending an impasse with Mugabe’s Zimbabwe African National Union- Patriotic Front that began last March after disputed elections deprived Zanu-PF of its parliamentary majority for the first time since it took power in 1980. Tendai Biti of Tsvangirai’s Movement for Democratic Change became finance minister.

To spur trading, stamp duty on purchases and sales of stocks has been cut to 0.5 percent from 2 percent, according to Netsai Muyaka, a trader at Harare-based Kingdom Stockbrokers Ltd. A withholding tax of 5 percent on sales was also removed, according to Renaissance.

“Trading costs have been reduced and this is a good signal,” said Chataika at BoE. “It says that the new finance minister is trying to realign trading with international norms.”

Renaissance sees a 60 percent probability of the Zimbabwe Stock Exchange All-Share Index soaring 150 percent this year, a 30 percent likelihood of a 50 percent advance, and 10 percent odds of a 250 percent surge, according to a report published yesterday. Shares gained 56,436 percent on the Zimbabwe Industrial Index, part of the All-Share Index, in September in Zimbabwe dollars, according to Bloomberg data. The currency was re-dominated at the start of February at one trillion per U.S. dollar.

“Trading on the exchange is going to be a process of discovery in the first few days as investors try and figure out the dollar value of their shares,” said Danha at Renaissance. “Those who want to trade will also have to open foreign-currency accounts so that they can trade in dollars. There will initially be sellers who need cash.”

To contact the reporters on this story: Janice Kew in Johannesburg at

Zimbabwe PM: To talk with S.Africa on use of rand

Thu Feb 19, 2009 7:47pm GMT

By Nelson Banya

HARARE, Feb 19 (Reuters) - Zimbabwe is engaging South Africa over using its neighbour's rand currency to boost foreign exchange liquidity, Prime Minister Morgan Tsvangirai said on Thursday.

South African President Kgalema Motlanthe said earlier this month that Zimbabwe, grappling with inflation of more than 200 million percent which has rendered its currency worthless, could adopt the rand, but he did not give details.

"I don't want to pre-empt this, but we are really engaging the South Africans to make sure we can discuss (using the rand) ... to provide relief," Tsvangirai told business leaders in Harare.

"We are in an emergency situation, a fire-fighting situation. For now we are talking of an emergency plan," he said when asked what Zimbabwe's new unity government was doing to ease an acute foreign currency crunch."

Tsvangirai was due to meet Motlanthe in Cape Town on Friday, accompanied by Zimbabwe's Finance Minister Tendai Biti and Foreign Minister Simbarashe Mumbengegwi, the South African government said.

"The meeting would be in the context of how now to address the issues around the reconstruction of Zimbabwe," foreign affairs director-general, Ayanda Ntsaluba, told a media briefing.

"We will continue to keep an eye with a view of lending whatever support as South Africa."

Thursday, February 19, 2009

Zimbabwe stock exchange to resume trade on Thurs

02.19.09, 03:37 AM EST

HARARE, Feb 19 (Reuters) - Zimbabwe's stock exchange will resume operations on Thursday after a 3-month halt and trades will be conducted in foreign currency due to the collapse of the Zimbabwe dollar, a bourse official said.

'The market will finally start trading again today at noon,' a ZSE official told Reuters. 'There will be a single callover and trades will be in foreign currency.'

Zimbabwe Finance Minister Biti Unveils US$100 Supplement to State Workers

By Thomas Chiripasi & Blessing Zulu
Harare & Washington
18 February 2009

Zimbabwean Finance Minister Tendai Biti on Wednesday announced his first major policy step in announcing that the government has begun paying civil servants ranging from soldiers to teachers a US$100 monthly supplement to their nearly worthless Zimbabwe dollar wages.

Biti's move represented a down payment on Prime Minister Morgan Tsvangirai's promise in his inaugural speech one week ago that the government would start paying state workers in hard currency as of the end of February. It soon emerged that Mr. Tsvangirai had not lined up the estimated US$40 million to US$50 million needed to fully dollarize state wages.

Biti is secretary general of the Movement for Democratic Change formation headed by Mr. Tsvangirai, who founded the former opposition party in 1999 and after years under heavy pressure from the ruling ZANU-PF party of President Robert Mugabe led the combined MDC to victory in the March 2008 general elections, garnering a parliamentary majority.

Organized labor was not impressed with the US$100 stipend. General Secretary Raymond Majongwe of the Progressive Teachers Union of Zimbabwe denounced the "allowance" as an insignificant sum compared with the US$2,200 monthly minimum his striking members are demanding as a condition to returning to public classrooms shuttered for months.

Correspondent Thomas Chiripasi of VOA's Studio 7 for Zimbabwe reported from Harare on the finance minister's news conference and the displeased response by teachers.

Expanding on his monetary approach, Biti in an exclusive interview with Studio 7 reporter Blessing Zulu said he'll maintain the present multi-currency monetary regimen rather than adopting the South African rand as the official currency, as some have proposed, and described the US$100 payments as a stimulus to boost consumption and output.

Wednesday, February 18, 2009

The Theft of Private Assets

Tuesday, 17 February 2009
When I left school at the age of sixteen and went to work on a farm,
my father sent an insurance salesman to see me and said that I should take
out a life insurance policy that would give me a pension when I retired in
49 years time. I forget what the monthly payments were but I signed up and
sacrificed some of my meager salary to the Old Mutual.
As I grew older, periodically I revised my insurance cover and took
out new agreements - eventually leading me to a situation where I was
contributing via a bank stop order to five contracts with the Old Mutual for
life cover and pensions of various sorts. By the time I left my last job, I
was a Managing Director of a large corporate and had a salary commensurate
with my position. I certainly never had to really worry about my family's
basic needs. In that position I had to fund not only my personal policies
but also the company pension scheme.
My father retired in 1978 and when he did, his pension was Z$268 a
After a lifetime of hard work. They could never have lived on this and
I was glad to be able to bring them into my own family, build a cottage next
to the house and support their basic needs. When he died 17 years later, his
pension rights barely paid for his immediate personal needs. But his
lifetime medical aid was still valuable.
When I reached the magical age of 65 and my lifelong savings in the
form of contributions to the Old Mutual matured, I expected to receive a
reasonable pension. The total value of all five contracts was insufficient
to pay for the petrol required to travel to the Old Mutual and collect the
cheque. I never received a cent for all the years of my contributions and
not even a letter of explanation.
One day I will do a calculation of what my total lifelong
contributions to the Old Mutual; were worth - but this I know, that until
1980, 24 years into my payments, the local dollar still bought a pound and
two US dollars. It was real money. When I started my payments in 1957, the
local currency bought two pounds. I would like to know what those sales guys
got in the way of a pension when they retired? I bet it was not linked to
the local!
We now have many thousands of pensioners here - some 300 000 from the
civil service, 16 000 from the railways and many thousands like myself who
were in the private sector. They are nearly all totally destitute. Many have
to be supported by relatives and friends and even special organisations that
have been set up to help.
This is not the only theft of private assets that has taken place.
Anyone, whose assets were held in monetary form, is now destitute. I well
remember a couple in Harare who when they retired sold their family home and
rented a smaller home, putting the money onto fixed deposit in a financial
institution (remember those days?). At the time I advised them not to go
that route and to buy a smaller home and invest the rest in blue chip
equities (do they exist anymore?) - they did not and they now live on small
monthly remittances from family abroad.
How did this happen and is there a remedy? It happened because the
massive cash flows from this myriad of small individual monthly payments
went into the pool of national savings and were easy pickings for the major
players in the economy. The first heist was in the form of the chunk taken
off the top and invested in government bonds (prescribed assets) at low
interest rates.
Then the companies administering the funds took their share for
expenses and overheads.
What was left they invested - not in productive ventures but most
often in high rise luxury buildings that even today stand as monuments to
our hard work and savings. I am told that 80 per cent of all the buildings
in down town Harare are owned by pension funds and insurance companies. It
explains how this country - one of the poorest in the world can boast a
skyline in Harare that would rival many cities in the richer developed
After that they invested in equities - so that they had some liquidity
in case they needed it to meet the occasional payout after a crisis.
The Old Mutual started out as a Mutual Fund owned by its
policyholders, became a major listed public company and gave us all shares -
I got 400 or so and sold them to help fund my business. It is now one of the
largest investors in the world - certainly in South Africa. But it pays
little or no attention to the plight of the tens of thousands of policy
holders in countries like Zimbabwe, who have had their lifetime savings
wiped out.
The reasons are, of course inflation - in the States right now you
will struggle to find an investment that will return you more than the cost
of inflation. Dividends from equities are a joke. When you have a spell of
hyperinflation like we have are having then cash assets just get wiped out
over night. It's a storm from which there is no protection.
I am told that credit card debt in the USA is bigger than the national
It is now clear that the entire developed world have been living so
far out front on credit that any loss of confidence will result in just what
we have experienced - the collapse of finance houses and the equity markets
and the value of real estate. Until savings deals with burden of debt and
real earnings in goods and services match incomes, the crisis will persist
and real living standards will fall.
At least here in Zimbabwe we have no debt - at least not in Zimbabwe
dollars, they were wiped out together with our savings. What we have to do
now is get our real assets working again and then make sure that in future
we invest our surpluses in real working assets and not in guilded towers
that do not produce anything.
One thing is also certain, we must do something to support our
pensioners - they after all were responsible for everything you see in
modern Zimbabwe.
This probably means that we will have to all sacrifice some of our
future income to meet the needs of those who supported us in the past.

Eddie Cross
Bulawayo, 17th February 2009

Biti to announce forex salaries for civil servants today

Tuesday, 17 February 2009

HARARE - Zimbabwe's new Finance Minister Tendai Biti will today
announce foreign currency salaries for civil servants in line with a pledge
made by Prime Minister Morgan Tsvangirai after his inauguration last week.
Sources said the new government tasked Biti after its first Cabinet
meeting yesterday to announce how much civil servants would be paid
beginning this month-end.
This, the sources said, was after Tsvangirai convinced the Cabinet
that he had sourced substantial funds to pay civil servants.
"The Cabinet was satisfied that Tsvangirai had secured the money from
donor organisations," one of the sources said. "Biti will hold a press
conference tomorrow (Wednesday) to unveil the civil servants packages."
The sources declined to reveal how much Tsvangirai had in the kit and
the identity of the organisations where the money came from.
However, speculation was rife that the money would come from UNICEF
and USAID.
Biti yesterday confirmed that he would address a press conference to
deal with "civil servants remuneration and other pressing issues".
The Ministry of Information and Publicity yesterday invited the local
media to the press conference on "civil servants' salaries" to be held by
Biti at his official offices.
On Monday, Tsvangirai met representatives of teachers and told them
that they would be paid in foreign currency.
Progressive Teachers Union of Zimbabwe (PTUZ) secretary general
Raymond Majongwe said the Movement for Democratic Change (MDC) leader had
told them that he had sourced the money and were to be informed of their new
salaries before the weekend.
"The prime minister told us that Biti will announce the new salaries
for civil servants," Majongwe said. "We are going to wait and find out the
package on offer before we decide the next course of action."
Teachers and other civil servants have been on strike since last year
pressing to be paid in hard currency. They want to be paid a minimum of US$2
300 monthly.
Speaking after taking oath of office last Wednesday, Tsvangirai
pledged to pay health workers, teachers, soldiers, police officers and civil
service professionals in foreign currency from the end of this month.
In return, he asked that schools be re-opened and civil servants
return to their desks by Monday - a plea most teachers snubbed.
"Our public service has ground to a halt as many of our patriotic
government employees can no longer afford to eat, let alone pay for
transport to their place of work," Tsvangirai said.
"Hard currency salaries will enable people to go to work, to feed
their families and to survive until such time that we can begin to sustain
ourselves as a country."
His pronouncement was questioned by many who wondered where Tsvangirai
had obtained the foreign currency.
Then acting finance minister Patrick Chinamasa issued a statement
saying the government would pay civil servants foreign currency denominated
coupons with a face value of US$100 to buy food at selected places.
The country's inclusive government was formed last week between
President Robert Mugabe, Tsvangirai and the leader of the smaller MDC
formation, Arthur Mutambara, after they signed a unity government deal last
Meanwhile teachers' unions said they had advised Tsvangirai that
should the issue of salaries be resolved there was need for the new
government to revise the school calendar after most public schools - where
the majority of Zimbabwe's children learn - failed to open for the new term
on January 27 because teachers were on strike.
Zimbabwe Teachers Association (ZIMTA) secretary general Richard
Gundani said: "We also advised him that there was need to revise the school
calendar that will be officially announced by the new minister as we feel
there has not been any effective learning since January 27 when schools were
supposed to be officially opened."
PTUZ spokesman Oswald Madziva said a new calendar would allow
authorities to assess the situation in the education sector and to devise
ways to ensure a return to normalcy. - ZimOnline

Tuesday, February 17, 2009

Promises of Change: Will they be kept,

What will they cost and who will supply the money?

Very nearly all the efforts to measure the importance of the long list of changes described or hinted at in with the budget statement, the monetary policy statement, the signing of the Unity Accord and the passage through Parliament of Constitutional Amendment No 19 suggest a broad consensus: Zimbabwe has arrived at a major turning point.
Some of the changes are so startling that most Zimbabweans are eagerly awaiting confirmation that follow-through action will really be allowed to take place. Other changes clearly hinge on whether the claimed political breakthroughs will actually happen; whether a start can be made on rebuilding of the country’s severely damaged economic foundations depends absolutely on an enabling political environment.
All of them, however, share the common denominator of money. All are affected by the glaring facts that Zimbabwe has far too little foreign exchange and the processes needed to acquire it have been severely disabled.
If one factors in the additional handicaps that violations of civil rights have disqualified the country from access to development support and that contempt for property rights has placed the country off-limits to most investors, the reason why the first hurdle is so high becomes apparent.
But because the economic base from which to jump that hurdle has become a soft quagmire of dishonoured debt repayment commitments, of totally eliminated domestic savings, of the useless remains of a dead domestic currency and a banking system that is close to its last gasp, Zimbabwe will not be able to clear that hurdle without help. But with one of the lowest credit ratings in the world, Zimbabwe will have to take many more steps in the right direction to become deserving of that help.
Hopes of operating an effective cash system now depend on the country finding ways to draw in an increasing flow of currency notes from other countries. However, very much more than a steady supply of cash notes will be needed to reconstruct a functional monetary and banking system. Among Zimbabwe’s many priorities is the replacement of all Zimbabwe dollar balances with a currency that actually works so that their clients can also get back to work.
Such inflows would also permit the banks to get back onto a firmer footing, but like most other companies, they too stand in great need of re-capitalisation inflows of equity funds. The banks have been crippled by the general business conditions, but commercial and merchant banks were further weakened by the Reserve Bank setting the Statutory Reserve Ratio at 50% of deposits.
A major change that is already effective is that this figure has been reduced to 15%, so the banks have just had returned to them 70% of the money extracted from them by this obscene misuse of authority. Unfortunately, as it is unlikely that anybody will have need of it, the return of the vast number of Zimbabwe dollars will serve only to emphasise how useless the money has become.
Acknowledging this in their oblique fashion, the Reserve Bank and the Ministry of Finance have concentrated most of their efforts on ways to restore foreign earnings. Many allusions to political policies can be taken as indirect admissions that past policies were wrong, but more than that will be necessary to restore confidence among existing and potential investors. Serious intent to stay on a policy reform course will have to be proved and reinforced, specially as investment funds from any sources will inevitably take time to impact on the challenging tasks or rebuilding lost capacity.
Foreign exchange will have to be found and spent on rebuilding the skills base, repairing or replacing capital equipment, re-stocking with materials and recapturing lost markets long before any foreign exchange can be earned.
Just how long? This is a question with many answers. Less time will be needed by some sectors than by others, but because all sectors will be held back by the poor state of the country’s infrastructure, all will benefit if Zimbabwe can re-qualify for long-term financial assistance that might become available from governments, international banks and development agencies, but only if Zimbabwe is seen to have become deserving of such help.
Many industrialists might not choose to – or might not be able to – commit funds to the development work needed before electricity and water supplies are dependable. Many will not succeed in attracting the needed skills before the people being sought have been persuaded that the education and health sectors are back on their feet and well on their way to a full recovery. People here already can do a great deal of the work, but they all urgently need funding.
At a practical level, external credits that permitted all bank deposits to be converted into balances expressed in a readily accepted currency would be of enormous help. Only when a sizable portion of bank deposits is held in currencies that are acceptable for payments will most Zimbabweans get back to work, and this is as true for people in local and central government departments as it is for people in business.
Official efforts to keep the still falling Zimbabwe dollar on some expensive life-support system are likely to prove futile, but will threaten the recovery prospects and will cause nothing but resentment among those who the authorities believe can be forced to accept payments in Zimbabwe dollars.
Unfortunately, the budget and monetary policy statements do not go this far. The shortage of locally available foreign exchange is acknowledged, but the population’s total rejection of the Zimbabwe dollar is not. For government, the major bind is that the quantity of foreign bank notes flowing into in the country is flowing out again just as quickly.
More is needed, and both the Ministry of Finance and the Reserve Bank appear to believe that the concessions made to exporters will result in an immediate surge of foreign earnings. Their hopes appear to be that the exporters’ obligation to surrender 7,5% of foreign revenues to the authorities and pay taxes in the same hard currencies, plus rising profits and P.A.Y.E. taxes will soon cover government’s commitments to all concerned.
Whatever government hopes, no quick responses will be forthcoming from any of Zimbabwe’s productive business sectors. They might carry on flowing from the service sectors, particularly retailing, but the current returns are not likely to improve before employers in all the other sectors are able to pay wages and salaries in foreign currency.
However, as very nearly all of them will have to spend foreign exchange before they can start making more of it, government’s most immediate challenge is clear: it will have to become extremely successful in its efforts to persuade those international institutions that can help that the right political changes are being made and that nothing will be allowed to derail them.
What the changes so far amount to can be described as promising, but not yet decisive. Price controls have been lifted, a reduced off-take from foreign revenues and turnovers of companies licensed to deal in foreign currency has been announced, the 92,5% balance may now be retained indefinitely in Foreign Currency Accounts and each importer’s bank is now empowered to decide on whether to its client should be permitted to place import orders.
Dividend remittances no longer need Exchange Control approval, restrictions on withdrawals from Foreign Currency Accounts have been virtually eliminated and from July this year exporters are to be given 180 days to repatriate export proceeds, twice as long as before.
A new exchange rate regime is intended to track market sentiment so accurately that the variety of other rates in use will disappear. This could be important, but it might be only temporarily so if the Zimbabwe dollar itself also disappears. The inter-bank rate was devalued from Z$12,3 billion to Z$20 trillion to one US dollar, a 99,94% devaluation, and then the dollar was assisted on its way to extinction by the removal of twelve more zeros. This brought the total to 25 in the space of 29 months. Not surprisingly, shares listed on the Zimbabwe Stock Exchange and for every other kind of financial or physical asset will soon be quoted only in hard currency.
For farmers, a competitive trading environment has been created for sales and purchases of maize and wheat, which means that the Grain Marketing Board’s monopoly has been broken and its market function is now buyer of last resort. Tobacco and cotton farmers are to be defined as exporters and paid in foreign currency, but as with other exporters will have to open Foreign Currency Accounts and relinquish 7,5% of their foreign currency proceeds to the Reserve Bank in exchange for Zimbabwe dollars at the inter-bank rate.
For miners, the gold producers among them will have more flexibility than at any time in the past 100 years – including the right to export physical gold, once it has been refined by the Reserve Bank’s gold refinery for a fee amounting to 7,5% of the refined metal. Despite this remarkable jump, the money owed to gold miners in terms of earlier commitments made but not honoured will remain unpaid for at least another year. Tradable Gold-Backed Foreign Exchange Bonds are to be issued to cover the debts and these will be redeemed 12 months after issue, plus 8% interest backdated to the date the amounts fell due,
Taken together, these measures plus reaffirmations of intentions to privatise more than a dozen loss-making parastatals, amount to very important changes in direction. Market forces will have a far greater bearing on the outcome of business decisions and contrived distortions will no longer threaten the majority or enrich a privileged minority.
For an economy that is supposed to fully respect market forces and is not supposed to be able to fall back on subsidies, some of the numbers in the fiscal and monetary proposals are of enormous concern. For example, all the 5% of turnover sums that must be handed over by all holders of foreign currency trading licenses will accumulate through the links in the transaction chain, all the way to the final consumer. This cascading effect is not countered by any recovery of amounts paid already, so it adds considerably to end prices.
The imposition of taxes on taxes is not only unjust, it is also counter-productive in that it causes inflation, it reduces the viability of business operations, it cuts the buying-power of the working population and limits the effective levels of demand from producers.
The VAT rebate system was adopted for the very reason that taxes on taxes were damaging to business interests, but no such provision has been offered to companies buying from companies that have included in their prices the 5% they have to pay on their turnover.
But at a more fundamental level, taxes or fees based on turnover are bad in principle. Operating costs can easily match or exceed gross revenue and in such cases there is little or no profit. The payment of a turnover tax in such cases would not be possible unless arrangements could be made to borrow the money. If the same company is trying to pay the US$12 000 annual licence fee as well, its prospects of survival would rely on its ability to charge much higher prices. Government policies are therefore ensuring that inflation will continue. Many features of its fee proposals need to be challenged.
The need to restore supplies from local sources is repeatedly stated, but the fiscal and monetary presentations both fall hopelessly short of identifying the changes needed to restore the volumes of product that used to come from Zimbabwe’s industrial sectors. The shortcomings are most starkly obvious for agriculture. Despite filling a separate booklet with a discussion on The Role of Property Rights in Investment Promotion, there is not a single line acknowledging that it was the destruction of property rights for large-scale industrialised farming operations that tipped the Zimbabwe economy over the edge.
The booklet’s concluding observations on land is that “the issuance of transferable 99-year leases should be expedited” and that various ministries and institutions should be “capacitated”. Unfortunately, the volumes of raw material supplies to most of Zimbabwe’s factories and the volumes of exportable goods will not return before large-scale capital intensive farming has been reinstated. Such an option is clearly off the map for the current planners and it has to be hoped that the changing political process will soon clear the decks for the needed return of modern farming technologies as well as the personalities who have the needed skills.
Contradictions are also evident in the comments on mining. While in one place the Reserve Bank states that “there is need to have clear and unambiguous legislation which gives investors a basis to plan and make concrete decisions…”, in another it states that, “all special dispensations allowing platinum and diamond mining companies to keep offshore Foreign Currency Accounts has been and is hereby revoked…”.
This statement places at risk the largest mining operation ever to start in Zimbabwe and it attempts to abrogate an international treaty. The uncertainty, if it is allowed to become a contest, will become a highly corrosive display of dishonest intentions and devious behaviour on the part of the Zimbabwe government. This is another area in which the actions of the Government of Unity Accord could make an early and crucial difference to Zimbabwe’s outlook.
Politically, it seems likely that Zimbabwe is heading towards a very different administrative environment. Zanu PF’s overwhelming majority over far too many years permitted it to adopt a leadership style based on patronage and fear. Its most ardent supporters were well looked-after and its detractors could easily be threatened with, or actually subjected to harsh treatment.
No need was felt for intellectually supportable policies because the preferred schemes and scams were usually easier to concoct and always far more attractive to those who could profit from distortions, whether contrived or accidental. The ruling party also had very little need of debating skills or even arguments that would strengthen their claims to be right. If they were wrong, it did not matter, as nobody wanted to challenge them for fear of retribution.
Now Parliament has a strong chance of becoming a much more challenging place. Rather more earnest debate might now be expected and any who want to demolish a Zanu PF position on almost any subject will have all the evidence they could wish for from years of blundering, insensitive and destructive behaviour that has come close to destroying a whole country.
With the decisions to start respecting market forces an important start has been made. Many in Zanu PF are going to see an immediate loss of privileges because almost all of these could be funded only because of the top-level support for behaviour that disregarded basic rules and laws. The policy changes evident in the fiscal and monetary statements suggest that this top level has awakened to a new reality, at least part of which has been brought home by distinct changes in the quality of the moral backing that has come from regional leaders.
Whatever it is that brought about the signing of the Unity Accord, it has happened. But it is still fragile and it needs support. The business sector must be seen to be ready to be supportive if the process stays on track, so it has to be hoped that the MDC will find it can readily get guidance as well as the backing it needs to remain focused on ideas that work.

John Robertson
February 8 2009

Highlights of Zimbabwe 2009 budget statement

The Budget Statement was presented on the 29th of January 2009
The credibility of the 2009 Budget should be judged against its ability to pronounce measures shift government policies from those promoting and fueling consumption to those which create wealth, through supporting productive sectors, particularly agriculture, mining, tourism and manufacturing, whose capacity utilization is now below 30%.
This is against the background of high inflation; low domestic production and a consistent decline in export performance resulting in balance of payments problems with a deficit of US$410 million being recorded in 2008, from US$33 million in 2007.
The proposal is premised
• on the reduction of inflation to double digit levels as well as a positive economic growth rate of about 2% in 2009, projecting a nominal GDP for the country at USD 5.5 billion for the year 2009(highly unlikely given the global slowdown and the state of the economy in terms of production capacity), and a balanced budget linking expenditures to revenues of USD 1.9 billion.
• On the use of multiple foreign currencies for business transactions, alongside the Zimbabwe dollar. The Central Statistical Office, with effect from January 2009 has started to track developments in price indices in foreign currency terms.
• On the revaluation of the Zimbabwe dollar with immediate effect so as to maintain stability (This was effected through the monetary policy statement of 02 February 2009, which dropped 12 zeroes on the local currency). Stability of the currency will depend on matching the monetary base to developments in the real sector, thus matching expenditures to revenue targets.
• On cessation of Reserve Bank of Zimbabwe’s quasi fiscal operations. As at 31 December 2008, all quasi fiscal expenditures incurred since December 2003 have been settled in full and henceforth the Reserve Bank has stopped all quasi fiscal expenditures.
• On a Remuneration Framework for all public servants which provides for:
o . Payment of salaries in local currency, with periodic reviews in line with
cost of living developments
o . Payment of a monthly foreign currency allowance, to facilitate access to a
basket of goods and services now being charged in convertible foreign
• On simplifying the licensing requirements and arrangements to transact in foreign currency for businesses.
• On implementing an Exchange Rate Policy that promotes foreign exchange generation in the economy, as well as encourage the inflow of both short-term and long-term
capital. This is spelt out in the Governor of the Reserve Bank’s monetary
Policy Statement of 02 February 2009.
• On allowing Insurance Companies and Pension Funds to mobilize savings for both public and private investment. Hence, as part of the 2009 Budget policy measures, insurance companies and pension funds, including the National Social Security Authority (NSSA),
have been given the flexibility of conducting business in either local or
foreign currency. With effect from 1 February 2009, insurance companies shall be granted licenses to trade in foreign exchange and to collect premiums in foreign
Similarly, pension funds shall be granted licences to trade in foreign
exchange and to receive contributions in foreign exchange. Consistent with this, the Prescribed Asset requirements applicable with effect from 1 February 2009 is as follows:
• Long term insurance companies will hold 7.5% of their foreign currency
assets in Prescribed Assets denominated in foreign exchange, whilst short
term insurance companies will hold 5%.
• Pension funds, also collecting their contributions in foreign exchange,
will be obliged to hold 10% of their foreign exchange assets in Prescribed
Assets denominated in foreign exchange.
• In cases where the local currency continues to apply, the current
prescribed assets ratios of 35%, 30% and 25% for pension funds, long, and
short term insurance companies shall apply, respectively.
• On allowing The Zimbabwe Stock Exchange to play its critical pivot for socioeconomic
development through its intermediary role between surplus economic agents
and those intending to raise capital.
In order to ensure that the Zimbabwe Stock Exchange fully plays its developmental role, the Ministry of Finance, through the Securities Commission, is putting in place a rigorous code of ethics, as well as stringent licensing and risk management systems for stockbrokers.
Thus stock market trading in both local and foreign currency will be allowed once the necessary framework has been agreed upon regarding:
• The level of domestic foreign currency liquidity to allow for meaningful stock
market trading.
• The level of foreign investor participation, vis-à-vis promotion of local
ownership and participation in local companies.
• On allowing Utility Authorities, such as ZESA, ZINWA, and National Oil Company of Zimbabwe (NOCZIM) among others, to charge for their services in both local and
foreign currencies. This will be complemented by periodic review of tariffs to economic
levels which allow institutions to cover operational costs, consistent with
the “User Pays” principle.
o All NOCZIM customers, Government and farmers included, will pay the full price in foreign exchange. The Minister of Energy and Power Development will implement a trigger mechanism in the pricing of all petroleum products that immediately captures shifts in international prices and procurement costs.
o As from 1 February 2009, the electricity tariff has been adjusted by 47% from the current US$0.067 to US$0.098 per Kilowatt per Hour (kWh) in order for ZESA to recover costs of supply. This is payable in both local and foreign currency (This tariff is still far short of the regional average)
Whilst adopting a cost reflective tariff approach, a tariff regime
providing for a lifeline tariff of up to 50 kWh hours for domestic consumers will be used to provide for continued subsidisation of low income households, while cost reflective tariffs are to be charged on other consumer categories.
With regards to farmers, the subsidy has been reduced to 20% from 45% of the obtaining tariff level with effect from 1 February 2009.
o As from 1 February 2009, government is decentralising the management of water to local authorities with effect from 1 February 2009.
This will be accompanied by the charging of economic water tariffs.
• On continued targeted support for the productive sectors so as to realize improved production supply.
In agriculture, Government proposes measures for continued support to
farmers, including improved market-based access to inputs, farm
mechanization as well as support for extension services.
o With effect from 1 February 2009 the marketing arrangements for grain is as follows:
o All maize and wheat grain exports are suspended
o The GMB will now announce Free on board (FOB) import parity related maize
and wheat grain floor prices in foreign currency or the local currency
equivalent. Hence, the GMB assumes the role of buyer of last resort.
o Millers and any other grain merchants will now compete in the purchase of
maize and wheat grain direct from farmers, alongside the GMB, at prices not
lower than the import parity related floor price.
o Millers are now also able to participate in marketing arrangements with the GMB to purchase in foreign exchange some of the wheat already delivered to the GMB.
o The price of seed maize payable to farmers upon harvest will be in both local and foreign currencies, and pegged at F.O.B. import parity levels for commercial maize plus 30%.
o The selling price of seed maize to farmers by Seed houses will also be
in both local and foreign currencies, and pegged to levels which take
cognisance of seed maize growers’ price as well as processing costs.
• Financing of agriculture will now resort back to the financial institutions. The Reserve Bank will be coordinating measures to restore and enhance the level of participation by our banks and other financial institutions in lending to farmers. This will be both in terms of provision of short term as well as medium term agricultural finance.
Short term finance facilities will essentially avail 90 - 180 day working capital for purchase of inputs and other requirements. Syndicated financial facilities, guaranteed by Government, through issuance of such financial instruments as Grain Bills offer great opportunity for tapping into what would otherwise remain idle bank deposits.
Furthermore, the Reserve Bank will be taking the lead in coordinating
the banking system in the provision of medium term finance to capacitate
farmers through access to purchase of equipment. This, could be on the basis of such arrangements as lease and hire purchase finance facilities.
The participation of banks in agricultural finance will be strengthened
by the liberalisation of agricultural pricing and marketing arrangements
alluded to above.
o Support measures for agriculture include support for grain, tobacco and livestock production. A crop input pack to support the Communal, A1 and the newly resettled farmers in grain production is planned. To this effect resources amounting to $280 quadrillion (US$8 million) have been set aside.
The support will be in the form of subsidised inputs targeting 300 000 ha with expected yield of 500 000 metric tonnes. Support will also be extended to the vulnerable groups through provision of inputs comprising 10kg grain seed; 50kg compound D and 50kg ammonium nitrate.
To facilitate achievement of the set production levels, resources amounting to $240.1 quadrillion (US$6.9 million) have been set aside to strengthen extension services and monitoring of the programme through Agritex.
Resources amounting to $105 quadrillion (US$3 million) have also been set-aside for working capital in tobacco production targeting about 25 000 hectares.
Resources amounting to $56 quadrillion (US$1.6 million) have been allocated towards the rebuilding of the National Herd Programme. The programme involves the procurement of bulls, cows and artificial insemination will be implemented through Agribank, agricultural
colleges, the Cold Storage Company and the Agriculture Rural Development Authority (ARDA).
Alongside the livestock-rebuilding programme, Government is also making resources available for enhancement of veterinary services including procurement of vaccines and dipping chemicals for the prevention of animal disease outbreaks under the Animal Disease and Risk Management Programme.
o The Government will for the coming summer crop season be encouraging increase contract farming. Hence, agro-processing companies are now invited to begin making arrangements for provision of inputs, financing and extension support
to farmers on a Contract farming win-win basis.
In Manufacturing measures that contribute to the competitiveness of domestic production, and review of import duties that offer unfair competitive advantage to foreign produced goods were announced. These include:
o Reviewing the role of the National Incomes and Pricing Commission to that of monitoring price trends obtaining in the sub-region and beyond, guiding producers and retailers as well as advising Government on import parity based pricing.
o The continued facilitation, over the short term, the uninterrupted importation and availability of basic goods in our markets by individuals and corporates.
o The establishment of an Export Bank to support all the productive
sectors venturing into export markets has become necessary given our drive
on increasing our export earnings and rendering the whole country an export
zone. Initiatives were left to the Reserve Bank to institute but to date nothing has been announced
In Mining
o Government is also setting up a Zimbabwe Exploration Corporation
dedicated to mineral exploration and assessing the potential of the various
mineral deposits.
o Exportation of unprocessed mineral deposits is being suspended in support of greater beneficiation. This includes current exportation of chrome ore in its raw form, scrap
metal, among others. Furthermore, the issuance of export permits for scrap metal, is now
rationalised and restricted to one Authority, namely, the Ministry of Industry and International Trade. All such other authorities are, therefore, invalidated.
o Government has reclassified diamonds, emeralds, and platinum as reserve
assets, alongside gold, the management these will be through the Reserve Bank.
On capitalisation quasi government companies,
A Framework for the re-capitalisation of such entities as the Cold
Storage Company, ZESA, Air Zimbabwe, National Railways of Zimbabwe (NRZ), as
well as telecommunication companies Tel-One and Net-One, is being developed.
This will also apply to companies in which Government has significant
shareholding, such as Hwange Colliery, and the Zimbabwe Iron and Steel
Company (ZISCO).
On Governance of quasi government companies
Legislation is being proposed for providing for greater role clarity and accountability
of boards and management through a Public Finance Management Bill.
In the interim, all Public Enterprises boards are now required to
institute the necessary arrangements to ensure that key posts are manned by
substantive personnel with the requisite skills and competencies.
all companies in which Government has shareholding to pay dividends. In this regard, the
Accountant General has been directed to work out the necessary arrangements
with the respective company Boards and Management.
On Infrastructure Development
Infrastructure rehabilitation and development in such sectors as power generation, road and dam construction as well as water infrastructure offer scope for stimulating economic activities and generate more employment. This will be pursued through joint ventures under the Built Operate Transfer/Built Own Operate Transfer(BOT/BOOT) arrangements.
However, this requires structuring appropriate incentives and other measures that guarantee viability of identified projects.
Notable sectors and projects identified for implementation under
BOT/BOOT arrangements include the following:
Roads and Railways
. Harare - Beitbridge road dualisation;
. Harare - Chitungwiza railway line.
Electricity Generation
. Expansion of Kariba Power Station;
. Expansion of Hwange Power Station.
Water & Irrigation
. Construction of Kunzvi, Tokwe-Mukosi, Biri and Gwayi-Shangani dams;
. Expansion and construction of irrigation schemes such as Middle Sabi,
Nuanetsi, Wenimbi, Osbourne, Manyuchi and Dande.
. Network expansion and upgrading.
Government Buildings & Housing
. Construction of houses;
. Maintenance of Government buildings.
Iron & Steel Making
. Refurbishment of ZISCO.
On Toll Gates
The Zimbabwe Revenue Authority to set up rudimentary Toll gate structures to facilitate the collection of toll fees along major highways as from 1 March 2009. An allocation of $70 quadrillion (US$2 million) was made for the construction of appropriate structures.

The payable Toll gate rates will be as follows:
Motor cycles US$1.00
. Passenger vehicles & light trucks US$2.00
. Minibuses US$3.00
. Buses US$5.00
. Heavy Trucks US$7.00
. Haulage Trucks US$10.00
Vehicle Registration, Change of Ownership and Vehicle Number Plates
o Production of number plates for vehicle registration to be done locally as was the situation before. This measure takes effect from 1 March 2009.
o With immediate effect, the Central Vehicle Registry will allow upon change of ownership, the same number plates to be transferred to the new owner. This only applies to the newly introduced alpha numeric number plates.
Indiscipline & Corruption
A new standard scale for fines was set up which takes effect from 30 January 2009 which will be reviewed by the Minister of Finance
Level Current fine (Z$) Proposed fine (US$)
1 5 5
2 10 10
3 20 20
4 50 100
5 100 200
6 200 00
7 300 400
8 400 500
9 500 600
10 600 700
11 900 1 000
12 1 000 2 000
13 2 000 3 000
14 5 000 5 000
• A total 2009 Budget of $66.5 quintillion (US$1.9 billion), comprising $50.75 quintillion (US$1.45 billion) recurrent expenditure and $15.75 quintillion (US$0.45 billion)
capital expenditure was proposed.
• The above Budget provision includes an amount of $7 quintillion (US$200
million), being resources already committed by cooperating partners which
are earmarked for specific programmes. Such resources will be accounted for
as the Vote of Credit.
• Employment Costs comprising the wage bill, pension as well as medical aid insurance,
amounts to $16.9 quintillion (US$482.8 million).
• Operations & Maintenance requirements, including office running expenses, stationary supplies and other necessities, an amount of $17.96 quintillion (US$513 million) was allocated. This covers line Ministries and their Departments as well as institutions funded through grants from the fiscus such as the Sports and Recreation Commission, the Consumer Council of Zimbabwe and universities.
• Social Protection programmes such as the Basic Education Assistance Module (BEAM), Public Health Assistance, Public Works and Children in difficult circumstances, among others were allocated $1.87 quintillion (US$53.5 million).
• Education was allocated an amount of $5.2 quintillion (US$149.8 million) through the Ministry of Education, Sport and Culture. This amount to cover construction and rehabilitation of schools (US $10.8 million); procurement of teaching and learning materials (US$46.1 million); ZIMSEC ( US$16.9 million) which will be supplemented by additional income from examination fees.
• Tertiary Institutions were allocated an amount of $1.1 quintillion (US$29.9 million) for state universities, comprising $437.5 quadrillion (US$12.5 million) for recurrent expenditure
requirements and $609 quadrillion (US$17.4 million) for capital projects, including teaching and learning equipment; and $437.2 quadrillion (US$12.5 million) for the
thirteen Teachers’ Training colleges and ten Polytechnics, mainly focusing
on operational requirements.
• An amount of $5.52 quintillion (US$157.8 million) was allocated for health through the Ministry of Health and Child Welfare. $2.1 quintillion (US$59.9 million) is targeted at
Government central, provincial and district hospitals as well as rural health centres. In this allocation, 60% caters for the procurement of drugs and medical supplies while the balance stands for general running expenses for these institutions.
o An amount of $759.5 quadrillion (US$21.7 million) is allocated for the procurement of drugs and other medical supplies for local authorities and mission hospitals and clinics and another special allocation to NatPharm for capitalisation of $568.75 quadrillion (US$16.25 million).
o In addition an amount of $141.2 quadrillion (US$4 million) has been set aside for procurement of sixty-one ambulances and eighty service vehicles.
Revenue collections are anticipated to amount to providing for Revenues amounting to US$1.7 billion, which will be raised through the following taxation measures
1 Corporate Profit Tax
With effect from 1 January 2009, corporate tax will be remitted in the currency in
which business is conducted. Corporate profit tax is currently payable in local
currency, except in instances where the holder of a special mining lease has
elected to maintain all books and records relating to the special mining
lease operation in foreign currency. However, most companies now conduct
business in foreign currency, hence realise profits in the same currency.

2 Value Added Tax (VAT)
The VAT legislation provides that where payment for supplies of goods
and services is in foreign currency, VAT should also be payable in foreign
currency. However, upon importation VAT is payable in local currency. VAT
remittances to the fiscus are thus not commensurate with the volume of
business conducted in foreign currency.
With effect from 30 January 2009, import VAT now payable in foreign currency on
the value of all imports with effect from 30 January 2009.
3 Customs Duty
Customs duty will be charged in foreign currency on all imports with effect from 30 January 2009.
4 Carbon Tax and NOCZIM Debt Redemption Levy on Fuel
Carbon tax and NOCZIM Debt redemption levy on fuel to levied in
foreign currency with effect from 30 January 2009.
The reviewed rates applicable as from 30 January 2009 for customs duty, carbon tax and NOCZIM redemption levy on fuel will be as follows:
Tax Head Current Rate Proposed Rate
Customs Duty 5% of CIF value or Z$236 500 per litre 30% of CIF value or US16 Cents per litre or whichever is greater

Carbon Tax Z$0.20 per litre
5% of CIF value or US 3
cents per litre, whichever is greater

NOCZIM Debt Redemption Z$0.20 per litre
litre 5% of CIF value or US 3 cents per litre, whichever is greater

Total Z$236 500.4 per litre 40% or US 22 Cents per litre
5 Excise duty
With effect from 30 January 2009 excise duty on imported and locally produced beer and alcoholic beverages and locally produced cigarettes and tobacco to be charged in foreign currency.
6 Second Hand Motor Vehicles
Excise tax on second hand motor vehicles be collected in foreign currency with effect from 30 January 2009.
7 Presumptive Tax
Presumptive tax was introduced to capture the hard to tax informal sector. With effect from 1 January 2009 presumptive tax will be paid in foreign currency on a quarterly basis as follows:
Driving Schools
. Vehicles used for Class 4 Training - US$500 per vehicle.
. Vehicles used for Classes 1 and 2 Training - US$600 per vehicle.
Haulage Trucks
. Of carrying capacity of less than 20 tonnes - US$1 000 per vehicle.
. Of carrying capacity of more than 20 tonnes - US$2 500 per vehicle.
. Combination of haulage truck trailers of a capacity of 15 - 20 tonnes -
US$2 500 per vehicle.
Commuter Transport Operators
. Of carrying capacity of 8 - 14 passengers - US$150 per vehicle.
. Of carrying capacity of 15 - 24 passengers - US$200 per vehicle.
. Of carrying capacity of 25 - 36 passengers - US$400 per vehicle.
. Of carrying capacity of 37 passengers and above- US$650 per vehicle.
Taxi-cab Operators
. US$100 per vehicle.
Hair Salons
. US$1 500 per salon.
8 Capital Gains Tax and Stamp Duty on Immovable Properties
Capital gains tax and stamp duty to be paid in foreign currency where immovable property is disposed of in the same currency with effect from 30 January 2009.
9 Pay As You Earn (PAYE)
Separate foreign currency tax tables for employees remunerated in foreign currency to be introduced with effect from 1 February 2009.
10 Withholding Tax
10.1 Tenders, Consultancy and Other Services
Where transactions are conducted in foreign currency, withholding tax should be payable in the same currency. This measure will apply on tenders, consultancy and other services above S$250 per transaction with effect from 30 January 2009.
10.2 Commercial Imports by Unregistered Traders
Withholding tax on commercial imports by unregistered traders to be paid in foreign currency with effect from 30 January 2009.
Accelerated Remittance Periods
10.3 VAT
VAT payment date brought forward to the third day of the following month with effect from 1 January 2009. The proposed payment date applies to all registered operators.
10.4 PAYE
Remittance date for payment of PAYE reviewed to the third day of the following month with effect from 1 January 2009.
10.5 Capital Gains Withholding Tax
The remittance date for Capital Gains Tax reviewed to the third day of the following month with effect from 1 January 2009.
11 Value Added Tax Registration Threshold
The VAT registration threshold to reviewed to US$60 000 per annum. This measure does not apply to operators who are already registered for VAT purposes.
12 Motoring Benefits
The deemed motoring benefits reviewed, with effect from 1
February 2009, as follows:
Engine capacity Current Level per month ZW$ Proposed Level per month US$
Up to 1 500cc 45 000 50
Over 1500cc not exceeding 2000cc 50 000 60
Over 2000cc not exceeding 3000cc 70 000 80
Over 3000cc 90 000 100
Where the fringe benefit accrues to a taxpayer earning a salary in
local currency, the deemed income will be converted to local currency using
the rate at which exporters are paid by the Reserve Bank upon surrender of
export proceeds.
13 Tax on Miscellaneous Income Deposits into Individual & Corporate Accounts
A special tax to levied on funds deposited into individual and corporate accounts at the highest marginal tax rate of 40%, with the tax-free threshold to be determined in tandem with market developments, with effect from 1 February 2009.
NB This proposal will not apply to lawful sources of income as defined in
the Income Tax Act and in incidences where the same income has already been
subject to tax.
Tax Incentives
0 Corporates
0.1 Incentives for the Tourism Sector
exempt from duty capital goods used by registered tourist service providers that include tour operators, safari operators, boat operators and car hire companies.
exempt from duty equipment for expansion, modernization and renovation of hotels and
. The above measure takes effect from 1 March 2009.
0.2 Capital Allowances
Capital allowances for companies reviewed with effect from 1 January 2009, as follows:
. Passenger motor vehicle allowance - US$10 000.
. Staff housing allowance - US$25 000.
0.3 Donations to Schools, Hospitals, Clinics, Research and Development
Allowable deductions for donations to schools by the private sector pegged at maximum of US$100 000 per annum with effect from 1 January 2009.
0.4 Attendance at Conventions
To incentivise companies to attend trade conventions so as to market their business, the
deductible allowance reviewed to US$2 500 per annum with effect from 1 January 2009.
Tax Relief Measures
0.1 Tax-free Pension Contributions
Maximum deductible monthly pension contribution in foreign currency
pegged at US$300 with effect from 1 February 2009.
0.2 Tax Credits
Tax credits for the elderly, blind and physically challenged set at US$75 per month with effect from 1 February 2009.
0.3 Retrenchment/Severance Packages
The minimum tax free threshold of the retrenchment package set at US$1 000 or one third of the retrenchment package,up to a maximum of US$9 000 with effect from 1 February 2009.
0.4 Rental and Investment Income for Elderly Taxpayers
The exempt portion of proceeds from such income to US$250 per month with effect from 1 February 2009.
15 VAT on Mobile Phone Airtime
The VAT rate on mobile phone airtime declines to 15% from 22.5% with effect from 1 February 2009.
16 Customs Duty
16.1 Customs Duty Suspension on Basic Commodities
480. Customs duty was suspension on some basic commodities extended to 30 June 2009.
16.2 Customs Duty in Foreign Currency
Custom duty reduced and surtax of 15% removed on all products that attract current duty rates of 40% and above. New duty applicable as follows:-
Product Current rates of customs duty Proposed rates of customs duty
Raw materials 0% - 25% 0% - 15%
Intermediate goods 10% - 25% 10% - 15%
Finished Goods
Clothing and textiles 40% - 60% + US$10/kg 40% + US$5/kg
Clothing and textiles (school uniforms) 60% + US$10/kg 25%
Footwear 40% - 60% + US$5 per pair 40% + US$5 per pair
Electrical goods 60% 40%
Alcohol & alcoholic beverages 60% 40%
Cigarettes and tobacco 60% + US$5/1000 40% + US$5/ 1000
Motor Vehicles 40% - 80% 25% - 60%
Handbags and other articles of leather,plastic or textile material 60% + US$5/kg 40% + US$5/kg
Fruits and vegetables 40% 25%
This measure takes effect from 1 February 2009.
16.3 Travellers’ Rebate
Individuals are allowed to import under rebate of duty, goods valued up
to US$300 once in a calendar month. However, there are no restrictions with
regards to quantities that individuals may import. As a result, individuals
import commercial goods for resale under rebate of duty thereby prejudicing
revenue to the fiscus.
In order to minimise loss of revenue to the fiscus, it is proposed that the
travellers’ rebate be restricted to goods imported for personal consumption.
The Zimbabwe Revenue Authority will provide guidelines on goods of a
commercial nature to be excluded from the rebate.
District Councils’ Unit Tax
In order to raise the revenue base and capacitate rural district councils, they have been empowered to enforce the collection of Unit tax on A1 and A2 farming communities in foreign currency as follows with effect from 1 January 2009.

Natural Region Proposed unit tax per hectare per annum US$
1 3
2 3
2a 3
2b 3
3 2
4 2
5 1
Fees and Charges
Road Access Fees
The road access fee payable on locally registered vehicles at ports of entry set at US$10 and US$20 respectively with effect from 30 January 2009.
Health Fees
A two tier hospital service fee structure in both local and foreign currency, to be applied by government hospitals. (See Annex 1)
Schools’ Tuition & Examination Fees
With immediate effect, all schools other than primary schools in both
rural areas and high density suburbs are authorised to collect tuition and
examination fees as well as levies in both local and foreign currencies.
Rural day primary schools and primary schools in high density suburbs
will, however, be exempted from tuition and examination fees but will be
permitted to charge their levies in both local and foreign currencies.
It is further proposed that they schools offer Technical Vocational subjects, including Agriculture, in their Curriculum and also embark on farming activities. Those without land should,therefore, apply for it through the relevant authorities.
The responsibility to regulate and control school fees and levies,
taking account of economic developments, reverts back to the Ministry of
Education and away from the National Incomes and Pricing Commission who are
currently exercising that responsibility.
Tertiary Education Fees
Government has, approved the tuition fees and levies for
State Universities, Polytechnics and Teachers Colleges payable in both local
and foreign currency. (See Annexure 2)
Estate Duty
Deceased estates are entitled to a duty exemption on the principal residential property and one family vehicle. The estate is also subject to a tax-free threshold currently pegged at $25 billion, above which 5% duty is levied on additional estate properties.
The estate duty tax-free threshold is set to US$50 000 with effect from 1 February 2009.