Zimbabwe factory output doubles in H1 '09 – By: Reuters
21st October 2009
Zimbabwe's factory output doubled in the first six months of 2009, partly due to policy changes by the country's unity government, including the use of multiple foreign currencies, an industry group said on Wednesday.
President Robert Mugabe and Prime Minister Morgan Tsvangirai agreed to share power in February, following last year's disputed elections and have tried to fix an economy ravaged by years of hyperinflation and political uncertainty.
A survey carried out by the Confederation of Zimbabwe Industries (CZI) showed that factory capacity utilisation had risen from below 10 percent before the unity government was formed, to about 32,3% now.
"Consequently, signifying this improvement ... overall output grew by 110% in the first six months of the year. At the beginning of the year there was a positive policy change that saw the government introduce the use of multiple currencies," CZI chief economist Lorraine Chikanya said at the launch of the report in Harare.
"This policy framework ushered in a breath of life into what was becoming a dying sector."
The CZI said the unity government had restored confidence, with $1,5-billion being invested in the manufacturing sector, mainly for plant rehabilitation and expansion.
BACK TO WORK
Zimbabwe's average working week, which had come down to two days as firms laid off staff amid hyperinflation, raw material shortages and price controls, is now at five days.
At its peak, the manufacturing sector contributed 22% to Zimbabwe's gross domestic product, 37% of export earnings and accounted for 40% of employment.
The renewed business confidence, however, is at risk now after Tsvangirai and his MDC party decided to boycott the unity government until Mugabe fully implements a power-sharing agreement.
Industry and Commerce Minister Welshman Ncube, from a splinter MDC faction, told industrialists that efforts were underway to resolve the standoff, which had unsettled investors.
Ncube said Zimbabwe's cabinet had, before the MDC boycott, approved a long-awaited bilateral investment protection agreement with South Africa. He, however, did not say if the approved draft excluded land from investments to be protected.
South African farmers have urged their government not to sign any pact that did not include a clause to protect land and related property rights.
"I'm in contact with [South African Trade and Industry] Minister Rob Davies who has received the documentation. By the end of this month, we have planned that we should sign it by then. We are now waiting a response from the south Africans," he said.
Ncube added the government had agreed to use a $500-million IMF loan given to Zimbabwe to repay debt, for infrastructural development and local industries.
"Part of the money will be used to pay off IMF arrears so that we can have access to another IMF loan. We agreed that $150-million of this money should go towards productive sectors such as mining and manufacturing," Ncube said.
Edited by: Reuters
Thursday, October 22, 2009
The Zimbabwe Economy
The Zimbabwe Economy
Business conditions, October 2009
Zimbabwe’s economy remains severely affected by liquidity shortages, weak domestic demand, reduced supplies of locally supplied inputs, the losses of skilled personnel and weak commodity prices for many of its exports. All of these problems are made more serious by the low levels of efficiency among the suppliers of electricity, water, telecommunications and municipal services and by the large numbers of people who have to depend on the earnings of the very few in steady employment.
In all sectors, the shortage of liquidity, which impacts upon consumers as well as on borrowers, and therefore upon lenders as well as producers, is a major constraint on the levels of economic activity. Very few businesses can offer extended credit terms to clients, mainly because they cannot easily borrow funds to meet operating costs or to pay suppliers for materials while waiting for payments.
Tight payment conditions at every stage in the production process mean that many companies cannot make payments until they have been paid. In the many cases in which the ultimate retail customers are too few, have limited buying power and can choose between several competing suppliers, the producers face acute challenges in their efforts to remain in business. These challenges relate to efficiency, productivity, prices, access to working capital, good labour relations and accurate assessments of effective market demand, or the population’s limited disposable income.
The origins of some of these specific difficulties go back to the destruction of the Zimbabwe dollar balances that formerly constituted the bulk of the country’s liquid assets. This process left Zimbabweans with only those foreign currency balances that had not fallen victim to the Reserve Bank’s powers of expropriation, but these amounted to sums that were too small to fund a revival.
For the country as a whole, the prospects of a recovery are now tied to the pace at which export earnings can be increased and the pace at which its policy-makers can persuade investors, development agencies and donor countries that Zimbabwe is worthy of support.
For individual businesses, the targets are no different: they too need increasing incomes that have to be earned by offering acceptable goods and services to difficult markets, but they often have need of capital that has yet to be earned. Whether they seek this in the form of loans or equity, they have to present a very strong case to win the needed support.
But while the prospects for individual companies might stand or fall on whether they keep their promises of quality, price and delivery, the prospects for any country will stand or fall on more philosophical issues, such as political involvement, rule of law, respect for civil rights and property rights, and whether the government chooses to respect international treaties, laws of contract and market forces.
Zimbabwean business people today are engaged in the unequal struggle of rebuilding a sound business base even though the country’s politicians have yet to persuade the world’s investment, development and banking community that their efforts to rebuild international credibility deserve support.
Although some companies have had some success in securing toll manufacturing contracts with South African companies and others have received backing from parent companies abroad, most are having to try on their own to make the best they can of a very limiting business environment.
Political:
Since the signing of the Government of National Unity agreement, official efforts to overcome severe Balance of Payments and national budgetary constraints appear to have become an inter-party contest that neither party is winning, but from which divisive influences are the main effect. Zanu PF seems keen to discredit and disparage the achievements of MDC by maintaining sufficient instability at home to prevent any outright MDC successes. At the same time, MDC has called into question the size and even the existence of huge flows of funding said by Zanu PF to be on their way from China.
To these must be added the continuing wrangles over trivia that have stopped Parliament from making any of the changes needed to improve Zimbabwe’s tarnished image abroad. The casualty from these energy-sapping exchanges has been the whole Zimbabwe economy. Humanitarian aid is still flowing into the country, but the politicians have still to make a useful start in rebuilding the confidence needed to attract investor support and development funding.
This funding is urgently needed to begin the restoration of bank liquidity and manufacturing production and to improve access to the working capital needed to carry our basic repairs to electricity supplies, transport and other infrastructural services. The lack of progress in these areas is setting the limits to the effectiveness of the many separate efforts being made by producers in every sector and it is therefore holding GDP growth prospects to very low levels.
As the current leadership has fallen so far short of acceptable standards of conduct called for by trading partners, donor countries, banking institutions and international funding agencies, major changes are now needed to restore Zimbabwe's credibility. If the changes needed lie outside the limits the leaders are prepared to accept, the challenge has to be to persuade the leaders to stand down in the interests of the welfare of the whole population.
By concentrating his entire policies on the one question of recapturing land from non-indigenous people and allocating it to black Zimbabweans, the President has fallen foul of international opinion by:
· Abrogating human rights
· Attacking the country's independent judiciary
· Attacking the freedom of the Press
· Denying citizens the rights of freedom of association
· Withdrawing the protection of the law from minority racial groups
· Denying opposition party candidates and supporters their civic rights
· Tolerating corrupt practices in government and parastatal activities
· Repudiating international investment protection agreements
· Promoting or condoning dishonest practices in the election process
· Defaulting on international debt service commitments
· Signing into law new statutes that deprive certain citizens of their rights
Much of the foreign resentment stems from the gross injustices involved in dispossessing white farmers of properties because other, unrelated, whites first settled these areas 100 years ago. As countries that try to promote development no longer consider such conduct acceptable or excusable, the leaders who hold to such ideas are being urged to win the respect of the world's community of nations by changing their policies.
Election timetable
On MDC insistence, the Constitution of Zimbabwe is to be redrafted in time for the next election. The re-drafting process has started and the intention is to have a draft ready for public debate by the end of 2009. After responding to observations in the preparation of a final document, the proposed timetable requires that a referendum be held by July 2010. If the electorate accepts the proposed constitution, it will then be approved by Parliament and signed into law by the President by September 2010. A general election date will then be set and this event should take place within the first months of 2011.
Economy:
Mining
The mining sector continues to be affected by the highly restrictive controls and direct intervention in setting exchange rates that had a major impact on mining profitability in the past ten years. At the practical level of day-to-day mining activities, they so badly affected each individual company’s ability to meet the costs of regular maintenance programmes for machinery and equipment that most mining companies are still affected now by their impacts on efficiency profitability.
For most of the years, reduced levels of the investment spending needed to improve upon, or even match former output volumes held back development and they prevented the accumulation of reserves to pay for exploration for new ore-bodies. ZimPlats is almost the only company that was able to remain committed to its development programme.
From the mining finance perspective, the controls often forced companies to borrow heavily to close the gap between recurrent expenditure and the revenue received at the controlled exchange rates. Their increasing debt damaged each company’s prospects of paying dividends or carrying out maintenance, which affected share prices and their prospects of raising equity finance from the market.
Companies were also affected by the proportions of foreign earnings that they could retain to meet the cost of essential imports, but if the retained funds were not used a matter of weeks, they had to be relinquished to the authorities. By being prevented from accumulating foreign funds, most companies were unable to finance any form of capacity expansion.
Manufacturing
Until recently, local manufacturers supplied a high proportion of the consumer goods required by Zimbabwe’s rapidly growing population. With the growing success of commercial agriculture, increasingly dependable supplies of inputs for food processing companies led to investments in import-substitution manufacturing companies, many of which became successful enough to capture export markets.
Improving supplies of non-food agricultural products also helped bring into existence manufacturers of tobacco products, textiles, furniture, construction materials and paper. However, business confidence was badly shaken by the nationalisation of commercial farming businesses and by the consequential damage done to business volumes in every sector and to Zimbabwe's foreign earnings.
Reactions from the authorities to the falling Zimbabwe dollar exchange rate, shrinking tax revenues, job losses and rising inflation placed ever-increasing restrictions on business activity as government tried to capture the resources needed to bolster and subsidise the crippled farming sector and to sustain political popularity.
One of the reasons given for falling levels of domestic investment in these years was that the level of national savings was not adequate for sustainable investment. With deeply negative interest rates in place since 2001 and frequent raids on reserves through increases in Statutory Reserve Ratios, the savings base was effectively eroded out of existence.
Looking to the future, these factors make it clear that virtually all the needed investment funding will have to be sourced from outside the country for the foreseeable future. But with competition for foreign investment rapidly getting tougher among developing countries, and more impressive economic and political developments taking place in a number of countries in the region, Zimbabwe will needs to become much more imaginative about its efforts to attract the attention of investors.
Because government is continuing to reject all proposals for revisions to the Land Reform Policy, the many food-processing manufacturing businesses seem likely to remain at a disadvantage because very low production volumes from the farms will limit their recovery prospects. Those still in operation have become more dependent on imports, but the funding and power shortages as well as the skills shortages are also serious problems for those wishing to restore former production volumes at competitive prices.
Capacity utilisation has started to improve in some areas of manufacturing, but the evidence strongly suggests that the severe power cuts alone will continue to make significant increases in output impossible for most factories.
Although the extent of the recovery that does prove possible might look impressive because it will be off a very low base, the constraints presently affecting output are certain to continue imposing severe limitations for as long as they remain in place. These will be reinforced by the reluctance of buyers on the domestic as well as export markets to place too much reliance on Zimbabwe’s suppliers at this stage.
The Government of National Unity’s acceptance of the need to make far-reaching changes has not so far generated the practical changes needed to overcome the lingering effects of years of losses that eroded each company’s skills, physical capacity, standing with customers and suppliers and financial stamina.
A few undoubted successes have been recorded, led by companies like Delta Corporation, which is recapturing the local market from suppliers of imported beer and is about to commission a significant increase in bottling capacity. Some of the clothing factories are also making some headway, having recaptured the support of buyers from the importers of poor quality Chinese goods. However, the needed increases in buying power await the private sector investment decisions that will lead to a demand resurgence and help create employment.
Even then, the full recovery of industry will have to await the completion of the extensive repairs and maintenance required by the infrastructure in general and by Hwange and Kariba power stations in particular. Separate, but equally essential work has to be done to restore coal production and the coal deliveries by rail needed to re-commission the thermal power stations in Harare and Bulawayo. In the medium term, the completion of at least one new power station is considered necessary for the achievement of energy self-sufficiency.
While the signs of improvement in levels of output have been encouraging, investor confidence is unlikely to be fully restored before government has issued unequivocal statements assuring potential and existing investors that property rights will be fully restored and investors in all sectors will be protected against any possibility of threats to property rights in future.
Inflation
Zimbabwe’s hyperinflationary experience came close to breaking all world records because the authorities had persuaded themselves that “illegal international sanctions” had caused the economic decline, not the forced closure of the country’s biggest productive sector. Therefore, they claimed, the printing of money was entirely justified, as was the adoption of widely differing exchange rates that provided the authorities with the advantage of low-cost imports. However, as they could fund these imports only by claiming the right to remove foreign currency from company and NGO bank accounts, the authorities became directly responsible for further downturns in local output and the development of worsening shortages.
As the exercise of this advantage depended upon their ability to confiscate foreign earnings, government’s policies soon began to also affect what was left of the country’s exporters. Foreign exchange scarcities became very much more serious and were soon a principal source of the inflationary pressures.
On this track, the total collapse of the Zimbabwe dollar was inevitable and it soon followed upon the hyperinflation registered in the final months of 2008.
For lack of options, Zimbabwe then adopted the use of US dollars and rand for all transactions and the inflation came to an abrupt end. Initially, goods priced in US dollars in the shops went down in price as stocks of imports improved and competition between retailers became more pronounced.
In the monthly inflation indicators for the second half of 2009, despite the use of relatively stable currencies, prices started rising again and expectations of further increases, based partly on the effects of exchange rate movements between the US dollar and the rand and partly on wage demands, seem likely to keep prices rising. However, the official September Consumer Price Index reported a month-on-month fall of half of one percent.
Although Zimbabwe is earning most of its export proceeds in US dollars and receiving a high percentage of its remittances in the same currency, it is placing its orders for most consumer goods and industrial materials with South African suppliers, so the strengthening rand and weakening US dollar have added to Zimbabwe’s procurement costs.
Demands for higher wages are also posing a threat, not just to the prices of the goods that can still be produced in Zimbabwe, but also the prospects of survival for many of these companies.
Many wage negotiation processes have broken down and the arbitration proceedings that followed have granted the trades unions most of their demands. Some employers have responded with efforts to appeal against the arbitration decisions in their efforts to avoid bankruptcy.
Agriculture
During 2009, agriculture attracted the most exaggerated forecasts of recovery, but as the sizes of the year’s crop deliveries were set by events and conditions during the 2008 economic melt-down, most of the forecasts have not been realised.
For the hoped-for recovery in 2010, the disappearance of government’s capacity to offer subsidies has brought harsh financial realities home to previously generously subsidised resettlement farmers. For example, even though the quantities of locally produced fertiliser are far from adequate, unsold stocks are accumulating for lack of buying power. The evidence suggests that next year’s harvests are already threatened.
All the intricately balanced linkages and business relationships that used to help deliver success and food security to Zimbabwe’s population were damaged or broken by the land reform programme. Today, Zimbabwe’s agricultural sector consists largely of small farms that have no market value and no collateral value, and most have been allocated to people who lack the resources and experience needed to cultivate the areas put in their charge.
Despite subsidies and state funding, very few farmers have been able to move away from peasant farming methods and since land reform, every harvest has been extremely disappointing. Every year since land acquisitions started in earnest, Zimbabwe has had to import food.
Now, in any efforts that are made to restore productive capacity, government and all those international bodies that wish to assist the country will have to acknowledge that the country has adopted policies that do not meet the requirements of a larger, better educated, more urbanised and much more demanding population.
Zimbabweans are fully capable of dealing with the challenges of commerce and a wide range manufacturing and service industries, but the country has need of efficient and dependable agricultural production. The population therefore has good reason to hope that large-scale capital-intensive cultivation methods will be reinstated, and that the need to rely on the small-scale subsistence methods brought back by Land Reform will fall away.
This table illustrates the extent of the decline in physical output since the Land Reform Programme was started. Maize, soybeans, beef, dairy and cut- flowers output have fallen to figures close to one quarter of their levels in 2000 and tobacco, wheat, coffee, groundnuts and paprika volumes are now at much smaller fractions of former levels. Cotton, sugar and tea production volumes have fallen by less severe percentages and barley has recovered to former levels, but most of these are now being threatened by renewed land acquisition activities that are targeted at formerly advantaged plantations.
While small-scale subsistence farming might remain an important income source for the large communities that still follow traditional life-styles, this system cannot be relied upon to meet the needs of Zimbabwe’s large urban population. The subsistence methods are far too unreliable in Zimbabwe’s uncertain tropical climate and today the overall population is far too big.
The policies introduced to initiate the Land Reform Programme, which amounted to the nationalisation of land, are also considered incapable of attracting the investment needed for development in agriculture and every other economic sector. Critics argue that important requirements for all forms of investment are secure and marketable individual property rights.
In trying to bring about the needed changes, commentators are arguing that Zimbabwe should not be looking for funding that will help to make its badly chosen policies work a little better. Donor countries and development agencies should therefore be persuaded not to offer support until the country agrees to the adoption of acceptable policies with a proven track record.
In essence, the disbursal of assistance in any form should be made conditional upon Zimbabwe showing the needed willingness to make radical changes and to adopt acceptable policies. In its 2008 election manifesto, the MDC argued that the primary conditions for these included the empowerment of ordinary citizens through the acceptance and promotion of individual property rights, and it argued that these rights should be given absolute protection in the proposed new Constitution.
Unfortunately, this position appears to have been eroded since the formation of the Government of National Unity. By way of explanation, commentators have explained that because property rights empower individuals and improve their prospects of economic success, they are opposed by the ruling elites because this success can dilute the powers of the people who are trying to retain absolute authority. Many African governments seeking aid therefore also demand the right to decide who will benefit.
This unacceptable approach is thought to be best countered by requiring the acceptance of ownership rights for the assets essential to effective investment. The concept of property rights has to be accepted so that the very specific needs of local as well as foreign investors will not be frustrated by issues of no relevance to their being able to meet business challenges.
As these challenges are already more than sufficiently exacting, demanding and unforgiving, and as the people who can meet them have to be highly experienced in many aspects of business, the authorities should accept the need to encourage them by offering a supportive policy environment.
After very few years of the levels of development that would be made possible by accepting these basic requirements, very nearly all the countries that are now claiming dependence on aid would become self-sufficient and their people would become considerably more prosperous.
In describing what they have done, the architects of Zimbabwe’s current chaos have chosen to focus only on the relatively small number of farmers they have displaced. They dismiss as irrelevant the wider social issues, but the destruction of about four thousand large-scale farming businesses has impacted directly upon employees, suppliers and customers and indirectly upon every other member of Zimbabwe’s population.
In essence:
o In the process of reclaiming land, about 4 500 farming companies have been closed, causing the direct loss of 350 000 full time farm jobs and sharply cutting production of crops for local consumption and for export.
o The loss of property also meant the loss of accommodation, many elementary schools, many clinics and high schools, as well as incomes that supported the workers’ families, a total of several million people.
o Almost all of these people are now destitute and assessments suggest that up to 30% of them have died since 2002.
o Inexperienced small-scale farmers or peasant farmers now make up almost the entire farming sector
o Because Zimbabwe's agricultural land now has no collateral value, the new farmers cannot use their holdings as security for bank loans
o Government has been forced to support the new small-scale farms with massive subsidies that were not needed by the former large-scale farms.
o As the subsidies are beyond Zimbabwe’s financial means, the payments contributed to the very high rates of inflation that reached world record levels before making the Zimbabwe currency valueless. Having now adopted the use of the US dollar,
o The loss of foreign earnings from the export of crops and other products drastically reduced the country's ability to import essential goods.
o The need to import food that Zimbabwe used to export has further reduced the foreign currency available for other industrial and commercial imports
o The closure of large-scale farms has severely damaged the viability of thousands of other companies that depended on large-scale farms
o In the hands of less experienced farmers, the land and farm assets captured have only a fraction of the value and earning capacity that they had in the hands of the highly skilled, but now dispossessed farmers
o The rapidly deteriorating services infrastructure and frequent fuel shortages have generated severely critical Press reports that have accelerated the decline of Zimbabwe's tourist industry
o The state-sponsored attack on property rights has arrested productive investment, job creation and export growth and now prevents access to international credit lines and project finance, and
o Far from being a success, the land reform programme has been an unmitigated disaster.
The on-going consequences of the policy measures responsible for these effects have been so profound that any claims that Zimbabwe’s economic recovery is possible before they are appropriately dealt with have to be challenged.
Although few donor countries have spelled out such reservations in any detail, they have indicated in various ways that funding to help Zimbabwe’s reconstruction will not be made available while the authorities continue defending the policy decisions that led to the collapse of the country’s economic capacity and social services. Many have continued to offer humanitarian aid, but most have done so on condition that they do not have to work through any division of government.
Banking
Business recovery is being held back by, among other things, the inability of the banks to offer the overdraft facilities or the longer-term loans needed to rebuild stocks of materials, carry out long overdue maintenance and repairs or attract back skilled personnel to run factories or staff production lines.
Zimbabwe’s use of foreign currency since the collapse of the Zimbabwe dollar has marginalized the Reserve Bank of Zimbabwe and nullified its ability to regulate the country’s use of the available foreign exchange.
With no foreign reserves of its own, but foreign currency debts to local creditors amounting to about US$1 billion, the Reserve Bank has not been able to function as Lender of Last Resort. In turn, this has made the country’s commercial and merchant banks very unwilling to lend to each other.
A change of some significance is possible now that the IMF has chosen to allocate funds to all member countries in an effort to ease the worldwide liquidity crisis. Zimbabwe’s share is US$517 million, of which a little more than US$400 million will be released to the authorities. The balance is to be held in an escrow account until arrears of US$139 million have been settled. As the amount being sent is supposed to be used to support the country’s foreign reserves position, technically it should come under the control of the Reserve Bank, but details are being withheld until the publication of the national Budget towards the end of November.
How the funds will be put to use is therefore still unclear, but the settlement of the outstanding debts to the IMF would seem to deserve high priority. Funds are needed also by Zesa, NRZ, Air Zimbabwe and most municipalities, among others, but if some could be retained by the Reserve Bank to permit it to function as lender of last resort, that too would be extremely helpful.
A solution to Zimbabwe’s liquidity problem awaits the return of balance in the unbalanced banking sector, which currently has 29 banking institutions. Many have struggled to meet capital adequacy requirements and some of these are expected to seek mergers with other banks in due course.
Prospects for an improvement in the financial strength of the banks that survive will improve when their numbers have been cut by about half. Direct intervention by the Reserve Bank is less likely under current conditions, but the pace of developments might be forced up if the more seriously undercapitalised banks are put at further risk by company closures, such as the tentative decision by David Whitehead Textiles to wind up their Zimbabwe operations if the unions cannot reconsider their wage demands.
International developments
Hesitant, but mainly improving share and commodity prices are supporting beliefs that the recessions in Europe, North America and the Far East have bottomed out. However, the strengthening gold price and the continued weakness in the recovery of retail spending suggest that the recovery is fragile and useful export volume and employment growth figures might take some time to materialise.
An area of particular uncertainty is the oil market, on which price increases to around $80 a barrel ahead of the northern hemisphere winter is suggesting the possibility of further increases and consequential impacts on production and transport costs. While consumer demand remains weak and suppliers are forced to compete aggressively for market share, their efforts to hold prices to the lowest they can afford are impacting directly on profit levels.
Low and uncertain returns are already affecting investor confidence as well as the ability of producers to fund research, development or expansion plans, but if production cost inflation further erodes profit margins and employment recovery, this could slow the already sluggish recovery period.
Unfortunately for the governments of most western countries, these pressures will impose limits to tax collections and make more difficult the effects of their having had to incur heavy domestic debt in their efforts to assist their banking sectors through the financial crisis.
Budget deficits as percentages of Gross Domestic Product have reached extraordinarily high figures for Western countries. These are forcing governments to call for expenditure cuts that are coinciding with increasing demands for unemployment benefits and other welfare payments.
Low interest rates under these circumstances appear to be the most appropriate response from the various central bank authorities, but they threaten to seriously erode the value of the already depleted savings as producer price inflation rates rise above the rates of interest.
Retired people and others who were previously able to live on interest earnings are now having to withdraw capital to meet ongoing living expenses, or move capital to countries that are still offering acceptable rates of interest.
South Africa is currently offering interest rates of seven to ten percent and attracting enough of the affected funds to cause a strengthening of the rand, but Zimbabwe, with equally attractive interest rates, has been almost completely unsuccessful due to continuing concerns about the safety of balances sent into the country’s banking system.
Assurances that past experiences of having funds appropriated by the authorities will not recur have not been enough to satisfy most fund managers. The evidence that the authorities have become increasingly desperate to get their hands on funds, particularly as the inflows expected from donor countries and development agencies have not materialised, has worsened this mistrust.
Financial difficulties abroad have sustained Zimbabwe’s concerns over the likelihood of mergers or bank closures if market conditions force an unsatisfactory resolution to the excessive number of inadequately capitalised banks.
More confidence, and perhaps even some willingness to participate in a consolidation process, might be forthcoming from external banks if Zimbabwe’s banking sector could start making more deliberate plans for a managed rationalisation towards a more appropriate structure and size.
Labour
Mounting friction has developed between employers and employees as trades union leaders have tried to force employers to more than double wages and to back-date these to April this year.
As everyone concerned, from the smallest workers’ committee to the Ministry of Labour, is aware that employers have neither the turnover nor the profit margins needed to meet such wage demands, beliefs are being expressed that the trades unions have very short-term political motives. These tie in with mounting evidence that political progress is being held down to a negligible pace by Zanu PF’s fear that MDC will benefit the most from any progress achieved.
Many employers are known to be responding to the unions with blunt statements that they would be forced out of business if they tried to meet such demands and that their employees, not the union officials, would be the losers. David Whitehead Textiles’ threat to close is the most significant response so far.
Others are arguing their case by pointing out how many of the processes carried out in their businesses can now be performed by machines, all of which call for far fewer people. As all of the people then needed would require specialised skills, current staff members’ jobs would again be put at risk.
As most employees have some knowledge of the political dimensions hidden in every argument, it is probable that, with the benefit of carefully articulated advice, most will be readily persuaded not to allow themselves to become expendable pawns in a political game.
However, even if the country moves onto a more encouraging track, many companies will have to be able to provide for higher labour costs. To cope with these while also having to contend with strong competition that might prohibit price increases, high and increasing levels of efficiency in every single department will be essential and every producer will be acutely aware of the need to match the quality standards of their competitors’ products.
Unless workers can be persuaded that their own and their employers’ interests are identical, producers will incur increasing losses through poor quality control, wastage of materials, wastage of fuel, power and water, machine down-time, failures to deliver on time, and theft, all of which add to effective production costs. These are already threatening the survival of a large number of companies.
Investment prospects:
Considerable interest has been shown in Zimbabwe’s prospects in recent months. Conferences on mining, financial services and equity investment have been well supported, and numerous visits have been recorded from property developers and companies hoping to tender for large public works and infrastructural restoration contracts as well as interest groups from various countries.
However, apart from purchases of a few reasonable blocks of shares, most of the visits have ended with expressions of “cautious optimism” and little else. Almost no invitations have been offered to tender for properly defined projects and potential investors have been able to make very few decisions beyond their decisions to await further developments. The few commitments to invest have come mainly from the external parent companies of local businesses, such as Delta Corporation and Triangle Sugar Estates.
Immediate prospects of the hoped-for domestically-driven recovery remain affected by the still limited inflows of foreign earnings and the continuing inability of the banks to offer loan finance, either for short-term working capital needs or for medium-term capital investment needs. Much lower than expected levels of financial support from donor countries, international banks and development agencies. These have held in place very severe liquidity shortages throughout the economy. Lines of credit have been offered to several of the banks that have external partners, but the conditions set for the disbursal of these funds have kept them beyond the reach of most borrowers.
The needed inflows of investment capital are being impeded by the very slow recovery of investor confidence. This appears to be mainly because of political intransigence, which reflects the fears of Zanu PF leaders that if they lose further control, they will increase the risk of their being brought to account for Human Rights charges by the International Criminal Court.
The many countries and organisations that stand ready to assist have very quickly noted each reversal of this nature, and each of them has put Zimbabwe back onto square one. Our marker on this board will make no progress before the weight of evidence clearly shows the assistance will be used to put the country onto a sound recovery path, and not used to more deeply entrench the powers of a government that is seen to be responsible for, and is still defending, policies that have caused extensive damage throughout the economy.
Given the facts that Zimbabwe’s economy has been disabled, that its production and export revenues have fallen sharply, that its infrastructure is highly inefficient, that its debt are already large and its debt arrears are more than the country’s Gross Domestic Product, Zimbabwe is seen by all to amount to an extremely serious credit risk.
This fact makes Zimbabwe of the least appetising investment destinations in the world, but these terrible handicaps could be quickly countered by a commitment to adopt policies that would restore confidence. The requirements of such policies are well known and entirely within the country’s reach. For this reason, Zimbabwe’s longer-term prospects might best be conditionally described as sound, the condition being that political change is allowed to considerably reduce the uncertainties that presently confront investors.
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John Robertson
October 21 2009
Business conditions, October 2009
Zimbabwe’s economy remains severely affected by liquidity shortages, weak domestic demand, reduced supplies of locally supplied inputs, the losses of skilled personnel and weak commodity prices for many of its exports. All of these problems are made more serious by the low levels of efficiency among the suppliers of electricity, water, telecommunications and municipal services and by the large numbers of people who have to depend on the earnings of the very few in steady employment.
In all sectors, the shortage of liquidity, which impacts upon consumers as well as on borrowers, and therefore upon lenders as well as producers, is a major constraint on the levels of economic activity. Very few businesses can offer extended credit terms to clients, mainly because they cannot easily borrow funds to meet operating costs or to pay suppliers for materials while waiting for payments.
Tight payment conditions at every stage in the production process mean that many companies cannot make payments until they have been paid. In the many cases in which the ultimate retail customers are too few, have limited buying power and can choose between several competing suppliers, the producers face acute challenges in their efforts to remain in business. These challenges relate to efficiency, productivity, prices, access to working capital, good labour relations and accurate assessments of effective market demand, or the population’s limited disposable income.
The origins of some of these specific difficulties go back to the destruction of the Zimbabwe dollar balances that formerly constituted the bulk of the country’s liquid assets. This process left Zimbabweans with only those foreign currency balances that had not fallen victim to the Reserve Bank’s powers of expropriation, but these amounted to sums that were too small to fund a revival.
For the country as a whole, the prospects of a recovery are now tied to the pace at which export earnings can be increased and the pace at which its policy-makers can persuade investors, development agencies and donor countries that Zimbabwe is worthy of support.
For individual businesses, the targets are no different: they too need increasing incomes that have to be earned by offering acceptable goods and services to difficult markets, but they often have need of capital that has yet to be earned. Whether they seek this in the form of loans or equity, they have to present a very strong case to win the needed support.
But while the prospects for individual companies might stand or fall on whether they keep their promises of quality, price and delivery, the prospects for any country will stand or fall on more philosophical issues, such as political involvement, rule of law, respect for civil rights and property rights, and whether the government chooses to respect international treaties, laws of contract and market forces.
Zimbabwean business people today are engaged in the unequal struggle of rebuilding a sound business base even though the country’s politicians have yet to persuade the world’s investment, development and banking community that their efforts to rebuild international credibility deserve support.
Although some companies have had some success in securing toll manufacturing contracts with South African companies and others have received backing from parent companies abroad, most are having to try on their own to make the best they can of a very limiting business environment.
Political:
Since the signing of the Government of National Unity agreement, official efforts to overcome severe Balance of Payments and national budgetary constraints appear to have become an inter-party contest that neither party is winning, but from which divisive influences are the main effect. Zanu PF seems keen to discredit and disparage the achievements of MDC by maintaining sufficient instability at home to prevent any outright MDC successes. At the same time, MDC has called into question the size and even the existence of huge flows of funding said by Zanu PF to be on their way from China.
To these must be added the continuing wrangles over trivia that have stopped Parliament from making any of the changes needed to improve Zimbabwe’s tarnished image abroad. The casualty from these energy-sapping exchanges has been the whole Zimbabwe economy. Humanitarian aid is still flowing into the country, but the politicians have still to make a useful start in rebuilding the confidence needed to attract investor support and development funding.
This funding is urgently needed to begin the restoration of bank liquidity and manufacturing production and to improve access to the working capital needed to carry our basic repairs to electricity supplies, transport and other infrastructural services. The lack of progress in these areas is setting the limits to the effectiveness of the many separate efforts being made by producers in every sector and it is therefore holding GDP growth prospects to very low levels.
As the current leadership has fallen so far short of acceptable standards of conduct called for by trading partners, donor countries, banking institutions and international funding agencies, major changes are now needed to restore Zimbabwe's credibility. If the changes needed lie outside the limits the leaders are prepared to accept, the challenge has to be to persuade the leaders to stand down in the interests of the welfare of the whole population.
By concentrating his entire policies on the one question of recapturing land from non-indigenous people and allocating it to black Zimbabweans, the President has fallen foul of international opinion by:
· Abrogating human rights
· Attacking the country's independent judiciary
· Attacking the freedom of the Press
· Denying citizens the rights of freedom of association
· Withdrawing the protection of the law from minority racial groups
· Denying opposition party candidates and supporters their civic rights
· Tolerating corrupt practices in government and parastatal activities
· Repudiating international investment protection agreements
· Promoting or condoning dishonest practices in the election process
· Defaulting on international debt service commitments
· Signing into law new statutes that deprive certain citizens of their rights
Much of the foreign resentment stems from the gross injustices involved in dispossessing white farmers of properties because other, unrelated, whites first settled these areas 100 years ago. As countries that try to promote development no longer consider such conduct acceptable or excusable, the leaders who hold to such ideas are being urged to win the respect of the world's community of nations by changing their policies.
Election timetable
On MDC insistence, the Constitution of Zimbabwe is to be redrafted in time for the next election. The re-drafting process has started and the intention is to have a draft ready for public debate by the end of 2009. After responding to observations in the preparation of a final document, the proposed timetable requires that a referendum be held by July 2010. If the electorate accepts the proposed constitution, it will then be approved by Parliament and signed into law by the President by September 2010. A general election date will then be set and this event should take place within the first months of 2011.
Economy:
Mining
The mining sector continues to be affected by the highly restrictive controls and direct intervention in setting exchange rates that had a major impact on mining profitability in the past ten years. At the practical level of day-to-day mining activities, they so badly affected each individual company’s ability to meet the costs of regular maintenance programmes for machinery and equipment that most mining companies are still affected now by their impacts on efficiency profitability.
For most of the years, reduced levels of the investment spending needed to improve upon, or even match former output volumes held back development and they prevented the accumulation of reserves to pay for exploration for new ore-bodies. ZimPlats is almost the only company that was able to remain committed to its development programme.
From the mining finance perspective, the controls often forced companies to borrow heavily to close the gap between recurrent expenditure and the revenue received at the controlled exchange rates. Their increasing debt damaged each company’s prospects of paying dividends or carrying out maintenance, which affected share prices and their prospects of raising equity finance from the market.
Companies were also affected by the proportions of foreign earnings that they could retain to meet the cost of essential imports, but if the retained funds were not used a matter of weeks, they had to be relinquished to the authorities. By being prevented from accumulating foreign funds, most companies were unable to finance any form of capacity expansion.
Manufacturing
Until recently, local manufacturers supplied a high proportion of the consumer goods required by Zimbabwe’s rapidly growing population. With the growing success of commercial agriculture, increasingly dependable supplies of inputs for food processing companies led to investments in import-substitution manufacturing companies, many of which became successful enough to capture export markets.
Improving supplies of non-food agricultural products also helped bring into existence manufacturers of tobacco products, textiles, furniture, construction materials and paper. However, business confidence was badly shaken by the nationalisation of commercial farming businesses and by the consequential damage done to business volumes in every sector and to Zimbabwe's foreign earnings.
Reactions from the authorities to the falling Zimbabwe dollar exchange rate, shrinking tax revenues, job losses and rising inflation placed ever-increasing restrictions on business activity as government tried to capture the resources needed to bolster and subsidise the crippled farming sector and to sustain political popularity.
One of the reasons given for falling levels of domestic investment in these years was that the level of national savings was not adequate for sustainable investment. With deeply negative interest rates in place since 2001 and frequent raids on reserves through increases in Statutory Reserve Ratios, the savings base was effectively eroded out of existence.
Looking to the future, these factors make it clear that virtually all the needed investment funding will have to be sourced from outside the country for the foreseeable future. But with competition for foreign investment rapidly getting tougher among developing countries, and more impressive economic and political developments taking place in a number of countries in the region, Zimbabwe will needs to become much more imaginative about its efforts to attract the attention of investors.
Because government is continuing to reject all proposals for revisions to the Land Reform Policy, the many food-processing manufacturing businesses seem likely to remain at a disadvantage because very low production volumes from the farms will limit their recovery prospects. Those still in operation have become more dependent on imports, but the funding and power shortages as well as the skills shortages are also serious problems for those wishing to restore former production volumes at competitive prices.
Capacity utilisation has started to improve in some areas of manufacturing, but the evidence strongly suggests that the severe power cuts alone will continue to make significant increases in output impossible for most factories.
Although the extent of the recovery that does prove possible might look impressive because it will be off a very low base, the constraints presently affecting output are certain to continue imposing severe limitations for as long as they remain in place. These will be reinforced by the reluctance of buyers on the domestic as well as export markets to place too much reliance on Zimbabwe’s suppliers at this stage.
The Government of National Unity’s acceptance of the need to make far-reaching changes has not so far generated the practical changes needed to overcome the lingering effects of years of losses that eroded each company’s skills, physical capacity, standing with customers and suppliers and financial stamina.
A few undoubted successes have been recorded, led by companies like Delta Corporation, which is recapturing the local market from suppliers of imported beer and is about to commission a significant increase in bottling capacity. Some of the clothing factories are also making some headway, having recaptured the support of buyers from the importers of poor quality Chinese goods. However, the needed increases in buying power await the private sector investment decisions that will lead to a demand resurgence and help create employment.
Even then, the full recovery of industry will have to await the completion of the extensive repairs and maintenance required by the infrastructure in general and by Hwange and Kariba power stations in particular. Separate, but equally essential work has to be done to restore coal production and the coal deliveries by rail needed to re-commission the thermal power stations in Harare and Bulawayo. In the medium term, the completion of at least one new power station is considered necessary for the achievement of energy self-sufficiency.
While the signs of improvement in levels of output have been encouraging, investor confidence is unlikely to be fully restored before government has issued unequivocal statements assuring potential and existing investors that property rights will be fully restored and investors in all sectors will be protected against any possibility of threats to property rights in future.
Inflation
Zimbabwe’s hyperinflationary experience came close to breaking all world records because the authorities had persuaded themselves that “illegal international sanctions” had caused the economic decline, not the forced closure of the country’s biggest productive sector. Therefore, they claimed, the printing of money was entirely justified, as was the adoption of widely differing exchange rates that provided the authorities with the advantage of low-cost imports. However, as they could fund these imports only by claiming the right to remove foreign currency from company and NGO bank accounts, the authorities became directly responsible for further downturns in local output and the development of worsening shortages.
As the exercise of this advantage depended upon their ability to confiscate foreign earnings, government’s policies soon began to also affect what was left of the country’s exporters. Foreign exchange scarcities became very much more serious and were soon a principal source of the inflationary pressures.
On this track, the total collapse of the Zimbabwe dollar was inevitable and it soon followed upon the hyperinflation registered in the final months of 2008.
For lack of options, Zimbabwe then adopted the use of US dollars and rand for all transactions and the inflation came to an abrupt end. Initially, goods priced in US dollars in the shops went down in price as stocks of imports improved and competition between retailers became more pronounced.
In the monthly inflation indicators for the second half of 2009, despite the use of relatively stable currencies, prices started rising again and expectations of further increases, based partly on the effects of exchange rate movements between the US dollar and the rand and partly on wage demands, seem likely to keep prices rising. However, the official September Consumer Price Index reported a month-on-month fall of half of one percent.
Although Zimbabwe is earning most of its export proceeds in US dollars and receiving a high percentage of its remittances in the same currency, it is placing its orders for most consumer goods and industrial materials with South African suppliers, so the strengthening rand and weakening US dollar have added to Zimbabwe’s procurement costs.
Demands for higher wages are also posing a threat, not just to the prices of the goods that can still be produced in Zimbabwe, but also the prospects of survival for many of these companies.
Many wage negotiation processes have broken down and the arbitration proceedings that followed have granted the trades unions most of their demands. Some employers have responded with efforts to appeal against the arbitration decisions in their efforts to avoid bankruptcy.
Agriculture
During 2009, agriculture attracted the most exaggerated forecasts of recovery, but as the sizes of the year’s crop deliveries were set by events and conditions during the 2008 economic melt-down, most of the forecasts have not been realised.
For the hoped-for recovery in 2010, the disappearance of government’s capacity to offer subsidies has brought harsh financial realities home to previously generously subsidised resettlement farmers. For example, even though the quantities of locally produced fertiliser are far from adequate, unsold stocks are accumulating for lack of buying power. The evidence suggests that next year’s harvests are already threatened.
All the intricately balanced linkages and business relationships that used to help deliver success and food security to Zimbabwe’s population were damaged or broken by the land reform programme. Today, Zimbabwe’s agricultural sector consists largely of small farms that have no market value and no collateral value, and most have been allocated to people who lack the resources and experience needed to cultivate the areas put in their charge.
Despite subsidies and state funding, very few farmers have been able to move away from peasant farming methods and since land reform, every harvest has been extremely disappointing. Every year since land acquisitions started in earnest, Zimbabwe has had to import food.
Now, in any efforts that are made to restore productive capacity, government and all those international bodies that wish to assist the country will have to acknowledge that the country has adopted policies that do not meet the requirements of a larger, better educated, more urbanised and much more demanding population.
Zimbabweans are fully capable of dealing with the challenges of commerce and a wide range manufacturing and service industries, but the country has need of efficient and dependable agricultural production. The population therefore has good reason to hope that large-scale capital-intensive cultivation methods will be reinstated, and that the need to rely on the small-scale subsistence methods brought back by Land Reform will fall away.
This table illustrates the extent of the decline in physical output since the Land Reform Programme was started. Maize, soybeans, beef, dairy and cut- flowers output have fallen to figures close to one quarter of their levels in 2000 and tobacco, wheat, coffee, groundnuts and paprika volumes are now at much smaller fractions of former levels. Cotton, sugar and tea production volumes have fallen by less severe percentages and barley has recovered to former levels, but most of these are now being threatened by renewed land acquisition activities that are targeted at formerly advantaged plantations.
While small-scale subsistence farming might remain an important income source for the large communities that still follow traditional life-styles, this system cannot be relied upon to meet the needs of Zimbabwe’s large urban population. The subsistence methods are far too unreliable in Zimbabwe’s uncertain tropical climate and today the overall population is far too big.
The policies introduced to initiate the Land Reform Programme, which amounted to the nationalisation of land, are also considered incapable of attracting the investment needed for development in agriculture and every other economic sector. Critics argue that important requirements for all forms of investment are secure and marketable individual property rights.
In trying to bring about the needed changes, commentators are arguing that Zimbabwe should not be looking for funding that will help to make its badly chosen policies work a little better. Donor countries and development agencies should therefore be persuaded not to offer support until the country agrees to the adoption of acceptable policies with a proven track record.
In essence, the disbursal of assistance in any form should be made conditional upon Zimbabwe showing the needed willingness to make radical changes and to adopt acceptable policies. In its 2008 election manifesto, the MDC argued that the primary conditions for these included the empowerment of ordinary citizens through the acceptance and promotion of individual property rights, and it argued that these rights should be given absolute protection in the proposed new Constitution.
Unfortunately, this position appears to have been eroded since the formation of the Government of National Unity. By way of explanation, commentators have explained that because property rights empower individuals and improve their prospects of economic success, they are opposed by the ruling elites because this success can dilute the powers of the people who are trying to retain absolute authority. Many African governments seeking aid therefore also demand the right to decide who will benefit.
This unacceptable approach is thought to be best countered by requiring the acceptance of ownership rights for the assets essential to effective investment. The concept of property rights has to be accepted so that the very specific needs of local as well as foreign investors will not be frustrated by issues of no relevance to their being able to meet business challenges.
As these challenges are already more than sufficiently exacting, demanding and unforgiving, and as the people who can meet them have to be highly experienced in many aspects of business, the authorities should accept the need to encourage them by offering a supportive policy environment.
After very few years of the levels of development that would be made possible by accepting these basic requirements, very nearly all the countries that are now claiming dependence on aid would become self-sufficient and their people would become considerably more prosperous.
In describing what they have done, the architects of Zimbabwe’s current chaos have chosen to focus only on the relatively small number of farmers they have displaced. They dismiss as irrelevant the wider social issues, but the destruction of about four thousand large-scale farming businesses has impacted directly upon employees, suppliers and customers and indirectly upon every other member of Zimbabwe’s population.
In essence:
o In the process of reclaiming land, about 4 500 farming companies have been closed, causing the direct loss of 350 000 full time farm jobs and sharply cutting production of crops for local consumption and for export.
o The loss of property also meant the loss of accommodation, many elementary schools, many clinics and high schools, as well as incomes that supported the workers’ families, a total of several million people.
o Almost all of these people are now destitute and assessments suggest that up to 30% of them have died since 2002.
o Inexperienced small-scale farmers or peasant farmers now make up almost the entire farming sector
o Because Zimbabwe's agricultural land now has no collateral value, the new farmers cannot use their holdings as security for bank loans
o Government has been forced to support the new small-scale farms with massive subsidies that were not needed by the former large-scale farms.
o As the subsidies are beyond Zimbabwe’s financial means, the payments contributed to the very high rates of inflation that reached world record levels before making the Zimbabwe currency valueless. Having now adopted the use of the US dollar,
o The loss of foreign earnings from the export of crops and other products drastically reduced the country's ability to import essential goods.
o The need to import food that Zimbabwe used to export has further reduced the foreign currency available for other industrial and commercial imports
o The closure of large-scale farms has severely damaged the viability of thousands of other companies that depended on large-scale farms
o In the hands of less experienced farmers, the land and farm assets captured have only a fraction of the value and earning capacity that they had in the hands of the highly skilled, but now dispossessed farmers
o The rapidly deteriorating services infrastructure and frequent fuel shortages have generated severely critical Press reports that have accelerated the decline of Zimbabwe's tourist industry
o The state-sponsored attack on property rights has arrested productive investment, job creation and export growth and now prevents access to international credit lines and project finance, and
o Far from being a success, the land reform programme has been an unmitigated disaster.
The on-going consequences of the policy measures responsible for these effects have been so profound that any claims that Zimbabwe’s economic recovery is possible before they are appropriately dealt with have to be challenged.
Although few donor countries have spelled out such reservations in any detail, they have indicated in various ways that funding to help Zimbabwe’s reconstruction will not be made available while the authorities continue defending the policy decisions that led to the collapse of the country’s economic capacity and social services. Many have continued to offer humanitarian aid, but most have done so on condition that they do not have to work through any division of government.
Banking
Business recovery is being held back by, among other things, the inability of the banks to offer the overdraft facilities or the longer-term loans needed to rebuild stocks of materials, carry out long overdue maintenance and repairs or attract back skilled personnel to run factories or staff production lines.
Zimbabwe’s use of foreign currency since the collapse of the Zimbabwe dollar has marginalized the Reserve Bank of Zimbabwe and nullified its ability to regulate the country’s use of the available foreign exchange.
With no foreign reserves of its own, but foreign currency debts to local creditors amounting to about US$1 billion, the Reserve Bank has not been able to function as Lender of Last Resort. In turn, this has made the country’s commercial and merchant banks very unwilling to lend to each other.
A change of some significance is possible now that the IMF has chosen to allocate funds to all member countries in an effort to ease the worldwide liquidity crisis. Zimbabwe’s share is US$517 million, of which a little more than US$400 million will be released to the authorities. The balance is to be held in an escrow account until arrears of US$139 million have been settled. As the amount being sent is supposed to be used to support the country’s foreign reserves position, technically it should come under the control of the Reserve Bank, but details are being withheld until the publication of the national Budget towards the end of November.
How the funds will be put to use is therefore still unclear, but the settlement of the outstanding debts to the IMF would seem to deserve high priority. Funds are needed also by Zesa, NRZ, Air Zimbabwe and most municipalities, among others, but if some could be retained by the Reserve Bank to permit it to function as lender of last resort, that too would be extremely helpful.
A solution to Zimbabwe’s liquidity problem awaits the return of balance in the unbalanced banking sector, which currently has 29 banking institutions. Many have struggled to meet capital adequacy requirements and some of these are expected to seek mergers with other banks in due course.
Prospects for an improvement in the financial strength of the banks that survive will improve when their numbers have been cut by about half. Direct intervention by the Reserve Bank is less likely under current conditions, but the pace of developments might be forced up if the more seriously undercapitalised banks are put at further risk by company closures, such as the tentative decision by David Whitehead Textiles to wind up their Zimbabwe operations if the unions cannot reconsider their wage demands.
International developments
Hesitant, but mainly improving share and commodity prices are supporting beliefs that the recessions in Europe, North America and the Far East have bottomed out. However, the strengthening gold price and the continued weakness in the recovery of retail spending suggest that the recovery is fragile and useful export volume and employment growth figures might take some time to materialise.
An area of particular uncertainty is the oil market, on which price increases to around $80 a barrel ahead of the northern hemisphere winter is suggesting the possibility of further increases and consequential impacts on production and transport costs. While consumer demand remains weak and suppliers are forced to compete aggressively for market share, their efforts to hold prices to the lowest they can afford are impacting directly on profit levels.
Low and uncertain returns are already affecting investor confidence as well as the ability of producers to fund research, development or expansion plans, but if production cost inflation further erodes profit margins and employment recovery, this could slow the already sluggish recovery period.
Unfortunately for the governments of most western countries, these pressures will impose limits to tax collections and make more difficult the effects of their having had to incur heavy domestic debt in their efforts to assist their banking sectors through the financial crisis.
Budget deficits as percentages of Gross Domestic Product have reached extraordinarily high figures for Western countries. These are forcing governments to call for expenditure cuts that are coinciding with increasing demands for unemployment benefits and other welfare payments.
Low interest rates under these circumstances appear to be the most appropriate response from the various central bank authorities, but they threaten to seriously erode the value of the already depleted savings as producer price inflation rates rise above the rates of interest.
Retired people and others who were previously able to live on interest earnings are now having to withdraw capital to meet ongoing living expenses, or move capital to countries that are still offering acceptable rates of interest.
South Africa is currently offering interest rates of seven to ten percent and attracting enough of the affected funds to cause a strengthening of the rand, but Zimbabwe, with equally attractive interest rates, has been almost completely unsuccessful due to continuing concerns about the safety of balances sent into the country’s banking system.
Assurances that past experiences of having funds appropriated by the authorities will not recur have not been enough to satisfy most fund managers. The evidence that the authorities have become increasingly desperate to get their hands on funds, particularly as the inflows expected from donor countries and development agencies have not materialised, has worsened this mistrust.
Financial difficulties abroad have sustained Zimbabwe’s concerns over the likelihood of mergers or bank closures if market conditions force an unsatisfactory resolution to the excessive number of inadequately capitalised banks.
More confidence, and perhaps even some willingness to participate in a consolidation process, might be forthcoming from external banks if Zimbabwe’s banking sector could start making more deliberate plans for a managed rationalisation towards a more appropriate structure and size.
Labour
Mounting friction has developed between employers and employees as trades union leaders have tried to force employers to more than double wages and to back-date these to April this year.
As everyone concerned, from the smallest workers’ committee to the Ministry of Labour, is aware that employers have neither the turnover nor the profit margins needed to meet such wage demands, beliefs are being expressed that the trades unions have very short-term political motives. These tie in with mounting evidence that political progress is being held down to a negligible pace by Zanu PF’s fear that MDC will benefit the most from any progress achieved.
Many employers are known to be responding to the unions with blunt statements that they would be forced out of business if they tried to meet such demands and that their employees, not the union officials, would be the losers. David Whitehead Textiles’ threat to close is the most significant response so far.
Others are arguing their case by pointing out how many of the processes carried out in their businesses can now be performed by machines, all of which call for far fewer people. As all of the people then needed would require specialised skills, current staff members’ jobs would again be put at risk.
As most employees have some knowledge of the political dimensions hidden in every argument, it is probable that, with the benefit of carefully articulated advice, most will be readily persuaded not to allow themselves to become expendable pawns in a political game.
However, even if the country moves onto a more encouraging track, many companies will have to be able to provide for higher labour costs. To cope with these while also having to contend with strong competition that might prohibit price increases, high and increasing levels of efficiency in every single department will be essential and every producer will be acutely aware of the need to match the quality standards of their competitors’ products.
Unless workers can be persuaded that their own and their employers’ interests are identical, producers will incur increasing losses through poor quality control, wastage of materials, wastage of fuel, power and water, machine down-time, failures to deliver on time, and theft, all of which add to effective production costs. These are already threatening the survival of a large number of companies.
Investment prospects:
Considerable interest has been shown in Zimbabwe’s prospects in recent months. Conferences on mining, financial services and equity investment have been well supported, and numerous visits have been recorded from property developers and companies hoping to tender for large public works and infrastructural restoration contracts as well as interest groups from various countries.
However, apart from purchases of a few reasonable blocks of shares, most of the visits have ended with expressions of “cautious optimism” and little else. Almost no invitations have been offered to tender for properly defined projects and potential investors have been able to make very few decisions beyond their decisions to await further developments. The few commitments to invest have come mainly from the external parent companies of local businesses, such as Delta Corporation and Triangle Sugar Estates.
Immediate prospects of the hoped-for domestically-driven recovery remain affected by the still limited inflows of foreign earnings and the continuing inability of the banks to offer loan finance, either for short-term working capital needs or for medium-term capital investment needs. Much lower than expected levels of financial support from donor countries, international banks and development agencies. These have held in place very severe liquidity shortages throughout the economy. Lines of credit have been offered to several of the banks that have external partners, but the conditions set for the disbursal of these funds have kept them beyond the reach of most borrowers.
The needed inflows of investment capital are being impeded by the very slow recovery of investor confidence. This appears to be mainly because of political intransigence, which reflects the fears of Zanu PF leaders that if they lose further control, they will increase the risk of their being brought to account for Human Rights charges by the International Criminal Court.
The many countries and organisations that stand ready to assist have very quickly noted each reversal of this nature, and each of them has put Zimbabwe back onto square one. Our marker on this board will make no progress before the weight of evidence clearly shows the assistance will be used to put the country onto a sound recovery path, and not used to more deeply entrench the powers of a government that is seen to be responsible for, and is still defending, policies that have caused extensive damage throughout the economy.
Given the facts that Zimbabwe’s economy has been disabled, that its production and export revenues have fallen sharply, that its infrastructure is highly inefficient, that its debt are already large and its debt arrears are more than the country’s Gross Domestic Product, Zimbabwe is seen by all to amount to an extremely serious credit risk.
This fact makes Zimbabwe of the least appetising investment destinations in the world, but these terrible handicaps could be quickly countered by a commitment to adopt policies that would restore confidence. The requirements of such policies are well known and entirely within the country’s reach. For this reason, Zimbabwe’s longer-term prospects might best be conditionally described as sound, the condition being that political change is allowed to considerably reduce the uncertainties that presently confront investors.
----------------------------------
John Robertson
October 21 2009
Tuesday, October 20, 2009
Average prices fell by about half of one percent during September, according to the September Consumer Price Index table from Zimbabwe Central Statistical Office. The fall is mainly the result of falls in fresh vegetable prices and passenger transport fares, but declines were also recorded for hospital and paramedical services, clothing, household textiles and fuel prices, and between them, these decreases were enough to offset increases in the prices of dental services, electrical appliances and recreational equipment.
On the re-based index of December 2008 = 100, the September index was 91,2, which was 0,5% down on the August index of 91,7.
On the re-based index of December 2008 = 100, the September index was 91,2, which was 0,5% down on the August index of 91,7.
Friday, October 16, 2009
Britain to give Zimbabwe $100 mln in aid
Raymond Mhaka on Oct 15th, 2009 and filed under Politics. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry
HARARE, Oct 15 – Britain said on Thursday it was providing $100 million in aid to Zimbabwe this year, its largest ever donation to the country, to help the new unity government and ease a grim humanitarian crisis.
“We thought the formation of the inclusive government was a significant step. The UK wants it to succeed. We are not holding back and will be supporting it to the tune of $100 million this year,” said British ambassador to Zimbabwe Mark Canning.
“We don’t want it to fail as a result of lack of financial support,” he told reporters.
Relations between Britain and Zimbabwe have been strained for a decade, with London accusing President Robert Mugabe of disastrous policies such as the often violent seizure of white farms to resettle blacks, electoral fraud and rights abuses.
But the formation of a power-sharing government by Mugabe and rival Prime Minister Morgan Tsvangirai has raised hopes for improved ties.
Canning said the funds would be used to restore vital services such as water, sanitation, healthcare and education — which has virtually collapsed after years of neglect — as well as to provide food aid, seed and fertilisers to poor households.
Western donors have been reluctant to give large-scale development aid to Zimbabwe until they see more evidence of reforms being implemented.
Dave Fish, head of the UK’s Department for International Development, said Britain was not yet giving direct funding to the new unity government.
“We would expect significant developments on the political front before we deepen support or even provide funding directly through the government,” he said.
“We expect respect for human rights and international obligations, policies that help the people and the ability to manage donor funds transparently. In those three cases, Zimbabwe failed the test.”
The unity government has faced problems from the start, with Tsvangirai’s Movement for Democratic Change (MDC) accusing Mugabe of undermining the pact by refusing to reverse senior appointments made without consulting the former opposition.
On Wednesday, Tsvangirai’s ally Roy Bennett was detained after being indicted on terrorism charges, prompting an angry response from the MDC, which says its members are being persecuted through the courts.
Mugabe’s ZANU-PF party accuses the MDC of failing to honour an agreement to call for the removal of sanctions imposed by Western governments on the veteran leader and his inner circle.
Mugabe has accused the West of trying to divide the unity government through the maintenance of the sanctions, adding they hurt only the poor.
Canning said the full restoration of ties with Zimbabwe depended on the implementation of the power-sharing deal and the successful completion of current talks between Harare and the European Union.
“It is the progress on the ground that will determine the extent to which we increase co-operation,” Canning said.
“The issue of sanctions is one that will go away once the political agreement is fulfilled in spirit and letter.”
Additional reporting: Reuters (Reporting by Nelson Banya; editing by Andrew Roche)
HARARE, Oct 15 – Britain said on Thursday it was providing $100 million in aid to Zimbabwe this year, its largest ever donation to the country, to help the new unity government and ease a grim humanitarian crisis.
“We thought the formation of the inclusive government was a significant step. The UK wants it to succeed. We are not holding back and will be supporting it to the tune of $100 million this year,” said British ambassador to Zimbabwe Mark Canning.
“We don’t want it to fail as a result of lack of financial support,” he told reporters.
Relations between Britain and Zimbabwe have been strained for a decade, with London accusing President Robert Mugabe of disastrous policies such as the often violent seizure of white farms to resettle blacks, electoral fraud and rights abuses.
But the formation of a power-sharing government by Mugabe and rival Prime Minister Morgan Tsvangirai has raised hopes for improved ties.
Canning said the funds would be used to restore vital services such as water, sanitation, healthcare and education — which has virtually collapsed after years of neglect — as well as to provide food aid, seed and fertilisers to poor households.
Western donors have been reluctant to give large-scale development aid to Zimbabwe until they see more evidence of reforms being implemented.
Dave Fish, head of the UK’s Department for International Development, said Britain was not yet giving direct funding to the new unity government.
“We would expect significant developments on the political front before we deepen support or even provide funding directly through the government,” he said.
“We expect respect for human rights and international obligations, policies that help the people and the ability to manage donor funds transparently. In those three cases, Zimbabwe failed the test.”
The unity government has faced problems from the start, with Tsvangirai’s Movement for Democratic Change (MDC) accusing Mugabe of undermining the pact by refusing to reverse senior appointments made without consulting the former opposition.
On Wednesday, Tsvangirai’s ally Roy Bennett was detained after being indicted on terrorism charges, prompting an angry response from the MDC, which says its members are being persecuted through the courts.
Mugabe’s ZANU-PF party accuses the MDC of failing to honour an agreement to call for the removal of sanctions imposed by Western governments on the veteran leader and his inner circle.
Mugabe has accused the West of trying to divide the unity government through the maintenance of the sanctions, adding they hurt only the poor.
Canning said the full restoration of ties with Zimbabwe depended on the implementation of the power-sharing deal and the successful completion of current talks between Harare and the European Union.
“It is the progress on the ground that will determine the extent to which we increase co-operation,” Canning said.
“The issue of sanctions is one that will go away once the political agreement is fulfilled in spirit and letter.”
Additional reporting: Reuters (Reporting by Nelson Banya; editing by Andrew Roche)
Tuesday, October 13, 2009
Zimbabwe finance minister's ultimatum over local $
HARARE — Zimbabwe's finance minister Tendai Biti vowed on Monday that he would quit if he is asked to return the local dollar which was abandoned as the country fought a losing battle with hyperinflation.
"If someone is to ask me bring back the Zimbabwe dollar, then there will be a vacancy on the sixth floor of the government complex and I will go back to my law firm," Biti was quoted as saying by the state-owned Herald newspaper.
"The Zimbabwe dollar has been an instrument of arbitrage and rent-seeking behaviour. It had become an instrument of theft so we can't allow that."
He said debate on the possible return of the Zimbabwe dollar should only start in November next year.
Biti, a lawyer, was appointed finance minister in February in a power-sharing government of the country's three major political parties - long-ruling President Robert Mugabe's ZANU-PF, Prime Minister Morgan Tsvangirai's Movement for Democratic Change (MDC) and a breakaway faction of the MDC led by Arthur Mutambara.
The compromise government sought to ease political tensions in the wake of a contentious presidential run-off election and to mend the country's
"If someone is to ask me bring back the Zimbabwe dollar, then there will be a vacancy on the sixth floor of the government complex and I will go back to my law firm," Biti was quoted as saying by the state-owned Herald newspaper.
"The Zimbabwe dollar has been an instrument of arbitrage and rent-seeking behaviour. It had become an instrument of theft so we can't allow that."
He said debate on the possible return of the Zimbabwe dollar should only start in November next year.
Biti, a lawyer, was appointed finance minister in February in a power-sharing government of the country's three major political parties - long-ruling President Robert Mugabe's ZANU-PF, Prime Minister Morgan Tsvangirai's Movement for Democratic Change (MDC) and a breakaway faction of the MDC led by Arthur Mutambara.
The compromise government sought to ease political tensions in the wake of a contentious presidential run-off election and to mend the country's
Shoprite Scraps Plan to Pursue OK Zimbabwe Investment
By Nasreen Seria
Oct. 12 (Bloomberg) -- Shoprite Holdings Ltd., South Africa’s biggest food retailer, said it won’t pursue investment in Zimbabwe, citing political and economic “uncertainty.”
“Due to the current socio-economic and political uncertainty in Zimbabwe,” Shoprite “has decided not to engage in further investment opportunities in that country in the short to medium term,” the retailer said today in a statement.
Cape Town-based Shoprite was responding to media reports that it may buy OK Zimbabwe Ltd., the country’s second-biggest supermarket chain. Shoprite said on Aug. 28 it would “consider” buying businesses in Zimbabwe to expand its operations to the rest of the continent. Calls to OK Zimbabwe’s offices in the capital Harare didn’t connect.
Zimbabwean President Robert Mugabe signed a power-sharing agreement with opposition leader Morgan Tsvangirai in February, with the aim of drawing up a new constitution and holding elections within two years of that. The country is struggling to attract foreign investment to help the economy recover from a decade of recession. Mugabe’s program of seizing commercial farmland in 2000 to give to blacks slashed export earnings, caused shortages of food and foreign exchange, and turned the country into sub-Saharan Africa’s top corn importer.
‘High Risk’
Kingdom Meikles Africa Ltd., owner of Zimbabwe’s largest food retailer TM Supermarkets (Pvt) Ltd., was placed under state administration by the government on Sept. 18 under anti- corruption laws. Sternford Moyo, a lawyer for the company, said the move was illegal and Gilbert Muponda, a Zimbabwean investment analyst based in London, said the seizure indicates that Zimbabwe remains a “high risk investment destination.”
Shoprite, which posted a 27 percent jump in profit in the year through June, operates 102 stores in 16 countries outside of South Africa, including a grocery outlet in Zimbabwe’s second-biggest city, Bulawayo.
The retailer’s shares rose 71 cents, or 1.1 percent, to 63.20 rand as of 5:10 p.m. in Johannesburg today, taking its gain in the past six months to 21 percent.
To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net;
Oct. 12 (Bloomberg) -- Shoprite Holdings Ltd., South Africa’s biggest food retailer, said it won’t pursue investment in Zimbabwe, citing political and economic “uncertainty.”
“Due to the current socio-economic and political uncertainty in Zimbabwe,” Shoprite “has decided not to engage in further investment opportunities in that country in the short to medium term,” the retailer said today in a statement.
Cape Town-based Shoprite was responding to media reports that it may buy OK Zimbabwe Ltd., the country’s second-biggest supermarket chain. Shoprite said on Aug. 28 it would “consider” buying businesses in Zimbabwe to expand its operations to the rest of the continent. Calls to OK Zimbabwe’s offices in the capital Harare didn’t connect.
Zimbabwean President Robert Mugabe signed a power-sharing agreement with opposition leader Morgan Tsvangirai in February, with the aim of drawing up a new constitution and holding elections within two years of that. The country is struggling to attract foreign investment to help the economy recover from a decade of recession. Mugabe’s program of seizing commercial farmland in 2000 to give to blacks slashed export earnings, caused shortages of food and foreign exchange, and turned the country into sub-Saharan Africa’s top corn importer.
‘High Risk’
Kingdom Meikles Africa Ltd., owner of Zimbabwe’s largest food retailer TM Supermarkets (Pvt) Ltd., was placed under state administration by the government on Sept. 18 under anti- corruption laws. Sternford Moyo, a lawyer for the company, said the move was illegal and Gilbert Muponda, a Zimbabwean investment analyst based in London, said the seizure indicates that Zimbabwe remains a “high risk investment destination.”
Shoprite, which posted a 27 percent jump in profit in the year through June, operates 102 stores in 16 countries outside of South Africa, including a grocery outlet in Zimbabwe’s second-biggest city, Bulawayo.
The retailer’s shares rose 71 cents, or 1.1 percent, to 63.20 rand as of 5:10 p.m. in Johannesburg today, taking its gain in the past six months to 21 percent.
To contact the reporter on this story: Nasreen Seria in Johannesburg at nseria@bloomberg.net;
Australia to Give Aid to Zimbabwe Farmers to Boost Food Output
By Brian Latham
Oct. 12 (Bloomberg) -- The Australian government plans to provide $7 million of support to Zimbabwe farmers during the 2009-2010 summer crop season in an effort to boost food production in the southern African nation.
The money will be channeled through the World Bank’s Global Food Crisis Response Program, John Courtney, Australia’s ambassador to Zimbabwe, said in an e-mailed statement today. The program will distribute corn seeds to more than 300,000 poor farmers who own smallholdings across Zimbabwe, Courtney said.
Australia will provide a further A$5 million ($4.5 million) to the World Food Program to feed hungry Zimbabweans, Courtney added.
To contact the reporter on this story: Brian Latham in Durban at blatham@bloomberg.net.
Oct. 12 (Bloomberg) -- The Australian government plans to provide $7 million of support to Zimbabwe farmers during the 2009-2010 summer crop season in an effort to boost food production in the southern African nation.
The money will be channeled through the World Bank’s Global Food Crisis Response Program, John Courtney, Australia’s ambassador to Zimbabwe, said in an e-mailed statement today. The program will distribute corn seeds to more than 300,000 poor farmers who own smallholdings across Zimbabwe, Courtney said.
Australia will provide a further A$5 million ($4.5 million) to the World Food Program to feed hungry Zimbabweans, Courtney added.
To contact the reporter on this story: Brian Latham in Durban at blatham@bloomberg.net.
Monday, October 12, 2009
Biti calls Zanu-PF ‘grandmasters of looting’
October 11, 2009
By Raymond Maingire
HARARE – Finance Minister Tendai Biti says he has battled powerful politicians aligned to President Robert Mugabe’s Zanu PF party who were determined to see the country bleed to death through unbridled corruption.
He says he has brought order and sanity into the governance of economic affairs, much to the chagrin of ‘grandmasters of looting.’
Biti, who has just won the 2009 Euro Money Emerging Market Best Finance Minister in Africa award, is adamant he would not abandon his job through pressure from hawks opposed to his policies.
The 44-year-old lawyer turned politician, however, says he would not hesitate to return to his law firm if undue executive authority were to be applied to force him to abandon the very same policies that have brought him respect among his African peers.
Speaking for the first time since being presented with the prestigious award, a modest Biti said he believed he had been honoured for his cutthroat policies that have brought back sanity to what had become the world’s most turbulent economy.
“It (award) is in honour of the decent things that we have done in 2009,” Biti said.
“We have stopped the bleeding. We have put in some decency and we have put in some sanity under exceptionally difficult circumstances and conditions.”
Biti was being hosted in a pre-recorded television programme, the transition, at Harare’s New Ambassador Hotel.
The programme is set to be aired on the local ZTV in a few weeks to come, according to Information and Publicity deputy minister Jameson Timba.
Timba, an MDC legislator for Mount Pleasant constituency, is behind the programme, which he says was meant to appraise the general public on the operations of the inclusive government.
The award given to Biti has attracted displeasure from some of his critics within the current inclusive government who find the prize as unbefitting for a minister with only eight months into his job.
Outspoken Tsholotsho North Independent MP, Professor Jonathan Moyo, who has rejoined Zanu-PF, says Biti was a “manifestly unqualified and reckless Minister of Finance who is a laughing stock in his own country”.
But Biti is adamant he deserved the honour although he admits he still needs to do more to rescale the economic performance levels that existed in the mid 90s.
This was a few years before a plethora of populist but disastrous polices by President Robert Mugabe’s government triggered a devastating economic downturn that saw the once vibrant economy shrink by 60 percent in 10 years.
“We need to graduate from the macroeconomic era that we are going through to finding an economic stabilization and to the era of growth, transformation and reconstruction,” he said.
“We would want to get an award for wiping out unemployment of 95 percent and getting basic infrastructure working again.”
Biti said he would be happier if Zimbabwe would graduate from “the small miserable African state to an African giant that has to take its place among the giants of the African continent”.
He added, “One thing that I am proud of as an individual is predictability and consistency. Those are the two foundations of trust.”
“An economy works on the basis of predictability and trust and what we have done in the past seven months is to bring predictability, consistency and therefore some legitimacy.”
The MDC legislator, who has won a lot of admirers for restricting controversial central bank governor and close ally to President Mugabe, Gideon Gono, denies accusations that he was tying to sabotage the Zimbabwean economy.
There is a growing chorus of resentment to his policies by Zanu-PF officials since the finance minister got involved in a wrangle with Gono over the use of a US$510 million special credit line extended by the IMF to help developing countries deal with the impact of the global economic downturn.
“You cannot sabotage an economy that has been abused vandalized and raped such as the one which we had,” he said.
“The order and sanity which we have brought in the governance of economic affairs in this country has threatened shareholders of past grandmasters of looting, grandmasters of corruption, grandmasters of eating.
“There are people that have been eating our country. What we have done is to make sure that we play by the rules, to make sure that we play by the constitution of this country, to make sure that we play by the economic logic that is detected by our reality.
“There are those people that are blind to the reality of our mediocre situation and it’s a myth that is peddled that we are too rich to be poor and so a lot of myths are being peddled.
“There are certain people that were flourishing from the status quo. There are cat fish out there. A cat fish can only hunt in muddy waters. When it wants to hunt, it goes to the bottom and makes sure the water is muddied.”
Biti defended his firm handling of Gono, whom he has liked to a member of Al Qaeda to be brought before a firing squad.
“In 2008, the Reserve Bank’s economic activities were 34 percent of Gross Domestic Product. In 2007 they were 24 percent. In 2006 they were 32 percent. If you have a situation where basically your economy is now the Reserve Bank, there is something wrong.
“One has to deal with these issues of abuse which were being done through the euphemism of something called quasi-fiscal activities when there was nothing quasi about those activities, when they were pure involvement in the economy to the detriment of the Treasury and to the detriment of everyone else.”
Biti, regarded as a hardliner within the MDC, said although he took his job begrudgingly as he did not want to join the inclusive government, he would not be pressured out of it by people opposed to his policies.
“Having worked in the ministry of finance, I will not suffer fools. Fools will not celebrate having made me quit. They are not going to make me quit.
“The wars that are created, the arsenals and the arrows that are sent on us are not from government. I can live with that. I knew from day one that I was going to swim in sewage pond, so I can’t complain that the odour is bad.”
He added, “If I was to be told to sacrifice my principles that are fundamental to get this economy on its feet. If anyone tells me to bring back the Zimbabwean dollar tomorrow, then they would be a vacancy on the sixth floor of the new government complex (his office) and I am very clear on that.”
By Raymond Maingire
HARARE – Finance Minister Tendai Biti says he has battled powerful politicians aligned to President Robert Mugabe’s Zanu PF party who were determined to see the country bleed to death through unbridled corruption.
He says he has brought order and sanity into the governance of economic affairs, much to the chagrin of ‘grandmasters of looting.’
Biti, who has just won the 2009 Euro Money Emerging Market Best Finance Minister in Africa award, is adamant he would not abandon his job through pressure from hawks opposed to his policies.
The 44-year-old lawyer turned politician, however, says he would not hesitate to return to his law firm if undue executive authority were to be applied to force him to abandon the very same policies that have brought him respect among his African peers.
Speaking for the first time since being presented with the prestigious award, a modest Biti said he believed he had been honoured for his cutthroat policies that have brought back sanity to what had become the world’s most turbulent economy.
“It (award) is in honour of the decent things that we have done in 2009,” Biti said.
“We have stopped the bleeding. We have put in some decency and we have put in some sanity under exceptionally difficult circumstances and conditions.”
Biti was being hosted in a pre-recorded television programme, the transition, at Harare’s New Ambassador Hotel.
The programme is set to be aired on the local ZTV in a few weeks to come, according to Information and Publicity deputy minister Jameson Timba.
Timba, an MDC legislator for Mount Pleasant constituency, is behind the programme, which he says was meant to appraise the general public on the operations of the inclusive government.
The award given to Biti has attracted displeasure from some of his critics within the current inclusive government who find the prize as unbefitting for a minister with only eight months into his job.
Outspoken Tsholotsho North Independent MP, Professor Jonathan Moyo, who has rejoined Zanu-PF, says Biti was a “manifestly unqualified and reckless Minister of Finance who is a laughing stock in his own country”.
But Biti is adamant he deserved the honour although he admits he still needs to do more to rescale the economic performance levels that existed in the mid 90s.
This was a few years before a plethora of populist but disastrous polices by President Robert Mugabe’s government triggered a devastating economic downturn that saw the once vibrant economy shrink by 60 percent in 10 years.
“We need to graduate from the macroeconomic era that we are going through to finding an economic stabilization and to the era of growth, transformation and reconstruction,” he said.
“We would want to get an award for wiping out unemployment of 95 percent and getting basic infrastructure working again.”
Biti said he would be happier if Zimbabwe would graduate from “the small miserable African state to an African giant that has to take its place among the giants of the African continent”.
He added, “One thing that I am proud of as an individual is predictability and consistency. Those are the two foundations of trust.”
“An economy works on the basis of predictability and trust and what we have done in the past seven months is to bring predictability, consistency and therefore some legitimacy.”
The MDC legislator, who has won a lot of admirers for restricting controversial central bank governor and close ally to President Mugabe, Gideon Gono, denies accusations that he was tying to sabotage the Zimbabwean economy.
There is a growing chorus of resentment to his policies by Zanu-PF officials since the finance minister got involved in a wrangle with Gono over the use of a US$510 million special credit line extended by the IMF to help developing countries deal with the impact of the global economic downturn.
“You cannot sabotage an economy that has been abused vandalized and raped such as the one which we had,” he said.
“The order and sanity which we have brought in the governance of economic affairs in this country has threatened shareholders of past grandmasters of looting, grandmasters of corruption, grandmasters of eating.
“There are people that have been eating our country. What we have done is to make sure that we play by the rules, to make sure that we play by the constitution of this country, to make sure that we play by the economic logic that is detected by our reality.
“There are those people that are blind to the reality of our mediocre situation and it’s a myth that is peddled that we are too rich to be poor and so a lot of myths are being peddled.
“There are certain people that were flourishing from the status quo. There are cat fish out there. A cat fish can only hunt in muddy waters. When it wants to hunt, it goes to the bottom and makes sure the water is muddied.”
Biti defended his firm handling of Gono, whom he has liked to a member of Al Qaeda to be brought before a firing squad.
“In 2008, the Reserve Bank’s economic activities were 34 percent of Gross Domestic Product. In 2007 they were 24 percent. In 2006 they were 32 percent. If you have a situation where basically your economy is now the Reserve Bank, there is something wrong.
“One has to deal with these issues of abuse which were being done through the euphemism of something called quasi-fiscal activities when there was nothing quasi about those activities, when they were pure involvement in the economy to the detriment of the Treasury and to the detriment of everyone else.”
Biti, regarded as a hardliner within the MDC, said although he took his job begrudgingly as he did not want to join the inclusive government, he would not be pressured out of it by people opposed to his policies.
“Having worked in the ministry of finance, I will not suffer fools. Fools will not celebrate having made me quit. They are not going to make me quit.
“The wars that are created, the arsenals and the arrows that are sent on us are not from government. I can live with that. I knew from day one that I was going to swim in sewage pond, so I can’t complain that the odour is bad.”
He added, “If I was to be told to sacrifice my principles that are fundamental to get this economy on its feet. If anyone tells me to bring back the Zimbabwean dollar tomorrow, then they would be a vacancy on the sixth floor of the new government complex (his office) and I am very clear on that.”
Friday, October 9, 2009
EU gives 15.4 mln euros aid to Zimbabwe farmers
HARARE, Oct 8 – The European Union is providing seed and fertiliser worth 15.4 million euros ($22.73 million) to small-scale Zimbabwean farmers to boost grain production, an EU diplomat said on Thursday.
The EU, which maintains sanctions against Zimbabwe’s President Robert Mugabe and his inner circle over charges of human rights abuses and electoral fraud, remains one of the country’s largest donors, giving more than 510 million euros since 2002.
Mugabe and long-term rival Prime Minister Morgan Tsvangirai formed a power-sharing government in February to try to end a political and economic crisis, largely blamed on Mugabe’s drive to seize land from whites to resettle landless blacks.
Once a breadbasket of the region, Zimbabwe’s farming sector has collapsed.
The head of the European Commission in Zimbabwe, Xavier Marchal, told a meeting of agricultural experts and donors assessing the preparations for the farming season that the EU facility was aimed at improving household food security.
“The EC, on behalf of the EU, has signed an agreement with FAO (the United Nations’ Food and Agriculture Organisation), which will provide 15.4 million euros to support self-reliance at smallholder farmer level in Zimbabwe,” Marchal said.
“This programme is part of a wider EC policy aiming at moving this country from food aid to food security.”
When food shortages were at their peak in 2008, aid organisations were feeding about 7 million Zimbabweans, more than half the population.
The EU facility is part of a $74 million fund created by donors, including the World Bank and Britain’s Department for International Development, to support up to 700,000 small-scale farmers.
The donors’ project is expected to produce about 450,000 tonnes of the staple maize grain and meet a quarter of Zimbabwe’s annual requirements.
The government has forecast total maize output at up to 2.5 million tonnes, more than last year’s production, but farmers’ unions doubt the projection, citing input shortages and poor preparations.
Marchal said the EU would increase direct assistance to Zimbabwe once talks launched by Tsvangirai in Brussels in June were successfully concluded.
“But more importantly, government has to take its responsibilities. The decline in agricultural production is indeed related to issues relating to the way the land and agrarian reform programme has been conducted,” he said.
Additional Reporting: By Nelson Banya, Reuters
The EU, which maintains sanctions against Zimbabwe’s President Robert Mugabe and his inner circle over charges of human rights abuses and electoral fraud, remains one of the country’s largest donors, giving more than 510 million euros since 2002.
Mugabe and long-term rival Prime Minister Morgan Tsvangirai formed a power-sharing government in February to try to end a political and economic crisis, largely blamed on Mugabe’s drive to seize land from whites to resettle landless blacks.
Once a breadbasket of the region, Zimbabwe’s farming sector has collapsed.
The head of the European Commission in Zimbabwe, Xavier Marchal, told a meeting of agricultural experts and donors assessing the preparations for the farming season that the EU facility was aimed at improving household food security.
“The EC, on behalf of the EU, has signed an agreement with FAO (the United Nations’ Food and Agriculture Organisation), which will provide 15.4 million euros to support self-reliance at smallholder farmer level in Zimbabwe,” Marchal said.
“This programme is part of a wider EC policy aiming at moving this country from food aid to food security.”
When food shortages were at their peak in 2008, aid organisations were feeding about 7 million Zimbabweans, more than half the population.
The EU facility is part of a $74 million fund created by donors, including the World Bank and Britain’s Department for International Development, to support up to 700,000 small-scale farmers.
The donors’ project is expected to produce about 450,000 tonnes of the staple maize grain and meet a quarter of Zimbabwe’s annual requirements.
The government has forecast total maize output at up to 2.5 million tonnes, more than last year’s production, but farmers’ unions doubt the projection, citing input shortages and poor preparations.
Marchal said the EU would increase direct assistance to Zimbabwe once talks launched by Tsvangirai in Brussels in June were successfully concluded.
“But more importantly, government has to take its responsibilities. The decline in agricultural production is indeed related to issues relating to the way the land and agrarian reform programme has been conducted,” he said.
Additional Reporting: By Nelson Banya, Reuters
Wednesday, October 7, 2009
US Denies Sactions
Speaking at a press briefing yesterday, James Garry, the new US second secretary in Zimbabwe, said trade between the two countries had doubled since the sanctions were introduced in 2003.
Garry said: “American companies are doing business in Zimbabwe every day.”
He said the only proviso was that US companies were not allowed to trade with Zimbabwean citizens, or companies, on the sanctions list.
Garry said that, contrary to Mugabe’s claims, the US has never used the Zimbabwe Democracy and Economic Recovery Act to block trade with Zimbabwe.
Garry said the US act, which compels US citizens with voting rights on the board of multilateral lenders to vote against Zimbabwe’s attempts to access loans, had not been implemented.
The US diplomat said Zimbabwe had already been disqualified from getting more IMF loans – because it was in arrears with its loan repayments to the institution – when the act was drafted.
Mugabe has blamed his country’s economic collapse on “illegal” sanctions imposed by the West. He says sanctions are the greatest threat to the unity government.
Garry reiterated that targeted sanctions affect only Mugabe and his close allies, who are accused of gross human rights violations.
Mugabe was expected to open parliament today. This time he is likely to blame sanctions for his failure to deliver on his election promises.
Last year, Mugabe was booed and heckled by MDC MPs during his speech at the official opening of parliament.
With the unity government partners at each other’s throats, the opening of parliament promises to be a volatile affair.
Yesterday, riot police were deployed all over the capital.
Garry said: “American companies are doing business in Zimbabwe every day.”
He said the only proviso was that US companies were not allowed to trade with Zimbabwean citizens, or companies, on the sanctions list.
Garry said that, contrary to Mugabe’s claims, the US has never used the Zimbabwe Democracy and Economic Recovery Act to block trade with Zimbabwe.
Garry said the US act, which compels US citizens with voting rights on the board of multilateral lenders to vote against Zimbabwe’s attempts to access loans, had not been implemented.
The US diplomat said Zimbabwe had already been disqualified from getting more IMF loans – because it was in arrears with its loan repayments to the institution – when the act was drafted.
Mugabe has blamed his country’s economic collapse on “illegal” sanctions imposed by the West. He says sanctions are the greatest threat to the unity government.
Garry reiterated that targeted sanctions affect only Mugabe and his close allies, who are accused of gross human rights violations.
Mugabe was expected to open parliament today. This time he is likely to blame sanctions for his failure to deliver on his election promises.
Last year, Mugabe was booed and heckled by MDC MPs during his speech at the official opening of parliament.
With the unity government partners at each other’s throats, the opening of parliament promises to be a volatile affair.
Yesterday, riot police were deployed all over the capital.
Monday, October 5, 2009
Zimbabwe to Draft List of State Companies for Sale in 2 Weeks
By Camilla Hall
Oct. 4 (Bloomberg) -- Zimbabwe’s government will complete work within two weeks on a list of state-owned companies to be put up for sale, Finance Minister Tendai Biti said.
The government is examining the future of state companies including telecommunications operators, banks and the National Oil Company of Zimbabwe, Biti said at a seminar in Istanbul where he’s attending the International Monetary Fund’s annual meeting. It will decide within two weeks which companies should be sold and which should be restructured, he said.
To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net Last Updated: October 4, 2009 05:13 EDT
Oct. 4 (Bloomberg) -- Zimbabwe’s government will complete work within two weeks on a list of state-owned companies to be put up for sale, Finance Minister Tendai Biti said.
The government is examining the future of state companies including telecommunications operators, banks and the National Oil Company of Zimbabwe, Biti said at a seminar in Istanbul where he’s attending the International Monetary Fund’s annual meeting. It will decide within two weeks which companies should be sold and which should be restructured, he said.
To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net Last Updated: October 4, 2009 05:13 EDT
Zimbabwe GDP to Grow About 7% This Year, 13% in 2010, Biti Says
By Camilla Hall
Oct. 4 (Bloomberg) -- Zimbabwe’s economy may grow about 7 percent this year and 13 percent in 2010, Finance Minister Tendai Biti said.
Biti made the forecasts, which are roughly double the International Monetary Fund’s growth predictions for the African country, at a meeting in Istanbul where he’s attending the International Monetary Fund and World Bank annual summit.
He also said that it will be a “long while” before Zimbabwe returns to its own currency.
To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net Last Updated: October 4, 2009 02:27 EDT
Oct. 4 (Bloomberg) -- Zimbabwe’s economy may grow about 7 percent this year and 13 percent in 2010, Finance Minister Tendai Biti said.
Biti made the forecasts, which are roughly double the International Monetary Fund’s growth predictions for the African country, at a meeting in Istanbul where he’s attending the International Monetary Fund and World Bank annual summit.
He also said that it will be a “long while” before Zimbabwe returns to its own currency.
To contact the reporter on this story: Camilla Hall in Dubai at chall24@bloomberg.net Last Updated: October 4, 2009 02:27 EDT
Madombwe's Private Airline Plan Hits a Snag Shame Makoshori
Harare — Former Air Zimbabwe pilot Oscar Madombwe's dream to establish a private cargo airline has collapsed after the Civil Aviation Authority of Zimbabwe (CAAZ) refused to grant his OpEd Air a flying certificate.The Financial Gazette can reveal that Madombwe whose OpEd Air could have been the country's first cargo airline to fly the local skies following the demise of Affreitair in the late 1990s is now taking his project to Mozambique.This was after CAAZ had rejected a jet OpEd had leased from a South African company on the basis that it was old and posed a threat to Zimbabwe's skies.The jet spent most of the first half of the year grounded at the Harare International Airport before being returned to South Africa after officials from CAAZ dug their heels in.CAAZ chief executive officer (CEO) David Chawota was not amused when this paper contacted his office for comment.He said: "Why has this become newsworthy when there are many other cases that we have dealt with and you have not questioned. If your car does not pass a VID (Vehicle Inspection Department) test, is it worth writing?"One of the country's respected airmen, Madombwe wrote his own piece of history in 2006 after he became the continent's only flying airline CEO, albeit in an acting capacity.Madombwe left the national airline in 2007 after current CEO Peter Chikumba was appointed substantive head.Several local and foreign investors have expressed interest to start private airlines or expand existing networks to Harare.In July, a team of local investors led by Lloyd Muchaka, a local businessman, announced plans to launch Fly Kumba -- a regional low cost airline that would kick-off on the Harare-Johannesburg and Bulawayo-Johannesburg routes.London listed Pan-African investment fund, LonZim, has also long expressed its desire to expand business for its airline, Fly 540 into Zimbabwe.Apart from the collapse of several local private airlines, the Zimbabwean market has lost Austria's Quantum Airlines, Germany's Lufthansa, Switzerland's Swissair, KLM of the Netherlands and many others after tourist traffic -- the driver of African aviation industries -- slowed down in from 2000.Thirteen airlines servicing Zimbabwe's airports and tourist attractions suffered a 56 percent decline in passenger loads in 2008 after the effects of the political standoff, the escalating global financial meltdown and election induced violence, which forced foreign travelers to reschedule or suspend planned trips into the country.Official statistics indicate that arrivals by air in 2008 declined to 429 307 from 981 689 in 2007.Air Zimbabwe controlled 38,5 percent of the local passenger market share, according to CAAZ statistics for 2008.
Sunday, October 4, 2009
Chiyangwa and others buy into KMAL
October 3, 2009
HARARE – A consortium of entrepreneurs, which includes businessmen Philip Chiyangwa, has acquired the shareholding of Econet Wireless in the troubled Kingdom Meikles Africa Ltd (KMAL) for a total consideration of US$27 million.
The group is led by Rugare Chidembo, a former non executive director in KMAL, who is now MD of Chiyangwa’s Pinnacle Investments, a multi-million-dollar construction company and also RTG boss Chipo Mtasa, Zimre Holdings Ltd Chief Operating Officer Solomon Tembo, and Langton Nyatsambo.
In a statement issued to the market Thursday Econet said it had sold its 24 537 480 shares in KMAL at $0,71 per share. This represents a premium of 29 percent on KMAL’s closing price of $0,55 before its suspension from the Zimbabwe Stock Exchange last month. Market analysts immediately questioned how the shares of a specified company could be sold.
Econet said the US$27 million would be directed towards its network expansion. The company said that the sale was in line with a directive issued by its board in March that the company should sell all non-telecommunication investments.
Last week, the company announced that it had sold some of its shares in Afre Corporation, the life insurance and financial services group, which owns First Mutual Life.
Econet spokesman Ranga Mberi confirmed the sale but declined to say who had bought the shares.
“The company had received numerous enquiries about the shares from both local and international investors, but had accepted an offer from a consortium made up of Zimbabweans, whose membership includes business people in the country as well as in the Diaspora,” Mberi told The Zimbabwe Independent.
However, sources close to KMAL former chairman John Moxon and outgoing chief executive officer Nigel Chanakira said the consortium led by Chidembo had acquired the Econet shares.
Moxon told Violet Gonda of SW Radio Africa last week that he had been forced to flee Zimbabwe last year after he was warned that besieged KMAL chief executive Chanakira had motivated Chiyangwa, Affirmative Action Group chairman Supa Mandiwanzira, and Youth Minister Saviour Kasukuwere to molest him.
The takeover of the Econet shares has taken place while the company and Moxon are under specification. His lawyers have dismissed the specification as illegal. Negotiations between Chanakira and key shareholders in the blue chip company are currently underway in a bid to find an amicable demerger of KMAL.
The Independent reported that Chanakira, who is receiving medication in South Africa after he was airlifted from Harare last Monday, had said Thursday that the talks were centred on resolving the outstanding issues of the de-merger.
Shareholders of the group agreed in June to de-merge following serious boardroom fights between Chanakira and Moxon.
The High Court last week postponed for two weeks the group’s extraordinary general meeting to give Chanakira time to recover. The meeting was meant, among other things, to boot out Chanakira and two of his nominees, Callisto Jokonya and Sibusisiwe Bango, from the board of KMAL.
Chanakira said recent events and developments relating to the de-merger had taken a toll on his health, but he was now on the road to full recovery.
He said press reports that he collapsed were “unfortunately exaggerated”.
But it is Chanakira’s own lawyer, Canaan Dube, who said the businessman had collapsed. He said this in a supporting affidavit to an application seeking to stop last week’s extraordinary general meeting.
“I confirm that recent events and developments related to the arduous and lengthy process of demerging Kingdom Meikles Africa Ltd have had a toll on my health,” Chanakira said. “I am glad, however, that, as a result of expert medical attention in Zimbabwe and South Africa, I am resting and recovering well. I am confident I will be able to return back to normal duty soon.”
He said his ultimate goal remained focused on ensuring the successful demerger of KMAL so that the companies can revert to their original mandate of growing their respective core businesses for the benefit of their shareholders.
“I am as keen as everyone else to conclude the demerger of KMAL so that the demerged companies can revert to their original shareholders and mandate to grow their businesses. I am confident that all parties concerned are also concerned that the outstanding issues are resolved. It is regrettable the demerger has taken longer than we expected, but I am confident the end is near,” he said. “However, due to the sensitive nature of the current initiatives, it would be premature for me to go into specific details, suffice it to say there is goodwill on both sides to put this behind us.”
Chanakira and Moxon are embroiled in a boardroom battle over the control of KMAL amid accusations that the top banker lined up Zanu-PF politicians to take over one of Zimbabwe’s largest corporate organisations.
On the other hand, Chanakira accused Moxon of externalising huge sums of foreign currency. Moxon, some members of his family and some companies under the group have been now specified by the government as a result.
The boardroom wrangle has seen the value of the Zimbabwe Stock Exchange listed company drop from US$500 million last year to US$90 million.
HARARE – A consortium of entrepreneurs, which includes businessmen Philip Chiyangwa, has acquired the shareholding of Econet Wireless in the troubled Kingdom Meikles Africa Ltd (KMAL) for a total consideration of US$27 million.
The group is led by Rugare Chidembo, a former non executive director in KMAL, who is now MD of Chiyangwa’s Pinnacle Investments, a multi-million-dollar construction company and also RTG boss Chipo Mtasa, Zimre Holdings Ltd Chief Operating Officer Solomon Tembo, and Langton Nyatsambo.
In a statement issued to the market Thursday Econet said it had sold its 24 537 480 shares in KMAL at $0,71 per share. This represents a premium of 29 percent on KMAL’s closing price of $0,55 before its suspension from the Zimbabwe Stock Exchange last month. Market analysts immediately questioned how the shares of a specified company could be sold.
Econet said the US$27 million would be directed towards its network expansion. The company said that the sale was in line with a directive issued by its board in March that the company should sell all non-telecommunication investments.
Last week, the company announced that it had sold some of its shares in Afre Corporation, the life insurance and financial services group, which owns First Mutual Life.
Econet spokesman Ranga Mberi confirmed the sale but declined to say who had bought the shares.
“The company had received numerous enquiries about the shares from both local and international investors, but had accepted an offer from a consortium made up of Zimbabweans, whose membership includes business people in the country as well as in the Diaspora,” Mberi told The Zimbabwe Independent.
However, sources close to KMAL former chairman John Moxon and outgoing chief executive officer Nigel Chanakira said the consortium led by Chidembo had acquired the Econet shares.
Moxon told Violet Gonda of SW Radio Africa last week that he had been forced to flee Zimbabwe last year after he was warned that besieged KMAL chief executive Chanakira had motivated Chiyangwa, Affirmative Action Group chairman Supa Mandiwanzira, and Youth Minister Saviour Kasukuwere to molest him.
The takeover of the Econet shares has taken place while the company and Moxon are under specification. His lawyers have dismissed the specification as illegal. Negotiations between Chanakira and key shareholders in the blue chip company are currently underway in a bid to find an amicable demerger of KMAL.
The Independent reported that Chanakira, who is receiving medication in South Africa after he was airlifted from Harare last Monday, had said Thursday that the talks were centred on resolving the outstanding issues of the de-merger.
Shareholders of the group agreed in June to de-merge following serious boardroom fights between Chanakira and Moxon.
The High Court last week postponed for two weeks the group’s extraordinary general meeting to give Chanakira time to recover. The meeting was meant, among other things, to boot out Chanakira and two of his nominees, Callisto Jokonya and Sibusisiwe Bango, from the board of KMAL.
Chanakira said recent events and developments relating to the de-merger had taken a toll on his health, but he was now on the road to full recovery.
He said press reports that he collapsed were “unfortunately exaggerated”.
But it is Chanakira’s own lawyer, Canaan Dube, who said the businessman had collapsed. He said this in a supporting affidavit to an application seeking to stop last week’s extraordinary general meeting.
“I confirm that recent events and developments related to the arduous and lengthy process of demerging Kingdom Meikles Africa Ltd have had a toll on my health,” Chanakira said. “I am glad, however, that, as a result of expert medical attention in Zimbabwe and South Africa, I am resting and recovering well. I am confident I will be able to return back to normal duty soon.”
He said his ultimate goal remained focused on ensuring the successful demerger of KMAL so that the companies can revert to their original mandate of growing their respective core businesses for the benefit of their shareholders.
“I am as keen as everyone else to conclude the demerger of KMAL so that the demerged companies can revert to their original shareholders and mandate to grow their businesses. I am confident that all parties concerned are also concerned that the outstanding issues are resolved. It is regrettable the demerger has taken longer than we expected, but I am confident the end is near,” he said. “However, due to the sensitive nature of the current initiatives, it would be premature for me to go into specific details, suffice it to say there is goodwill on both sides to put this behind us.”
Chanakira and Moxon are embroiled in a boardroom battle over the control of KMAL amid accusations that the top banker lined up Zanu-PF politicians to take over one of Zimbabwe’s largest corporate organisations.
On the other hand, Chanakira accused Moxon of externalising huge sums of foreign currency. Moxon, some members of his family and some companies under the group have been now specified by the government as a result.
The boardroom wrangle has seen the value of the Zimbabwe Stock Exchange listed company drop from US$500 million last year to US$90 million.
Friday, October 2, 2009
IMF sees Zimbabwe economy growing 3,7% in 2009
By: Reuters
1st October 2009
Zimbabwe's economy is projected to grow by 3,7% this year, according to the International Monetary Fund, the first expansion since 1997.
The IMF in its latest World Economic Outlook published on Thursday did not give reasons for its assessment. It forecast that growth in the southern African nation's gross domestic product would accelerate to 6% in 2010. The economy contracted 14,1% in 2008, according to the IMF.
The growth projections for 2009 are in line with the Zimbabwean government's own forecasts, announced in July. The economy last grew 12 years ago, expanding by 3%, according to data from the Reserve Bank of Zimbabwe.
Southern Africa's former breadbasket has seen its once vibrant economy shattered by poor policy choices by President Robert Mugabe's government, particularly the seizure of white-owned farms for the resettlement of landless blacks.
But the formation of a unity government by Mugabe and his political rival Morgan Tsvangirai appears to have halted the economy's free-fall, although unemployment still hovers around 80% to 85% and industries are operating at only 20% and 30% capacity.
The withdrawal of the worthless Zimbabwean dollar from circulation early this year is also breathing life into the economy, which had battled world record-beating inflation.
The IMF forecast consumer inflation would average 9% this year and rise to an average of 12% in 2010. The fund forecast the country's current account deficit at 21,4% of GDP in 2009, narrowing to 19,9% next year.
Zimbabwe says it needs $10-billion in foreign aid to rebuild the country, but Western nations are reluctant to release cash without further political and economic reform under the unity government.
Finance Minister Tendai Biti said last month it would be a long while before the country received bilateral assistance.
Edited by: Reuters
1st October 2009
Zimbabwe's economy is projected to grow by 3,7% this year, according to the International Monetary Fund, the first expansion since 1997.
The IMF in its latest World Economic Outlook published on Thursday did not give reasons for its assessment. It forecast that growth in the southern African nation's gross domestic product would accelerate to 6% in 2010. The economy contracted 14,1% in 2008, according to the IMF.
The growth projections for 2009 are in line with the Zimbabwean government's own forecasts, announced in July. The economy last grew 12 years ago, expanding by 3%, according to data from the Reserve Bank of Zimbabwe.
Southern Africa's former breadbasket has seen its once vibrant economy shattered by poor policy choices by President Robert Mugabe's government, particularly the seizure of white-owned farms for the resettlement of landless blacks.
But the formation of a unity government by Mugabe and his political rival Morgan Tsvangirai appears to have halted the economy's free-fall, although unemployment still hovers around 80% to 85% and industries are operating at only 20% and 30% capacity.
The withdrawal of the worthless Zimbabwean dollar from circulation early this year is also breathing life into the economy, which had battled world record-beating inflation.
The IMF forecast consumer inflation would average 9% this year and rise to an average of 12% in 2010. The fund forecast the country's current account deficit at 21,4% of GDP in 2009, narrowing to 19,9% next year.
Zimbabwe says it needs $10-billion in foreign aid to rebuild the country, but Western nations are reluctant to release cash without further political and economic reform under the unity government.
Finance Minister Tendai Biti said last month it would be a long while before the country received bilateral assistance.
Edited by: Reuters
Zimbabwe in internet blackout
Zimbabwe in internet blackout
By GETRUDE GUMEDE
Published: October 1, 2009
ZIMBABWE – BULAWAYO – Online business in the country was on Tuesday and Wednesday been brought to a standstill after an Internet connection blackout on Powertel optic fibre connections outside Harare.
Powertel, a subsidiary of Zesa’s Zimbabwe Power Company, runs a network of optic fibre cables that link to major Internet service providers.
Powertel’s sales and marketing officer Vimbai Gwenzi said the fault was caused by vandalism on an optic fibre cable in Harare linking the capital to other parts of the country on Tuesday.
“Powertel engineers are working flat out to resolve the problem. As for now we are not so sure of the nature of the damage and the total amount required to repair the damages. We urge our customers to bear with us in this difficult time,” said Gwenzi.
Some clients failed to access money from their bank accounts because their computers are linked to servers in Harare by the Powertel optic fibre cable.
“I came here on Monday morning and they told me that I should change my bank account to US dollars. When I went back to collect my money after changing my account I was told to come tomorrow (Tuesday) and when I returned the internet was down and up to now I have not accessed my money,” said an FBC client.-The Zimbabwe Telegraph
By GETRUDE GUMEDE
Published: October 1, 2009
ZIMBABWE – BULAWAYO – Online business in the country was on Tuesday and Wednesday been brought to a standstill after an Internet connection blackout on Powertel optic fibre connections outside Harare.
Powertel, a subsidiary of Zesa’s Zimbabwe Power Company, runs a network of optic fibre cables that link to major Internet service providers.
Powertel’s sales and marketing officer Vimbai Gwenzi said the fault was caused by vandalism on an optic fibre cable in Harare linking the capital to other parts of the country on Tuesday.
“Powertel engineers are working flat out to resolve the problem. As for now we are not so sure of the nature of the damage and the total amount required to repair the damages. We urge our customers to bear with us in this difficult time,” said Gwenzi.
Some clients failed to access money from their bank accounts because their computers are linked to servers in Harare by the Powertel optic fibre cable.
“I came here on Monday morning and they told me that I should change my bank account to US dollars. When I went back to collect my money after changing my account I was told to come tomorrow (Tuesday) and when I returned the internet was down and up to now I have not accessed my money,” said an FBC client.-The Zimbabwe Telegraph
Thursday, October 1, 2009
Top US Diplomat for Africa Warns Zimbabwe Sanctions Could Be Widened
By Patience Rusere
Washington
30 September 2009
Rather than lifting targeted travel and financial sanctions as Zimbabwean President Robert Mugabe has urged, the United States is considering adding names to its list of those subject to travel and financial restrictions, a senior State Department official said Wednesday.
U.S. Assistant Secretary of State for Africa Johnny Carson told a Senate Foreign Relations Committee hearing on policy options in Zimbabwe that the administration is now focusing on those who might benefit from mining ventures including operations in the Marange diamond field in Manicaland province, where human rights violations have been alleged.
He was responding to committee questions on how effective U.S. sanctions have been. The hearing was called to explore policy options for the ongoing transition in Zimbabwe.
In raising the possibility sanctions could be increased, Carson said that President Mugabe, who in a speech to the United Nations last week urged that U.S. and other Western sanctions be lifted, has effectively retained political control despite a power-sharing government.
Non-governmental policy experts urged continued humanitarian support to Zimbabwe.
Todd Moss, a vice-president and senior fellow of the Center for Global Development told the Senate committee that positive progress in Zimbabwe must be encouraged with additional aid as a simply adopting a wait-and-see attitude could result in a failed transition
Washington
30 September 2009
Rather than lifting targeted travel and financial sanctions as Zimbabwean President Robert Mugabe has urged, the United States is considering adding names to its list of those subject to travel and financial restrictions, a senior State Department official said Wednesday.
U.S. Assistant Secretary of State for Africa Johnny Carson told a Senate Foreign Relations Committee hearing on policy options in Zimbabwe that the administration is now focusing on those who might benefit from mining ventures including operations in the Marange diamond field in Manicaland province, where human rights violations have been alleged.
He was responding to committee questions on how effective U.S. sanctions have been. The hearing was called to explore policy options for the ongoing transition in Zimbabwe.
In raising the possibility sanctions could be increased, Carson said that President Mugabe, who in a speech to the United Nations last week urged that U.S. and other Western sanctions be lifted, has effectively retained political control despite a power-sharing government.
Non-governmental policy experts urged continued humanitarian support to Zimbabwe.
Todd Moss, a vice-president and senior fellow of the Center for Global Development told the Senate committee that positive progress in Zimbabwe must be encouraged with additional aid as a simply adopting a wait-and-see attitude could result in a failed transition
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