Zimbabwe Commercial Banks Resume Consumer Lending - At a Price

Bankers said consumer loans repayable over six or 12 months, help cushion low-paid workers from the harsh economic environment

Gibbs Dube
Washington 27 December 2010

Some Zimbabwean commercial banks are resuming consumer lending, making loans for school fees, settling power and water bills, and for other purposes, in general lending the equivalent of one month’s salary at 28 percent annual interest.

Bankers said such loans, repayable over six or 12 months, provide low-paid workers with a cushion against the current harsh economic environment.

Financial sources said banks offering such loans included Zimbabwe Banking Corporation, the Commercial Bank of Zimbabwe, Metropolitan Bank and Standard Chartered Bank.

Harare banker Charles Moyo said that customers who applied for loans should get their money in the next few days.

Economic commentator Bekithemba Mhlanga said such loan schemes signal a return of confidence between bankers and their

For those who do not qualify for bank loans or are reluctant to pay high rates of interest, savings clubs are springing up again as Zimbabweans with little disposable income pool their financial resources, correspondent Taurai Shava reports from Gweru.

From John Robertson

Consumer Price Index details show very few changes of consequence in the past month, the main exceptions being a sharp increase in the prices of fresh vegetables and another fall in the prices of electrical appliances. Of the 69 goods and services identified, 29 showed a fall in prices over the month of November and a similar number showed prices lower than they were in November 2009. Against the base of December 2008=100, the steepest increases by November 2010 were for Dental Services, for which the index had reached 241,8, followed by rates at 191,4 and Fuel & Lubricants at 153,8. The index number for 39 of the 69 items listed were still registering numbers below the base of 100 after almost two years.

Platinum Expected to Grow By 20 Percent

Tawanda Musarurwa - the Herald

16 December 2010

ZIMBABWE'S platinum production is anticipated to grow by around 20 percent by the close of 2010 from last year's figures to top output across the minerals sector.

According to official statistics, output to October stood at 5 077kg and is expected to reach 8 500kg by the end of the year, from 6 848 kg in 2009.

The growth of platinum mining in Zimbabwe has been largely driven by the country's two largest platinum producers, Mimosa and Zimplats, which have been operating at optimal levels unimpeded by the economy-wide illiquidity, electricity shortages and a credit crunch that has generally constrained the enhancement of productive capacities.

Notwithstanding these economic impediments, production at the country's mines has been buoyed by consistently positive international Platinum Group Metal prices, which have resulted in positive cash margins for exports of PGMs from the country.

The platinum global prices have been averaging just below US$1 600 per ounce.

Platinum currently accounts for 36 percent of the country's total mineral production, reflecting significant growth for a minerals sub-sector that is a relatively recent addition to the mining sector.

In presenting the 2011 National Budget, Finance Minister Tendai Biti indicated that platinum production for the upcoming year has been targeted to reach 12 000kg on the back of investment expansion programmes at the Unki and Mimosa mines.

Among the key platinum projects are Zimplats' investments around US$500 million in the second phase expansion of its Ngezi Mine.

It is anticipated that over time and with increased investment, the Zimplats project has the capacity to produce around one million ounces of platinum on an annual basis to match the mother company, Impala Platinum's core Rustenburg mines in South Africa, although at comparably lower operating costs.

The Zimplats project is cheaper to run insofar as the operations are shallow and mechanised, compared with the deep-level, labour-intensive mines in South Africa.

London-listed Kazakh mining firm ENRC, which acquired 60 percent of the Bokai project near Gweru, has indicated that it is set to operationalise the platinum project estimated at US$250 million.

Amari Resources, an African-focused mineral exploration and development company, has determined to spend US$20 million for its pre-feasibility and Serui platinum project evaluation exercise.
Through its wholly owned Amaplat subsidiary, the company has a 50/50 joint venture with the Zimbabwe Mining Development Corporation known as Zimari Platinum for the Serui project.

Platinum output in the country has been on an upturn since the beginning of 2009. According to analysts Johnson Matthey's "Platinum 2010" report shows that platinum supplies from Zimbabwe have surged in 2009 from the previous period. Zimbabwean platinum shipments totalled 230 000 ounces, up from 180 000 ounces in 2008. Platinum production in Zimbabwe's anticipated sustained growth in the foreseeable future is buttressed by realisation that global demand for the mineral is expected to outstrip supply as other key platinum producers including South Africa and Russia's production wanes.

According to an earlier forecast by MiningWeekly.com, platinum production on a global scale may remain flat or even decline between 2010 and 2016.

Zimbabwe nationalizing all its diamond mines

12/15/2010 by Raul Sapora
We publish courtesy of National Jeweler

Harare, Zimbabwe — The state-controlled newspaper in Zimbabwe reported Thursday that the government there plans to take 100 percent control of all alluvial diamond mines—which would include the controversial Marange area—and at least a 51 percent stake in all other mining projects.

The Herald’s report cited government official Saviour Kasukuwere as saying that Zimbabwe’s cabinet had determined that the country’s natural resources, including diamonds, must benefit Zimbabweans and that 10 percent of gross profit from all mining operations will go to local communities. Zimbabwe government officials plan to meet with the Chinese and South African companies currently working with the government at the Marange diamond fields.

Marange, the site of reported diamond smuggling and human rights violations, has been a source of controversy for the Kimberley Process (KP), the mechanism put in place to stem the flow of conflict diamonds into the diamond trade. Trade in rough from the area remains officially suspended for the time being as members of the KP and the Zimbabwean government continue to negotiate conditions for allowing exports to resume.

According to The Herald, outside of alluvial diamond mining, the proposed law also would affect all other new mining ventures and companies yet to meet the country’s indigenization requirements. Zimbabwe’s Indigenisation and Economic Empowerment Act dictates that foreign-owned companies operating in the country valued at more than $500,000 sell at least 51 percent shareholding to indigenous black Zimbabweans.

The new law regarding mining will take effect as soon as it is officially published, The Herald reports.

Food Price Rises Drive Zimbabwe 12-Month Inflation Rate to 4.2 Percent

Economist John Robertson of Harare said US dollar weakness against the South African rand has increased the cost of imported goods
Blessing Zulu & Gibbs Dube
Washington 15 December 2010

Consumer inflation in Zimbabwe for the 12 months through November accelerated to 4.2 percent from 3.6 percent in October, the Zimbabwe National Statistical Agency said.

Consumer prices rose by 0.5 percent during the month of November compared with a rise of 0.2 percent in October, ZimStats said. It said the rise in the cost of living was driven by food prices, including beef, milk and cooking oil.

Independent economist John Robertson of Harare said US dollar weakness against the South African rand has increased the cost of cross-border imports.

Elsewhere, the unity government in Harare is moving to restructure the moribund Grain Marketing Board, which long held a monopoly in cereals, by breaking it into a two units, one a strategic grain reserve, the other a commercial operating unit.

Sources said an inter-ministerial committee is moving to finalize the so-called GMB unbundling - though the government is still looking for a strategic partner to operate the proposed commercial arm and accountants are reviewing GMB books.

Economic commentator Masimba Kuchera said the GMB privatization is long overdue given the perennial losses posted by the state-controlled enterprise.

“If everything is done well, we expect the parastatal to start engaging in viable operations instead of being used by some political parties to distribute grains to supporters,” Kuchera said.

Privatizing the Grain Marketing Board is part of a government plan to revive at least 10 state enterprises which have run heavy losses and accumulated substantial debt.

Harare is partnering with Mauritian-based Essar Africa Holdings to restructure the Zimbabwe Iron and Steel Co. or Ziscosteel, which collapsed in 2008.

From John Robertson

I am pleased to be able to extract the following paragraphs from today's NewsDay:


Government freezes indigenisation

Government says it has shelved its indigenisation legislation until “the local economy recovers” and will be selling least 10 parastatals to foreign investors, ceding controlling stakes way above the statutory ceiling of 49%.

The landmark policy climb-down comes as a shock to everybody who heard government officials swearing categorically and repeatedly at every public forum that the country would never recoil from the programme, treating it with the same sanctity they gave the fast-track land reform programme.

The Act, which had been dormant since its promulgation in 2007 until government launched general regulations in January this year, prohibits foreigners from owning and controlling more than 49% of Zimbabwe-registered companies.

The statutory regulations currently under surgery obliged every firm with a net asset value of at least $500 000 to comply with the legislation.

In an interview, Industry and Commerce minister, Welshman Ncube, said Cabinet had agreed to waive the Indigenisation and Economic Empowerment Act for the time being and allow for flexibility in its application across sectors after noting its discouraging effect on foreign capital, considered critical for the economy’s recapitalisation and recovery.

“Until such a time when the economy recovers and rebuilds capacity, it’s not possible for every sector to achieve 51% (minimum indigenisation equity),” Ncube said.

“We need foreign investors with the balance sheet and the capacity. If locals had the capacity, would we struggle to build new power stations or to rebuild our railways and roads? But the capacity is not available locally. That’s why we have to engage foreign investors.”

The indigenisation legislation is widely blamed for soiling Zimbabwe’s investment profile and increasing country risk for one reason: no investor, local or foreign, would invest where board control is not guaranteed.

Selected paragraphs reproduced from NewsDay’s front page lead story, Tuesday December 7 2010

The 2011 Budget Statement

The 2011 Budget Statement


Initial Observations

Zimbabwe’s economic challenges are fully identified by the Minister of Finance in his Budget speech, and he classifies them as separate from the political, social and institutional challenges. The Minister’s selection shows that he has chosen to analyse the situation on an appropriately broad canvas.

In listing the economic challenges, the Minister might have been tempted to join the dots that link all of these to the very specific government policy choices that did the damage. These he did not mention, but they are the policies that –

Forced the closure of Zimbabwe’s biggest productive sector;

Destroyed most of the jobs in the country’s biggest employment sector;

Scaled down the revenues from what were Zimbabwe’s largest generators of foreign exchange;

Drastically reduced the previously dependable flow of locally-produced agricultural commodities to Zimbabwe’s manufacturing sector;

Wiped out the collateral value of the fixed assets that had previously secured the biggest proportion of bank credit offered to the whole business sector, and

Forced the dramatic shrinkage of the tax revenues around which the Minister now has to construct the national Budget.



If the Minister was so tempted, he managed to resist the urge to link these appallingly bad policy choices to the economic consequences that, in his Macro-economic Framework section, he listed in such detail:

Lack of Fiscal Space;

Absence of Alternative Instruments other than the Fiscus;

Lack of Foreign Direct Investment;

Lack of Liquidity;

Infrastructure;

Labour Market Inflexibility;

High Cost of Utilities;

Energy;

Skills Gap;

Lack of Absorption Capacity;

Debt Overhang;

Management of Public Resources;

Capacity stagnation;

Low Aggregate Demand;

Low wage equilibrium, and

High unemployment.



Government has always made the points that the policies were chosen for political reasons and that no economic considerations will ever be permitted to challenge these powerful political imperatives. From these points come the aggressive responses to any who dare to question the decisions.

Perhaps it is for political reasons that the Minister feels obliged to avoid mentioning any of the obvious steps that will have to be taken if Zimbabwe is ever to stage a recovery. Unfortunately, if this is the case, the country will have to brace itself for a further extension of this already painfully long misunderstanding of the wealth creation process.

As the mere mention of policy reversals has gained the status of blasphemy, perhaps the Minister felt it would be safer to list the political challenges, perhaps in the hope that the linkages will become self-evident.

But while only the last two of those he chose to highlight have any bearing at all on the claimed precious political advantages delivered at such extraordinarily high economic cost, even they are not cited as targets for a policy revision. Could it be that for ordinary Zimbabweans the political advantages either never materialised, or soon disappeared without trace?

Political challenges around Government of National Unity

Discord in the Government of National Unity;

Lack of certainty on the tenure of the Government of National Unity;

Global Political Agreement contestation and outstanding issues;

Democracy and rule of law deficit;

Cyclical and turbulent nature of the country’s politics;

Zimbabwe’s isolation and lack of integration;

Lack of finality on the land reform programme;

Lack of definition of a clear land tenure system;



Without question, the political structures in Zimbabwe are a shambles, but Zanu PF is in no doubt that Land Reform has reached finality. The party would also claim that the tenure system has been settled: all the land has been declared to be the property of the state.

The Minister does accept (para 513-4) that land must be marketable if the private financing of agriculture is to return, so he proposes to make the 99year leases “registrable and executable”, but any thought of restoring private ownership rights seems still to be off limits.

Whether a free, fair and open market for leases will develop and whether the banks will trust the party not to threaten the dispossession of any whose loyalty is questioned has yet to be seen.

On the social challenges, the Minister could have pointed out that most of the social problems he identifies stem directly from the massive downturn in the country’s economic performance. He saw these challenges to be:

Poverty and unemployment;

Huge numbers of vulnerable, including households with chronic illnesses, child headed households;

• Weak social delivery in education and health where there is a –

High number of school drop-outs;

High infant mortality rate;

• Low quality of life; and

67% of the population draws water from unprotected sources,

46% of the population have access only to unimproved toilet facilities.



Among the other social challenges he does not mention is the staggering dependency burden of every Zimbabwean who has a steady job, or the appalling examination pass rates of school children, the politicisation of the rural schools, the exploitation and indoctrination of young Zimbabweans at political youth camps and the need for nearly every young Zimbabwean to emigrate if he or she wants to find a proper job.

On the institutional challenges, the Minister draws attention mostly to State-run institutions, but the private sector does not escape notice. He draws attention to the –

Lack of competitiveness;

Huge bureaucracy and red tape;

High cost of doing business;

No public confidence in public institutions e.g. parastatals and government departments;

High levels of leakages and arbitrage;

Polarised spaces in particular in the media (even churches are not spared); and

Huge levels of mistrust in both public and private spaces.



In his 250-page Budget Statement, the Minister makes many additional references to numerous shortcomings, but the extent of the dilution of the ideas within the impressive range of observations on other matters seems likely to remove the focus from these issues. This seems likely to be the case specially in the Parliamentary debates that should precede the votes that have to be cast to approve or reject the Estimates of Expenditure.

On the forecasts of revenue inflows, the Minister is expecting the collection of taxes to increase by 25,5% to US$2,7 billion.

Expenditures, in the near-absence of access to both domestic and foreign loans, will have to be within the US$2,7 billion limit. The Minister now accepts that the lenders and donors to specific Zimbabwean beneficiaries are managing the disbursal of the foreign funding themselves, so it is not being channelled through government ministries.

The cost of employing public sector workers in 2010 is expected to come to US$1 billion and provision has been made for this to rise to US$1,4 billion in 2011, implying a 40% increase in total incomes. However, changes are to be made to pension contributions, as the current sums being collected have to fund the pensions being paid to those who qualify, and they need US$237 million a year, compared to the US$192 million being collected. A decision was taken in 1999 to convert the government pension scheme from a defined benefit to a defined contribution arrangement, but it was never implemented. It is now to be introduced.

Another proposed change that will absorb part of the 40% increase in remuneration packages is a decision to have government employees contribute 20% of the cost of their membership of their medical aid scheme. Previously the fiscus paid the membership costs in full. A further cut in take-home pay will come from the fact that many state employees will find that the salary increase has moved them into the tax net.

This table records the recent trends and shows the figures that are currently expected to surface in 2011:

2009

2010

2010

2011

Growth

Zimbabwe's Budget

Revised

Original

Revised

Current

Rate

Framework 2010

Estimate

Estimate

Estimate

Projections

Projected

Revenue US$ 'm

1 040

1 440

2 152

2 746

27,6

Expenditure US$ 'm

1 431

2 250

2 258

2 746

21,6

6 210

6 716

6 716

9,3

4,7

8,1

8,1

20,0

26,0

32,0

28,0

40,5

33,6

37,4

-391,0

-810,0

0,0

107,2

Overall Balance % of GDP

6,3

12,1

0,0

Vote of Credit

391,0

810,0

360,2

500,0

107,2

Exports US$ 'm

2 006,4

2 018,0

2 540,0

2 790,2

0,6

Imports US$ 'm

3 659,8

3 498,0

4 043,6

4 042,5

-4,4

Exports % of GDP

35,0

36,3

37,8

38,0

Imports % of GDP

64,0

62,9

60,2

55,1

Annual Inflation Average

-5,5

5,1

4,8

4,5

Agriculture % Growth

10,0

10,0

33,9

19,3

Mining % Growth

2,0

40,0

47,0

44,0

Manufacturing % Growth

8,0

10,0

2,7

5,7

Tourism % Growth

6,5

10,0

10,0

6,0

A determining factor in the budget projections is the forecast 9,3% improvement in Gross Domestic Product, which is also thought to be coming off an 8,1% increase in GDP in 2010.

Neither figure is particularly extravagant, considering the low base from which they are emerging and the considerable amount of under-used capacity that can be found all over the country, but the beliefs that 8,1% was achieved this year and that 9,3% growth can be achieved in 2011 are based upon several optimistic assumptions.

For 2010, the main assumptions are that tobacco and maize production figures, 123 million kilograms and 1,3 million tonnes respectively, are correct, and that it is also safe to accept the frequently repeated claim that “capacity utilisation has increased from less than 10% to between 30% and 50%”.

The tobacco industry accepts that the crop was much bigger than first expected, but considerable evidence suggests that much of the tobacco sold was held over from the 2009 crop and passed off as current production, while another significant quantity was not grown in Zimbabwe, but was imported from neighbouring countries and passed off as Zimbabwean.

A third discrepancy is the purchase and re-offering of poorly graded and presented tobacco, which led to double-counting. Some industry analysts suggest that the 2010 crop might have been only 95 million kilograms.

Government is so eager to believe that Land Reform is working and the crop sizes are beginning to return to pre-1997 volumes that it has avoided questioning imports of maize that have been passed off as Zimbabwean-grown. However, the evidence that it has come from neighbouring countries cannot be disputed. Because of a long-standing ban, no seed for genetically-modified maize is allowed to be sold in Zimbabwe, but tests on maize bought from the Grain Marketing Board have shown that a sizeable proportion of their current stocks is GM maize.

On the capacity utilisation claims, the evidence of significant growth is very patchy. Manufacturing statistics suggest the possibility of 16% growth in 2010 over 2009 and gold production in the first eight months of 2010 was certainly more than double the output in the same months of 2009, but such increases do not tie in with the 300% improvement that are implied by claims that capacity utilisation has improved from less than 10% to around 40%.

More significantly, the constraints that were holding production back in 2009 are still very much in evidence in 2010 – the power cuts, water shortages, scarcity of bank finance, competition from South African and Chinese imports, lack of employment prospects, large retrenchment exercises and limited buying power.

Consumption appears to have been well maintained and the revenue receipts from tobacco, cotton, the Diaspora and thousands of market-gardening operations have kept many families going, but the Minister’s statistics show that 41% of the VAT collected was from the sale of imported items. As GDP figures measure production rather than consumption, Zimbabwe’s retailers might well have added more significantly to South Africa’s GDP than to Zimbabwe’s.

The table shows that the 2011 forecast revenue and expenditure figures are higher percentages of the forecast GDP figures than in earlier years, so these percentages will be even higher if the GDP forecasts cannot be achieved, so special attention is needed to overcome the constraints.

The Minister does make some forecasts on improvements to electricity generation that will take the country up to 75% of its requirements, compared to 56% in 2010, and he speaks of the coordinated efforts of the government and the banks to fund the 2010 / 2011 cropping season.

If they work, these measures will help, but proposed reductions in the 2011 import duties to be levied on clothing, footwear, blankets and travel goods will further reduce the competitiveness of all Zimbabwean manufacturers of these items. Local producers of packaging materials and poultry feeds will also face more competition from imports, also because of duty reductions.

These changes, together with the recent increases in industrial wages, might be enough to prevent the manufacturing sector from contributing to the hoped-for GDP growth and from attracting greatly needed investment inflows.

In essence, this budget has been assembled much more from wishful thinking and the avoidance of realities than from determined efforts to make Zimbabwe an attractive place to invest. Another year of difficulties seems inevitable.

=======================

John Robertson November 29, 2010

2011 National Budget is Conservative - Biti

Golden Sibanda

30 November 2010

FINANCE Minister Tendai Biti has said his US$2,7 billion 2011 National Budget was conservative pointing out that revenue could top US$3,5 billion next year while the economy had potential to post double digit growth.

The Finance Minister said he had been very cautious with his 2011 projections as he provided for factors that might affect the current growth momentum, which could see gross domestic product expanding by 8,1 percent this year.

"I see massive growth of this economy in 2011. I had planned for US$8 billion GDP by 2015, but we will achieve it next year. I have, however, discounted the other growth potential in mining next year. Bindura Nickel Corporation will reopen and we will have another Zimplats as more platinum mines will open," said Minister Biti while addressing the Confederation of Zimbabwe Industries 2011 National Budget breakfast meeting in Harare last Friday.

Minister Biti added that he could have easily got away with a budget of US$3,5 billion but chose to be cautious considering resource constraints and the apprehension that affects economies in the event of elections, which are likely to be held next year.

"Everything being equal the economy could actually grow by a double digit rate next year, but I do not know what will happen next year. I also do not know what will happen in 2012," said Minister Biti.

Against this background Minister Biti has set official estimates of revenue collection at US$2,7 billion and economic growth at 9,3 percent. Annual inflation is estimated at 4,5 percent from less than 5 percent by end of the year.

He expects GDP to grow to an estimated US$6,08 billion by end of next year.

CZI president Mr Joseph Kanyekanye applauded Government for trying to balance the economic scale under difficult circumstances.

Minister Biti said the budget was premised on the multi-currency system, cash budgeting and consolidating the macro-economic reforms adopted at the beginning of the year and emphasised the budget would be broad based.

Apart from making provisions for civil service salary increments, at US$1 billion, Minister Biti made significant votes in the budget for education, health and social protection programmes for the poor and underprivileged citizens.

Despite limited fiscal space, said Minister Biti, he had set aside funds for critical infrastructure such as dams, roads, international airports, border post and completion of information communication technology infrastructure.

He also budgeted for water and sanitation systems to improve access to clean water and ablution facilities.

In addition, he said the Reserve Bank of Zimbabwe would be further capacitated to discharge the lender of last resort functions, which include setting the prime rate to give direction to lending rates in the local money market.

However, industry expressed some concern on the fact that the budget caused confusion on the issue of fiscalised memory devices, which must be implemented next January, a departure from the June deadline announced earlier.

Industry also demanded that the politics of the country be conducted in such a way that they do not create uncertainty and that they be consistency of policy and pronouncements of the same to enhance predictability and planning.

There were also concerns on the issue of demonitisation with industry demanding that the issue be finalised as bank account holders who lost money when the local currency was replaced expected some form of compensation.

From John Robertson

Zimbabwe’s October's inflation figures show a month-on-month increase of 0,22%, which carried the index number up to 95,27. As this figure was 91,96 in October last year, the year-on-year inflation rate works out at 3,6%.


Prospects for change in the coming year seem likely to be driven mostly by wage demands and by movements of the rand against the US dollar. On the local increases in labour costs, the faster rate of increase in affected consumer goods prices might not impact on the prices people pay if they can choose a more competitively priced imported product. Local producers seeking to recover higher labour costs are therefore more likely to price themselves out of the market than to add to inflation. However, the loss of jobs for those companies that fail will cause a shrinkage in local buying power as well as in the taxes paid to government and the local authorities.

The rand exchange rate appears to be settling into a pattern of minor adjustments between R6,8 and R7,10 to the US dollar. The news a week ago that the US is to print another $600 billion to ease the liquidity has cast the US dollar’s recovery prospects into a deeper shadow, so perhaps a weakening rand is still some way off. Meanwhile, Zimbabweans will be spending mainly weaker US dollars to pay for goods priced in strengthening rand, so our import procurement costs are more likely to go up — unless we can source the goods from local suppliers. Zimbabwean factories should be trying to recapture the loyalty of local retailers now, while the rand is strong, and industrial workers will be more likely to keep their jobs if they can restrain their wage demands and improve on their levels of productivity.

Mineral output - from John Robertson

Zimbabwe's mineral production volume and value figures through to August have now been released. The attached table shows the figures recorded by the Chamber of Mines and these illustrate the extent of the improvements seen in gold and coal output. However, progress has been hesitant for many of the minerals and figures for some of them, such as limestone and black granite, have not been recorded as efficiently as they were in the past, even though the minerals are still being produced.

From John Robertson

The Central Statistical Office has updated its Poverty Datum Line table to August 2010. This shows the dollar amount needed by an individual and by an average family of five people to meet the cost of basic essential food items for a month and the amount needed by them to meet the total consumption needs, also for a month.


The CSO defines the PDL as the cost of a given standard of living that must be attained if a person or family is to be deemed not to be poor. Accordingly, in August 2010, if an individual were receiving an income below US$146 a month, or if a family of five were receiving a sum below US$477, and if they were entitled to no benefits, allowances or subsidies, they would be deemed to be poor.

From John Robertson

The detailed Consumer Price Index table shows that during September the price changes recorded were mostly fractions of one percent and the prices dropped down slightly during the month for about two dozen of the consumer goods identified.


A similar number of goods are also shown to have decreased against their levels a year ago, but some of these decreases are quite significant, led by carpets and floor coverings, which fell by 38,7%. New and used car prices went down by 29,7% and small electrical household appliances became 22% cheaper. However, hotel accommodation increased by 45,9%, motor cycle prices increased by almost 30% and vehicle maintenance charges rose by 21,3%.

Figures for school fees remain absent from the table, but the reason for this has not been explained.. Very few new statistics are being released by the Central Statistical Office at present, but I am hoping to receive indications of manufacturing output changes within the next few weeks. Some mining production volume and value figures will also be ready soon.

Kindest regards,

John

Banker Association President Defends Bank Charges

12 October 2010
Harare — THE Bankers Association of Zimbabwe has defended local bank charges saying they are comparable to the region, although they differ slightly due to high cost of utilities.

In an interview with Herald Business BAZ President Mr John Mushayavanhu said according to a recent study, also sent to the Ministry of Finance, rates levied by the local banks were not out of line with regional trends.
"We have done a study and I can confirm that our rates are very much comparable to the region. There are slight differences because our infrastructure and utilities such as power as we sometimes use generators," he said.

The BAZ president said local bank charges were not exceptional considering other countries such as South Africa even charge their clients for depositing money, which does not happen in the local banking sector.

There has been concern from the banking public, the Ministry of Finance and Reserve Bank that banks were ripping off clients with high charges yet they did not give any interest on account facilities such as current accounts.

In many instances depositors are baffled when they discover that after making bank deposits their balances would be significantly reduced by service and monthly charges, which have discouraged the use of the banking system.

Economists said current account balances are reduced each time the holder withdraws money or asks for a statement with banks charging up to US$3 per transaction. Current accounts may attract 3 percent interest in a year.

Mr Mushayavanhu said bank clients had options to operate either holding or investment accounts. Current accounts, despite the apparently high service charges, do not attract interest on deposits, as they are believed to be meant to facilitate the transfer of money from one point to the other and usually do not hold funds for a long time.

On the other hand, savings accounts, which hold deposits over a fixed period of time, hold funds for a given time allowing banks to also draw on the money for investment elsewhere meaning banks earn a return on them.

Savings accounts, which essentially are demand accounts where the holder may call on the money after a month, are able to attract interest of between six and eight percent.

Clients can also make returns from investment facilities such as fixed term deposits. On average a 60-day deposit, depending on amount, attracts between 11 percent and 15 percent.

Ninety-day deposits presently attract between 12 percent and 16 percent, but the actual rate may be determined by amount invested.

As part of efforts to encourage use of the banking system, said BAZ, banks were now advertising business conditions. He noted confidence was slowly returning to the sector after a decade of instability eroded public trust.

Mr Mushayavanhu said the imminent resumption of lender of last resort function by the Reserve Bank and the existence of the Depositor Protection Board should help improve public confidence in the operations of local banks.

"We have the Depositor Protection Board, which is more like an insurer of banks, which would compensate depositors in the event that a bank goes under," said Mr Mushayavanhu.

Confidence in the local banking sector was shaken after a decade of economic instability when thousands of people lost their money after the country dumped the local currency and adopted the multi-currency system.

China and Zimbabwe

The rise of China in Zimbabwe:


"Closer economic and diplomatic ties between China and Zimbabwe have had wide and far-reaching effects. Not only has Beijing been vetoing plans by the West and European capitals to take sterner action against Harare at the United Nations Security Council for her alleged human rights violations, but its capital has also come in handy for Zimbabwe.

State-owned Chinese firms, supported by their powerful State apparatus and employing low-cost but efficient labour are not only outbidding contractors from other parts of the world for African projects, but are now controlling a formidable slice of telecommunications, textiles, construction and mining deals in Zimbabwe..."

Virgin Unite, Humanity United and the Nduna Foundation announce plans to help restore Zimbabwe to a thriving nation.

 Zimbabwe's economy was once as rich as its culture. But today, unemployment in one of southern Africa's landlocked nations, has skyrocketed to an alarming 95 percent. If ever there was a time to help this nation, it is now. Fortunately, social philanthropists and influential leaders such as Richard Branson and Nelson Mandela have stepped up to the plate.

Enterprise Zimbabwe CEO Isabella Matambanadzo tells Tonic, "We don't have the financial resources to match the ideas we have for business." So what's a country to do when its people have great ideas and a healthy dose of entrepreneurship but no money to match their intentions? They ask for help.

Together, Virgin Unite, Humanity United and the Nduna Foundation established Enterprise Zimbabwe, an independent nonprofit aimed at fostering a transformation of the nation's economy by finding investment partners to ignite and fuel the existing entrepreneurship of the Zimbabwean people.

The program was born under the direction of The Elders, a group of leaders founded by Nelson Mandela and Craca Machel, and chaired by Desmond Tutu. The independent assembly identified the need for investment partners and quickly put this initiative to revitalize the Zimbabwe economy into motion. Of course, none of this would be possible without the financial support and efforts of Virgin Unite and Richard Branson.

"Zimbabwe was once a shining example of a thriving economy in Africa and known worldwide for having an incredible spirit of entrepreneurship," said Branson. "Now is not the time for donors to take a wait and see approach. It's critical for the global community of business leaders and philanthropists to come together to support Zimbabweans."

The scramble for Zimbabwe has already begun

The Scramble for Africa, also known as the Race for Africa, was a process of invasion, attack, occupation and annexation of sovereign African territory by European powers during the New Imperialism period, between the 1880s and World War I in 1914. (Source Wikipedia).

I wager that we have begun to see the scramble for Zimbabwe but this time it will not be characterised by any attacks, occupations and annexation but rather by billions of US dollar touting investors from all over the world as they seek to get their stake of Zimbabwe's vast mineral resources. Already on Tuesday it was reported that Zimbabwe's government received five bids for its 70% stake in Zimbabwe Iron and Steel Co.

Zimbabwe has the second largest deposit of platinum reserves in the world. Zimbabwe has a good percentage of the world's known reserves of metallurgical-grade chromites. Other commercial mineral deposits include coal, asbestos, copper, nickel, gold, and iron ore and lately diamonds. In order to develop these mineral deposits, the country needs billions of dollars. Zimbabwe has well skilled population, excellent climate and numerous opportunities in all sectors going forward.

The deterioration of infrastructure and social services over the last ten years provides significant opportunities for investors; there is no doubt about that. China is quietly already there so are the Russians. Opportunities also exist in agriculture and related industries where farms and companies are lying idle in need of new capital. The one thing about Zimbabwe is that, because of ZANU (PF)'s mismanagement of the economy since 2000, basically all industries have been underdeveloped and must be recapitalised presenting huge opportunities in all sectors. According to the Infrastructure Development Bank of Zimbabwe (IDBZ), in which the Chinese now have a stake, US$20bn is required to revive the country's infrastructure. In addition to that, we have heard that Woolworths is returning, Pick n Pay has upped its stake in TM, MacDonald's will be back, DRDGold is there, the French are looking at huge energy investments, Ecobank has bought a stake in a local bank, a number of Zimbabwean companies are looking for secondary listing on the JSE to raise new expansion capital while those banks whose licences were unfairly revoked in 2008 are back in action. Lately, Richard Branson has joined the chorus and we are likely to see Americans coming aboard. Zimbabwe has also lagged behind in the ICT and Services sectors and those investors with smart ideas and capital should make a bundle.

The fundamental requirement is that Mugabe and his cronies exit and the question is, will this happen soon enough? Personally I think Mugabe is tired and it must dawn on any intelligent man as he is that, all things come to an end. However we have a serious problem with the army and those in ZANU (PF) that who would rather have the current scenario prevailing.

As the scramble begins we all do hope and pray that free and fair elections will be held this coming year and the best thing that could happen to the country is that ZANU(PF) exits and we see the emergence of a democratic dispensation and hopefully, a new leadership driven by a new value system. Something at the back of my mind, however, tells me that ZANU (PF) will not go quietly. Investors need therefore to take a calculated risk and must not underestimate Mugabe who has a penchant for doing the unexpected. Yes it's time for him to go but I can see him beating his chest and claiming that without him and his insistence that sanctions must go, the investors would not be back. I can bet my bottom dollar that the MDC will not get any credit for this.

My own personal opinion is that it is such a pity that capital is insensitive to human rights. There is much national healing that needs to go on before we can claim that things are normal. This, however, will surely be swept under the carpet as the power of capitalism rears its ugly head once more. However, if you want to be part of the action, the time to go and invest in Zimbabwe is now.

*Vince Musewe is an independent Zimbabwean economist based in South Africa and chairman and founder of Truth2Power an organisation that seeks to encourage fearless debate and dialogue on creating a new Africa. You may contact him on vincemusewe@yahoo.com

Gono gives RBZ clean bill of health

Saturday, 02 October 2010 18:27

THE Reserve Bank of Zimbabwe (RBZ) say it is on course to be operationally ready to resume its lender-of-last-resort role.

The move is likely to restore confidence in the troubled financial services sector.

RBZ stopped playing the lender-of-last-resort role in 2008 creating fears that the local financial institutions were now susceptible to shocks in the event of problems in the sector.

RBZ governor, Gideon Gono told Standardbusiness on the sidelines of the Sadc Central Banks meeting on Friday that once the central bank is ready, Treasury will disburse the money.

He said they were not performing that role, not because the Ministry of Finance had not disbursed the money but for other technical reasons.

“The Minister of Finance has written to the governor and is on record as saying as soon as they are operationally ready he would disburse the money to kick-start that process.

“Unfortunately we have not been operationally ready but we are there now. We should be able to begin the process,” Gono said.

RBZ is in the process of rationalising its staff in line with the new focus of sticking to the bank’s core business.

Gono said rationalisation is one of the items on the agenda but would not commit himself on the numbers involved because “it will be pre-emptive of me to report on where we are to the public before we have concluded matters and reported to our principals”.

Meanwhile, the 31st meeting of the Committee on Central Bank Governors from the Sadc region ended in Harare on Friday with 15 central bank governors and 30 senior officials in the region in attendance.

Gono said the mere fact that the meeting was held in Zimbabwe got certain directional signals to others about their perception of the venue and the country.

“You cannot wish away Zimbabwe’s central bank, you cannot prescribe it out of existence, you cannot hope to achieve economic turnaround let alone stability and growth outside the involvement of your central bank,” Gono said.

“These men and women showing their weight to come over here is a great tribute to the country, an indication that our country is stable, turning around and they now want to see and understand Zimbabwe more.”

BY NDAMU SANDU - The Standard

ZSE rebounds as foreigners return

Written by Vusimuzi Bhebhe
Saturday, 25 September 2010 13:38

HARARE – Zimbabwe’s stock market continues to be a boon among foreign investors despite negative sentiment about the overall political and economic climate in the troubled southern African country.

Latest figures from the Zimbabwe Stock Exchange (ZSE) show that net inflows from foreigners more than quadrupled in the four months to August.

According to the ZSE, foreign investors pumped in US$27.2 million to buy shares on the local bourse in August, up from US$17.7 million the previous month and an insignificant US$6.6 million in May.

The renewed foreign investor interest surpasses the performance of the ZSE before the introduction of Zimbabwe’s controversial black economic empowerment regulations in February which saw the market slip by at least 300 percent in one month under a cloud of uncertainty.

The empowerment regulations, which compelled foreign-owned firms to cede controlling stake to indigenous Zimbabweans over the next five years, have since been toned down following concerns by business and the MDC-T led by Prime Minister Morgan Tsvangirai.

Jitters over the regulations saw the bourse raking in only about US$5 million between February and March compared to more than US$20 million a month previously.

Critics fear Mugabe wants to press ahead with transferring majority ownership of foreign-owned companies as part of a drive to reward party loyalists with thriving businesses.


“We have seen an improvement in foreign inflows over the past month or so as the foreigners take positions in anticipation of the day when the country’s fortunes improve,” an analyst with a Harare-based stockbroking firm told The Zimbabwean On Sunday last week.


The improvement in foreign investor sentiment comes against the backdrop of a recent report by Netherlands-based Amstel Securities which labelled the ZSE the worst performing bourse in the sub-Saharan Africa.

Amstel said the Zimbabwean bourse declined by 7.5 percent between January and July compared robust performances by other African markets such as Kenya and Uganda which grew by more than 40 percent over the same period.

Concerns over Zimbabwe’s fragile coalition government have also lurked over the country’s economic horizon.

Constant bickering about the parties in the coalition regime has failed to restore confidence in an economy pummelled by a 10-year political crisis.

ZSE stocks remain under pressure

THE Zimbabwe Stock Exchange industrial index fell last week as stocks continue to suffer from pressures of tight liquidity and other economic challenges.

The benchmark index lost 1,2 percent compared to week ending 17 September 2010 while the mining index came off 7.10 points, a decline of 4,8 percent to close at 162.41 points.

Weekly turnover amounted to about US$6,6 million from 75 736 306 traded shares.

Econet was the most liquid counter with total weekly revenue of US$1,6 million.

It was followed by Delta at US$1 million, Interfin at 945 997, Innscor at US$426 588 and OK Zimbabwe at US$326 530.

There was a special bargain involving about four million Interfin shares.

The parcel traded at a special bargain price of US24c being 14,29 percent premium to the trading price of US21c.

Market capitalisation declined from US$3 338 646 185 during the week ended September 17 to US$3 302 214 185 implying that aggregate shareholder value lost US$86,4 million.

ZSE stocks are expected to remain under pressure due to liquidity constraints.

In the short term, the money market will continue providing better returns than the equities market.

Although it has been largely anticipated that liquidity could significantly improve after the sale of Chiadzwa diamonds, money supply has remained low and the situation would remain favourable for money market investors.

Analysts say the prevailing trading environment does not encourage a passive investment strategy on the stock market.

Since the beginning of the year, the money market has outperformed the returns from equities market.

As at September 1, the benchmark industrial index had posted a loss of 13 percent whilst the mining index had shed about 31 percent.

However, there is now growing participation by foreign investors.

Foreign trades have significantly improved amid indications that the value of shares bought rose by 309 percent between May and August.

According to statistics from the ZSE, foreigners bought shares worth US$6 612 312,20 in May and the value slightly increased in June to $6 667 649.33.

The purchases by foreigners rose to US$17 727 545,61 in July and in August the value shot up to US$27 203 071.40.

Most foreign traders, whose appetite for risk is generally on the lower end, have shunned the ZSE for other less risky stock exchange due to political uncertainties and lack of clarity on the country’s empowerment laws.

Volumes of trades from foreign investors has therefore remained relatively subdued than expected, a development that has also led to depressed activity on the ZSE.

Analysts said the growing participation by foreigners reflects renewed confidence among foreign investors who had shunned the market as a result of some uncertainties, particularly the country’s indigenisation and empowerment laws.

Elsewhere, US stocks soared in opening trade on Friday, led by Nike’s strong earnings and better than expected manufacturing data as well as a rise in German business confidence.

The Dow Jones Industrial Average jumped 1.5 percent or 158.29 points to 10,820.71 shortly after the opening bell, while the broader S&P 500 index was up 1,4 percent or 15.65 points to 1,140.39 points.

The tech-rich Nasdaq composite index rose 1,36 percent or 32.06 points to 2,359.26.

Nike saw its shares jump by nearly four percent after its quarterly earnings report exceeded expectations with a nine percent rise in net income and an eight percent rise in revenue to US$5.18 billion.
Traders were also digesting data released before the opening bell showing that orders for big-ticket items decreased in August at a slower than expected rate.

Excluding the transportation equipment, mainly aircraft parts, orders of items such as household appliances nevertheless rose by a more-than-expected 2.0 percent.

The manufacturing industry is seen as one of the main engines pulling the US economy out of one of its worst recessions in decades.

Investment remains doubtful despite PM's progress speech

http://www.swradioafrica.com/ By Alex Bell
17 September 2010
Delegates at Thursday's Future of Zimbabwe summit have said that serious doubts remain about investing in the country, until there are visible changes on the ground.

The summit in Johannesburg looked at the investment environment in Zimbabwe, the impact of the country's brain drain, the future of agriculture and food security and the ethics of investment in Zimbabwe.

Prime Minister Morgan Tsvangirai was the keynote speaker and made an effort to encourage investment in the country, saying there was tangible progress in economic reforms.

While conceding the pace of progress has been slow and limited, Tsvangirai said the past 18 months under the unity government had witnessed steps forward in the implementation of political and economic reforms. He went on to cite a few examples of this economic turnaround, singling out the return of health workers and availability of medicines in hospitals, teachers and books in schools, food in supermarkets and granaries, as well as water, fuel, stable currency and a single digit inflation.

But the summit went ahead against a backdrop of worrying developments in Zimbabwe that are contrary to Tsvangirai's accounts of progress and change.

On Tuesday a farm illegally seized by a ZANU PF senator was burned to the ground, despite a bilateral investment protection agreement and a protective court order, as part of the ongoing onslaught against Zimbabwe's commercial farming community. Robert Mugabe also recently insisted that the controversial business indigenisation programme will go ahead, which will see foreign companies in the country forced to hand over 51% of their shares to pre-selected Zimbabweans.
Alongside this the exercise to gather public opinion on a new constitution has faltered marred by incidents of violence and intimidation.

At the same time, a deadline set by Southern African leaders for the unity government to implement the two year old Global Political Agreement

(GPA) has come and gone, and there is still no sign from either the MDC or ZANU PF that there will be any real change.

Despite all this Tsvangirai still moved to defend Robert Mugabe as his partner in the government, saying he was committed to change. Tsvangirai told a news conference after the summit on Thursday that Mugabe could rescue his legacy as the country's liberator.

I suppose Robert Mugabe has been portrayed as a demon, he said. He himself made a contribution to that caricature because I cannot defend what he did over the last 10 years in terms of violence, in terms of expropriation and all these other activities.

Tsvangirai continued: But there is also a positive contribution to our country that he has made. Remember that he was the national liberation hero, and so those are positive years. I suppose there is the personality conflict between a hero and a villain, of which you have to make an assessment.

History will have to judge him.

Zimbabwean businessman Trevor Ncube, who owns the recently launched NewsDay paper, said the government was yet to put together policies to entice investors into the country. Ncube was one of the speakers at Thursday's summit. He told SW Radio Africa on Friday that there was still doubt that the current reforms Tsvangirai was speaking about could be sustained.

Government has to create political stability that guarantees security for people to go back home and for investors to funnel money into the country, Ncube said. There is still understandable wariness about investing in the country, because there are no guarantees of any sustainable change.

John Worsley-Worswick from Justice for Agriculture (JAG) was another speaker at Thursday's summit, and he told SW Radio Africa that the summit appeared to be a propaganda exercise.

There is a great deal of scepticism about investing in the country, and it's understandable given the lack of normalcy in the country, Worsley-Worswick said. But what we found alarming was the deliberate effort to paint over the cracks.

PM describes progress at future of Zimbabwe summit
Written by SW Radio Africa -
Friday, 17 September 2010

As the farming community mourns the loss of yet another commercial farm in Zimbabwe, Prime Minister Morgan Tsvangirai  has described as tangible progress in the country.

Tsvangirai was speaking at the Future of Zimbabwe summit in Johannesburg on Thursday, where delegates gathered for a one day conference to debate the country's economic future and investment potential. Tsvangirai, the key note speaker, said he believes the country is making progress in all sectors of the economy.

'We chose progress over violence, polarisation, decline and decay.

Zimbabwe is moving forward. From the darkness of madness and self-destruction, to the new dawn of a new Zimbabwe,' said Tsvangirai in his address.

'This progress is tangible. Yes, it is slow. But it is there.'

He went on to cite a few examples of this economic turnaround, singling out the return of health workers and availability of medicines in hospitals, teachers and books in schools, food in supermarkets and granaries, as well as water, fuel, stable currency and a single digit inflation.

He added however that the failed policies of the past government, led by Robert Mugabe and ZANU PF, continued to haunt the country.

'Disdain for the rule of law and property rights continue to undermine our image as a safe investment destination,' said Tsvangirai.

'Disdain' for property rights is the closest Tsvangirai came to mentioning the ongoing farm invasions in the country, which are making a mockery of any attempts to encourage foreign investors. Many of the farm attacks have targeted properties meant to be protected by Bilateral Investment Protection and Promotion Agreements (BIPPA) with foreign countries. But these BIPPA's have done nothing to persuade Mugabe loyalists from invading commercial farms and violently evicting farmers.

Some observers have commented that the Prime Minister is showing insensitivity by trying to promote Zimbabwe has a safe investment zone, when it is so clear that there are no guarantees of investment safety.

Robert Mugabe also said this month that he will press ahead with plans to transfer control of foreign firms to local Zimbabweans, as part of the controversial indigenisation exercise. But Tsvangirai on Thursday tried to downplay this threat, saying the process would be implemented gradually and without forced sales.

'What's being implemented are minimum thresholds. You can't start with 51 percent, Tsvangirai said. But you also have to say how, over time, you are going achieve the maximum threshold.'

But with the MDC so clearly lacking any power in the unity government, it is unlikely that Tsvangirai will have any say over how Mugabe's indigenisation plan should be implemented.

From John Robertson

Almost all the increases were countered by decreases in the prices of other goods and ten of these decreased by more than one percent. This left the overall index down by 0,15% at 94,96 for August, but compared to 91,66 in August last year, the figure is an increase of 3,6% for the year.


The Index has been decreasing every month since May this year, when it was 95,32. In the same months of last year, the Index was rising each month, so the narrowing gap has produced the falling year-on-year percentage change.

Comments about the Index in the last few months show that many people share the view that life in Zimbabwe is getting harder and therefore the easing inflation rate claim that is not supported by the perceived facts. Unfortunately, the very subjective perspectives that are brought into this debate make generalisations difficult, but many people agree that the hardships are mounting for reasons other than cost increases. They speak of increasing burdens imposed by family and extended family members who are unable to find steady employment and have found whatever efforts they can make in informal activities are yielding shrinking returns.

The difficulties are worsening, therefore, because the demands on those in steady employment are increasing. More jobs are needed, but employers are struggling too and a large number are more preoccupied with trying to fund retrenchment plans than with any thoughts of expansion. New investors are very few in number and the procedures and hurdles encountered by those trying to qualify for investment licences seem to have been designed to discourage them. For many families, remittances from family members working abroad were the main source of their spending power, but the evidence suggests that difficulties in Europe and South Africa have made the payment levels hard to sustain. Many are already returning from South Africa and most of them are likely to take some time to become contributors again.

Current conditions are unlikely to bring about the needed job creation. The labour unions have become particularly aggressive and very few wage settlements are reached without going to arbitration. The demands are making those employers who can fund any retooling exercise choose capital-intensive rather than labour-intensive production methods. As one example, new bottling plants in the major company referred to most frequently in claims that “the economy is recovering” need far fewer people to operate them. However, the limited bank finance available is holding back many of the business development plans, and the indigenisation policy has prompted many more of these plans to be shelved.

Even if prices remain steady for more months, the stresses at the household level seem likely to remain in place. As they will have their counterpart effects on government’s ability to collect increasing tax revenues and pay better salaries to public sector employees, we ought to be able to get government’s attention by offering thoughts on the ways that their own policy choices are to blame for many of these problems.

Kindest regards,
John

Zimbabwe inflation slows to 4.1 pct y/y in July

Mon Aug 23, 2010 1:38pm GMT
HARARE Aug 23 (Reuters) - Zimbabwe's annual inflation fell to 4.1 percent year-on-year in July from 5.3 percent in June, driven down by a drop in the cost of food and non-alcoholic beverages, official data showed on Monday.

Zimbabwe, whose inflation peaked at 500 billion percent in Dec. 2008 according to IMF data, has stabilised its economy under a coalition government set up last year by bitter rivals President Robert Mugabe and Prime Minister Morgan Tsvangirai.

The price of food, which constitutes 30 percent of the consumer price index basket, has stabilised over the last year thanks to a better agriculture output.

The Zimbabwe National Statistical Agency said month-on-month inflation was -0.1 percent in July, unchanged from June.

Finance Minister Tendai Biti has projected that inflation would end the year at 4.5 percent, against a previous government forecast of 5.1 percent, although some analysts see a higher figure.

The government abandoned use of the Zimbabwe dollar last year after hyperinflation rendered it worthless and now uses the US dollar and South African rand. (Reporting by Nelson Banya; editing by Patrick Graham)

Zimbabwe economy may be bigger than thought

Just how big is the Zimbabwe economy and how upbeat should one be about growth prospects?


The questions are taking on growing importance for investors who have already bought into the Zimbabwean market and those thinking about it.

The IMF and the mid-term review of Zimbabwe Finance Minister Tendai Biti incline to caution. Yet local companies are much more upbeat, according to an assessment from Imara Asset Management Zimbabwe, a subsidiary of the Pan-African Imara financial services group.

Imara has given a lead with investment facilitation into Zimbabwe and provides regular updates to international investors.

In his latest analysis, John Legat, Chief Executive of Imara Asset Management Zimbabwe, notes: “We find it hard to understand why both the IMF and government are being as cautious as they are… Their views give a rather sobering view of the economy rather than an upbeat and exciting outlook for a country barely in its second year of reform.”

The IMF believes Zimbabwe has an economy worth just over US$5 billion, though it admits supporting data has “serious shortcomings”.

Legat thinks the IMF arithmetic does not add up and uses the neighbouring Zambian economy – worth US$14 billion – as a yardstick. The countries have populations of a similar size, but until its ‘lost decade’ Zimbabwe’s economy was about 50% bigger.

Zimbabwe’s argriculture, tourism and manufacturing sectors gave it the edge over its copper-rich neighbour. By some measures, Zimbabwe still outdoes its neighbour.

Zambia’s two major breweries sold US$230 million worth of beverages last year while sales at Zimbabwe’s Delta brewery totalled $324 million.

MONETARY POLICY SUMMARY

STANBIC BANK ZIMBABWE

MONETARY POLICY SUMMARY
JULY 2010
Policy Area
Key Issues

Implications
Liquid Asset Ratio
( Liquidity ratio)

With immediate effect, minimum liquidityratio increased from 10% to 20%. This was done to minimize systemic risk.
For the market, the increase in liquidity ratio has an effect of
squeezing commercial bank lending capacity.

Statutory Reserves
In an effort to release more resources for lending, the statutory reserve ratios have
been scrapped with immediate effect.

Lending capacity of banks is not
likely to immediately improve due to other considerations including the need to comply
with increased liquidity

ratios
Bank Capitalization
As at 30 June 2010, 17 out of the 24 banking institutions were in compliance with the minimum capital requirements.
The non-compliant banks have been given up to 31 December 2010 to comply
Adequately capitalized banking
sector will help in minimizing
systemic risk.

Bank Charges ( incl Interest Rates)
Government expressed concern over the wide spread between lending and deposit rates, but would, for the time being, rely
on moral suasion.

With immediate effect, all banks must post on visible boards their explicit conditions of service including deposit rates

Lender of last resort function
RBZ has been capacitated through the fiscus to perform the lender of last resort function.
Fund described as “modest”. Operational modalities to be issued in due course.
Impact on money market
developments will depend on the size of the facility.
Enhancement ofRisk Management
Banks required developing formal frameworks for risk management that incorporate the ERM concept – integrated processes.

Risk management guideline being revised.
Real Sector Developments
• GDP is projected to grow by 5.4% in 2010 and is underpinned by growths in mining(31%), agric (18.8%) and manufacturing (4.5%).
• Mining sector growth is supported by rising minerals prices i.e. platinum and nickel prices have increased by 25% and 33% respectively, since December 2009.
GDP growth forecast remains fragile due to challenges including :
• Lack of external support
• Skills flight
 Energy constraints and
• Inadequate liquidity levels.

Inflation Developments
Annual inflation stood at 5.3% in June 2010 and this is comparable to regional average levels of around 7-8%.
The Governor warned institutions to refrain from paying wage levels which are
above productivity levels.
In the outlook inflationary pressures
will emanate from:
o High utility charges,
o Rising oil prices,
o Wage pressures,
o Psychological hangovers
from past hyperinflationary
behaviors.
Developments in South Africa will also have a significant impact on Zim inflation due to strong trade links.

Money Supply &
Stock Market
Developments
Money Supply &
Stock Market
Developments (continued)
• Broad money (M3) increased from US$1.4 billion in January 2010 to US$1.8 billion by 18 June 2010.
• Major sources of liquidity include
o Gold sales,
o Tobacco finance facilities,
o Off shore lines of credit and
o Workers remittances
• Loans to the private sector also increased from US$760 million in January 2010 to US$1.1 billion by 18 June 2010.
• Stock market capitalization declined from US$4.2 billion in December 2009 to US$3.19 billion by June 2010.

Monthly growth in money supply has significantly declined to 5% in 2010 from 15% in 2009. This decline clearly highlights stagnation in economic performance.
Low activity on the stock market is impacting on money supply growth.

External Sector
Cumulative to 30 June 2010, total export shipments amounted to US$871 million
compared to US$422 million over the comparable period in 2009.
Total external debt increased from US$ 5.67 billion in December 2009 to US$ 6.43
billion by June 2010. The increase was due to :
o Short term borrowings by private sector,
o Capitalization of interest on
external payment arrears.

Low donor support and the
continued deterioration of the trade balance will constrain the country’s ability to accumulate reserves and service outstanding debt obligations.
Exchange Control Issues
• In a bid to curb unwarranted
externalization of forex resources, the RBZ will seek to review the existing admin and
monitoring mechanisms for cross border transactions.
• In order to curb the illegal practice of keeping export proceeds in unapproved offshore accounts, all exporters with overdue export proceeds shall continue to be red-flagged in the CEPECS system and will remain red-flagged until they have cleared the overdue status
• The above exporters will be subject to a higher Form CD1 Accessing fee of US$ 50 as a default penalty
Companies need to ensure
compliance with exchange control requirements to avoid attention from regulators
SOURCE : STANBIC BANK

Toll fees relief for motorists

Herald Reporter
Motorists living within a 10km radius of tollgates are now required to pay US$10 per month.

However, the motorists would have to meet set Government requirements for them to be eligible for such a relief.

In the past, all those living close to the country’s 22 tollgates were forking out nearly US$60 per month in toll fees.

In an interview yesterday, Zimbabwe National Road Authority chief executive Mr Frank Chitukutuku said they had taken over management of tollgates from the Zimbabwe Revenue Authority to improve accountability and efficiency.

"Locals will have to produce a registration book, proof of residence in the form of a bill and a national identification card and can purchase the tickets from Zinara offices or any post office.

"On collection of fees, we have taken over from Zimra, but we are only going to recruit management staff while Zimra officials manning the tollgates will be retained, but under Zinara," he said.

Government has realised more than US$15 million since toll gates started operating in August last year, an official has said.

In cases where there are no bills, Mr Chitukutuku said citizens would have to produce a letter signed by the local authority where they live.

He said the new management staff would be trained in South Africa by Inter Toll, a subsidiary of Group Five Limited.

Mr Chitukutuku said the road authority would now be involved in the printing of tickets to be issued to motorists to control the amount of receipts in circulation for audit purposes.

"We now have to be involved in the whole process unlike in the past when Zimra was in control. By mid-August all tickets will be bearing our logo," he said.

He said construction of proper structures at the tollgates was underway and would be followed by computerisation.

"Work is in progress at the country’s major roads. The manual system is full of loopholes but with computerisation we can remove human factors of bribery, corruption and misappropriation.

"The system will have sensors which will play a pivotal role in audit purposes," Mr Chitukutuku said.

Out of the US$15 million collected to date, US$8 355 608,58 has been disbursed to the Department of Roads while Zimra got 10 percent and the remainder was paid to police for their services.

Mr Chitukutuku dismissed reports that Zanu-PF strongholds in Mashonaland had grabbed the largest amounts of money collected from the tollgates.

"Areas which have received bigger allocations are a representative of the dualisation process which is currently underway.

"Moreover councils bring programmes which we vet to see if they are fundable and allocations for maintenance are given on first come first served basis.

"People must know that toll fees are used to maintain trunk roads—roads that have toll gates only," he said.

Mashonaland West and East were allocated US$2 273 692 and US$1 532 171 respectively.

Manicaland got US$521 953, Mashonaland Central US$801 802, Midlands US$909 318, Matabeleland South US$851 979 Matabeleland South US$741 017 and Masvingo US$681 750.

Government introduced tollgates as a way of mobilising money to rehabilitate and maintain roads.

SE, Survival, Solidity the Priorities - Mguquka

29 July 2010
THE Zimbabwe Stock Exchange (ZSE), once the second largest exchange in Africa in terms of market capitalisation, is in dire need of foreign investment. In the absence of foreign investment, privatisation of government entities could be used to excite the market.

The Zimbabwe Independent senior business reporter Bernard Mpofu (BM) spoke to newly appointed ZSE committee chairman Ndodana Mguquka (NM) on Wednesday in the capital on issues affecting the equities market.

Mguquka -- who took over from Tedious Kasaira -- is the New Africa Securities MD. Below are excerpts of the interview.

What is the main priority of the ZSE committee?
The main priority for this year's committee is to turn the stock exchange into business. By that I mean we are trying to attract a lot of quality listings on our stock exchange because this country is a resource-based country.

We understand that Zimplats went to raise money in Australia because we were trading in Zimbabwe dollars. But now that we are dollarised, there is no reason why they can't list on our exchange especially when their resource is in Zimbabwe.

How do you intend to engage with such companies that are currently not listed?
NM: We have created a business development committee within the ZSE committee which will make a presentation to the Chamber of Mines of Zimbabwe sometime in August. This presentation will focus on the advantages of listing and why they are being unfair to us. We will probably talk to the Bankers Association of Zimbabwe to try and persuade some of the banks that are not listed here, but are listed elsewhere, to consider listing in Zimbabwe.

Do you think such companies will be interested in listing here given that government is expected to review the multi-currency system in 2012?

The whole issue about listings is raising money. From now on I think local pension funds have got the capacity to take up some of these IPO shares. They are recovering slowly and they are the major players on the exchange.

What impact will the anticipated stockpiled diamonds sale in Zimbabwe have on the exchange?

There is a liquidity crunch on the market. All we need is some money in the bank. So if the sales improve liquidity, that will definitely help us on the market. The reason why our market is falling is that there is no money. We are really suffering -- the viability of stockbroking firms is at its worst right now. Stockbroking firms are struggling to pay salaries and so on.

So what is keeping them going?
Innovation has become the only key (kiya kiya), but it is really getting difficult.

How come we haven't seen any stockbroking firm going under since February, apart from NDH and ISB Securities which were disposed of earlier this year?

It is us the independent firms that are going to suffer because the shareholder must put more money, but firms that are owned by big banks and parent companies will always survive. They can pay rentals and salaries until the rainy day comes because stockbroking business is called fist and famine -- it's a cyclical business and it is very sensitive to all sorts of things.

Apart from liquidity problems, what else is hampering stockbroking business in Zimbabwe?
There is so much happening. We are in dialogue with the new regulator (Securities Commission of Zimbabwe) because we are the ones who promoted the establishment of this commission. We have a feeling that they are coming up with a lot of rules that people do not understand. For example, them (SEC) trying to licence financial journalists is something that is unheard of. That should apply to CEOs of listed companies.

Disclosure is a thorny issue in your sector. Has there been any resolve on this issue since last year's dollarisation of the economy?

We are resolving our listing requirements although they are widely at par with the region. We should have new listing requirements by the end of the year and they will mainly focus on disclosure. At present we are copying and pasting listing requirements in South Africa, not entirely though because we only apply what is suitable here and leave out what is not.
What is your view on indigenisation?
Government owns about 40% of this economy. It should promote the exchange through privatisation. The only way this privatisation can be transparently done is through listings and IPO. Once you have got a viable stock exchange, you have got a viable economy and studies have proved that.

Did foreign participation on the bourse improve after indigenisation regulations were amended?
No, I did not see any improvement. Foreign investors normally have a keen interest in blue chips and there are no volumes in these counters.

Is privatisation sustainable under prevailing conditions?
That is where your diamonds come in. You must understand that when you list quality assets, foreigners are allowed to own 40% of listed companies. At present, foreigners have pulled back because of indigenisation regulations yet in countries like South Africa, foreign portfolio investment makes up about 25% of the gross domestic product. We can market these IPOs and listings in the region and worldwide for as long as they are attractive. No one will refuse to buy Zimasco or Zimplats for example.

So, should we anticipate any new listings soon?
We may have a few this year.

How is your relationship with the SEC? And when is the commission going to be fully in charge of the exchange?

We are in dialogue with them and we will continue to do so. Turning to your next question, they are in charge and they are licensing as we speak. They are licensing in terms of issuing out new licences because under the Securities Act, you are deemed licensed if you are an existing firm. We are, however, still negotiating with them because their licensing fees are too high.

Is the ZSE ready for demutualisation because this matter has been on the cards for quite some time now?

We think the stock exchange as it stands is too thin. So we can only demutualise once there is proof that it makes good sense to do so. Demutualisation is a business case, we will definitely get there but the issue right now is survival and making sure that the exchange is solid enough. We will definitely demutualise, in what form, I don't know. But we have consultants working on that.

Can you briefly take us through the day of the ZSE chairman?
It is not a paid job, but it is almost full time. I have to run New Africa and address stock broking issues which pop up daily. I spend most of the time walking up and down to the ZSE or on the phone with ZSE CEO Emmanuel Munyukwi.

Zimbabwe c.bank threatens action on interest rates

Fri Jul 30, 2010 4:50pm GMT Print
Single Page [-] Text [+]
* Bank seeks market-based interest rates
* New deadline for minimum bank capital requirements
By Cris Chinaka

HARARE, July 30 (Reuters) - Zimbabwe's central bank said on Friday it would intervene to force banks to slash "punitive" lending rates of as high as 50 percent that are partly blamed for slowing economic recovery.

A unity government formed by President Robert Mugabe and rival Prime Minister Morgan Tsvangirai 18 months ago adopted the use of foreign currencies including the South African rand and U.S. dollar, which has helped to stabilise the economy and stemmed hyper-inflation.

But Reserve Bank of Zimbabwe Governor Gideon Gono said lending rates had remained too high, with banks charging between 30 and 50 percent, discouraging companies from borrowing.

"Some of the players in the banking sector have completely diverted their interest rate regimes from the co-fundamentals of inflation and fair evaluation of risk profiles in the market, more towards unexplained outrageous punitive lending rates," Gono said in a mid-year monetary statement.

"The Reserve Bank has been left with no other option but to intervene with the immediate introduction of a more robust market-based interest rates framework," he said without offering further details

EU provides $23m to improve Zimbabwe’s food security, water supply

July 27th, 2010 in Development, News
-Harare (Zimbabwe) The European Union has approved a € 15 million (about $23 million) aid package to support the re-establishment of essential health and water supply services and provide food assistance, short term food security and livelihood support in Zimbabwe, APA learns here on Tuesday.

The EU said here Tuesday that the new funding would address Zimbabwe’s humanitarian concerns through a wide range of interventions including support to primary health care, the provision and distribution of medicines and medical supplies, and support to the water, sanitation and health emergency response units.

Part of the money would also be used in pilot livelihood support activities, including cash transfers and voucher systems, the EU said.

“If we want Zimbabwe to get back on the path towards longer-term development, we will need to carry on with our efforts to provide clean water and sanitation facilities to the population, alongside our food assistance programmes," said Kristalina Georgieva, EU Commissioner for International Cooperation, Humanitarian Aid and Crisis Response.

The EU has been one of the largest donors in funding emergency water and sanitation interventions in Zimbabwe as part of the integrated public health approach to tackle potential epidemics such as cholera and measles outbreaks.

The bloc is overall the main donor to the vulnerable population of Zimbabwe, having provided €572 million (about $880 million) in both humanitarian and essential development aid since 2002.

JN/daj/APA
2010-07-27

Russian spy network moved money to Zimbabwe

By Lance Guma 21 July 2010

Many Zimbabweans in the United Kingdom will be familiar with a company called Southern Union, which they used to send millions of pounds in cash to their relatives back home. Unknown to the thousands who used the service the company is alleged to have been used by exposed Russian spy Anna Chapman in a money smuggling operation involving a syndicate linked to the Mugabe regime.

According to British newspaper the Daily Mail, Chapman was behind black market deals worth millions of pounds while working with a businessman introduced to her by her father, who is a diplomat in the Russian Embassy in Zimbabwe. She is said to have got the job at Southern Union via Ken Sharpe, a Harare based businessman with strong Russian and Ukrainian contacts. During her stint with the company Chapman moved cash from British bank accounts to those in Zimbabwe.

“Zimbabweans wanting to send cash home from the UK would pass it to Ms Chapman and her husband who, through international accounts with British banks, would offer a superior exchange rate to anything else on the black market, and wire the sterling to accounts in the African state,” the Daily Mail reported. Several more millions of pounds are said to have been traded in similar fashion on behalf of the business community in Zimbabwe.

On the Zimbabwean side of the operation, a ‘bagman’, known as Vitaly, distributed the money in cash to the recipients. When spiraling inflation began to affect the operation the syndicate began to trade in gold ingots and gems to secure foreign currency which would then make its way back into bank accounts. The Daily Mail spoke to a former client who said; ‘We had Russians and Ukrainians running most of the business from our offices in Harare. Businesses all over Zimbabwe relied on us. We were not the only money-smugglers but we were the biggest.’

So how do Zimbabweans in the Diaspora ensure they do not deal with companies that are involved in these sorts of activities? Exiled investment banker Gilbert Muponda told Newsreel most governments in the West had introduced stringent anti-money laundering measures and registration requirements for money transfer agents. He urged customers to make sure the companies they dealt with were registered

Zimbabwe Assembles US$8M Supplementary Budget for Constitutional Outreach

Parliamentary Select Committee Co-Chairman Douglas Mwonzora said more funds were needed to complete the constitutional outreach process as it had been extended by 23 days on top of 65 days planned
Jonga Kandemiiri and Thomas Chiripasi 21 July 2010

Zimbabwean Minister of Constitutional Affairs Eric Matinenga said Wednesday that the government with the help of international donors has put together a supplementary budget of some US$8 million for the often-troubled public outreach phase of the country's constitutional revision process expected to conclude in September, followed by drafting.

VOA Studio 7 correspondent Thomas Chiripasi reported on a news conference called by Matinenga in which he said a national command center for the outreach process will shortly be established in Harare. More than 1,000 outreach meetings have been held around the country, but the process has yet to start in Harare and Bulawayo.
Co-Chairman Douglas Mwonzora of the parliamentary select committee running the constitutional revision process, said more funds were needed to complete the outreach as it was extended by 23 days on top of 65 days planned.

Mwonzora said the outreach process, initially plagued by organizational and technical problems, is now running smoothly despite reports some drivers were threatening a strike because they had not been paid. Some outreach team members received allowances this week, but sources said drivers received no explanation as to why they were left out.

Mwonzora told VOA Studio 7 reporter Jonga Kandemiiri that contracts for drivers are not the same as the contracts outreach team members have in that they are paid on the 25th of the month

Shunned by Western Investors, Zimbabwe Seeks Credit Lines in Southern Africa

Zimbabwe National Chamber of Commerce President Trust Chikohora said that the country’s enterprises desperately need lines of credit to increase production and create jobs

Gibbs Dube
Washington 21 July 2010

Lacking foreign direct investment and donor funding to reactivate Zimbabwe's battered economy, Finance Minister Tendai Biti and business leaders are looking to South Africa and Botswana for credit and capital.

Biti will soon lead a high-powered government and business delegation to Johannesburg and Gaborone in search of investment and credit lines to revive manufacturing where less than 40 percent of capacity is being used.

The two countries pledged to provide a total of US$120 million following the formation of the inclusive government in early 2009, but divisions within the Harare power-sharing government have impeded implementation.

Zimbabwe National Chamber of Commerce President Trust Chikohora told VOA Studio 7 reporter Gibbs Dube that the country’s enterprises desperately need lines of credit to increase production and create jobs. “Foreign direct investment will bring in capital which is needed for rejuvenating the economy currency facing serious liquidity problems,” he said.

But Deputy Secretary General Japhet Moyo of the Zimbabwe Congress of Trade Unions voiced skepticism as to Biti's strategy, saying the Southern African region is unlikely to provide the kind of funding Zimbabwe needs.

Zimbabwe attracted just US$852 million in foreign direct investment in 2009 and a mere US$105 million so far in 2010.

From John Robertson

The Consumer Price Index fell fractionally from 95,3 to 95,2 in June after declines in clothing and the prices of telephone equipment. Because the index a year ago started moving up, after its decline every month from January to May 2009, the gap measured by the year-on-year percentage change narrowed from 6,08% to 5,31%. This effect will be repeated in July and August because the index continued to rise in those months too, last year. The slowly weakening rand might also help to slow the rate of increase in Zimbabwean prices of South African-sourced goods in the coming months

INDIGENISATION REGULATIONS AMENDED

INDIGENISATION REGULATIONS AMENDED


Statutory Instrument 116 of 2010 was gazetted on Friday 25th June

under the title: Indigenisation & Economic Empowerment

(General) (Amendment) Regulations, 2010 (No. 2)

The regulations giving force to Zimbabwe’s Indigenisation and Economic Empowerment Act have been amended to allow for different circumstances that might affect companies in different sectors and a few definitions have been tidied up. However, the basic unacceptability of a law that confers upon the State the power to dispossess targeted individuals or companies of productive assets is not addressed. The revised wording and more precise definitions do not make the legislation any less damaging to the investment process, nor do they make the claimed “economic empowerment” objective any less dishonest.

The belief that indigenous people are entitled to success, for which they should not be expected to work, remains unaltered. The belief rests solely on the unchanged definition of an “indigenous Zimbabwean” being “any person who, before the 18th April, 1980, was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person.

This definition does not embody proof that the people so defined were prohibited from forming companies and acquiring assets before April 1980, and claims that “this goes without saying” can be disproved by the citing the many successful indigenous business people who had emerged before that date.

Arguments that they should have been successful in far greater numbers can easily be made, but the reasons why many thousands more did not make fortunes were linked more directly to cultural constraints than to racial discrimination. This remains the case today, thirty years after independence.

While non-indigenous Zimbabweans might ascribe their relative successes to a wide range of issues, the most important of these was a set of advantages that underpinned all the others. These can be briefly described as the existence of, and respect for, individual, bankable property rights. However, a longer description would show how these rights supported everything that matters to the business of generating wealth.

Colonial governments usually had no difficulty accepting and retaining traditional feudal structures and even worked with the local Chiefs to reinforce them, knowing that they would slow the growth of political aspirations.

For the same reason, the leadership ranks of traditional indigenous cultures all over Africa are hostile to the concept of individual ownership rights. When these leaders had overcome the power of colonial governments, many of them systematically removed ownership rights in an effort to increase their own authority. Zimbabwe is no exception.

Even though the leverage of property rights made possible the capital accumulation and investment that transformed production and brought vitally important technologies within the country’s reach, Zimbabwe’s government has sought to dismantle the process that made these developments possible.

Government pretends that its objective is the empowerment of the masses, but by enforcing a process that cuts off both the ability and the inclination to invest, government is actually trying to prohibit the empowerment of everybody other than those in authority. And as a prior objective, government sees the need to dis-empower those who already wield influence through their ability to run successful businesses.

On this basis, the conclusion has to be that the real objective of the Indigenisation and Economic Empowerment Act is to gain control over the business sector. While the transfer of 51% of the shares from a few hundred non-indigenous companies might appear to empower tens of thousands of new shareholders, the considerable dilution of shareholdings and dividends will amount to, for them, no empowerment at all. But under government instruction, the new shareholders’ voting rights will no doubt be used to ensure the appointment of boards of directors of government’s choosing.

In this regard, an important amendment outlines the procedure that government will adopt to consider whether transfers of percentages lower than 51% might be more appropriate. In terms of this addition to the regulations, the Minister is required to set up about 50 sector and sub-sector committees, under the eight business classifications identified in the original Statutory Instrument. These committees have to be formed after consultations with the Ministers responsible for the sectors, these being manufacturing, mining, tourism, finance, transport, communication, construction and energy.

Once established, these committees of between nine and fifteen people will have three months to recommend to the Minister ‘the appropriate minimum net asset value threshold above which a business in the sector or sub-sector concerned is required to comply with these regulations’.

Where socially and economically desirable objectives can be identified, the wording suggests that indigenous Zimbabweans would be prepared to settle for shareholdings of less than 51%. This provision was referred to in the original Statutory Instrument and the socially and economically desirable objectives are listed as:

(i) the undertaking of specified development work in the community in which the business in question carries on its business; and

(ii) the beneficiation to a specified extent of raw materials that are extracted in Zimbabwe by the business in question before it exports them; and

(iii) the transfer to a specified extent of new technology to Zimbabwe by the business in question; and

(iv) the employment to a specified extent of local skills or the imparting of new skills to Zimbabweans to a specified extent; and

(v) any other socially and economically desirable objective not mentioned above.

The committees are also expected to submit to the Minister their recommendations on the policies needed to overcome specified barriers and challenges to indigenisation in any sector or sub-sector of the economy.

In this regard, the nature of indigenisation as a philosophical concept calls for some examination. Will the committees be allowed to point out that the word indigenisation has no meaning in the context of economics?

In trying to describe a process of indigenisation, government appears to believe that the only possible active sequence amounts to measures necessary to displace, limit or exclude non-indigenous people.

As such, it is a political concept. However, identifying the policies needed to overcome specified barriers and challenges to indigenisation could lead to a very productive economic debate, provided government does not specify the subject of property rights to be off limits.

The fact that the indigenous population, which is more than a hundred times the size of the non-indigenous population, did not totally overwhelm the business ventures of the non-indigenous is entirely related to the question of property rights.

The vast majority of the population lives and works on land that has no monetary value or collateral value because traditions prohibit land from being placed on the market and prohibit individual ownership.

Without access to funds and without security of tenure, the people on such land cannot become involved in the process of capital accumulation without taking very high risks. The modest number who made fortunes before independence had to live with the difficulties of pledging movable assets as bank security, so many of them ran transport fleets that, with the backing of carefully built good reputations, made the individuals acceptable credit risks.

Since independence, government had every opportunity to sweep aside these barriers and challenges to indigenisation, but they have chosen not to do so, claiming that the ways of the colonisers have no part to play in a post-colonial country and the time-honoured traditions must be respected.

But the real issue is that these traditions deliver enormous power to the authorities. For that reason, they prefer to retain them, and to claim that they are remaining true to cultural values, so the masses should respect their motives – and their authority.

The claim now being made on the shareholdings and control of businesses started by non-indigenous people is no less a property rights issue than was the claim that commercial farmers should be rightfully dispossessed of their land and equipment, or that pensioners could be legitimately dispossessed of their savings.

For us today, the core issue is that the enforcement of this Act and its regulations will prevent new inflows of venture capital and will prevent the recovery of the productive capacity that previously enabled the country to earn the export revenues that helped to fund and maintain an improving infrastructure.

The country’s dependable foreign earnings also gave it access to credit that supported growing industries, job creation and training, improving social services and further investment inflows, but these have also been compromised by government’s various attacks on property rights.

The other amendments to the enabling legislation more carefully define certain words. ‘dispose’ means to sell/donate/otherwise dispose; a ‘management share ownership scheme/trust’ is to enable managerial employees to acquire stock/shares/debentures and receive income; a ‘managerial employee’ is a principal executive officer, corporate secretary, CFO, HR manager, whether or not also a director, or any employee directly answerable to the board of directors, or any employee who can hire/transfer/promote/suspend/lay-off/dismiss/reward/discipline/adjudge grievances of other employees.

Net asset value means net worth, i.e. total value of fixed and other assets minus liabilities; a ‘share option scheme’ is an arrangement where shares are offered to employees for purchase at a future date at a price fixed in advance; and the definition of ‘qualifying scheme or trust’ is changed to ‘an employee, management or community share ownership scheme or trust that qualifies in terms of section 14, 14A or 14B for the purposes of being used to assess the extent to which a business that is a company has achieved or exceeded the minimum indigenisation and empowerment quota’, these references being to paragraphs in the original Statutory Instrument.

Under Objective of regulations, the word ‘cede’ is replaced with ‘dispose of’.

Under Notification of compliance with indigenisation, the changes are to insert ‘non-indigenous’ between ‘every’ and ‘business’ and to insert a cross-reference to subsection (1) into subsection (2), to confirm that the regulations only apply to businesses with a net asset value of US$500 000 or more.

The word ‘provisional’ is now to be written before ‘indigenisation implementation plans’; and the new section 5A deals with sector and sub-sector committees referred to earlier.

Employee share ownership is now extended to include new sections 14A, which identifies ‘management’, and 14B, which identifies ‘community’ share ownership as means of achieving the minimum indigenisation quota. Community schemes would apply particularly to companies exploiting natural resources in ‘distinct communities’, such as Rural District Council areas.

Counterparties to notifiable transactions are identified in Section 15, confirming that the ‘Fund’ set up in terms of section 12 of the parent Act will be financed by levies on businesses will be the purchaser of last resort in cases where an indigenous buyer of shares on offer cannot be found.

For the valuation of businesses, Section 16 changes ‘value of its assets’ to ‘net asset value’. This also requires that any ‘valuator whom the Minister may appoint’ must be a person ‘registered in terms of the Public Accountants & Auditors Act (Chapter 27:12)’.

For companies that have not submitted Form IDG 01 by tomorrow’s deadline, June 30th, they should wait until they have received notification from the Minister’s office that the absence of their submission has been noticed. If a business that has been identified in this way then fails to submit the forms during the following 30 days, penalties may be invoked.