Tuesday, August 24, 2010

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)

Friday, August 20, 2010

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.

Friday, August 6, 2010



JULY 2010
Policy Area
Key Issues

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

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
Developments in South Africa will also have a significant impact on Zim inflation due to strong trade links.

Money Supply &
Stock Market
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

Monday, August 2, 2010

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.