Tuesday, December 28, 2010

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.

Saturday, December 18, 2010

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.

Thursday, December 16, 2010

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.

Sunday, December 12, 2010

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

Wednesday, December 1, 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;


Labour Market Inflexibility;

High Cost of Utilities;


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:






Zimbabwe's Budget






Framework 2010






Revenue US$ 'm

1 040

1 440

2 152

2 746


Expenditure US$ 'm

1 431

2 250

2 258

2 746


6 210

6 716

6 716
















Overall Balance % of GDP




Vote of Credit






Exports US$ 'm

2 006,4

2 018,0

2 540,0

2 790,2


Imports US$ 'm

3 659,8

3 498,0

4 043,6

4 042,5


Exports % of GDP





Imports % of GDP





Annual Inflation Average





Agriculture % Growth





Mining % Growth





Manufacturing % Growth





Tourism % Growth





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.