Air Zimnbabwe

Zimbabwe – GOVERNMENT no longer has capacity to run Air Zimbabwe alone and urgently needs an equity partner to salvage the national flag airline, analysts and aviation experts have said.


The experts and analysts also say besides an equity partner, there was an urgent need to appoint a business strategist as chief executive to usher in a new business model, de-politicise its workforce from its current combative and confrontational approach and turn it into a team of professionals that take instructions from management.

This, the analysts said, includes pilots, who have of late, tended to “talk too much outside professional parameters.”

Aviation and tourism expert Mr Karikoga Kaseke said with a strategist as chief executive and a new business model in place, the airline needed three years to turn around.

“Get me right, I don’t want to be chief executive of Air Zimbabwe because I have my own airline, Royal Zimbabwe Airline Holdings, which takes off, God willing, by the end of this year. “At the moment, Government has no capacity to run Air Zimbabwe alone, it needs an equity partner. The equity partner will probably provide money for retrenchment, because I don’t see us raising the needed amount yet the workforce is too big.

“Every expert in aviation will tell you that Air Zimbabwe needs a new business model, a new chief executive who is a strategist and who should seriously de-politicise the workers and put them in their right position.

“From experience, every chief executive at Air Zimbabwe retrenched workers or tried to retrench workers except for (Dr) Tendai Mahachi.

“(Dr) Peter Chikumba was right in trying to retrench because the worker-plane ratio there is too much. Air Zimbabwe does not need to downsize but to right-size. Chikumba was right, he was right-sizing.

“At the moment Air Zimbabwe has no business model, do you know it yourself? I don’t know it. They need a business model that is compatible with modern trends and sustainable and it is such a model that will direct operations. Ask them what is directing their operations right now?” said Mr Kaseke.

Asked to expand on the business model, Mr Kaseke said it was abnormal for everyone to afford an air ticket at Air Zimbabwe. “There should be a business model which defines operations, pricing regime, salaries, flight routes, profit margins and so on.

“Flying should be expensive . . . it is not for every Jack and Jill. It is for the filthy rich. Why should we subsidise the rich? Airlines are a means of transport not for everyone but for the rich. “Air Zimbabwe has killed itself by refusing competition. We allow even our own children to compete with other children, if you don’t allow them to compete what happens? They fail,’’ he said.

“Air Zimbabwe needs a strategist probably from the service industry, I did not say from the military but from airline, tourism and hospitality industry that is the service industry. “It will take that strategist three years or so to turnaround the fortunes.’’

Asked on the type of planes Air Zimbabwe should require, Mr Kaseke said the business model should determine that. “That is for the business model but if I were to advise them, they don’t need the (Airbus) A340 being talked about, because it is too big for them.

“I would prefer they start with Boeing 767-300 or 400. A340 is too big and costly as it carries more than 300 passengers, the 767-300 will carry around 230 passengers depending with configuration. You must know that growth will not be rapid, it will be steady, so they should later graduate into triple sevens, later,’’ said Mr Kaseke.

Mr Moses Mutengweni, a student at Singapore Aviation College, said it was clear that Air Zimbabwe was a victim of sanctions and other problems and that it could still be turned around.

“A new business model is unavoidable at this stage and I agree with Mr Kaseke that the only way out is doing things differently.

“It is for the Government to accept that it has no resources to revamp air Zimbabwe alone because Government has too many things to sort out in trying to make things work under sanctions for everyone.

“Air Zimbabwe is strategic for Government and it must not be let go, but should be remodeled together with a business partner, probably along the lines of the indigenization model of 51-49 percent.

“It must function like business and everyone must pay. I am glad that President Mugabe pays for all his trips but there are some Government officials and members of Parliament who don’t want to pay. “Air Zimbabwe must be run on profit lines. Government must make payments on time, any delays affect business. Competition is healthy and so is a new thinking,’’ said Mr Mutengweni.

Another Aviation analyst, who declined to be named, said the airline should have changed its business model long back.

“The situation has become untenable and the workers have become the masters there, Government departments do not pay on time, others don’t want to pay at all. Get me right, this is the inclusive Government and not one part of Government.

“Their spouses want to travel for free and yet this is an airline that should be run like a business. Here and there, people get free ticket but not always.

“If President Mugabe pays upfront why can’t others do the same? During their strike, pilots agreed to fly President Mugabe because they all know that he pays upfront.”

Other observers said without financial discipline at the airline, turnaround was difficult to achieve. The observer who declined to be named for professional reasons argued that the salary structures at the company also contributed towards the company’s inevitable demise.

Government has indicated that it had no money to bail out the troubled national airline although once in a while it released money to rescue the company. When the workers first went on strike last year, the official records revealed the following as the salaries some of the workers were earning.

While the lowest paid worker at the airline last year earned a basic salary of US$255, housing US$110 and fuel allowance of US$45, the chief executive officer earned US$3.500 per month, housing of US$110, fuel of US$420 and cellphone allowance of US$88.

As for the pilots and engineers, their salaries were as follows: A captain earned US$567 per month, monthly retention allowance of US$11 258.80, housing allowance of US$110, while first officer (also pilot) earned US$541 per month, retention allowance of US$5 942.14 and housing allowance of US$110.

The highest paid engineer at the airline got US$619, retention allowance of US$3 831.12 and housing allowance of US$110. The pilots and engineers also received a maximum school fees allowance of US$3 000 per term.

The official records indicate that as of August 31 2010, Air Zimbabwe owed 184 engineers about US$5.3 million, 44 pilots US$4.4 million, its 33 managers US$1.1 million, 729 active employees US$1.6 million and 343 employees on retrenchment list US$1.2 million before taxation.

However, these figures have ballooned because the company has also been failing to clear the salary backlog, while some of the workers’ allowances are reported to have been increased.

Thumbs up to gold-backed Zim dollar

May 17, 2011 04:00
By Gilbert MupondaBudget, Money Last updated on: May 17, 2011

RESERVE Bank Governor Gideon Gono’s proposal this week for the introduction of a gold-backed Zimbabwe dollar is an idea whose time has come. If implemented properly, the gold-backed local currency will resolve the liquidity crisis currently ravaging the sanctions-hit economy
In light of the global financial crisis and sanctions, Zimbabwe is effectively barred from accessing any meaningful lines of credit and the liquidity crisis will persist if the domestic capital market is not re-activated with the introduction of a local currency backed by a precious metal.

There is no shortage of reasons for the collapse of the Zimbabwe dollar, but it is now universally agreed that quasi-fiscal activities by the central bank and excessive printing of money accelerated the demise of the local currency. But the country has started to generate meaningful revenues with Zimbabwe Revenue Authority regularly outperforming revenue collection targets. Previously, the government had been forced to print money to finance everything. This is no longer necessary given the economic recovery and the discovery of diamonds.

The revenue from diamonds can be used to build the six months import cover and stock up gold reserves to support the Zimbabwe dollar as proposed by the Governor.

The gold-backed currency is anchored on the premise that the central bank holds a large amount of gold (or other precious metal) in relation to the paper money that they issue. That means if the country doesn’t have any gold reserves, no money can be issued, effectively eliminating the normal inflationary pressure that comes from modern FIAT money.

Zimbabwe has systematically been excluded from the international credit system, specifically because of the ZIDERA Act passed by the United States in 2001. The Act makes it illegal for any US national or entity do transactions with certain companies or individuals in Zimbabwe. This affects various institutions such as the World Bank, IMF, IFC and ADB where US representatives cannot vote in favour of any credit to Zimbabwe. This creates a huge political risk premium which makes international banks hesitant to grant lines of credit to Zimbabwe and Zimbabwean institutions.

This situation effectively blocks these institutions from doing any meaningful business with Zimbabwe as the country’s political risk is magnified. This lack of access to international credit markets has become very clear throughout the economy with banks failing to grant any medium to long term loans. This is partly causing the mini-financial crisis rocking Zimbabwe’s banks as they fail to access reasonably-priced funding.

It is widely-reported that banks are lending at 40 to 60 % per annum which is way too high an interest rate to give to a legitimate business transaction. This has created a very high default risk and forced banks to avoid lending. This illiquidity needs to be addressed through the introduction of a gold-backed currency.

Modern currency is basically paper money backed by the country’s revenue generation capacity and assets. The United States is the largest holder of gold reserves. How much of this is still in Fort Knox PHYSICALLY and not just on paper is another question as much gold is loaned out for the whopping sum of 0.20%! In essence, the US has sold a lot of its gold into the market through gold leasing (even though it still shows up on the central bank’s books as an asset (accounts receivable)).This partly explains why the US$ is still the world’s reserve currency since the USA holds the largest amounts of gold even though its exact quantity remains a subject of speculation.

In foreign exchange, no major currency is considered to be as safe and stable as the Swiss Franc. The country’s centuries-long policy of political neutrality as well as the fact that 40% of its currency reserves were previously backed by the precious metal, contribute to Swiss’s image as “liquid gold”. The proposed gold-backed Zimbabwe dollar can in fact be based on the same model.

Canada and Australia possess large reserves of precious metals and both countries have very strong, well-developed mining sectors. Australia is the world’s third largest exporter of gold with mining accounting directly for approximately 8.5% of its GDP. Canada is the world’s third largest producer of gold. These two countries have strong economies and currencies. Whilst Zimbabwe has huge gold and other mineral reserves, these have been properly leveraged out to create liquidity in the country’s economy. There is need for Zimbabwe to move away from total dependency on a foreign currency whose economy has nothing in common with Zimbabwe’s.

The economy and industry is currently reportedly operating at approximately 45 -50 % of capacity. This is significantly higher than the 10-20% capacity utilisation before the introduction multiple currencies in 2009. Now the multiple currencies have achieved their main intended purpose which was to stabilise the economy. The next phase, which is growth, requires the use of a softer currency which closely mirrors the country’s macro and micro economic conditions and the US$ can be used in its traditional sense as a foreign currency but not to permanently replace the Zimbabwe dollar.

Gilbert Muponda is CEO of GMRI Capital .He can be reached at gilbert@gmricapital.com or on Skype: gilbert.muponda

$100 trillion bill finally has value

Sunday, May 15, 2011 12:00 AM


Scripps Howard News Service

Zimbabwe’s $100 trillion bill is finally worth something. The Wall Street Journal reports that it is selling as a curiosity in this country for $5, far more than it was ever worth in real life.

The bills, it is reported, are popular with financial doomsayers, who brandish the bank-note as a warning of what’s in store for the U.S. if we don’t follow the doomsayers’ economic prescriptions. House Budget Committee Chairman Paul Ryan, R-Wis., carries one to underscore his demands for more and more spending cuts.

After independence, Zimbabwe in 1980 introduced a new dollar to replace the old Rhodesian dollar. The government of Zimbabwe’s first — and so far only — president, Robert Mugabe, proved not only brutal and corrupt, but also singularly incompetent, and the nation’s dollar began its long slide toward being the world’s least valuable currency.

The Mugabe government’s answer to money problems was to print more money, leading to hyperinflation. Periodic devaluations and other measures failed to halt the out-of-control spiral. Price controls only made matters worse.

In 2008, the last people to exchange their old currency for new currency did so at the rate of 1 trillion to 1. In 2009, Zimbabwe abandoned its currency altogether. Business is now done in U.S. dollars, South African rands and British pounds.

Collectors and dealers began buying up the $100 trillion notes and the unlikely happened: Uncirculated dollars, the kind collectors value most, are hard to come by. Even more unthinkable, considering how worthless the money was, there are rumors it’s being counterfeited.

The Journal cites estimates that the Mugabe government printed somewhere between 5 million and 7 million of the $100 trillion bills, but that only a few million were released.

That means Zimbabwe’s financial wizards, having wiped out the value of their currency as actual money, now have it within their power to wipe out its value as a novelty item, too.

Indaba Tourism Fair in South Africa

Zimbabwean tourism stakeholders exhibiting at Indaba Tourism Fair in South Africa have revealed that they have clinched a number of business deals after just two days of exhibition, state controlled ZBC News reported on Sunday.


This development has raised optimism that Zimbabwe's tourism sector is on the path to recovery as seen by the interest and bookings by international buyers.

After two days of exhibiting at the Indaba 2011, which officially opened in Durban on Friday, more than 27 Zimbabwean private and public sector tourism stakeholders said this year's Indaba marks a change in the country's tourism sector as seen by a lot of interest in what Zimbabwe has to offer by international buyers.

Wild Zambezi Operator, Ms Sally Wynn, Cresta Hospitality representative, Rusununguko Tairoodza and Khanondo Safaris and Tours representative, Forward Mutero among other operators all concurred that the Zimbabwe stand at the Indaba is buzzing with international buyers from America, Europe, China and Russia, who have a keen interest to re-introduce the spectacular diverse tourist attractions inherent in the country to the world as a destination of choice.

Zimbabwe Tourism Authority Chief Executive, Mr Karikoga Kaseke said it is clear that Zimbabwe has made a strong come back to the market as the second best tourism destination in the region after South Africa.

He added that Zimbabwe's thrust of exhibiting at Indaba this year is to increase its market share globally, increase the number of foreign tourist arrivals, the number of domestic trips, increase tourism's contribution to Gross Domestic Product, promoting growth and job creation in the country.

Mr Kaseke went further saying Zimbabwe would like to establish a strong international presence in support of becoming a global tourism player.

The Indaba Tourism Fair is Africa's biggest travel and tourism show.

This year's event, which runs from the 7th to the 11th, was officially opened on Friday by the South African Tourism Minister, Mr Marthinus van Schalkwyk under the theme "Playing globally, winning locally.

The theme encapsulates the ideals of shared and inclusive growth, job creation as well as marketing Africa's tourism products as a region and not as individual countries.

Source: ZBC