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..."

Banks

RBZ and Min of Finance got all the banks together in a meeting yesterday to tell them that they have until the 1st March to restore their correct Loan to Value limits and Reserve limits or they will be shut down. Some banks like Kingdom are scrambling around trying to arrange a merger to fix the books in a sense, but have been told that merger will have to tick all the right boxes to be considered legitimate. There are about 5 banks most likely to be caught out by this hard line approach, and have been told if they can't reach the targets they will have to operate as microfinance companies.


2012 will be a shake out for the banks and probably a difficult year to find capital. CABS is a relatively safe bet but have reached their 20% mortgage lending limit already so not issuing mortgages anymore. Interesting times.



Caz

Mugabe rules out exception for foreign firms in Zimbabwe

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(Globalpost/GlobalPost)

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Mugabe rules out exception for foreign firms in Zimbabwe
HARARE, Dec. 8 (Xinhua) -- Zimbabwean president Robert Mugabe said on Sunday that no sector will be spared from the indigenization law, quashing recent media reports that platinum miners could be exempted from the rule if they establish a refinery.
Zimbabwe's law enacted in 2010 requires foreign businesses operating in the country to cede at least 51 percent of the share- holding to black Zimbabweans. Implementation started first from the mining sector which is a pillar to the country's fragile economy.
Addressing mourners at the burial of a senior military official at the national shrine, Mugabe said there will be no exception in the 51/49 indigenization threshold which seeks to give Zimbabweans greater control in foreign companies operating in the country.
"I have heard in some quarters that there can be exceptions but I am saying no. We are saying 51/49 percent. It's very clear, that is our stand," he said.
Mines minister Walter Chidhakwa was recently quoted in the media saying platinum miners could have a lower indigenization threshold if they build platinum refineries in the country since Zimbabwe currently sends platinum ore to South Africa for processing.
Platinum miners in Zimbabwe argue that it is not yet viable to establish the refinery as less than 500,000 tonnes is currently produced in the country.

Copyright 2013 Xinhua News Agency.

Just a month before Christmas Zimbabweans are standing in long winding queues to withdraw cash from banks, amid reports of a fresh liquidity crunch.

1. Just a month before Christmas Zimbabweans are standing in long winding queues to withdraw cash from banks, amid reports of a fresh liquidity crunch.
   
   
   

   Queue for cash at MetBank Bulawayo (Picture by Nehanda Citizen Reporter)
   Simon Muchemwa, our correspondent in Harare, told us that cash shortages and long bank queues, last seen during the 2008 meltdown when the Zim dollar was still in use, are now commonplace.
   After the July elections were controversially ‘won’ by ZANU PF, the country’s banking sector lost nearly a $1 billion to offshore accounts due to political uncertainty amid concerns about the new government’s economic policies.
   Muchemwa said depositors are no longer making regular deposits and this has resulted in most banks imposing withdrawal limits of $200, in an attempt to make the little cash available go around.
   Civil servants were last week paid their annual November bonuses and have been rushing to banks to access their salaries, a situation that has increased the demand for cash ahead of the festive season.
   
   
   

   A security truck at ZB Bank Bulawayo prepares to take bank notes to Plumtree (Picture by Nehanda Citizen Reporter)
   Munjonzi Mutandiri, the regional coordinator of the newly formed political party the NCA, told SW Radio Africa that there is no debate the economy’s performance is linked to the politics of the country.
   ‘In Zimbabwe it is clear that the government is arrogant and to a certain extent irresponsible for bringing economic ideas that are not in the best interests of the country.
   ‘Their economic policies are not good for the country and that brings lack of confidence in the economy. The only way to remedy this is to go back to the drawing board and come up with a blue print that helps the nation and not individuals,’ Mutandiri said.
   Economist Luke Zunga agreed that the flight of money from Zimbabwe was because of the economic policies generated by the political system.
   ‘One of such policies is indigenization, so anybody who is sitting in Zimbabwe with a business there would think twice whether to keep their money or not. The political system doesn’t encourage growth in the economy itself and it is a derivative of the economic policies of the government,’ Zunga said. SW Radio Africa

Zimbabwe warns foreign firms of January 2014 arrest

Updated Saturday, November 23rd 2013 at 12:57 GMT +3

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ZIMBABWE: The owners of foreign firms operating in certain sectors in Zimbabwe after 1 January 2014 will be arrested, a senior official has warned.
Economic Empowerment Secretary George Magosvongwe issued the warning in parliament, state media reports.
"Indigenisation" of the economy was one of President Robert Mugabe's main campaign themes in the March election.
Farming, hairdressing and baking are among the sectors now reserved for "indigenous", or black, Zimbabweans.
"1 January is a month to come and we are putting in place measures for enforcement in the event that they do not comply," the state-owned Herald newspaper quotes Mr Magosvongwe as saying.
He said that Zimbabweans were being identified to take over businesses to prevent shortages of goods.
According to the Herald the "reserved sectors of the economy" include: Retail and wholesale business, hairdressers, beauty salons, bakers, employment agencies, agriculture, transport, estate agencies and advertising agencies.
It said that foreign-owned restaurants which did not serve local food would not be affected.
Owners of businesses without indigenisation compliance certificates face a fine or imprisonment if they are still operating, the Herald reports.
It says these certificates are only given to local people.
The BBC's Brian Hungwe in Harare says that there has been growing concern in Zimbabwe over an influx of traders from Nigeria and China who sell all sorts of goods in local markets, undercutting local retailers.
Mr Mugabe says his policies are needed because under colonial rule, many economic sectors were reserved for white people.

Zimbabwe: Liquidity Crunch

Zimbabwe: Liquidity Crunch - Zimbabwe Banks Limit Withdrawals

By Chris Muronzi, 22 November 2013

Related Topics

• Zimbabwe

  Zimbabwe: MDC Insists It Remains United, Strong

• Banking

  Tanzania: Shilling Firm On Corporate Demand

LIQUIDITY conditions have worsened in the last two weeks with more banks limiting cash withdrawals in recent days amid fears the financial services sector is headed for troubled times.
Information gathered by the Zimbabwe Independent shows some banks, particularly indigenous ones, have resorted to withdrawal limits for their clients due to liquidity constraints. Civil servants, some of whom are set to receive annual bonuses this month, may not get their money.
The banking sector, reeling from the liquidity crunch and systemic vulnerabilities, needs a massive cash injection, together with the rest of the economy to avoid a full-blown crisis.
Zimbabwe's liquidity crunch has been worsened by its negative balance of payment position, with the country importing more than it is exporting. After a prolonged economic and political crisis, Zimbabwe's economic recovery began with the end of hyperinflation in 2009, supported by the inclusive government, a favourable external environment, multicurrency regime and cash budgeting, but the situation is now deteriorating as shown by company closures.
One banker said yesterday: "The problem now is liquidity is being funneled out just as fast as it comes through the import bill. Unless we get some kind of cash injection via an FDI (foreign direct investment), loans or grants, the situation will get worse."
Another banking executive said the situation was critical. "There is no stability in the economy and markets because most deposits are transitory deposits; they are funds held in bank accounts from which they can be withdrawn at any time without any advance notice," the executive said.
The Bankers Association of Zimbabwe says 83% of total deposits are transitory.
Growth in exports has remained low, averaging less than 1% monthly against a background of rising imports and low production. An expansion in imports against static exports means the current account deficit continues to worsen while the economy haemorrhages.
While the central bank maintains broad money supply, which in September stood at US3,9 billion up from US$3,7 billion in August, improved marginally, the liquidity situation on the ground is suffocating.
"Annual broad money growth declined from 5,77% in August 2013 to 4,89% in September 2013," said the RBZ bulletin. "On a month-on-month basis, money supply recorded an increase of 3,01% to US$3,910 billion in September 2013, from US$3,796 billion in August. The month-on-month increase in broad money was largely due to inflows of US$87,83 million at commercial banks."
Annual growth in credit to the private sector declined by 1,88 percentage points, from 12,84% in August to 10,96% in September.
However, on a month-on-month basis, credit to the private sector grew by 0,64% in September 2013, from US$3,694 billion in August 2013 to US$3,717 billion. As a result, the loan-to-deposit ratio declined to 95,07% in September 2013, compared to 97,32% in August 2013.
Commercial bank deposits amounted to US$3,3 billion in September, the central bank said.

Duel currency

THE government is likely to adopt a dual currency system that could bring

back the Zim dollar alongside the United States currency if the government

fails to resolve the liquidity crisis and to convince multilateral

institutions to lend money, an analyst has said.

Zimbabwe ditched its local currency after being rendered worthless by

hyper-inflation which topped 500 billion percent and adopted the

multi-currency system dominated by the US dollar in February 2009.

It has enjoyed an economic growth rate averaging seven percent since then

and inflation fell to 0.86 percent in September but GDP growth is seen

slowing to three percent this year after President Robert Mugabe's Zanu PF

party claimed a decisive victory in the July 31 elections disputed by the

opposition.

Finance minister Patrick Chinamasa has said the regime will continue

indefinitely but Tony Hawkins, the head of the University of

Zimbabwe's Graduate School of Management said the tightening liquidity in

the economy could force a rethink and that there was always the risk that

politicians would seek a "superficially attractive" way out to finance

campaign promises.

"I suspect - perhaps fear - that the government will opt for some dual

currency option," said Hawkins in a presentation of the 2014 economic

outlook on Wednesday.

An International Monetary Fund (IMF) delegation is in the country to

assess progress made in implementing the Staff Monitored Programme (SMP),

which if successful, could help it clear $10 billion in external debts and

give it access to new credit from international lenders although that is

unlikely to happen soon.

"Given the IMF forecast of a sluggish global economy and the third

successive year (in 2014) of decline in non-fuel commodity prices,

Zimbabwe can expect little in terms of an external stimulus to growth," he

said.

"This means growth must be domestically-driven in an economy where the

government budget is under enormous pressure and there is no scope for a

fiscal stimulus."

Information minister Jonathan Moyo recently said the Zanu PF party

election manifesto left the door open for the return of the local currency

to circulate along with the multiple-currency, although not in the

foreseeable future.

The government has adopted a new economic blue print, Zimbabwe Agenda for

Sustainable Socio-Economic Transformation (ZimAsset) which projects a GDP

growth of 6.1 percent in 2014 and 9.9 percent by 2018 but Hawkins said the

plan failed to explain where the investment would come from.

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President Mugabe told a party meeting on Friday that government expects

more money from diamond sales after the European Union removed sanctions

on the state-owned Zimbabwe Mining Development Corporation.

Original: http://www.newzimbabwe.com/news-12984-Liquidity+crunch+seen+forcing+Zim$+return/news.aspx

CONTINUED USE OF MULTICURRENCY SYSTEM IN ZIMBABWE.

CONTINUED USE OF MULTICURRENCY SYSTEM IN
ZIMBABWE.
1. Reference is made to rumors circulating in the market and
uninformed pronouncements suggesting the immediate or nearterm
return of the local Zimbabwe currency by what-ever name.
2. This statement serves to emphatically dismiss those rumors
and to confirm that there are no plans whatsoever, within and
outside the Bank, for the immediate or near-term introduction of
new currency or re-introduction of the Zimbabwe dollar into our
system. As late as last week, at a press conference, His
Excellency the President clarified this issue, for the umpteenth
time, stating the same position as we are alluding to above and
adding that “when the time comes, we will be very cautious and
gradual about it."

2
3. It may be the wishes of some stakeholders in debates, and this
is a free country where freedom of speech, thought or wish is
allowed, that the Zimdollar be returned immediately but these
are just wishes. The multi-currency regime will be with us for
the foreseeable future and in any case, when the time comes,
the local currency will circulate alongside other existing
currencies with people exercising their choice of currency to
hold.
4. Besides, there are preconditions which His Excellency the
President has stipulated, and these we publicized two weeks
ago,, which must be fulfilled INORDER to make the return of
the local currency technically feasible, financially viable to the
economy and economically sustainable. The Agenda in the
environment is focused on genuinely improving the livelihoods
of our people and economically empowering them in a fiscally
sustainable way. In my view, there is no reason to doubt that
sound economic policies will be introduced or pursued and
sustained by the new Cabinet soon to be appointed by His
Excellency the President.
5. Stakeholders are also advised that the multi-currency regime is
not an area of emotional choice or option but rather a measure
officially introduced in January 2009 as part of our adaptive
economic strategy and a pragmatic response to the challenges
of the day.

3
While the hyper-inflation challenge is now a thing of the past, a
number other deep-seated challenges which bedeviled the
economy prior to 2009 are still with us, hence the need to stay
the course.
6. Accordingly, market players and the banking community are
urged to stop panicking and instead, get on with their boardroom
strategies aimed at prospering their companies and
selves in the wake of the new political realities which have been
ushered in by the recently concluded HARMONISED elections.
G.GONO
GOVERNOR
6 August 2013

Zimbabwe Stock Exchange

Written by: African Alliance on July 25, 2013.

The ZSE Industrial gained 1.2% to close the week at 224.4 on the back of gains in Mashonaland Holdings (+19.3%), Barclays Zimbabwe (+10.7%), and Innscor Africa (+9.3%). During the week, losses were recorded in National Foods Holdings (-4.3%), Econet Wireless (-2.2%), and Kingdom Meikles Africa (- 1.6%). The top traders by value were Delta Corp Zimbabwe (USD 6.4m), Econet Wireless (USD 1.8m), and CBZ Bank (USD 1.2m). Trading in these shares accounted for 66.6% of this week’s turnover of USD 14.1m. The average weekly value traded in the last six months is USD 8.4m. The ZSE Industrial is up 47.2% YTD and the total market capitalisation is currently USD 5.8bn.
The Zimbabwe National Statistical Agency, published inflation numbers for the month of June this week. All items Consumer Price Index came in at 1.87% y/y, shedding 33 bps from the prior month rate of 2.20%.The food and non-alcoholic beverages y/y inflation was recorded at 2.90% while the non-food inflation rate came in at 1.35%. On a m/m basis, inflation showed a decline of -0.13%.
Aico Africa is reportedly set to dispose of a 20% shareholding in SeedCo to a United Kingdom seed company, Limagrain. The money realised from the transactions would be used to finance some of the group’s operations. Aico owns 50% shareholding in SeedCo, 100% in the Cotton Company of Zimbabwe and 49% in Olivine Industries.
Toronto Stock Exchange listed miner, New Dawn on Friday said consolidated gold production at its operations in Zimbabwe for the second quarter of 2013 increased by 4.7% compared with the same period last year. In a trading update, New Dawn said 9 986 ounces of gold were mined during the quarter ended on 30 June, compared with 9 536 ounces produced during the same period last year.
MBCA Bank has secured USD 75m from majority shareholder, Nedbank Group of South Africa, to provide lines of credit to Zimbabwean companies. The funds will largely be utilised to finance agricultural and mining sector projects.
An SA based firm, Vasari Global Holdings, has reportedly won the bid to acquire a controlling stake in Cairns Holdings. Vasari was amongst four leading bidders eyeing the Reserve Bank of Zimbabwe stake in the group. The other three are Dairibord, Judah Holdings and Eastern Trading Company of South Africa.
Excerpt from The Africa Weekly

Zimbabwe Stockexchange rallies

ABOUT 67 million shares valued at US$6,3 million were traded on the Zimbabwe Stock Exchange on Friday last week, representing a staggering 2 343 percent recovery in sales.
The increase in the value of shares traded on the ZSE last Friday represented a 781 percent increase compared to Thursday. However, the recovery in both volumes and value of shares could not stop the main industrial index sliding southward. The main index was 0,6 percent weaker on Friday at 211,2 points after losses in Barclays, which fell 20 percent to US4,5c as Old Mutual shed 7 percent to US214c, Delta slid 2,1 percent to US140c, Meikles softened 1,6 percent to US31,5c and CBZ shed 0,7 percent to US13,5c.
However, the ZSE mining index was unchanged at 73,3 points as Falgold, Bindura, RioZim and Hwange failed to trade as investors shied away the from resource firms' shares. The top five gainers were led by Zimplow, which added 9 percent to US5,5c, ZHL gained 7,7 percent to US1,4c, Afdis rose 3,1 percent to US33c, Econet surged 3,1 percent to US66c while PPC moved 2 percent to US250c.
FBC led the top five value leaders after US$5,1 million of its shares changed hands while US$400 320 Econet shares were bought followed by Mashhold at US$343 874, CBZ at US$106 432 and Natfoods which had US$43 810 worth of shares sold.
Pioneer (US8c) leads the value gainers year to date at 700 percent followed by GB Holdings (US0,5c) and Willdale (US0,25c) both gaining 400 percent and Masimba (US12c) and Trust (US0,8c), which gained by 300 percent. Trading on the ZSE continues to be dominated by cash rich foreign investors due to the liquidity challenges pervading the entire domestic markets, which constraints local investors.
The country showed significant potential for recovery growth after dollarisation and adoption of the short-term recovery policies, but started showing signs of slow down in 2011, which forced Government cut growth forecasts. However, the factors arresting the country's potential for growth have been lack of affordable capital to fund companies' working capital and capital expenditure needs.
Where capital is available it is invariably short-term and prohibitively expensive. Most companies that borrowed at dollarisation in 2009 have ended with huge interest burdens now suffocating progress towards achieving profitability. However, expectations are that after the harmonised elections expected at the end of this month and the new Government comes into office, investors who have been sitting on the fence will come to decide to act and invest on the ZSE and various other sectors.
Zimbabwe has innumerable investment opportunities, broadly, in such sectors as mining, agriculture, tourism and manufacturing while lucrative opportunities also exist in specific sub-sectors of infrastructure, financial services, ICT, pharmaceuticals, agro-business, value addition and retail.

situation this week

A good recovery week for global markets with major Asian markets up 2 to 3%, US markets up 1% and EU markets up 1 to 2%.

Gold took another dive this past week losing 8.66% and finishing under the $1200 level – its lowest in 3 years and worst quarter performance since 1920 (22% decline since April this year).

Oil however, rose by 1%.

76-year-old former Italian Prime Minister Silvio Berlusconi was sentenced to seven years in jail after being convicted in a sex trial.

The latest edition of The Banker's Top 1,000 World Banks showed that ICBC (The Industrial and Commercial Bank of China) jumped to the top spot earning it the world’s richest bank title overtaking JP Morgan and Bank of America.

According to its latest filings, Apple did not pay any UK corporation tax for 2012 after making $15 billion profit from EU sales alone.

Despite a slowdown in Europe's top economies, latest data shows that the super rich in Europe increased their wealth last year. Their combined fortunes surged 13% to $3.4 trillion. Full article: https://www.devere-group.com/news/Super-rich-Europe-richer-high-net-worth-estate-planning.aspx

Investment/saving ideas for the week:

Educating your children: obviously this falls as a priority to every parent, but do you really take into account how much your children cost you? How much money do you save and invest for their education each month? It’s important to consider the fact that fee’s rise every year, and more often than not, as a percentage, more than your salary does. However by simply saving money you therefore are actually going backwards, you need to have your investments for your children growing at least 5 to 10% average each year to keep up with fee inflation.

“The Universities and Colleges Admissions Service announced that the number of students applying for university studies is still well below levels seen before tuition fees trebled.“ https://www.devere-group.com/news/Education-fees-UK-university-students-ucas.aspx

Shane Helberg ACSI

Senior Wealth Manager

shane.helberg@devere-group.com

www.devere-group.com

www.shane-helberg.com