Saturday, November 8, 2014

Zimbabwe economy

Policymakers and business leaders in Zimbabwe seem to share the opinion that past policies are still appropriate for the New Normal economy of the post-Global Financial Crisis world.


Since dollarization, investment has averaged only 17% of GDP. For the economy to grow at the targeted (ZIM-ASSET) 6% to 7% rate, investment of at least 30% of GDP needed.


China, the US, the Euro area and many others have to undergo – often painful –rebalancing. Zimbabwe is no exception, especially after the meltdown of the “Lost decade” (1998-2008).


For the immediate future the economy will continue in muddle-through mode, as growth will be lack-lustre – 3% to 4%.


Financial sector will restructure as banks consolidate, hence fewer banks and asset managers.



A republication of a presentation by Professor Tony Hawkins, Economist and Professor, University of Zimbabwe.


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Saturday, August 9, 2014

Zimbabwe will soon run out of money: Baz

 Zimbabwe will soon run out of money: Baz - DailyNews Live


HARARE - Bankers Association of Zimbabwe (Baz) has warned that Zimbabwe will soon run out of money to sustain imports.


Joseph Mverecha, Agribank divisional director, speaking on behalf of Baz president Sam Malaba at the Gweru Agricultural Show business conference last week, said Zimbabwe's depressed economic performance was ominous.


"The trade deficit that we are experiencing, sooner or later, we will run

out of money to finance it," Mverecha said.


He said since 2010, Zimbabwe's import bill had ballooned from $1,5 billion to about $6 billion in 2014.


"Since dollarisation, our current account has drastically increased and at

some stage we will fail to pay for those imports," Mverecha said. He

predicted that the country would witness a decline in imports soon.


The influx of imports into the economy has been met by insignificant

exports which are largely in raw form, hence noncompetitive on the

international market.


Imports in Zimbabwe increased to $528,18 million in June of 2014 from

$510 million in May of 2014.


Mverecha said Zimbabwe needed fresh money to shore up the economy.


"We need fresh capital into the economy," he said.


Zimbabwe has failed to attract the much-needed foreign direct investment (FDI) due to a cocktail of government policies hostile to investors, chief among them the Indigenisation and Economic Empowerment Act, which requires foreign firms to cede 51 percent to locals.


Targeted sanctions against some political leaders in Zimbabwe were actually hurting ordinary people

In a rare one-on-one stage interview he held with US president Barack Obama, Zimbabwean technology entrepreneur, Takunda Chingonzo, told Obama that the supposedly targeted sanctions against some political leaders in Zimbabwe were actually hurting ordinary people.Chingonzo said technology entrepreneurs looking to get technology or funding from US-based companies often hit a brick wall because of the sanctions."In our work, we got to a point where we needed to import a bit of technology from the United States. And so we were engaging in conversation with these US based businesses, and the response we got time and time again was that unfortunately we cannot do business with you because you are from Zimbabwe. I was shocked. This doesn't make sense," explained Chingonzo to Obama.In response, Obama said that the US is facing the challenge of balancing helping the people of Zimbabwe with what he termed "repeated violation of basic democratic practices and human rights" in the country. Obama agreed with Chingonzo that what was was needed were initiatives that enhance as opposed to retard the progress of the Zimbabwean people.The US president then suggested that projects be explored by Zimbabwean entrepreneurs together with the US to ensure Zimbabweans are not affected.He was adamant, however, that the US is set on sending the strong message about good governance in Zimbabwe.Chingonzo is in the US on the Young African Leaders programme. The founder of wireless internet startup, Saisai, had the one-on-one with Obama on stage yesterday at the US-Africa Leaders Summit in the US. - See more at:

THE Zimbabwe Stock Exchange (ZSE) industrial index declined

THE Zimbabwe Stock Exchange (ZSE) industrial index declined by 6,9% to 188,08 points in July from the December figures as the bourse took a battering from the slow performance of the economy, latest statistics have shown.

The industrial index was at 202,12 points on December 31.
Market capitalisation for the local bourse declined by $203 129 to $5 billion from $5,2 billion in December 2013.
This means that $203 129 in shareholder value was lost on the stock market.
Market capitalisation is the total value of the issued shares of a publicly traded company.
During the month of July the stock market indices increased due to the performance of stocks of Econet, Seed Co and Bindura Nickel Corporation.
The industrial index increased to 188,08 points up from 186,57 points in June while the mining index increased to 95,00 points in July up from 61,32 points in June.
Turnover value for the bourse increased to $28,5 million in July from $25,2 million in June.
Turnover volume for the ZSE increased to 322 407 141 shares during the month of July compared to 178 469 676 shares in June.
EFE Research said Hippo, OK and SeedCo were the top risers as Hippo recovered 3,3% to 62 cents while OK Zimbabwe and SeedCo were up 5,82% and 1,27% to
18 cents and 80cents respectively.
MMC Capital said the industrial index rose in July because there was a period during the month when demand at the market increased because of the demand of Delta, Econet and OK share prices.
The mining index increased to 95,00 points due to the strong performance of Bindura Nickel Corporation share price which has been on a growth trajectory since June this year.
In May, the turnover value decreased by 31% to $35,9 million compared to $51 million in April. The turnover volume was down to 235 704 129 shares from
429 086 166 shares.
The performance of the ZSE is a mirror of what is happening in the economy. The economy is weighed down by liquidity constraints and low investor confidence.
This has forced Finance and Economic Development minister Patrick Chinamasa to revise downwards the growth projections to 3% from 6,1% earlier projected.

Friday, June 20, 2014

10 services you can now enjoy in Zimbabwe thanks to PayPal

paypal-credit-cardsPayPal’s opening up of its services to Zimbabwe this past week has created a lot of excitement in the market. Many entrepreneurs see this as a godsend and I can just see them smiling all the way FROM the bank (after going to deposit their funds to start transacting using the payment gateway). But there may be some of you who are wondering what all the excitement is about. Why is everyone (well at least those online) excited about being able to PAY other people and NOT SELL their goods and service? I penned an article yesterday of why I felt that PayPal wouldn’t be a hit just yet here in Zimbabwe and how local payment solutions were better poised to service the Zimbabwean market. Well, there are still sections of the populace that may want to know what they can pay with PayPal now that it has opened up. Let me first break down to how it works. As PayPal is a payment gateway, it accepts various payment providers through their system (an option that many suppliers would prefer), including VISA and MasterCard. If any website used PayPal to process their payments, even though you have a VISA (for example), because Zimbabwean cards were not recognised by PayPal your card would be rejected and essentially your transaction would fail. This created a stumbling block for many-an-entrepreneur that needed to buy services and products online. Well, PayPal has finally recognised that we exist and have been gracious enough to open their platform to us (someone give these guys a Bells). With this comes a host of opportunities, and I hope to list at least 10 services that you can now enjoy as a Zimbo.
  1. WhatsApp subscriptions: For those of you that have been having sleepless nights over how you can pay your WhatsApp subscription and are tired of downloading and using it for FREE, the day has finally come. WhatsApp have been lenient on us and continually extend our expiry date for their service every year. No, it is not because Econet and/or Telecel (or whatever mobile network you’re on) paid for you as some people believe! One of the challenges that the Facebook owned instant messaging app has is how to collect money from developing nations. The coming of PayPal is a step in getting you to pay that $1 per year. C’mon guys, rejoice with me!
  2. eBay: From the amount of comments and feedback from my last post on the issue, eBay should be a happy lot. It seems everyone was waiting for PayPal so that they can start buying stuff from the American website. Hokoyo ZimBay. If you didn’t know, PayPal is a wholly owned subsidiary of eBay (arguably the biggest consumer to consumer marketplace, a.k.a. classifieds) and now we can buy goods through their website. (Anybody do a transaction yet? Please advise of the logistics so that we all can start enjoying)
  3. Skype: If you need to communicate cost efficiently then Skype is your answer. Internet connection allowing you can stay in touch with friends and relatives all over the world with your Skype Credit. PayPal now affords us this opportunity.
  4. DropBox: For those of you that are always on the go and need to store information in the cloud, enter DropBox. The cloud storage service offers a limited amount of storage for FREE but for just $9.99 you can get access to 100GB extra!
  5. Fiverr: My love and flirtation with Fiverr dates back over two years, where I have been using it ever since. For just $5 you can get an app made, Facebook login plug-in developed, even hire a “fake girlfriend” to make that somebody on Facebook jealous. Now that we can make payments there are so many freelance services that we can get for less than the price of the lowest DStv package (hey, wait, just about anything is lower than that!)
  6. WordPress: For those of you who like to churn out websites on the fly and use WordPress for quick to market solutions, now you can buy your favourite templates easily. The world of themes and templates, plugins included are estimated to be a $25m industry, so believe me there is some value in them.
  7. GoDaddy: For those of you that are more interested in .com websites (I’d recommend instead, get them from Name) he is one of the industry leaders that will aide you in getting online quickly.
  8. Udemy: if you haven’t visited Udemy, then what are you waiting for? This has got to be one of THE BEST learning resources online, though it might have a few FREE courses that will help you to further your career; the paid content is off the chain! (N.B. Econet offer this website along with over 50+ other FREE websites through their Econet Zero service, though I have been unable to access it). The courses that are available are widespread and very relevant to what is needed in today’s app market, e.g. Apple Swift Programming
  9. iTunes: For the iEnthusiasts (all your iDevices) here is an easier way for you to now buy your Apple iTunes Store products at cost. Say good bye to middlemen who we visited at certain stores locally and bought iTunes credit at a premium (I know, you can thank me later).
  10. Market Motive: I have saved the best for last. My passion is in Social Media Marketing and this is one of the world leaders when it comes to online learning. Teaching you topics such as SEO, PPC, Social Media and Content Marketing, you can get yourself a worldwide recognised certificate all from the comfort of your desktop…
If you are interested in more information on what services you can use with your PayPal account, be sure to check out their Store Directory. Comment - just watch out that servicesyou may be able to pay for may not deliver to Zimbabwe.

Company closures continue in Zimbabwe

Company closures continue in Zimbabwe by Tererai Karimakwenda 19 June 2014 |Reports of the rapid closure of companies in Zimbabwe have continued to make headlines as government fails to find a solution, with the latest news revealing that at least 10 companies are closing every month.According to the Financial Gazette newspaper, a senior official at the National Social Security Authority (NSSA) disclosed figures that suggest 60 companies had shut their doors so far this year. The total could be over 120 closures by year's end.The figures represent only statistics on the number of companies that stopped contributing to monthly pension funds due to closure. This means there could be even more companies closing that had not been paying into the fund, which is a crime under the law.In addition, mineral prices have declined significantly in the last two years and foreign investors are shunning Zimbabwe, following the seizure of several farms that were protected by bilateral agreements and confusion over government's indigenisation policy, which requires foreign firms to be owned by majority locals.Economist Tony Hawkins said indigenisation has created uncertainty and is deterring new investment, but the closures reflect a "deeper malaise"."This economy is no longer terribly competitive due to long periods of high inflation. We have a difficult infrastructural situation in terms of transport, water, and especially in terms of electricity, and we have an uncompetitive exchange rate linked to the dollar, which is too strong a currency for Zimbabwe," Hawkins explained.He added that government needs to follow through on some of the existing policies, such as the staff monitored programme of the International Monetary Fund and negotiating debt relief and debt restructuring. This would then allow government to finance the major infrastructural investment that they need to undertake.Hawkins said business leaders and politicians are so fixated on indigenisation that they have lost sight of all the other issues affecting the economy. - See more at:

Wednesday, June 18, 2014

Paypal comes to Zimbabwe

Paypal comes to Zimbabwe by Staff reporter 16 June 2014 |
LONDON- PayPal is entering 10 new countries this week, including Zimbabwe, providing online payment alternatives for consumers via mobile phones or PCs in markets often blighted by financial fraud.Rupert Keeley, the executive in charge of the EMEA region of PayPal, the payments unit of eBay Inc, said in an interview on Monday the expansion would bring the number of countries it serves to 203.Starting on Tuesday, consumers in Nigeria, which has 60 million users and has Africa's largest population, along with nine other markets in sub-Saharan Africa, Eastern Europe and Latin America will be able to make payments through PayPal."PayPal has been going through a period of reinvention, refreshing many of its services to make them easier to use on mobile (phones), allowing us to expand into fast-developing markets," Keeley said.Once the services go live, customers in the 10 countries with access to the Web and a bank card authorized for Internet transactions will be able to register for a PayPal account and make payments to millions of sites worldwide.Initially, PayPal is only offering "send money" services for consumers to pay for goods and services at PayPal-enabled merchant sites while safeguarding their financial details. This is free to consumers and covered by fees it charges merchants."We think we can give our sellers selling into this market a great deal of reassurance," said Keeley, a former regional banking executive with Standard Chartered Plc and senior executive with payment card company Visa Inc.PayPal does not yet cover peer-to-peer transactions, which allow consumers to send money to other consumers. It has not yet enabled local merchants in the new markets to receive payments, nor is it offering other forms of banking services, he said.A 2013 survey of 200 UK ecommerce sites by Visa's CyberSource unit estimated that 1.26 percent of online orders are fraudulent and that 85 percent of merchants expected fraud to increase or remain static last year.CyberSource also estimated that suspicion of fraudulent transactions result in 8.2 percent of online orders in Latin America being rejected by merchants, compared with 5.5 percent in Europe and 2.7 percent in the United States and Canada.Such fraud can include ID theft, social engineering, phishing and automated harvesting of customer financial data via botnets, or networks of computers controlled by hackers.A total of 80 million Internet users stand to gain access to PayPal global services this week, including those in five European markets - Belarus, Macedonia, Moldova, Monaco and Montenegro, four in the African nations of Nigeria, Cameroon, Ivory Coast, and Zimbabwe, as well as Paraguay. Internet usage figures are based on research by Euromonitor International.PayPal counts 148 million active accounts worldwide. .responsive-middle-article { width: 674px; height: 200px; } (adsbygoogle = window.adsbygoogle || []).push({}); Last week, MasterCard Inc, the world's second-largest debit and credit card company, and a PayPal rival in payment processing, said it was working with the Nigerian government on a pilot to overlay payment technology on a new national identity card.PayPal has operated in 190 markets since 2007 and added three countries - Egypt, Georgia and Serbia last year. Roughly a quarter of the $52 billion in payment volumes PayPal reported in the first quarter of 2014 were for cross-border transactions. PayPal reported $1.8 billion in revenue during the period. Paypal Bank Source: newsday -

Monday, June 2, 2014

At dollarisation in 2009, we didn’t inflate any telephone bills, says TelOne

At dollarisation in 2009, we didn’t inflate any telephone bills, says TelOne

100-trillion-ZimbabweWhen TelOne started billing customers in US dollars back in February 2009, it was accused of having converted Zimbabwean Dollar bills to US dollars at unrealistic exchange rates resulting in ridiculously high bills which subscribers failed to settle.
Today, TelOne released a press statement apparently to clarify the issue. Essentially, the company says they never converted bills at an unfair rate but used a Reserve Bank of Zimbabwe official rate. Here’s part of the statement:
TelOne has noted sentiments emanating from the market indicating that TelOne inflated Zimbabwe dollar bills and converted the amounts to United States Dollars hence the current outstanding bills that have accrued on the client accounts. TelOne would like to set the record straight and dispel this incorrect view.
At dollarization (February 2009) all outstanding bills were converted to the US dollar using an exchange rate prescribed by the Reserve Bank of Zimbabwe. This resulted in all businesses and households starting off with zero balances upon transfer.
In addition, TelOne wrote off the entire January 2009 bill following stakeholder representations. Further to this, tariffs were reduced from 7 cents to 5 cents per minute in September 2009 but this reduction was backdated to February 2009 when dollarization commenced. The relevant credits were passed on to each account.
It should be noted therefore that the current bills did not accrue from the pre-dollarisation era and the conversion to US dollar but due to failure by clients to honour their bills over an extended period of time. TelOne urges all clients to honour their outstanding bills.
One strange thing in there is that TelOne doesn’t mention what exchange rate specifically was used. The RBZ website suggests however that it was around 12 billion Zimbabwean dollars for a US dollar, so assuming your bill was ZW $100 billion, you’d owe just US $8.
We have no idea really what TelOne was charging a minute in Zim dollars, but we do know the government operators were the slowest in reacting their prices to the hyperinflation resulting in them essentially offering service for free (If you have an old bill from around December 2008, please help us out by posting it in the comments below).
In fact we think this late reaction to hyperinflation is the core of the problem TelOne and its subscribers have today. TelOne (NetOne and Telecel too actually), because of sticking to postpaid even when it didn’t make inflationary sense in those crazy years, essentially got their subscribers hooked to paying nothing for service. When these providers did however react immediately to the USD billing relief that they were granted by the Reserve Bank in January 2009, they did a poor job of communicating effectively to subscribers that free was over. Subscribers continued to abuse but realised at month-end that you can’t abuse real dollars. They didn’t pay and eventually service was suspended. Hence the ugly situation today.
- See more at:

Wednesday, May 7, 2014


AT least 111.6 million kilogrammes of tobacco worth US$358 million have has been sold since the 2014 marketing season opened in February this year, according to the latest statistics from the Tobacco Industry and Marketing Board (TIMB).
The volume of the golden leaf sold so far is a 23.6 per cent increase on the 90.3 million kg of tobacco worth US$334.7 million sold during the comparable period last year, the TIMB data show.
Of the total, 78.1 million kg of tobacco were sold through contract sales while the remainder went under the hammer.
The seasonal average price of the tobacco this season was US$3.21 per kg, a drop of 13.4 per cent from US$3.71 per kg of last year. This year's tobacco selling season had opened on a low note with depressed prices of below US$2.0 per kg.
When the marketing season closed last year, at least 166.5 million kg of tobacco had been sold at an average price of 3.70 USD per kg, realising US$616.1 million in sales.
The government has forecast this year's output at 170 million kg after many farmers turned to tobacco and abandoned other cash crops which yield less attractive producer prices.
Since the adoption of multiple foreign currencies in Zimbabwe, principally the US dollar, the tobacco industry has become one of the fastest to recover from the economic meltdown of the past decade.
The sector has seen a rebound as 103,941 farmers registered to sell tobacco this season.
Many farmers have been shifting to tobacco because of the favourable prices and abandoned other crops, particularly maize and cotton.
Tobacco is one of Zimbabwe's major agricultural exports, accounting for 10.7 per cent of the country's gross domestic product (GDP).
Export destinations for Zimbabwean tobacco include Belgium, the United Arab Emirates, China, Sudan, Hong Kong, Indonesia, Philippines, United Kingdom, Spain, New Zealand, Montenegro and Russia.

Foreign investors dominate bourse

Foreign investors dominate bourse
Foreign investor activity on the Zimbabwe Stock Exchange increased in the first four months of the year with over a billion shares changing hands despite the total market value taking a knock. According to latest statistics from ZSE 1,1 billion shares valued at $170 million were traded between January and April this year.
Transactions completed during the first four months of this year compare favourably to last year when turnover came in at about $144 million while volumes traded were under a billion, at 717,7 million.
Foreign shareholders accounted for a total of 437 million of shares bought, 283,7 million of the shares sold and $111,5 million of turnover from buyers and $74,5 million of sellers turnover.
The latest statistics from the ZSE show that a total of 316 million shares were bought by foreign shareholders with the same investors selling about 217 million shares in the same period last year.
While the ZSE market capitalisation opened the year at $4,7 billion, it had declined to about $4,5 billion by end of last month.
The decline in the total value of shares traded on the bourse has also reflected in the continuous gradual drop in the industrial index, which opened the year at 189.25 points but closed April at 172.91 points.
Likewise, the southward trend also characterised shares of listed mining companies with the mining index dropping from its year opening levels of 35.04 points to end the first four months at 29.64 points.
Foreign investors continue to dominate trading on the local bourse as locals are largely constrained by the liquidity crunch pervading the entire economy since dollarisation of the economy in 2009.
Analysts said the level of investor activity on the bourse shows the appetite of foreign investors for Zimbabwean stocks despite the tight liquidity that is constraining the profitability of companies.
Most foreign investor interest has tended to fall on bellwether stocks such as Econet Wireless, Delta Corporation and Innscor, which have somehow found a way to make profit despite the challenges.
They also said that while investors are generally risk averse, most of them strong believe in potential lucrative returns when the economy recovers, taking advantage of current discounted prices.
Zimbabwe is facing serious liquidity crunch after dropping its currency due to hyperinflation, which reached a crescendo in 2009 and adopting a basket of currencies dominated by the greenback.
Through Zim-Asset, the Government is working on a cocktail of measures to improve liquidity and the economic environment in should drive productivity and recovery in the medium to long term. Business Herald

Saturday, March 29, 2014

Zim the dollarization process

Zimbabwe is essentially operating a multiple currency system and recently the then Acting RBZ Governor, Dr Charity Dliwayo announced the adoption of more currencies in the economy.
Despite this Zimbabwe is viewed as a dollarised economy given that the Government conducts all its business using the United States (US) dollar and it is the currency that has become predominant among the other currencies used in the country.
The chief advantage to dollarization is that rampant inflation has been dramatically stabilized. This has, in turn, stabilized the overall economy, sustained the buying power of the Zimbabwean people, and allowed the nation as a whole to experience significant economic growth.
Long-term economic planning is easier to do under a stable currency, and the hope is that the dollar will attract foreign investors who were previously reluctant to invest in Zim due to its economic and monetary weaknesses.
On the other hand, there is also a downside to dollarization. By scrapping its own currency, the Zim government can no longer make its own monetary decisions which Dr. Ngwenya, a lecturer at Solusi University describes as seigniorage.
Zimbabwe’s monetary policy is now essentially made thousands of miles away in Washington, D.C. by the Federal Reserve Board. The decisions the Fed makes, furthermore, might not necessarily be in Zimbabwe’s best interests.
Moreover, Zimbabwe is at a competitive disadvantage to its trading partners in that, unlike neighbouring countries such as Zambia or South Africa, it cannot make its goods cheaper in the worldwide market by devaluing its currency.
Other drawbacks to dollarization became apparent during its implementation: people were unfamiliar with the currency, which made counterfeiting easier, and the illiterate portion of Zimbabwe’s population (which, unfortunately, is significant in rural areas) had difficulty identifying the uniformly-green bills (the sucre had been printed in different colors for different denominations).
Perhaps most importantly, dollarization still does nothing to address the core problems that are dragging Zim’s economy, such as the nation’s woeful lack of infrastructure, Zimbabwe’s massive internal and external debts caused by rampant spending, continued political instability, and debilitating corruption.
Dollarization is a factor of stability. Commerce and services grow rapidly in Zimbabwe, encouraged by dollarization. The monetary scheme succeeded in that the spending power of Zimbabweans is maintained and is going towards the purchase of goods and services, many of which are imported.
The control of inflation was key for these activities. This is reflected in the shopping centers, harbors, bazaars, stores and in the streets of the main cities, where the supply of products of Chinese, South African and Dubai origin at low prices is unlimited.
Dr Ngwenya a lecturer at Solusi University says, dollarization only gave stability to some of the economic variables that were used by entrepreneurs to plan their businesses. He refers to inflation and the stability of foreign exchange.
Dr Ngwenya recognizes that now the economy is concentrated in the services, while the contribution of national production is reduced.
“Dollarization has weaknesses, because it does not generate wealth from exports. It is reducing industry and increasing imported goods,” he explains. Dr Ngwenya recommend increasing productivity and reducing costs of production so that industrial activity does not further decay.
But Dr. Warambwa, the Managing Director of Siabuwa Infrastructure Development Cooperation (SIDC) adds that, first, the Government must lower the public debt and maintain an economic policy of fiscal austerity and reduced taxes.
“Dollarization is like a straitjacket, but heretofore it hasn’t felt like one and we continue spending more.”
Dr Ngwenya, on the other hand, maintains that the presence of wealth from exports in the economy is generated by high prices of petroleum and the remittances of emigrants.
“That allows there to be a balance in the public finances and the balance of payments,” he adds. But the predicaments are not only for entrepreneurs.
Dollars do not circulate easily in the marginal urban areas of the country.
Dollarization corrected problems with electricity, petroleum, telecommunications and interest rates. We could not continue ignoring (washing away) inefficiency.
The dollar has been a stability factor. In order to visualize the relation that dollarization has had on political policy, a small exercise of imagination is required. What might have happened with the Zim dollar had rumors of political wars actually existed?
It is not difficult to imagine terrible devaluation that would have occurred and the effect that would have had on the Government. Dollarization has been, then, an economic phenomenon that has had enormous political meaning. In fact, the decision to adopt that model was a political measurement.
Some analysts also agree that dollarization has created an atmosphere of stability for the public, soothed by their purchase capacity, that neutralizes the calls to mobilization that indigenous and labor leadership often make.
In Zim the dollarization process also has meant a certain change in the behavior of the political class regarding the topic of the budget. Although the old custom still exists to press the government in power to add items to the budget for political purposes, every day grows a new, more conscious understanding of the State’s inability to put more money into circulation.

Wednesday, March 19, 2014

Zimbabwe enters deflation

2014-03-18 19:46


Special Report

Zimbabwe caps salaries of state firm bosses
Zimbabwe caps salaries of state firm bosses
Zimbabwe’s cabinet has announced a $6 000 monthly salary cap for executives of state-owned entities, following reports they were grossly overpaid.
Harare - Zimbabwe recorded deflation in February, official figures showed on Tuesday, in what analysts deemed a further danger sign for the struggling economy.
Year-on-year inflation for February was minus 0.49% - almost a whole percentage point lower than January's 0.41% inflation - according to the Zimbabwe National Statistical Agency.
"This is a reflection that there is dampened economic activity. There is hardly any major economic activity taking place," said Godfrey Kanyenze, director of the Labour and Economic Development Research Institute of Zimbabwe.
"Fewer people have money to buy the available goods and services. We really need to come up with fiscal stimuli to whip up demand," he told AFP.
Sustained deflation can be dangerous for an economy as a widespread decline in prices may lead to consumers delaying purchases.
It can trigger a destructive spiral where companies forced to cut prices also cut wages and lay off workers, leaving consumers with less money to spend and the entire economy worse off.
Kanyenze said the country needs to attract more foreign investment and boost mining and agriculture exports, but its risk profile is keeping investors away.
Eric Bloch, an independent economist based in the second city of Bulawayo, said one monthly drop was insignificant in the context of poor economic performance.
"There is no benefit or prejudice to the consumer," Bloch said. "It's as bad as continuous inflation."
Most Zimbabweans have little disposable income, which translates into low aggregate demand for goods and services.
This is pressing on employment, rather than consumers holding off on purchases.
In January already the main trade union federation said companies were laying off around 300 people every week.
Zimbabwe's economy has been on a downturn for over a decade, with most people living below the poverty line and firms either downsizing or pulling down the shutters.
But economists estimate the country is only running at a third of its current capacity, and conditions have failed to improve after President Robert Mugabe's ZANU-PF party won polls in July last year.
The government has also been pursuing a policy of pushing foreign companies to hand over a majority stake to locals, which has served to reduce foreign investment.


Tuesday, March 18, 2014

Zimbabwe economy

A CURRENCY is a wonderful flagship for a country, bobbing away minute by minute on the waves of global sentiment and trade. It is a useful proxy for where the market and economy is heading next, but in Zimbabwe’s case it has become more like an albatross around the necks of its leaders, dragging them further into an abyss of economic disaster.
Zimbabwe had to abandon its currency — hard won via bloody civil strife for freedom — in 2009 as effectively worthless, with the US dollar and rand being accepted instead as the main legal tender.
While this change did put a plug in runaway inflation, a new plank in the strategy has been to look east by accepting the Chinese yuan, Japanese yen, Indian rupee and Australian dollar as legal tender too.
The jury is out on how clever all of this is, as the ultimate aim should surely be to reclaim your flag — your currency in this case — and let it proudly flap away in the winds of global economic change.
My son, aged five, got into trouble during the recent heavy rains in South Africa when he left my iPad exposed to the elements after forgetting it on the lawn. I was, of course, furious (I use it for work, not only games), but he came up to me once the dust had settled with a Z$20m bill his grandfather, who is prone to going on safaris into deep, dark Africa, had given to him to pay. He’d heard an iPad cost about R5,000 or so, and thought the money would easily pay for it.
Of course, his attempt to solve one of the first bad experiences in his young life warmed everyone’s hearts — and we thanked him profusely for the largesse. But I did quickly explain to him that this money came from Zimbabwe, and was no longer in use because their economy was not like ours, or most others. It was certainly nowhere close to his German grandfather’s economy, which used the euro, of which each one was worth R15 and a whole lot more than the millions of Zim dollars he was so keen on parting with to settle his damages.
It is a sad state of affairs when a country can fall into a state of such disrepute — even sadder when it is on our doorstep. Of course, letting things slide so badly — it was so bad in Zimbabwe that the value of its citizens’ money was halving every day, and Z$20-trillion was worth just one US dollar — has serious repercussions. And there is no worse repercussion for a country and its elected leaders than when people begin to starve.
While Zimbabwe’s politicians have been running around looking for food import deals with South Africa to help stem a new food crisis as 2-million people need food assistance, the United Nations’ (UN’s) World Food Programme says money is a problem. The UN’s own plan to feed 1.8-million Zimbabweans is running into money trouble — it is $60m in the red and desperately looking for donors.
Of course, there is no reason Zimbabwe can’t become a breadbasket again — it has the land and resources to do it. But the system of land grabs has turned everything into a mess. Investors need to be brought in, and they’ll only do so if property rights are protected — if they know they are dealing with people who have the rights to farm the land. So, unfortunately, it’s over to the politicians again, who seem to forget that their future, and that of the starving millions, hinges on the economy. Running off to South Africa or adopting the yuan is not ultimately going to help.
Setting up two fairly simple programmes may be better. Start with a foundation of private property rights protection, as it is the clarity over property titles that is holding back investment. Then set up a programme to drive smallholder farming. To do this, go back to the basics — it needs an efficient market of buyers and sellers. Then there will be no more need to import hundreds of thousands of tons of maize. With these things on track, you can fly your economic flag — your currency — proudly again.
A top UN food man I spoke to said the UN would be only too keen to help set up such a market, but what is lacking is the political will. The Southern African Development Community also tells me it has a four-year plan in place to beef up food security, which includes Zimbabwe. But, again, all indications are that more input is needed from the Zimbabwean government.
Investment Asset Management’s Zimbabwe expert, Roelof Horne, says ultimately any country would want to have its own currency again at some stage as it formed a "shock absorber". Other currencies are driven by their own monetary policy and could be misaligned to your needs.
A looming problem is the need for even more money. The Zimbabwean government has agreed to a 26% pay increase for civil servants — which is hardly affordable. Its government bond market is not working well either — you need your own money for that — and so the country is battling to borrow externally.
The whole mess has led to a general lack of market liquidity, with banks short of funds, capital and deposits.
It is giving rise to talk of a possible relaunch of the Zim dollar, but the timing is out. To relaunch it, they will need high levels of confidence in economic policies. The value of a currency is determined by confidence, which is nowhere on display. According to Horne, should the currency be launched now, it will be a decision "doomed to be a failure".
"It is probably bound to lose value very quickly as people have no confidence," he tells me.
The solution is to get working on solid economic policies. Look to Asia as an example — using their currencies is not the solution, but their models, when implemented, would help set up the foundations for a booming food or cotton trade. Until then, Zimbabwe’s basket-case status remains in play, its currency doomed to the sidelines of the daily market news pages.

Broken Hearts, Tension and Anger at the Tobacco Auction Floors

Zimbabwe: Broken Hearts, Tension and Anger at the Tobacco Auction Floors

TENSION was high at various tobacco auction floors in Harare last week where angry growers said they were being cheated by unscrupulous buyers.
The situation was especially volatile at Boka Auction Floors where farmers pushed for physical action, including protests, against what they said was a deliberate move by the buyers to shortchange them.
The farmers claimed that prices, which ranged from as low as US$0,60c to around US$3 per kilogramme, were a mockery of their hard work.
Anti-riot police could be seen milling around the premises, further incensing farmers who believed it was a move to intimidate them against protests.
Decked out in their full combat gear, the police patrolled the premises and its environs in a menacing manner.
One of the farmers, 27-year-old Kudakwashe Budayo from Bocha in Marange district, said she was disappointed by the prices that the auctions floors were offering.
"I left my two minor children with their father hoping I would sell at a good price but it has been so disappointing. I'm a new farmer but I do not think I will grow tobacco again," she said.
Looking dejected and angry, Budayo said she had sold three bales of tobacco for prices ranging from US$0,60c to around US$3 per kilogramme, which she said were very low by any standards.
"I know my crop was of excellent quality but they gave all sorts of reasons so that they could not pay well and in the process of sorting out, the weight of the bales was reduced drastically," she said.
Budayo accused some officials of corruptly taking farmers' tobacco and then selling it later.
"We do not trust the manner in which those girls were handling our crop," said Budayo. "They gave all sorts of reasons just to disqualify our crop. I am going home empty-handed. After all the hard work, this is what I get."
But officials at the auctions said some of the tobacco failed to meet the required grade because it was wet, badly packed or poorly sorted or cured.

Chinese Firm to Invest U.S $250 Million in Solar Project

Zimbabwe: Chinese Firm to Invest U.S $250 Million in Solar Project

CHINESE energy company, Zhenfa New Science and Technology plans to invest $250 million in a 100 megawatt solar photovoltaic project this year. In a statement issued at the just-ended Zimbabwe Agenda for Sustainable Socio Economic Development seminar last week, the company said the project will require 315 hectares and will generate 218 million Kw/h in the first year of operation.
"Zhenfa will invest in a 100MW solar photovoltaic power project in Zimbabwe in 2014," said the company.
"The project will generate 218 million Kw/h in the first year and five billion Kw/h after five years.
"The company decided to invest in Zimbabwe by referral after hearing that the country had power challenges but very good solar radiation ratios.
"The rich sunshine resource and climate enables Zimbabwe to be one of the leading countries to build solar power stations.
"We are still looking at various sites to set-up the plant but any place in Zimbabwe would be good for a solar power plant."
A director at the company, Mr John Wang said the firm would use internal resources to invest in the country. Over time, he said Zhenfa plans to invest as much as 2 gigawatts solar energy capacity in the country.
"Zhenfa group plans to invest in a 2GW solar photovoltaic power project in Zimbabwe within the coming five years. We would like to share the experience and invest in PV power projects in Zimbabwe and Africa as a whole," said Mr Wang.
He said both projects would support agriculture and animal husbandry activities thereby creating employment.
Mr Wang said the firm has since identified ChiMuts Solar Zimbabwe as a strategic partner in which Deputy Foreign Affairs Minister, Christopher Mutsvangwa's son Tendai has interests.
Established in 2004, the firm focuses on solar power system technology innovation, PV system equipment development and large scale applications.
The firm has so far completed PV projects with total capacity of 2GW (include EPC and own investment). In 2013 alone, the firm installed 1,3GW.

Monday, March 17, 2014

RBZ Collaped CAPS Operations

Zimbabwe: RBZ Collapsed Caps Operations - Mutanda

CAPS Holdings executive chairman Mr Fred Mutanda has made sensational claims that the Reserve Bank of Zimbabwe collapsed the operations of CAPS Pharmaceuticals after ordering delivery of "all stocks of medicines" to State hospitals about six years ago.
CAPS Pharmaceuticals, once the country's largest drug manufacturing firm has since ceased operations and its premises in Southerton were once auctioned for $1,5 million.
The auction was, however, reversed after the High Court ordered that the sale of the premises should be done through a private treaty.
Government was also reported not to be happy with the business that was likely to be conducted by the winning bidder.
While the collapse of CAPS Pharmaceuticals is blamed on poor management and alleged interference by Mr Mutanda, who is also the majority shareholder, the businessman has blamed the actions of the central bank, which he alleged collapsed the company.
CAPS Pharmaceuticals used to manufacture about 75 percent of the country's essential drugs. In court papers filed at the High Court in which Mr Mutanda is challenging the placement of QV Pharmacies, one of CAPS Holdings subsidiaries, he said the central bank had promised to pay the drug maker in foreign currency to procure raw materials. But the company had to look for funds elsewhere after the central banks failed to pay.
"Around August 2008 the Reserve Bank crippled CAPS Pharmaceuticals after commandeering the delivery of all stocks of medicines to Natpharm to facilitate re-opening of Government hospitals, promising to provide foreign currency for raw materials to replace the delivered medicine and restock the whole product portfolio," he claims.
"The promised foreign currency never materialised but CAPS was paid months in worthless Zimbabwean dollars, which the company could not access until local currency was demonetised."
Zimbabwe adopted a multi-currency regime on January 29 2009 in the wake of the collapse of the Zimdollar, and four currencies were adopted - the South African rand, the Botswana pula, the British Pound Sterling and the US dollar.
Government has since directed that CAPS should be re-opened due to the strategic nature of the business.
In 2008, most gold mines, including those operated by Metallon, the country's largest producer of the metal suspended operations due to delays in receiving payments for gold delivered to the central bank which had monopoly on the gold trade. But the miners resumed operations in July 2009 after a new unity Government allowed miners to sell their own bullion.
The RBZ owes gold producers about $50 million, acting governor Dr Charity Dhliwayo said last week. The debt has since been assumed by the Ministry of Finance and Economic Development which will settle all payments.
Former central bank governor Dr Gideon Gono has on several occasions defended his actions. His actions were meant to prevent the country from descending into chaos "like Somalia."
"Whatever I did had authorisation from the Government of the day," Dr Gono once said.

From John Robertson

It is not over yet. But to what extent we can hope for the change we really need, which is the repeal of the Indigenisation and Economic Empowerment Act, rather than mere amendments, has yet to be seen. Today, Thursday, a meeting of the Council of Ministers is to be held to discuss this topic. I have reproduced below an entry from the Prime Minister’s Newsletter, Edition 37, published on his website yesterday. You can download updates by calling up but I hope to be able to alert you to any helpful developments


Zimbabwe: Chemco Shareholders Okay ZSE Delisting

CHEMCO Holdings shareholders this week approved the delisting of the company from the Zimbabwe Stock Exchange (ZSE). A manufacturer and distributor of agricultural inputs, Chemco was suspended from the ZSE in 2012.
The de-listing follows after the public was said to be no longer offering value to shareholders and the company also wants to change the business model from being a manufacturer to become a distributor.
TSL- Chemco's majority shareholder is of the view that corrective actions for the company, which has been posting losses over the last three years are best implemented outside of regulations and social pressures of the capital markets. TSL has a 62 percent stake in Chemco. Chemco will become a wholly owned subsidiary of TSL, but as a delisted entity
The company recorded a comprehensive loss of US$380,479 for the year ended October 2013 compared to a US$1,1 million loss same period last year.
Shareholders voted for the issuing about 15,8 million Chemco shares to TSL by way of private placement in exchange for assuming debt and third party trade payables of up to US$2,64 million.
The company said it recorded a 27 percent increase in revenue to US$4,4 million from US$3,5 million during the same period last year.
All resolutions including the conversion of US$2,64 million worth of debt and trade payables into equity and the issue of shares to TSL by way of private placement were unanimously approved. Chemco's flagship brand, Agricura, is held in Agricor, in which Chemo owns 68 percent. Other divisions include Chemical and Pest Control.
In addition to retailing building material and timber supplies through TS Timber branches, Chemco operates Agriculture Buying Services in Harare, which sells agriculture and hardware supplies.
Other shareholders in Chemco include Farm-A-Rama (14 percent), TS Timber (6,5 percent), Agriculture Buying Services (5,6 percent), Old Mutual Life Assurance (5,3 percent) and Alpha Asset Management (3 percent).