Economic Views from Zimbabwe

Finance minister Tendai Biti has been forced to take steps to slash the shock 25 percent hike of surtax on imports of food and other basics.

2012-01-28T09:32:00.001+02:00

Biti admitted at a news conference in Harare yesterday that he had come

under withering pressure from “various stakeholders” after publication of

the new import tariff regime in the January 14 edition of the Daily News.

The new tax regime came into force on January 1, 2012.

The 25 percent surtax was imposed across the entire range of goods from

basics to luxuries, with the new import regime affecting almost everything

from second-hand vehicles to food, even beer and cigarettes.

The new duty regime was announced in the 2012 national budget presented by

Biti to Parliament in November last year as a measure to support increased

domestic production and level the playing field with regards to some of the

imported commodities.

When the new tariff regime was gazetted last week by the Zimbabwe Revenue

Authority, they torched a storm, which has forced the minister into a

dramatic climb-down.

“Concerns have been raised by stakeholders over some of the tariff measures

government implemented from the 1st of January 2012,” Biti told reporters

yesterday.

“Here there are two things. First is the expanse of those tariffs, the

expanse of the goods that are affected by those tariffs, there have been

concerns about those.”

The 25 percent surtax covers literally everything from beauty products to

electrical household appliances such as refrigerators, ovens, cookers and

other reception apparatus for TVs.

The surtax more importantly affects a wide array of basic foodstuffs such as

fresh as well as frozen whole chickens, frozen cuts and offal, milk and

cream, yoghurt, fermented milk, buttermilk, cheese, bird’s eggs, potatoes,

tomatoes, onions and shallots, garlic, carrots and turnips, mixtures of

vegetables, peas, beans, sausages, uncooked pasta, jams, fruit jellies,

marmalades, soup and broth preparations, sweet biscuits, tomato ketchup and

other tomato sauces.

The new regime also affected alcoholic beverages such as malt beer, wine,

ciders, brandy, whiskey, vodka, spirits as well as Virginia flue-cured

tobacco and burley tobacco.

Biti said he had taken heed of concerns from economists and other

stakeholders that the hike will trigger a massive inflation surge and that

it could ignite shortages of basics given depressed local supply side

constraints.

“We have listened to the way they are affecting basic commodities and so

forth,” Biti said.

The tough-talking minister blasted the manner in which the new tariff

measures were being implemented by tax collector Zimra.

“We have women being asked to put on new shoes, bags being opened (at the

border) and so forth. We don’t accept that, it is not the law,” Biti said.

“Public servants, parastatals, have got a duty to respect the public; they

have got a duty to respect citizens of this country. We will not accept

that.”

The inhuman treatment of travellers by Zimra officials at several border

posts including Harare International Airport was exposed by the Daily News

through a series of articles.

Biti admitted there was overwhelming national condemnation of the 25 percent

hike in surtax of second-hand cars and basics.

“Given the huge representations that have been made to us as a ministry, we

have embarked on the process of stakeholder consultation so that we review

or adjust those statutory instruments, the appropriate measures to review,

and some of the measures therefore will be instituted in the next few weeks

or few days if we are lucky,” Biti said.

“But I want to appeal to the Zimbabwe Revenue Authority, I want to appeal to

all government bodies that provides services to the people whether it’s the

passport office, whether it’s the death certificate office, whether its VAT,

the government is there to serve the public, public servants are there to

serve and not to be islands of fascism where we harass people and so forth.

“So we don’t accept what certain officials at the Zimbabwe Revenue Authority

have been doing.”

Biti said he had received several complaints from trans-border traders and

other stakeholders of intrusive searches and other bizarre methods of

enforcing his new regulations at the border.

“That is not the policy of this ministry, that is not the policy of this

government,” he said. “The long and short of it is that we will review and

adjust following a process of consultation. We will make announcements

through the relevant statutory instrument.”

Biti has also introduced a controversial ban of imports of second-hand

underwear that has also attracted massive criticism.

New Taxes

2012-01-19T11:49:00.000+02:00

HARARE - Food prices and other basic commodities are set to increase

following an announcement by the Zimbabwe Revenue Authority that a 25
percent surtax would be charged on the commodities starting January 1.

The development follows disclosures that government officials, including
ministers, were bringing commodities into the country without paying duty.

This includes luxury motor vehicles and even food.
The surtax, according to Zimra, will be charged on things such as food
stuffs, second-hand light passenger motor-vehicles which are more than five
years old from the date of original manufacture, and many other commodities.

Reads the notice in part: “...Surtax of 25 percent of the value for duty
purposes shall be charged and paid in respect of the importation into
Zimbabwe.
“Included in the goods to be taxed are double cab vehicles for the transport
of goods, foodstuffs such as fresh, chilled as well as frozen whole
chickens, frozen cuts and offals, milk and cream, yoghurt, fermented milk,
buttermilk, cheese, bird’s eggs, potatoes, tomatoes, onions and shallots,
garlic, carrots and turnips, mixtures of vegetables, other vegetables, peas
(excluding garden peas and marple peas), beans, sausages and similar
products, uncooked pasta, jams, fruit jellies, marmalades, soup and broth
preparations, sweet biscuits, tomato ketchup and other tomato sauces,” the
notice added.

Alcoholic beverages such as malt beer, wine, cider, brandy, whisky, vodka
and spirits will also attract surtax.
Smokers will not be spared either as virginia type flue-cured tobacco,
burley tobacco as well as all other tobacco types will be taxed.

Other products that will be attracting surtax range from beauty products to
electric household equipment such as refrigerators, ovens, cookers and other
reception apparatus for television sets.
Economic analyst John Robertson said the move by Zimra will trigger massive
price increases which will increase inflation.
Robertson said; “It will add to the cost of those things unless if we can
produce them ourselves.
A lot of these goods are not being made in the quantities needed by the
country and in most cases we can’t find them in our local shops because we
do not have the machinery to make them.

Power cuts are also negatively affecting our manufacturing industry and we
have experienced a loss of skilled people.”
He added: “We will see an increase in the price of buying these goods and it
is going to affect inflation first and in the next two years we might see a
positive result in that we might be able to produce our own products but
this will be in the long run.”

Air Zimbabwe

2012-01-05T07:55:00.000+02:00

Zimbabwe’s national airline is in the headlines again this week after the only plane still operational was grounded, due to technical faults. This continues a very troubled season for the management who are facing strong criticism for the financial failings at Air Zim.

Flights from Harare to Bulawayo and Victoria Falls were reportedly cancelled on Monday when the Boeing 737 aircraft developed a “glitch” in one of the engines, leaving passengers stranded.

Air Zim’s acting chief executive officer, Innocent Mavhunga, and board chairperson Jonathan Kadzura, have so far made no comment regarding the airline’s future. It is believed debts of at least $140 million are outstanding.

According to Newsday newspaper, the broken down plane could not be fixed because workers are currently on strike over unpaid salaries. A source reportedly said that most workers had not been paid for nearly six months.

Political and economic analyst Bekithemba Mhlanga told SW Radio Africa that blame for the airline’s demise “should be placed squarely on Robert Mugabe and the board of directors”. He referred to Mugabe’s constant use of the airline for personal trips and mismanagement by the board as the major reasons.
“We’ve reached a point where there should be either civil action or criminal liability against the management for their part in terms of how we got to this position,” Mhlanga explained. He added that the board never had a plan of action and should have forced privatization of the airline years ago.

A crisis developed a week before the holidays last month when creditors seized a plane at Gatwick Airport in London because Air Zim had failed to pay $1.5 million owed to an American spare parts company. Hundreds were stranded for over a week at the airport.

Earlier in the week Transport Minister Nicholas Goche ordered all its regional and international flights to be suspended, fearing seizure of the remaining aircraft by creditors.

De Beers Retail Arm Says Will Avoid Zimbabwe's Marange Diamonds

2011-11-15T11:32:00.000+02:00

The Marange fields have been mired in controversy since the military took over operations from African Consolidated Resources in 2006 with rights defenders saying the army perpetrated abuses on ordinary people, killing some in the process

Forevermark, the high-quality diamond retail arm of diamond giant De Beers, says it will not sell any diamonds from the controversial Marange fields in eastern Zimbabwe citing inferior quality.

De Beers and Harare are currently embroiled in a war of words over the diamond giant's activities in Marange between 2000 and 2005. Harare alleges that De Beers siphoned rough stones worth millions of dollars while telling government it was just prospecting.

But De Beers denies the charges saying its operations in Marange were above board and they left after realizing the diamonds were not up to their standards.

Speaking at the launch of the exclusive brand in Johannesburg, South Africa at the weekend chief executive Stephen Lussier said Marange diamonds were generally too small and low in quality for the brand to sell.

He added that Forevermark’s selection process goes well beyond adherence to the minimal standards of the Kimberley Process, which recently gave Harare permission to sell Marange diamonds on the international markets after a three year stalemate in the diamond watchdog group.
Lussier said today’s consumers are now more interested in the source of their luxury purchases.

“The Forevermark carries a guarantee that the diamonds used for our products have contributed positively to communities, the environment and supply chains along the way," said Lussier.

“In a diversifying and maturing industry, consumers seek more from their luxury purchases. Not only do they demand value for money, but there is increasing interest in the source of their purchase and the journey it has traveled."

He added that less than one percent of the world’s diamonds are eligible to be branded Forevermark.

The Marange fields have been mired in controversy since the military took over operations from African Consolidated Resources in 2006 with rights defenders saying the army perpetrated abuses on ordinary people, killing some in the process.

Studio 7 was unable to reach De Beers to check if the diamond giant’s other operations would handle Marange diamonds.

Mines Minister Obert Mpofu said Harare is not surprised by Forevermark’s statement.

He repeated his accusations that De Beers had already unlawfully benefited from Marange diamonds during the 10 years the company held prospective rights for the fields.

Diamond activist Farai Maguwu of the Centre for Research and Development in Mutare said for as long as there’s no consensus amongst the governing parties in Harare over Marange, the world would find it difficult to accept Marange diamonds.

Research Director Allan Martin of Partnership Africa Canada commented that Forevermark has done the right thing, adding more international companies could follow suit.

Zimbabwe to have no electricity for another 4 years

2011-11-15T11:28:00.000+02:00

Published: November 15, 2011

(Harare)Zimbabwe which has struggled with electricity supply in recent years, is to yet brace up for a gruelling additional 4 years without adequate supply of electricity resulting in little or no electricity for many areas as load sheddings’ frequency is increased, Zesa’s chief executive officer Engineer Josh Chifamba revealed yesterday.
The reasons for the shortages are still to be made fully known with ZESA at present blaming what it termed ‘an array of challenges among them vandalism that destroys property worth US$810 000 per month’.
Last year in June, ZimEye revealed that power outages would continue into 2014 as ZESA was struggling to raise a whooping US$125 million needed to repair the outdated Hwange Power Station generators, with US$8 billion needed for the country to restore optimum power production levels.

Zimbabwe Electricity Transmission and Distribution Company’s systems development manager Ikhupuleng Dube told a business forum in Harare on Thursday that ZESA needs US$125 million to repair Hwange thermal power station adding that Zimbabweans should brace for more power outages till 2014 because of the problem.

ZESA power lines

Zesa chief executive officer Engineer Josh Chifamba said the challenges that include a huge debt overhang, low installed capacity and general dip in the availability of power in the region will see the power utility load-shedding to share the limited resources.
Eng Chifamba was giving oral evidence before a Parliamentary Portfolio Committee on Mines and Energy
The committee, which was chaired by Uzumba MP Cde Simba Mudarikwa (Zanu-PF), wanted to know the challenges faced by Zesa. Eng Chifamba said the recent tariff increase, coupled with new projects currently being implemented both at Hwange and Kariba Power Station should be a source of hope for improved electricity supply in the next three years.
“When are we going to see improvement? Obviously what Honourable Members and the rest of the country are expecting to hear is the time when we will not be load shedding.
“That time is not very close, the time we need to commission new projects is about three years.”
He said two more projects are being implemented at Hwange and Kariba.

“At Hwange, we will be putting two extra machines to give us 600 Megawatts and Kariba 300 MW, that’s 900 MW, we expect to finish Kariba in 2015 and Hwange 2016,” he said.

Eng Chifamba said the completion of these projects would not see loading shedding easing.

“When that happens, it will alleviate our situation but we will still not be out of the woods.”

He said Botswana was currently working on a new project and Zesa hopes to tap into it when it is completed.

The deal was, however, subject to the two countries agreeing terms.

Eng Chifamba said consumer debt had been reduced from US$450 million to US$427 million owing to payment arrangement Zesa has entered with customers.

The delay in approving a cost reflective structure has seen Zesa failing to repair and maintain equipment while affecting operations.
The Zesa boss implored legislators to come up with a legal instrument that would punish consumers who continue to use old bulbs instead of energy savers once new bulbs have been introduced.

On tariffs, Eng Chifamba said the approved structures though coming late had gone a long way in stabilising operations.
“The tariffs are meant to address these challenges. It will simply allow us to operate our business normally,” he said.
It was critical, said Eng Chifamba, for stakeholders to realise that electricity was not cheap.

He said the price of coal has also threatened the viability of their business.

Eng Chifamba called for a good operating environment conducive to draw investors.

“We need all forms of stability in the country,” he said.

On independent power producers, Eng Chifamba dismissed indications that they were blocking them.

He said Zesa wished to see more stakeholders coming in to assist them deliver electricity

PARLIAMENTARIANS want to be exempted from paying Zesa utility bills

2011-11-08T09:48:00.000+02:00

PARLIAMENTARIANS want to be exempted from paying Zesa utility bills saying they cannot afford the tariffs amid serious fears of disconnections.

Zesa has however, stood firm saying the request was untenable as it would result in consumers subsiding the legislators.

Mberengwa East MP, Cde Makhosini Hlongwane (Zanu-PF), said the power utility should consider either a full or a partial exemption for legislators in light of their poor remuneration.

He said this during a pre-budget seminar for parliamentarians in Victoria Falls.

"Can MPs have an exemption, even a partial exemption from paying electricity? If that is not done, most of them might suffer the embarrassment of having their power disconnected," he said, drawing applause from fellow legislators.

Zesa Holdings chief executive officer Engineer Josh Chifamba who was a participant on a topic "Measures to Address National Energy," shot down the proposal.

"We do not have that dispensation.

"Tariffs should be cost reflective. When we make that exemption, there have to be transparent otherwise the poor people in high density suburbs might end subsiding the rich in Borrowdale," he said.

Eng Chifamba said legislators might probably consider approaching Finance Minister Tendai Biti with their plight and discuss how Treasury could assist them.

Uzumba MP, Cde Simba Mudarikwa (Zanu-PF), proposed that Zesa debit the money owed by the Grain Marketing Board to cover for unpaid farmers' bills since both of them were State entities.

Eng Chifamba dismissed the proposal since Zesa has its own balance sheet.

Energy and Power Development Deputy Minister Hubert Nyanhongo said there was nothing Zesa could do to assist those consumers who had made advance payments for their electricity during the Zimbabwe dollar era but were not credited when the country switched to the multi-currency system.

Gokwe MP, Cde Dorothy Mangami (Zanu-PF), had complained that several people especially farmers had made advance payments covering almost a year but were not credited in the United States dollar terms.

"I want to say tough luck. We don't have replacement in terms of those who had deposited their Zim dollar in advance.

"When we dollarised we lost out everything in Zim dollar, so tough luck for those people," Deputy Minister Nyanhongo said.

On load shedding, Eng Chifamba said there was nothing the power utility could do to avert it until there is sufficient power generation.

He said one way of dealing with load-shedding and billing challenges was the impending pre-paid system.
The Zesa boss was however, quick to say they would be levying 10 percent of money paid for those owing Zesa prior to the commencement of the pre-paid system

Zimbabwe's Mugabe Threatens Swiss Holdings in 'Reciprocity' for Visa Denials

2011-11-01T08:54:00.000+02:00

Swiss companies in Zimbabwe include food giant Nestlé, which temporarily shut down a Harare processing plant in December 2009 due to pressure brought when it stopped buying milk from a Mugabe-owned dairy
Ntungamili Nkomo
Washington
News Updated: 8:06 UTC Monday 31 October 2011 RSS Feed 31 October 2011

Zimbabwe's Mugabe Threatens Swiss Holdings in 'Reciprocity' for Visa Denials

Although Mr. Mugabe had received a visa, he canceled the trip and headed to Singapore for treatment of what credible reports say is metastatic prostate cancer.

Arriving home at Harare International Airport late Sunday, Mr. Mugabe told journalists he was saddened by the Swiss visa denials, adding, “now they are showing that they are vicious and we will reciprocate because they have properties here. We are not without means to reciprocate.”

Mugabe, 87, brushed aside lingering concerns about his health saying he is fit.

Swiss companies operating in Zimbabwe include food giant Nestlé, which temporarily shut down a Harare milk processing plant in December 2009 amid threats from ZANU-PF after it stopped buying milk from Grace Mugabe’s Gushongo Dairy Farm.

The Swiss embassy in Harare refused to comment.

Switzerland imposed sanctions on Mr. Mugabe and hundreds of ZANU-PF officials in 2002, accusing them of human rights abuses and ballot-rigging.

Economic analyst Walter Nsununguli Mbongolwane commented that Mr. Mugabe’s threats could handicap economic growth by scaring away investors. "When they decide to seize Swiss companies, they will hide behind indigenization,"he said, referring to the ZANU-PF-inspired drive to claim a controlling black stake in foreign enterprises.

Political analyst Bhekilizwe Ndlovu told VOA Studio 7 reporter Ntungamili Nkomo that Mugabe’s threats do not bode well for economic recovery.

Zimbabwe Government Principals Block Payment of Legislator Arrears

2011-11-01T08:50:00.000+02:00

October 2011

Zimbabwean President Robert Mugabe, Prime Minister Morgan Tsvangirai and Deputy Prime Minister Arthur Mutambara have barred payment of back allowances for members of Parliament saying the state of government finances does not permit it.

Sources said the three unity government principals said such allowances, which in some cases amounted to US$40,000, will only be paid going forward.

The Standard newspaper said angry lawmakers nearly manhandled ZANU-PF Chief Whip Joram Gumbo and his counterparts in the two Movement for Democratic Change formations - Innocent Gonese and Edward Mkhosi - when they announced the decision.

The unity government principals did not specify a reason for blocking the payments, but sources said it was due to a lack of funds. The three ordered Parliament to pay only US$75 per sitting to the members beginning Tuesday, November 1.

Constitutional Affairs Minister Eric Matinenga said Parliament had completed calculating outstanding allowances last week and was preparing to pay them.

Independent political commentator George Mkhwanazi said legislators should be paid what is due to them as cabinet ministers have received hefty travel allowances.

2011-08-29T08:11:00.000+02:00

August 28 2011 at 12:28
Independent Newspapers

Impala Platinum may invest as much as $10 billion (R72bn) in Zimbabwe to expand production if the government backs down on a demand that its business there be controlled by the black citizens of the country.

Zimbabwe, which has the largest platinum reserves after South Africa, passed a law earlier this year to force foreign companies to cede at least 51 percent of their local assets to black Zimbabweans.
Anglo American Platinum and Aquarius Platinum also mine the metal in the southern African country.
“It would run into the billions of dollars, probably between $5bn and $10bn,” chief executive David Brown said in an interview in Johannesburg on Thursday, where the company is based.

“Fifty-one percent equity just does not work.”

Impala first invested in Zimbabwe in 2001 when it bought 30 percent of Zimbabwe Platinum Mines for the equivalent of $47 million and later took control of the company. It is now the biggest investor in Zimbabwean mining, with the country in the third year of recovery from a decade-long recession sparked by the seizure of white-owned commercial farms for redistribution to black subsistence farmers.

The unit, now known as Zimplats Holdings, produced 182 100 ounces of platinum in the year to June and is in the midst of a $460m expansion of its Ngezi mine – southwest of the capital Harare – which will boost output to 270 000 ounces in 2014, according to a company statement.

“We could begin to look at phase three and beyond but this requires stability,” Brown told investors at a presentation.

The company has until Wednesday to revise its May proposal to satisfy ownership rules, after it was rejected over a week ago.

Impala also owns the Mimosa mine in the country in a venture with Aquarius.

Impala, which produces about 25 percent of the world’s platinum used to cut car emissions and make jewellery, is spending R35 billion over the next five years to expand production as rising demand drives up prices.

While most of its deposits are in South Africa, 11.3 million ounces, or almost a third of its total platinum reserves, are in Zimbabwe. That’s worth about $21bn at the current platinum price.

“It’s a huge disappointment that we find ourselves in this position – we’ve been a model investor in this country,” Brown said.

Impala believed that “an appropriate level of ownership will be the final result” of talks with the government, Brown told investors. The ownership rule could “retard” investment in mining and other industries at a time when it’s needed.

Economic expansion has been “largely confined to the mining and agriculture sectors”, the London-based Economist Intelligence Unit said in a report earlier this month.

Power shortages, uncertainty over the likely election timetable, as well as the “continued confusion about legislation requiring 51 percent local ownership of all enterprises, are likely to prevent more rapid gross domestic product expansion”, it added.

Zimplats signed an agreement with the government in 2006 to release a portion of its mining claims in exchange for a combination of black empowerment credits and cash.

Impala announced in a June statement that year the area contained 99 million ounces of platinum, palladium, rhodium and gold.

The area could support open-pit mining and “could be turned into quite a profitable concern”, Brown told investors on Thursday.

“They gave that ground to people who weren’t necessarily interested in mining it.”

The country also has the world’s second-biggest chrome reserves, as well as deposits of coal, gold and iron ore.

Impala gained 2.1 percent to R168.95 at 9.18am on Friday in Johannesburg, giving it a market value of R106bn. At 5pm, shares gained 1.81 percent to close at R168.50.

Meanwhile, Gold Fields said Peru’s decision to base a new mining industry windfall tax on operating profit rather than revenue was in line with the industry’s preference.

“The new tax, we believe, will retain Peru’s competitiveness and will guarantee the government’s support for the growth of mining investment,” Gold Fields said on Friday. – Bloomberg

Choice in Currency Saved Zimbabwe

2011-08-25T09:54:00.000+02:00

August 24, 2011 by Jeffrey Tucker

The country’s new finance minister, Tendai Biti, declared that the Zimbabwean dollar had ceased to exist: “Our currency,” he said, “is moribund.” On April 12, Zimbabwe suspended the use of its currency as legal tender.

“At first covertly, then in openness, and finally with the consent of the government,” Mr. Noko writes, “foreign currencies – the rand, the euro, the pound, the U.S. dollar, the [Zambian] kwacha – replaced Zimbabwe’s dollar.” Precisely as Mr. Hayek had imagined, Zimbabwe’s inflationary spiral ended. Within weeks, the country’s economy showed dramatic improvement. Businesses began to open. Banks began to function. Unemployment began to fall. GDP began to rise. Private credit began to increase. Foreign investment began to return. The human exodus ended.

Out of sheer necessity, Zimbabwe adopted the fiscal discipline known as “cash budgeting,” which meant that the government could spend and lend only the money it had in cash. Mr. Biti, the finance minister, said simply: “We will eat what we have gathered.”

ElectraCard Services signs agreement with Zimbabwe`s bank

2011-08-25T09:53:00.000+02:00

BS Reporter / Mumbai/ Pune August 25, 2011, 0:21 IST

Pune based ElectraCard Services (ECS), a provider of software solutions for electronic payment systems, has signed an agreement with FBC Bank, Zimbabwe to provide an end to end processing for its MasterCard debit and prepaid cards.

With this, FBC Bank will be the first domestic bank to issue MasterCard prepaid card in Zimbabwe, since the introduction of multi-currencies.

"The FBC Bank MasterCard debit and prepaid cards will help the customers of FBC Bank to securely and conveniently transact anywhere in the world. ECS will not only assist the FBC Bank to provide more convenience to its customers but also help them strengthen their position as a market leader in electronic payment solutions," said Ramesh Mengawade, CEO, ElectraCard Services speaking on this occasion.

ECS is a preferred processor for prepaid for MasterCard in whole of Africa, Middle East and Asia-Pacific. As technology partners to FBC bank, ECS will handle complete processing of the debit and prepaid cards right from applications, card and accounts, transactions, billing, statements, payment and dispute resolution. It will host the solution from its World Class PCI-DSS certified data centre in Mumbai, India.

"We are committed to deliver value-added solutions to our customers in Zimbabwe and we are very excited about the partnership with ECS, which we believe has further strengthened our payment services to our customers. Through this partnership we are now able to deliver global convenience and security to the market. This will further assist us to constantly innovate and deliver the best for our valued customers," said Agrippa Mugwagwa executive director, retail banking and e-Commerce at FBC Bank.

Zimbabwe’s Biti in Bid to Create Separate Black-Ownership Rules for Banks

2011-08-24T10:02:00.000+02:00

QBy Godfrey Marawanyika - Aug 23, 2011 5:52 PM GMT+0200 .

Zimbabwe Finance Minister Tendai Biti said he is in talks with Youth Development, Indigenization and Empowerment Minister Saviour Kasukuwere to develop separate ownership rules for banks operating in the country to those of mines.

His ministry is trying to agree a minimum ownership threshold for banks, where for mining companies it is 51 percent, Biti told reporters in the capital, Harare, today. The ministry is also consulting banks regarding the ownership law, Biti said.

To contact the reporter on this story: Godfrey Marawanyika in Johannesburg at gmarawanyika@bloomberg.net

To contact the editor responsible for this story: Vernon Wessels at vwessels@bloomberg.net

Zimbabwe’s finance minister says rising food prices have driven up inflation

2011-08-24T08:22:00.000+02:00

HARARE, Zimbabwe — Zimbabwe’s finance minister says rising food prices have driven up inflation in the ailing southern African economy.

Tendai Biti said Tuesday the inflation rate has risen from 2.9 percent in June to 3.3 percent in July. He blamed local businesses for inflating prices on basic foodstuffs.

Zimbabwe has experienced food shortages and record inflation since 2000 after President Robert Mugabe, the longtime ruler, ordered farmland seizures.

Mugabe formed a shaky coalition government with former opposition Morgan Tsvangirai in 2009 after disputed elections in 2008.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Kasukuwere vows to grab companies

2011-08-22T09:27:00.000+02:00

Sunday, 21 August 2011 15:00

BY KUDZAI CHIMHANGWA

YOUTH Development, Indigenisation and Empowerment minister Saviour Kasukuwere on Friday vowed to go ahead with plans to seize foreign-owned companies despite a stern warning by Reserve Bank of Zimbabwe governor Gideon Gono to refrain from disrupting economic revival.

State media had reported that 11 companies that failed to comply with the government’s empowerment laws, including Barclays and Standard Chartered banks had been given a 14-day ultimatum to do so or risk losing their licences.

Gono, in an uncharacteristic attack on a Zanu PF minister, warned against “irrational exuberance during these times of necessary soberness.”
Kasukuwere’s ministry is trying to enforce the controversial indigenisation regulations that seek to force foreign-owned companies to cede 51% of their stakes to locals over the next five years.

Caledonia Mining Corporation also threatened a legal showdown with Kasukuwere after he reportedly wrote to Mines and Mining Development minister Obert Mpofu instructing him to withdraw Blanket Mine’s licence.

The Canadian firm owns Blanket Mine, one of Zimbabwe’s top gold producers, which was named among the 11 companies that were on the verge of losing their licences.

“Caledonia believes the Minister of Indigenisation has exceeded his legal powers, both in terms of his assessment of Caledonia’s proposal and his request to the Minister of Mines,” the company said in a statement.

“Caledonia is seeking urgent clarification from the relevant ministers and is also consulting with its legal advisors regarding appropriate legal action.”
But Kasukuwere remained defiant, vowing to follow through his threats that have already given investors jitters at a time when the economy is desperate for foreign capital injection.

“As far as we are concerned, we are going ahead with the process and we shall effectively use the laws to empower our people,” Kasukuwere told Standardbusiness.

“They (foreign companies) have taken us for a ride for too long, we have tried to be accommodative and understanding so we shall deal with those that don’t want to co-operate.”

The minister announced recently that he had thrown out proposals by mining companies on how they intended to comply with the empowerment law.

On Friday Kasukuwere said Caledonia and other companies were free to consult lawyers from “heaven” and appeal to whoever they wanted, but his ministry was not going to look back.

Gono pointed out that the minister’s proposal flew in the face of the Southern Africa Development Community proposals of stabilising the banking sector, at a time when the world was facing a double dip economic recession. “To this end, therefore, the timing of any move that we may take or intend to take is important,” Gono advised. “May all stakeholders please be guided accordingly and take heed before it’s too late.”
He said he was issuing the statement in order “to avoid fly-by-night, reckless and excitable flexing of muscles and decisions that overlook certain fundamentals that could irreparably harm the nerve-centre of our recovering economy.”

2006 empowerment deal binding: Zimplats

2011-08-22T09:25:00.000+02:00

21/08/2011 00:00:00

by Gilbert Nyambabvu

Contract binding ... David Brown

IMPALA Platinum – which owns Zimbabwe Platinum Mines (Zimplats) -- has insisted that the government honour the terms of an empowerment deal reached in 2006 as a cabinet minister threatened to cancel the company’s operating licence.

Empowerment Minister, Saviour Kasukuwere has given Zimplats and a number of other foreign firms operating in Zimbabwe 14 days to submit indigenization proposals complaint with the country’s laws or risk having their local assets seized by the government.

Foreign firms operating in the country are no required by law to give up at least 51 percent of their equity as part of measures aimed at economically empowering the historically disadvantaged black majority.

However, Impala, which owns 87 percent of Zimplats and has a 50 percent interest in Zvishavane-based Mimosa Platinum Mine – insists the three-part plan it has already submitted is compliant with the law.

Implats chief executive, Dave Brown said the plan involves a 26 percent equity transfer with the balance (to reach 51 percent) made of social investment projects and a prior agreement with the government.

“We reckon that’s somewhere between 25 percent and 26 percent – we’re quite happy with that. Still, people should understand there are real cost associated to that. If people give you a cheque up front there would be no cost associated,” Brown told mining publication, miningmx.com.

“But in reality that’s not going to happen. Such a deal would usually entail some deferred payment method, using dividends or methodology to repay the purchase price. There is a cost associated to that. Us bearing that cost is part and parcel of our commitment to empowerment.”

He also insisted that a 2006 deal under which the company gave up 36 percent of its mineral resource in Zimbabwe in return for so-called credits should be honoured.

“There was a lot of emotion about those agreements. But we have a valid contract, we have a binding contract and that contract is in essence what I’d like to see honoured," he said.

“Because if that contract is honoured I’d certainly believe it would create a great faith that contracts and promises would be honoured. At the time when we discussed these matters it was accepted it would be taken into account.”

Still, Kasukuwere has said previous empowerment deals will not be considered adding offers for so-called social investments were also off the table.

However, Brown says he is not overly worried by what he considers political rhetoric.

"I think at the end of the day politicians will always indulge in populist rhetoric. I get that. I understand that’s their job mandate," he said.

“The President (Robert Mugabe) himself said on several occasions we are a model investor. He’s appreciative of our involvement in the social fabric of the country. That’s providing jobs, trying to enhance infrastructure and also various social projects in the areas we mine.”

A second phase expansion of Zimplats expected to cost US$450 million is already under way and involves building a third underground mine and a second concentrator at Ngezi, which will lift output to 270 000oz/year when the project reaches steady-state production levels in 2014.

“The sooner we can get clarity and finality (on indigenization) the better it is for investment,” Brown said.

“We have phases. We’re almost at full production at phase one. At phase two we’d ramp up by 2014. And then we’d be looking at phase three. And phase three would be quite a considerable investment. We’d be talking potentially of a $1bn capital injection.”

Zimbabwe to Use Special Drawing Rights Facility to Pay Off IMF Debt

2011-08-16T08:23:00.002+02:00

Finance Minister Tendai Biti said Zimbabwe hopes for the release of US$93 million that was withheld by the IMF when the country got its share of global economic crisis adjustment funds in 2009

Gibbs Dube
.....Finance Minister Tendai Biti says Zimbabwe will use US$140 million of a US$500 million Special Drawings Rights facility to pay down debt to the International Monetary Fund which is preventing the country from obtaining any new loans.

Biti said in a statement that the payment will allow Zimbabwe to tap development funds under the global lender’s Poverty Reduction and Growth facility.

He said Zimbabwe hopes for the immediate release of US$93 million that was withheld by the IMF when the country got its share of crisis-adjustment funds in 2009.

But economists doubt the IMF will release the funds due to other debts.

Zimbabwe owes the African Development Bank some US$400 million and the World Bank US$1.2 billion, plus more than US$5 billion in other international loans.

Economist Daniel Ndlela said Biti has made the right decision to settle the debt to the IMF using the 2009 global crisis funds. “But as long as we still owe other institutions, we are still not out of the woods,” Ndlela said.

Economist Eric Bloch said Zimbabwe is not likely to receive financial support from international organizations until it has gotten current on its payments.

Biti said the SDR equivalent of US$150 million has so far been used for the purchase of agricultural inputs for the 2009-2010 crop season and infrastructural projects, and US$20 million for lines of credit for Zimbabwean industry under the Zimbabwe Economic and Trade Revival Facility administered by Interfin Bank.

The funds were spent to overhaul the Hwange Thermal Power Station, National Railways of Zimbabwe track and rolling stock, and Bulawayo City Council’s sewer and water distribution system, to upgrade broadcasting equipment, to resume construction of a Matabeleland water pipeline and for housing in Kwekwe and Harare.

Biti said SDRs equal to US$215 million are held at the IMF as national reserves

New VAT Refund Procedure - Beit Bridge Border Post

2011-08-02T09:56:00.000+02:00

IMPORTANT NOTICE

New VAT Refund Procedure - Beit Bridge Border Post
Effective 3 June 2011

With effect from 3 June 2011 there will be a new procedure for claiming a VAT refund for movable goods exported through Beit Bridge Border Post.

Qualifying purchases must comply with the following procedures:

The goods against which a VAT refund is claimed must be declared to RSA Customs in accordance with the Customs and Excise Act and relevant procedures.

• The goods must also be declared to the Customs authority in the country to which the goods are exported in accordance with that country's customs and excise formalities.

• After the movable goods have been declared to both customs administrations and exported, only then can the qualifying purchaser apply for a VAT refund.

The following documents must be lodged when making application for a VAT refund:

• The original tax invoice/s for which the VAT refund is claimed.

• Proof that the goods were declared to RSA Customs authorities

• Proof that the goods were declared in the country to which they were exported.

• A copy of the qualifying purchaser's passport reflecting entry and exit from the RSA.

• An address to which the VAT refund payment should be sent once approved.

In the case of claims by a foreign enterprise the following documents must also be lodged:

• The certificate of incorporation, trading licence or similar proof of registration.

• A letter of authorization on the foreign enterprise's letterhead authorizing an individual person to lodge the claim on its behalf.

• A copy of the authorized person's passport.

Refund claims may be posted to:
VAT Refund Administrator (Pvt) Ltd P O Box 107
O R Tambo International Airport, 1627, South Africa,
Physical address: 206/1 High Road, Bredell, Kempton Park 1619
Telephone: +27 873 100 200
Email: info@taxrefund.co.za

Duty on food stuffs restored

2011-08-02T09:49:00.002+02:00

Subject: Duty on food stuffs restored - http://www.herald.co.zw/index.php?option=com_content&view=article&id=16551:duty-on-food-stuffs-restored&catid=37:top-stories&Itemid=130

Business Reporters

FINANCE Minister Tendai Biti yesterday restored import duty on some food stuffs to protect local industry, as he expressed optimism on the economy achieving the targeted 9,3 percent growth figure by year-end.

Presenting the Mid Year Fiscal Policy Review Statement, Minister Biti said the re-imposition of duty has been necessitated by improved supply of basic goods and also the need to protect local producers.

He did not announce a supplementary budget preferring to go by the status quo.

For basic commodities such as maize meal and cooking oil, the proposed import duty will take effect from next month while for other food stuffs such as potato chips, baked beans and mixed fruit jam, the rates will start applying from the beginning of September.

The proposed duty will range between 10 percent and 25 percent.

Duty on salt, rice and flour will remain suspended until end of this year.

"Government will continue to monitor the supply of cooking oil and maize meal in order to ensure the availability at competitive prices," said Minister Biti.

He expressed optimism that the country would achieve the projected 9,3 percent economic growth rate this year. The growth would be largely supported by agriculture and mining sectors which are expected to expand by 19,3 and 44 percent respectively.

Inflation is expected to end the year at 4,5 percent on the back of improved production and fiscal discipline.

"I am pleased to report that economic growth remains on course, driven by robust performance in agriculture and mining, with moderate contributions from tourism and manufacturing," said Minister Biti.

He announced a US$40 million fund for distressed and marginalised areas in partnership with a local pension house. Government will avail US$20 million with the remainder coming from the partner.

Government is also putting together a US$40 million insurance and pension sectors housing fund from resources mobilised from the pension and insurance industry.

On the budget performance, Minister Biti projected a deficit of about US$700 million due to increased wage bill and huge cost of importing grain.

He said budgetary pressures compounded by unbudgeted employment costs were likely to reach US$404 million by year end.

Government had provided the wage bill of US$1,3 million under the US$2,7 billion 2011 budget.

"While the 2011 National Budget provided expenditure of US$2,7 billion, indications remain that, as pointed out above, the revenue performance to date shows a half year shortfall of US$65 million," he said.

"This is at a time when we face additional expenditure pressures totalling about US$550 million related to critical priority programmes in a number of areas.

"I have to appeal to my colleagues in the Cabinet committee on resource mobilisation to assist in raising this money."

Zimbabwe is set to import about 300 000 tonnes of maize to meet an impending shortfall.

Minister Biti said proceeds from diamond revenue have been earmarked to meet the additional employment costs for State workers.

He said there was a need for transparency over diamond revenue "as non-performance" of this sector poses serious budgetary and wage payment challenges.

Minister Biti expressed concern at the low uptake of funds by the private sector in the face of the existing liquidity crunch in the country.

He said during the first six months of the year, disbursements from approved facilities of about US$1,6 billion amounted to US$613,9 million.

About US$13 million was disbursed under the US$70 million Zimbabwe Economic Trade Revival Facility.

"The low uptake of lines of credit can be attributed to capacity issues, protracted approval process by the lenders and the delays in fulfilling conditions by the local banks," said Minister Biti.

In the six months to June this year, the country registered a trade deficit of US$1,4 billion with imports coming at US$3,4 billion against exports of US$2 billion.

On foreign direct investment, Minister Biti said the ability of the country to attract investment was being undermined by the perceived high profile country risk.

Government was finalising importation of coins from the US.

The coins are likely to be unveiled before end of this year.

Highlights

• Duty on foodstuffs re-introduced

• 9,3 percent economic growth projection maintained

• US$40 million Distressed and Marginalised Areas Fund for industry

• US$20 million for SME support

• ZETREF to be democratised

• US$700 million budget deficit forecast

• Duty on raw material to be reduced by September 1

• Rebate of duty on prepaid meters granted

• No supplementary budget

• US$40 million housing fund from insurance and pension industry

• Rebate on duty for motor vehicles and capital goods for tourism sector reinstated

US dollar coins likely to be unveiled in Zimbabwe before end of the year

2011-08-02T09:48:00.000+02:00

US dollar coins likely to be unveiled in Zimbabwe before end of the year

http://www.bulawayo24.com
by Nare Msupatsila
2011 July 27 07:39:45

Presenting the Mid Year Fiscal Policy Review Statement, Minister Biti said
the Zimbabwe government was finalising importation of coins from the US. He
indicated that the coins are likely to be unveiled before end of this year.

Earlier this year there were some reports that the US govt agreed to supply
coins to Zimbabwe. The United States Federal Reserve is said to have agreed
to supply coins and replace soiled notes to Zimbabwean banks in a bid to end
change problems in the economy.

According to sources, representatives Bankers Association of Zimbabwe led by
its president and FBC Bank boss John Mushayavanhu met Finance minister
Tendai Biti sometime back to map a way forward in dealing with change
problems in the economy.

The sources, said the US Federal Reserve have "formally" agreed that
Zimbabwe's economy is now dollarised and will now supply Zimbabwe with coins
and replace notes.

Officials from the Finance ministry are said to have finalised all the nuts
and bolts to the US dollar coins with the Fed and will soon depart for the
US to airlift the coins to Zimbabwe.

Banks and government, according to the sources have agreed to charter an Air
Zimbabwe flight to pick up the coins in the US. The flight costs will be met
by both government and banks.

Zimbabwe has been saddled with change problems since the introduction of
multi-currencies in February 2009.

Retailers are offering consumers credit notes, tokens and even sweets to
settle small change.

Mushavanhu declined to comment on the matter referring all questions to Biti
who was unreachable at the time of going to press.

In his 2011 Mid Term Budget Policy statement, Biti yesterday said government
had engaged the United States Federal Reserve over possible provision of
coins and replacement of soiled notes to ease small change problems in the
country.

Biti said: "I am pleased to advise on the fruitful interactions with the US
Department of the Treasury which stands ready to facilitate access to
acquisition of smaller denominated coins and replacement of soiled notes
through the US Federal Reserve and commercial banks. I will, therefore, be
finalising on this in conjunction with the banking system, that way
resolving the matter of challenges with change and coins."

"The availability of both US dollar and rand coins will do away with the
challenges posed by the current need to apply cross rates in giving change
in rand coins for transactions undertaken in US dollars," Biti said. "Whilst
this problem should be alleviated by electronic payment systems, the large
size of the informal sector and the lack of infrastructure for electronic
payment systems in rural areas necessitate the availability of large volumes
of small denominations".

Miners in Zimbabwe who don’t submit an approved plan by Sept. 30 on how they will meet local ownership laws will see the government “kick them out,” said Indigenization Minister Saviour Kasukwere.

2011-07-25T11:06:00.000+02:00

Miners in Zimbabwe who don’t submit an approved plan by Sept. 30 on how they will meet local ownership laws will see the government “kick them out,” said Indigenization Minister Saviour Kasukwere.

The government has rejected 175 proposals from companies on how they will comply with the legislation, Kasukwere said in the capital Harare today. Units of Impala Platinum Holdings Ltd. (IMP), Aquarius Platinum Ltd., Rio Tinto Plc and Anglo-American Plc. are among companies mining in the country.

Zimbabwe’s new Indigenization and Empowerment Act gave foreign and white-owned mines until June 2 to show how they would cede or sell 51 percent of their companies to black Zimbabweans or “state entities.” The law doesn’t make it clear what a state entity is, or how payment would be made to companies whose assets are acquired.

Kasukuwere said June 27 that all foreign miners had submitted plans, adding that they “fell short” of government expectations.

Mwana Africa Plc. and closely held Metallon Corp. also operate in the country, which has the world’s second-biggest reserves of platinum and ferrochrome after South Africa.

Gold, nickel, diamonds, coal and emeralds are also mined in the southern African nation, where political conflict led to economic recession between 1998 and early 2009.

Investors Discouraged
Harare-based RioZim Ltd., subject to the 51 percent law, said May 31 that foreign investors it had been courting to fund expansion by the gold, nickel and coal producer had withdrawn because of the ownership rules.

Bob Gilmore, a spokesman for Impala Platinum in Johannesburg, said he was unable to comment immediately on the the minister’s comments.

Calls to Pranhill Ramchander, an Anglo American spokesman in Johannesburg, weren’t immediately answered. Tony Shaffer, a spokesman for Rio Tinto, also didn’t immediately answer calls to his office or mobile phones in London.

No supplementary budget this yr: Biti

2011-07-15T09:08:00.000+02:00

No supplementary budget this yr: Biti

Posted by By Our reporter at 14 July, at 09 : 46 AM Print

FINANCE Minister Tendai Biti says there will be no supplementary budget this year when he presents his mid-term fiscal policy statement this month.

He said the country’s economy did not have the capacity to fund any extra budget since it was already struggling to raise money to finance this year’s budget.

He was responding to a question from Mbire MP Paul Mazikana (Zanu-PF) during a question-and-answer session.

Mazikana had asked him whether he would present a supplementary budget to cater for the civil servants’ salary increment.

“The position is that on July 26, I will present a mid-term fiscal policy review. There will be no supplementary budget. A supplementary budget presupposes that there is a capacity to increase your budget. There is no capacity,” said Minister Biti.

He said Treasury had only recorded a significant inflow of money in March and June, while the rest of the other months, revenue inflows were subdued.

He said this painted a gloomy picture in terms of financing the 2011 national budget of US$2,7 billion.

“We were able to break the US$230 million monthly revenue collection target for these two months because they are the quarterly payment dates on corporate tax,” he said.

There will be a US$500 million budget deficit arising from the January salary increment, purchase of grain to complement strategic reserves, constitution-making process and travelling costs.

“We have spent over US$30 million on travelling and this US$500 million deficit does not include the cost of the referendum the country will hold,” he said.

Minister Biti urged people to brace for a “collapse of fiscal space and gnashing of teeth as people should tighten their belts.”
Any additional expenditure outside the budgeted programmes would mean other allocations or areas would suffer, Minister Biti said.

He said Government ought to get rid of 75,000 “ghost workers” and improve transparency and accountability on diamond sale proceeds.

He slammed the International Monetary Fund, which he said did not accord small and poor nations equal treatment, yet the United Nations treated all nations equally.

Responding to another question, Prime Minister Morgan Tsvangirai, expressed concern at ministers who failed to attend the question and answer session.

Nyanga South MP, Willard Chimbetete (MDC-T) had implored the PM to take “restrictive measures” (sic) against ministers who failed to attend the sessions.

“We are seized with this issue; in fact every Cabinet meeting on Tuesday we table all questions that are on the Order Paper. I will ensure that we give focus to the business of this House. I, however, see that there has been some improvement today,” said the PM.

Industry and Commerce Deputy Minister, Mike Bimha, said Government was now in its final stage before the operationalization of the deal it signed with Indian company, Essar for the joint venture to revive Zimbabwe Iron and Steel Company.

He said the loose ends that needed to be tied related to other ministries that dealt with power generation (Ministry of Energy), railway (Ministry of Transport) and Mines Ministry.

“The hope is that by the end of this month we should see the finalisation of the agreement with these other ministries.

“We would then not only see the payment of salaries but the payment of debts, locally and externally,” said Deputy Minister Bimha.

He said there were a number of issues that ought to be discussed and some of the activities would entail Essar making extra investments in other areas such as power generation and improvement of the railways.

He had been asked when salaries for workers would be paid and whether it was true that Government had surrendered 80 percent of its iron ore reserves to Essar.

Constitutional and Parliamentary Affairs Minister Eric Matinenga said the Constituency Development Fund for this year would only be paid to those legislators that had properly accounted for the US$50 000 given to them in last year’s budget and submitted returns.

He said only 60 MPs had submitted returns.

Air Zimnbabwe

2011-05-31T10:29:00.000+02:00

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

2011-05-17T08:03:00.000+02:00

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

2011-05-15T08:30:00.000+02:00

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

2011-05-09T09:34:00.000+02:00

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

From John Robertson

2011-04-17T16:39:00.002+02:00

Annual inflation went down to 2,67% in March from 3,04% in February, according to the latest Consumer Price Index table from Zimstat. However, the monthly rate went up from 0,49% in February to 0,75% in March. The biggest monthly increases were recorded by Education at 3,57%, Transport at 2,5% and Restaurant & Hotels at 1,44%. Of the annual increases, the biggest was for Transport at 8,44% and Education at 4,9%. The education figures do not include school fees, the line for which has been left blank ever since the rebased index was re-launched with the base set at December 2008 = 100.

From John Robertson

2011-04-13T14:17:00.000+02:00

Mining output reached a value of US$1 381 005 628 in 2010, which compares very well to the US$671 593 936 earned in 2009. In the first two months of 2011, the not yet complete set of figures show earnings at US$240 million.

I have attached a table showing the 2010 monthly production figures for the principal minerals other than gemstones. Some production volumes are not recorded as systematically as in previous years, such as black granite and limestone, but hopefully the records for these will be restored in due course.

I have received two legal opinions on the demands made in the recent Government Gazette Extraordinary. One of these ends with this comment:

The mining notice is legally unenforceable and unintelligible.

However, ZANU PF supporters will threaten to use extra legal means to

enforce whatever interpretation they decide to put on it.

This threat will be sufficient for most companies to feel compelled to cut a deal.

The notice thus aids and abets this extortion. It is little more than racketeering by regulation.

The other concludes:

Finally, it is noted that there has been substantial criticism of the indigenisation legislation on a number of occasions by business leaders, the Zimbabwean Chamber of Mines, the Zimbabwe Congress of Trades Union, the Zimbabwean Reserve Bank Governor, the Zimbabwe Chamber of Mines, business leaders, economists, diplomats, potential foreign investors, the South African Reserve Bank Governor, the US Chamber of Commerce, the International Monetary Fund, European Union representatives and others.

The criticisms levelled include the following: that the legislation places the burden of empowering indigenous Zimbabweans on current owners of businesses irrespective of whether or not those owners benefited from past privileges; that the legislation aims to achieve empowerment through the transfer of ownership of assets rather than through the creation of an environment which enables indigenous Zimbabweans to earn for themselves; that devoting scarce funds to empowerment acquisitions will reduce the funds available for the much- needed capitalisation and expansion of existing businesses and for starting-up new businesses; that the programme is not going to empower ordinary indigenous Zimbabweans, as opposed to those who are well-off or well-connected; and that the programme is deterring foreign investment, to the prejudice of the national economy.

If you would like to receive copies of these two statements, please let me know.

It is my belief that the legislation is so flawed that mining companies have many sound reasons to challenge any demands made upon them. The best option would be to argue for the laws to be rescinded rather than amended. However, in the event of no progress being made on that course, the government’s belief that compensation for the 51% it is claiming of every company is met in full from its “contribution” of the minerals being mined, or yet to be mined, deserves to be challenged in the strongest terms. If this is not successfully challenged, new mining investment will very nearly disappear.

From John Robertson

2011-03-29T09:20:00.000+02:00

The Government Gazette Extraordinary published on Friday revises the indigenisation demands being placed on the mining industry. In essence, the changes are that:

(1) The disposal of 51% of the shares in mining companies to indigenous Zimbabweans will apply to all companies with a net asset value of more than one US dollar (US$1)

(2) The disposal of the shares to indigenous Zimbabweans must be completed by September 25 2011

(3) Affected companies must submit indigenisation plans by May 9 2011.

Previously, the indications were that companies with a net asset value of less than US$500 000 were exempt from the indigenisation legislation and that the disposal of the shares had to be accomplished within five years of the publication of the regulations.

The single-page publication is attached. Without referring to the earlier definitions of Indigenous Zimbabwean, this document adopts the phrase “designated entity” to describe the authorised recipients of the shares that companies must relinquish. The former definition, “Any person who, before the 18th of April 1980, was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such persons” is now replaced by these “designated entities”, which include:

(a) the National Indigenisation and Economic Empowerment Fund
(b) the Zimbabwe Mining Development Corporation
(c) any company formed by the Zimbabwe Mining Development Corporation
(d) a statutory wealth fund
(e) an employee share ownership scheme, or trust, or community share ownership scheme

Paragraph three refers to the valuation of asset values having to take into account the State’s sovereign ownership of the minerals, which requirement is clearly an attempt to reduce the amount that will have to be paid for the shares by the designated entities. However, no commitment is imposed on the designated entities to actually pay for the shares by September 25 or even to meet the bill for these by the end of the further three months that “on good cause” might be granted as an extension. Non-payment for what is being purchased would normally be considered very good cause for not parting with the asset, but it appears that government has no intention of offering the mining companies the right to cancel the sale of their shares on such grounds.

However, in most, if not all cases, the creation of shares that can be sold will involve the company in doubling the number of shares in issue and thus halving the nominal value of all existing shares. This is simply because the current shares are the property of the individuals who bought them and these individuals have no obligation to halve their own holdings. The simplest approach for each company might be to hold a special shareholders’ meeting at which they would have to seek the approval of all shareholders for a share split or a one-for-one rights issue. This would have to be accompanied by a request that the existing shareholders do not exercise their rights. The new shares thus created could then be offered to designated entities in exchange for the appropriate payment.

Finding the sums needed to pay for 51% of the mining industry will be quite a challenge. Not many of the mines are listed on the Zimbabwe Stock Exchange, so a market capitalisation calculation on the quoted shares adds up to a very small part of the answer. Allowing for the mines that are already in indigenous hands, half the value of the balance could easily come to more than a billion dollars. Apart from the proposed impractical indigenisation levy, nobody in government has offered a single suggestion on where a sum of that size that might be found, even if a further allowance is made to “account for the State’s sovereign ownership of the mineral”.

In respect of that sovereign ownership value, the State might be forced to accept the practical position that minerals under the ground have no value at all. Finding them, reaching them, extracting them and processing them for sale at prices that exceed all the costs involved is what mining is all about. Burdening the mining companies with huge theoretical costs for yet-to-be realised assets before the process starts is certain to ensure that the minerals remain locked in their buried ore-bodies. It won’t be long before people stop even trying to find them.

The publication of these new regulations is certain to lead to considerable debate and government can be expected to show increasing impatience with companies that appear to the authorities to be trying to undermine the indigenisation process. While the increasing antagonism and inevitable delays in resolving issues will certainly slow the levels of activity in the mining sector, the much more serious longer-term effect of these regulations will be the almost complete arrest of new mining investment inflows.

Even the Chinese investors, who appear to have been assured that the regulations will not apply to them, are likely to continue showing reluctance to commit funds. Part of the reason for this is the fact that the terms and conditions included in each of the Bilateral Investment Promotion and Protection Agreements include clauses that prohibit the Government of Zimbabwe from offering preferential terms to countries with which each BIPPA country might be competing.

I will do my best to keep you up to date with developments.

Kindest regards,

John

Zimbabwe gets heavy on indigenisation

2011-03-29T08:26:00.001+02:00

Brendan Ryan Mon, 28 Mar 2011 17:36
[miningmx.com] -- SHARES in Impala Platinum (Implats) and Aquarius Platinum (Aquarius) fell sharply on Monday as investors took fright over the seriousness of the Zimbabwe government’s indigenisation demands.

Both groups have significant investments in Zimbabwe’s fledgling platinum sector, where Implats has just committed to spend $450m on the Phase 2 expansion of its Zimplats operations.
The two have been in discussions with the Zimbabwean authorities for the past two years over the proposed indigenisation requirements.
The belief until now was that a “reasonable” outcome was likely, which would reduce the official demand for a 51% controlling indigenous equity stake to the 26% level ruling in South Africa.

That may have changed on March 25, when a notice was gazetted stating every mining company had to “submit an indigenisation implementation plan complying with this notice within 45 days of the date of publication of this notice”.

The real kicker was in the final clause, which specified the way in which the value of the shares or other interests to be acquired by the indigenous partner would be calculated.

According to the notice, this valuation would take into account “the state’s sovereign ownership of the minerals or minerals exploited or proposed to be exploited by the non-indigenous mining business concerned”.

That raises the spectre of nationalisation of assets and the issue of compensation for companies already operating in the country and paying royalties to the government on ground to which they had been granted mining rights.

According to a platinum analyst: "You can interpret that clause any number of ways, but it’s serious. The platinum boys are engaging with the Zimbabwe government as a matter of urgency.”

Implats CEO David Brown told Miningmx: "From our point of view, we don’t see a material impact at this point in time and we remain in discussions and negotiations with the Zimbabwe government.

“Our understanding is that the 51% indigenisation requirement will be made up through a number of elements. These will include our investments in the country’s infrastructure and recognition of the mining ground that we gave back to the Zimbabwean government to secure title to the ground we now hold. “

A statement by Aquarius said that its Zimbabean subsidiary - Mimosa – “is engaged in discussions with the relevant authorities in order to establish a position that will be compliant with the act and beneficial to stakeholders”.

The writer owns shares in Implats and Aquarius.

Bennett, party at odds over investment in Zimbabwe

2011-03-29T08:22:00.000+02:00

Old Mutual’s Zimbabwean subsidiary receives support for its investment in Zimbabwe from the main MDC-T opposition party.
SURE KAMHUNGA
Published: 2011/03/29 07:26:56 AM

OLD Mutual ’s Zimbabwean subsidiary yesterday received unlikely support for its investment in Zimbabwe from the main MDC-T (Movement for Democratic Change) opposition party.
This is after the party distanced itself from calls by one of its senior members, Roy Bennett, who wants the insurer to disinvest from two companies he says represent the face of alleged repression taking place in the embattled country.
Mr Bennett, who is in self- imposed exile in SA, has mounted a campaign to force Old Mutual to cut its ties with Zimbabwe Newspapers (Zimpapers) and Mbada Diamonds.
The two firms are directly owned by the state. Old Mutual has an indirect stake in Mbada Diamonds of 1,5% via its stake in New Reclamation Group. It also owns about 18% of Zimpapers.
Mr Bennett last week accused Old Mutual in Cape Town of investing in companies that are associated with the former Zimbabwe ruling Zanu (PF) party.

This is despite the fact that MDC-T is a partner with Zanu (PF) in the same government that he is critical of . The other partner is a smaller splinter party formed by disgruntled members from the original MDC party.

Mr Bennett wants Old Mutual to disinvest from the two firms, particularly "its blood-stained investment" in the diamond mine. The mine has been at the centre of controversy over allegations of rights abuses of villagers near the mine in eastern Zimbabwe. But the global diamond trade watchdog, the Kimberley Process , has given Zimbabwe the green light to export Chiadzwa diamonds.

Mr Bennett says some of the newspapers owned by Zimpapers are "spewing hate speech".

A spokesman for Mr Bennett’s party, Nelson Chamisa, yesterday said the public spat between Old Mutual and Mr Bennett did not represent the party’s official position. "That is Bennett’s view, not the position of the party," said Mr Chamisa, who is also minister of information and communications technology.
Mr Bennett was unavailable for comment at the time of going to press. With Dumisani Muleya
kamhungas@bdfm.co,za

RSS Feed Nephew of Zimbabwe's President Mugabe in Move to Take Over Mobile Provider

2011-03-18T08:29:00.000+02:00

Sources said President Mugabe’s nephew, Leo Mugabe, has approached the president and asked him to issue a new Telecel license to his group, the Zimbabwe Wealth Creation and Empowerment Council. That’s an umbrella for the Affirmative Action Group, the Indigenous Business Women’s Organization, the National Miners Association, the Zimbabwe War Veterans Association and several other organizations.

Sources informed on the situation said Leo Mugabe claims that this group has a right to purchase a majority stake in Telecel Zimbabwe as agreed when the company was set up. At present, Telecel Globe of Egypt holds a 60 percent stake.

Ousted Telecel Chairwoman Jane Mutasa told Parliament today that Telecel is operating without a license and many top Telecel officials, including James Makamba, another former chairman, are based outside Zimbabwe at present.

Telecel Chief Commercial Officer Anwar Soussa said the provider is doing business as usual despite the wrangle. “I cannot say anything about Telecel shares but in terms of conducting business, we are operating and exploring more opportunities,” he said.

Economic commentator Walter Mbongolwane said Leo Mugabe is trying to seize Telecel from its rightful owners through manipulation of Zimbabwe's indigenization laws.

“We are waiting to see what will happen to this company which is being targeted by indigenous groups that are fully aware of the huge benefits of a telecommunications entity in the mobile phone sector,” Mbongolwane told reporter Gibbs Dube.

Inflation falls in February

2011-03-17T08:05:00.000+02:00

17/03/2011 00:00:00
by Reuters

ZIMBABWE’S annual inflation slowed to 3 percent in February from 3.3 percent in January, the National Statistical Agency said on Wednesday.

Monthly inflation dropped to 0.5 percent from 0.9 percent previously.

Finance Minister Tendai Biti said early this month inflation would end 2011 at 4.5 percent year-on-year and reiterated that the economy would grow as much as 9.3 percent.

Zimbabwe’s economy was battered by hyper-inflation which reached 500 billion percent in 2008. The price index has since dropped to single digits following the adoption of multi-currencies in 2009.
Inflation quickened to 3.3 percent year-on-year in January.
Biti said growth this year would be driven by agriculture and mining.

"We have a bumper crop this year and I believe that in terms of maize production we will be second only to South Africa in the region.”

Zimbabwe investment conference allays fears

2011-03-14T15:46:00.000+02:00

By Southern Times Writer 14-03-2011 E-mail this article to a friend

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Harare - THE Zimbabwe Investment Conference held in Harare last week helped dispel misconceptions that foreign investors had about Zimbabwe, with strong emphasis on the need for the country to effectively communicate its policies to attract foreign direct investment.

At the end of the conference delegates felt progress had been made in correcting misconceptions and in highlighting main issues of concern to investors.

The meeting established indigenisation, political developments and policy predictability as major concerns investors wanted a clear position on. The conference was co-hosted by Euromoney Conferences and the Government of Zimbabwe.

The two-day event, which ended in Harare on Wednesday, was attended by over 300 local and foreign delegates, demonstrating the level of investor interest in Zimbabwe as a leading emerging market in Africa.

German Ambassador to Zimbabwe Mr Albrecht Conze said the conference managed to clarify issues that had been of concern over the past year.

He said the issue that raised most misconceptions was centered on indigenisation and economic empowerment.

European investors and their media perceived the indigenisation drive as an initiative which could result in the incarceration of non-compliant firms.

The conference has gone a long way in clarifying issues that were of concern that have been around for a year now. It has been over a year since regulations on implementing indigenisation were gazetted and I can tell you on very blunt terms how they were received by foreign investors.

'You don't give us 51 percent otherwise you go to jail! That was the message that was not intended, but otherwise arrived at. But I think everybody has come a long way now. Thirteen (sectoral) committees were set up and are now due to present their results to the Government.

He said the Government should articulate its position well and indicate that in special cases, such as in the Essar-Zisco deal, it was ready to negotiate.

Ambassador Conze said issues such as community ownership schemes, empowerment credits and sovereign wealth fund that were not part of the original indigenisation regulations needed to be explained.

'I think the Government is now able to present its position much better, but they must also communicate to the foreign investor what it is and only then can someone like me tell German investors the conditions and risks.

'I will be able to say in spite of these risks you can be able to come and invest. I need to be enabled together with my European colleagues as well to propose Zimbabwe as a foreign investment destination,' he said.

He said Zimbabwe had been out of the African investment context for a decade and needed to put special effort to rebuild the lost investor confidence.

'That is why Zimbabwe has special obligation to show to the outside world that conditions are now ripe for investment,' said Ambassador Conze.

Dwelling more on empowerment as opposed to indigenisation would help the country achieve much, he said.
Europe reportedly already had a position on how they felt the country could deal with its US$7,1 billion debt to the Paris Club lenders.

Commenting on the same issue Euromoney Conferences director Mr Christopher Garnet said the event had succeeded in achieving its objective.

'The two principal things that Zimbabwe needed to take away from this conference are the need to address the question of the debt, that is, negotiate together and restructure together. Secondly, it needed to be transparent with local and international investors and ensure certainty,' he said.

He added the Government needed to ensure clarity on the indigenisation law, equal treatment in application of the equity law and ensure that its laws and policies were consistent and predictable.

'Investors hate unpredictability,' he said.

Mr Garnet said there was misunderstanding on what had been achieved in Zimbabwe in terms regenerating the economy considering certain media houses in Britain were still talking about hyperinflation in Zimbabwe.

These sentiments were shared by Lord Paul Boateng, non-executive director of Aegis Advisory, a global risk management and mitigation firm and former British Member of Parliament and Minister of Health and Social Services.

He said there were a lot of negative information on Zimbabwe among investors, which formed misconceptions that needed to be corrected urgently.

'It is these misconceptions, formed due to lack of correct information, that we need to get out there and correct,' said the Aegis Advisory non-executive director.

Invictus Investment Management managing director Mr Ritesh Anand said Zimbabwe needed to create investor-friendly conditions to attract foreign investment.

There was need for practical action to create the right conditions as touting about potential things such as good climate were not good enough.

'Zimbabwe has tremendous potential. It has potential to become a US$100 billion economy, but do the investors feel confident?' said Mr Anand.

In interjection, Indigenisation Minister Saviour Kasukuwere said some of the investors' concerns were unfounded, considering Zimbabwe was probably one of the safest investment destinations on the African continent.

'If you are investing in a country where the people do not articulate their needs then that country is not the right place for investment,' he said.

Indigenisation and economic empowerment regulations compel foreign firms with a net asset value of above US$500 000 to sell at least 51 percent to locals.

Minister Kasukuwere explained that all empowerment transactions would be carried on a commercial basis where the equity value would be fully paid for.

He stressed that the EU and the US needed to lift their economic embargo which was suffocating business..

Finance Minister Tendai Biti and Economic Planning and Investment Promotion Minister Tapiwa Mashakada said Zimbabwe was ready for FDI and would abide by international rules to build a genuinely free market and modern economy.

From John Robertson

2011-03-08T08:32:00.000+02:00

Reserve Bank of Zimbabwe’s claims

Zimbabwe seems to stumble from one self-inflicted crisis to another, led by politicians who demand the right to be taken seriously. In the continuing debates outside the country, the behaviour of these politicians has generated lots of sympathy for Zimbabwe’s long-suffering population, but it has qualified the country’s leaders for nothing but ridicule.

Some of the ridicule has come from deeply flawed official interpretations of events, mostly characterised by demands that the results achieved be defined as resounding successes. These claimed successes are accepted by the few who argue that the destruction of most of the country’s productive capacity was intentional.

This tiny fraction of the population claims that Zanu PF can achieve its absolute control mission only by breaking down the physical and financial structures built since the country was colonised. Their view seems to be that success can be permitted to survive only if the people who brought it about are supporters of the party. And although the party does not publicly admit to supporting this thinking, it repeatedly demands respect for its “sovereign right” to confer impunity upon those commissioned to purge the country of political opponents.

The inevitable and massive human rights violations that were soon being documented led directly to restrictions being imposed from abroad on senior Zimbabwean officials who were identified as participants or promoters of these crimes. Zanu PF was quick to claim that sanctions applied to such important people were sanctions against the whole nation. In its repeated and increasingly impassioned calls for the restrictions to be lifted, in effect it has been asking that the international community should also grant impunity to Zimbabweans accused of crimes against humanity.

Every item on Zimbabwe’s long list of difficulties since 1997 is now being blamed on the countries that denied travel visas to these officials, or stopped them from drawing money from bank accounts opened in these countries.

While such claims are absurdly fictitious, the difficulties are real enough. But they can all be linked directly to odious policy decisions, and despite these clear linkages, the policy decisions are still being vigorously defended.

In remaining determined to stick with ideas that caused severe losses, the party protests that nobody is entitled to challenge its right to make such choices. However, its defence of bad ideas partly accounts for the unwillingness of international financial organisations to extend further loans. It is not in the mandate of these institutions to make up for huge losses caused by destructive ideas that are still being followed.

However, even if they wanted to offer tangible help, they couldn’t. These institutions have rules, all of which are well known to Zimbabwe’s authorities. One of these is that further loans may not be granted to borrowers who are in default in their repayments of previous loans. Knowing this, but deliberately misinforming the population that world development institutions are applying sanctions to shorten the lives of Zimbabwe’s poorest is simply and disgracefully dishonest.

Banks to return SA coins

2011-03-01T07:18:00.000+02:00

Monday, 28 February 2011 20:18

Herald Reporters

LOCAL banks are set to return R8 million worth of coins to South Africa that they have been holding onto since last year because retailers have resisted buying them to ease change shortages that consumers have long complained about.

President of the Bankers Association of Zimbabwe Mr John Mushayavanhu yesterday said they had been sitting on the coins for nearly eight months now.

A shortage of rand and US coins in circulation means people often spend more than they intend to in shops so that their bills can become round figures.

Shops also give out credit notes indicating how much change customers are owed, but these are only redeemable in the specific branches where they are given.

The Consumer Council of Zimbabwe has said this has contributed to the high cost of living in Zimbabwe as people spend more than they want to.

Banks had sought to ease the problem by buying coins in South Africa, which they offered retailers at prevailing rand-US dollar exchange rates, but the latter appear not to be interested.

Said Mr Mushayavanhu: "We have already received app-roval from the South African Central Bank and we will be returning the coins anytime now."

Mr Denford Mberi of the Retailers Association of Zimbabwe is on record as saying the banks were trying to profit from the coins by selling them higher than the exchange rate.

Many Harare retailers have maintained an artificial rand-US coins exchange rate of 10:1.

This means R5 is equivalent to 50 US cents.

The actual rate would have R5 at around 71 USc as the South African currency has long since gained on the greenback.

Oddly, Harare's informal traders apply more realistic rates and even commuter omnibus operators have tried to give people value for their money in coin terms by charging a normal trip at R4 or 50 USc.

Street vendors also have coins and these are easily changing hands, a development that has stoked people's fury as to why formal establishments cannot give them a fair deal as well.

Harare retailers have failed to explain why they can apply the prevailing rate quite easily on notes, but not on smaller denominations and for change purposes.

AfroFood Julius Nyerere Way branch said they only applied prevailing rates to amounts of R50 or more, but would not explain why this was so.

TM Mbuya Nehanda Street, OK Robson Manyika and Spar Joina City also had no reason as to why they undervalued South African coins.

Some of these retailers have branches in Bulawayo where similar problems are not being experienced.

Mr Mberi referred all questions to a Mr Ndebele at Truworths' headquarters in Harare, who was not available for comment.

Finance Minister Tendai Biti has for months said Zimbabwe will soon get US coins, but these have not been seen.

People have also questioned why the finance minister is prepared to bring in coins from across the Atlantic Ocean when the South African option is readily available much closer home.

The public has called for legislation to be put in place to force retailers to be fair.

"The Government must make it illegal for this daylight profiteering which these shops are practising.

"They are forcing us to buy useless things like sweets and if you add up all the money that people are forced to use, you will find that they have extra sales of over US$100 in each shop a day," railed Mr Cosmas Dumba of Warren Park who had been forced to take lollipops as change after buying a cough mixture in OK First Street.

The situation is much better in Bulawayo where the actual exchange rate is applied.

For instance, kombis in Bulawayo generally charge R3 per trip and coins are readily available as change in just almost every shop.

From John Robertson

2011-02-28T08:06:00.000+02:00

Last April you might recall my observation, "Several of the changes recorded by the Central Statistical Office in March 2010 seem likely to cause some surprise. Rents are said to have fallen by 16,4%...".

Well, the statistics office has reconsidered its claim that the figures collected showed that rents had fallen. In the January figures, the new figure is shown against a revised December figure, and the figures going back to July 2010 have also been revised upwards. It seems likely that the four months before that have also been revised, but the latest pages provided to not offer the records for those months. I will try to close the gap, which shows up in the graph, but if the stats office does not offer them now, we will get them in the tables to be published in the same months of this year.

The changes shown in the January 2011 figures are almost all minor, but as expected, passenger fares rose by a significant 12,59%. Apart from the indistinct Miscellaneous Other Services increase of 16,56%, the changes were mostly below 1% and the prices of 18 items went down slightly.

Price increases recently seen in world markets for many commodities seem certain to add to production costs, specially for food items, so it seems probable that the costs of many of the goods being imported will start rising a little more rapidly in the coming months. However, at 96,3 the index is still below the December 2008 = 100 figure, so average prices are still lower than they were two years ago. Current estimates suggest that we will get back to 100 only towards the end of this year.

Kindest regards,

John

From John Robertson

2011-02-25T08:39:00.002+02:00

The annual percentage change in the Consumer Price Index went up slightly from 3,24% in December to 3,51% in January, according to the Zimstat tables issued today. The month-on-month percentage change showed a 1,1% increase in January, the largest portion of which came from Transport, which increased by 5,16% after passenger fares went up by 12,59%. The expected rise in fuel prices showed a much more modest 2,2%, which suggests that the sampling carried out for the prices survey did not include the service stations that had increased prices the most.

Zimbabwe Government Orders State Power Utility to Reverse Rate Increase

2011-02-24T08:50:00.000+02:00

Energy Minister Elton Mangoma said the decision was made by government after the potential impact on business and consumers became clear
Gibbs Dube
Washington 23 February 2011

Consumer Council of Zimbabwe Director Rosemary Siyachitema earlier blasted the troubled parastatal utility accusing it of misleading consumers when indicating the proposed rate increase was 30 percent when it was actually 50 percent

The Zimbabwean government has ordered the Zimbabwe Electricity Supply Authority to suspend a rate increase of 30 percent which it recently announced for fear that higher costs of power to consumers and business will cause broad economic damage.

Energy Minister Elton Mangoma said the decision was made by the government after the potential impact on households and enterprises became clear.

Mangoma said ZESA must consult consumers before proposing further rate increases. The proposed increase infuriated ZESA customers many of whom were already up in arms about massive electric bills despite chronic power outages.

Mangoma said it may take time for ZESA to come up with a new pricing scheme.

“We cannot set a specific time-frame for this as we need wide consultations on this issue,” he said.

ZESA spokesman Fullard Gwasira confirmed that the state utility has suspended the increase. “”Government is a major stakeholder in our day to day operations and if they order us not to increase rates, we comply with such directives,” Gwasira said.

Consumer Council of Zimbabwe Director Rosemary Siyachitema earlier blasted the troubled parastatal utility accusing it of misleading consumers when indicating the proposed rate increase was 30 percent when it was actually 50 percent.

Implats Revenue Up On Metal Prices, Zimbabwe On Track

2011-02-17T15:45:00.000+02:00

By Devon Maylie
Published February 17, 2011

LONDON -(Dow Jones)- Impala Platinum Holdings Ltd. (IMP.JO), the world's second-largest producer of the metal, Thursday reported a rise in net profit for the first half of fiscal 2011 due mainly to increased volumes and stronger dollar metal prices, and said it's on track with its expansion project in Zimbabwe.

Impala reiterated that it plans to produce 1.85 million troy ounces of platinum in 2011 with 940,000 ounces of that coming from the South Africa-based Rustenburg mine.

Output in the first half of the year rose 6% to 952,000 ounces, the Johannesburg-based miner said Thursday.

The miner said output at its majority-owned Zimplats Holdings Ltd. (ZIM.AU) rose by 9% to 89,000 ounces. The first phase of the expansion project at the Zimbabwe-focused company was completed and the second phase is underway, chief executive David Brown said.
A Nice, Wholesome Hooters Girl for the Kids Coca Cola's Secret Recipe Allegedly Revealed by Radio Program How Much it Costs to Attend Super Bowl XLV House Begins Debate Over Plan to Chop Spending for Remainder of 2011 7 Tips for Negotiating With The IRS "The Phase Two expansion at Zimplats, which forms a key part of our growth strategy to 2.1 million ounces of platinum by 2014, has commenced and is progressing satisfactorily," Brown added.

The miner is holding discussions with the Zimbabwe government over how Impala will address the new law that requires companies to sell a 51% stake to locals.

"We are encouraged that government wants a dialogue with us given we are a major employer," Brown said. "Once we get clarity we will know how to expand further. Phase Three needs that clarity."

Impala Platinum said demand for platinum and palladium will remain strong and it forecasts the price of palladium to exceed $1,000/oz beyond 2012. For this year, it expects platinum to trade between $1,725/oz and $1,925/oz. It sees palladium between $775/oz and 950/oz and rhodium between $2,250/oz and $2,600/oz.

South Africa produces about two third of global platinum output a year. Prices on the spot market are currently trading around $1,823.25/oz and palladium is at $833.50/oz.

Impala Platinum revenue for the first half of fiscal 2011 of 15.32 billion rand compared to 11.12 billion the year before. Capital expenditure for the half year totaled ZAR2.4 billion, compared to ZAR2.2 billion in the previous half year.

Copyright © 2011 Dow Jones Newswires

Zim to stick with foreign currencies: Mutambara

2011-02-14T07:36:00.000+02:00

13/02/2011 00:00:00

by Business Reporter
Sticking with it ... Arthur Mutambar

DEPUTY Prime Minister Arthur Mutambara has said Zimbabwe will continue to use foreign currencies until capacity utilization improved to levels that can support the value of a local currency.

Mutambara said Zimbabwe should continue to pursue various economic reforms before rushing into making currency changes.

He was addressing delegates who attended a recent London Stock Exchange symposium in Harare.

Once considered among the highest value currency units in the world when it was it introduced in 1980, the Zimbabwe dollar was ditched in 2009 when it was virtually worthless, battered by political turmoil in the country and hyper-inflation.

The country has been using foreign currencies since with the Botswana Pula, the South African Rand and the United States dollar among the most popular.

Mutambara said the policy not to have a local currency in the interim was shared by principals in the inclusive government.

“Our desire is that the Zimbabwe dollar should not come back until we deserve a currency,” said Mutambara.

“At the moment we don’t deserve to have our own currency. Maybe in 2015 or 2020 can we start thinking of our own currency.”

He however conceded that there was no guarantee the policy would not change after elections widely expected sometime this year.

Zimbabwe debt arrears hit USD 4.8 billion

2011-02-08T08:40:00.002+02:00

PTI 03:02 PM,Feb 07,2011

Harare, Feb 7 (ZIMONLINE) Zimbabwe's foreign debt stood at more than USD 6.9 billion at the end of 2010 while the country has fallen behind on its payments to external creditors to the tune of USD 4.8 billion, according to latest data from the central bank. Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono said the southern African country's total external debt stock amounted to USD 6,929 million as at Dec 31, 2010, representing 103 per cent of GDP. This is way above the international debt sustainability benchmark of 60 percent. "The bulk of the country's external debt is owed to multilateral creditors which account for 36 percent of the country's total debt," Gono said. Bilateral and commercial creditors are owed 33 percent and 31 percent, respectively. Central government was the largest debtor at 57 percent while parastatals and the private sector owed 35 percent and 8 percent, respectively. The ballooning arrears on the external debt have prevented multilateral creditors such as the International Monetary Fund and the World Bank from extending new loans to Zimbabwe, demanding that the country clears the outstanding balances first before becoming eligible for further financial support. Harare owes close to USD 1 billion in arrears to the IMF, World Bank and African Development Bank. Economists and the IMF have contended that the only way Harare could pull itself out of its current debt trap is through international debt forgiveness. An IMF staff paper published last July said Zimbabwe was in debt distress and warned that neither the right economic policies nor its mineral wealth could immediately resolve the country's large debt problem. IMF staff estimate that Zimbabwe's foreign debt is projected to reach 151 per cent of GDP by 2015, with 104 pe rcent of GDP in arrears. To win debt relief Zimbabwe would need to improve ties with the international community and qualify for a global scheme for heavily indebted poor countries that would lead to debt cancellation after a two-year economic programme. Zimbabwe has struggled to win donor support despite the formation of a coalition government last year while private capital inflows have fallen over concerns about a government plan to force foreign-owned firms to sell majority shares to locals. ZIMONLINE

Cable reveals Biti's hand in Zimbabwe sanctions

2011-02-07T08:19:00.000+02:00

By: Samantha Chidzero

Posted: Sunday, February 6, 2011 8:47 am

THE Movement for Democratic Change party has been working with the European Union in the maintenance and partial lifting of sanctions against Zimbabwe, despite claims by that party that they have no control of decisions made in Brussels over Zimbabwe.

A confidential cable released on Friday by whistle-blowing website WikiLeaks shows that MDC-T secretary general Tendai Biti has been making recommendations to the EU over who should, and who should not, remain on the sanctions list.

Despite media remarks by Biti that sanctions were hurting the economy and should be lifted, he has been advocating their "partial lifting".

The confidential memo released on Friday entitled "SOMALIA/ZIMBABWE/SOUTH AFRICA: UK MINISTERS ON RESOURCES, SANCTIONS, AND RELATIONS" quotes Biti suggesting the "partial lifting" of sanctions against eight parastatals and at least one individual and informing the EU of dead persons on the sanctions list.
The cable, which originated from the US embassy in London, in January 2010 says the EU "decided to support ... a minimal lifting of sanctions on Zimbabwe by delisting the eight parastatals requested by Finance Minister Tendai Biti."

The memo also revealed that Biti was instrumental in having Zapu leader Dumiso Dabengwa removed from the list: "UK ministers agreed to support within the EU the de-listing of (1) the eight parastatals requested by Zimbabwean Foreign Minister Tendai Biti, (2) any persons on the list who have died, (3) a Lebanese national (NFI), and (4) former ZANU-PF supporter Dr. Dumiso Dabengwa."

The confidential diplomatic dispatch put paid to claims that MDC-T has no control over the sanctions policy in Brussels.
It also shows the duplicity of the MDC-T within the inclusive Government.

Ironically, Biti's MDC-T party has been involved in the EU-Zimbabwe political dialogue team which seeks to normalise relations (including lifting of Art. 96 of the Cotonou Agreement and sanctions) alongside progress in the implementation of the Global Political Agreement.

A separate confidential cable released last week revealed that MDC-T leader Morgan Tsvangirai, who is also the prime minister in the inclusive Government, used a state visit to the US to plot regime change in Zimbabwe.

Last year the MDC-T said it has no control in the matter of sanctions after President Mugabe and his Zanu-PF party charged that the former opposition party had a hand in setting the sanctions and therefore should be held responsible for removing them.

Zanu-PF has maintained that it will not give in to anymore MDC-T demands as it was not playing its role in the lifting of sanctions.

Subject: Poverty Datum Line update

2011-02-02T11:21:00.000+02:00

Subject: Poverty Datum Line update

Figures for December have now been received from the Central Statistical Office and they show that the cost of food went down slightly in December and the average is almost the same as it was in February 2010. For all the items in the index, the December figure was also down on November's and also not far off the figure for February, but all the prices had increased during the year and they peaked out in May for food and in June for the full range of goods in the index.

No details of the items included in the index are provided in these tables, but the differences in costs between different parts of the country are shown. Compared to $466,85, the average cost for the basic requirements for a family of five for the whole country, the figure for Harare is $455,41, for Bulawayo $476,15, for Masvingo $473,57 and for Manicaland $452,29. The highest figure for the country is Matabeleland North at $507,53 and the lowest is Mashonaland Central $430,48.

The fact that a very high percentage of the working population is not earning as much as $400 a month suggests that either most households have more than one source of income, or that the definition of the word “poverty” should be re-examined. In many other countries, the monthly wages are known to be very much lower than the rates of pay in Zimbabwe and they would probably be extremely envious of their Zimbabwean counterparts.

Unfortunately for Zimbabweans, the goods that our retailers can import from those countries are making many of the jobs in this country extremely insecure and employment growth appears not to be happening in any important business sector.

The trades unions are using these PDL figures to strengthen their arguments for pay increases that will further reduce Zimbabwean manufacturers’ hopes of being able to compete, so all the signs suggest that the whole issue should become the subject of much more intense debate. But before that debate starts, workers should be advised that if their trades unions get their way, it will be at the expense of many of the jobs that exist today and many more jobs that will never come into existence.

Kindest regards,

John

China to pump in US$10bn into Zimbabwe's economy

2011-02-02T10:14:00.000+02:00

By: MW-Reuters-TZG
Posted: Wednesday, February 2, 2011 12:54 am

CHINA Development Bank is poised to fund up to US$10 billion in Chinese investment in the Zimbabwean mining and agriculture sectors ‒ a significant boost for a country struggling to attract foreign investors.

President Robert Mugabe adopted a 'Look East Policy' after the west imposed illegal sanctions on Zimbabwe.
He has increasingly looked for help from China, which in turn is in search of natural resources for its rapidly expanding economy.
“We have met with officials from China Development Bank and they have said they are willing to invest up to US$10 billion in Zimbabwe," economic planning and investment promotion minister Tapiwa Mashakada told Reuters on the sidelines of a business conferencein Harare, Zimbabwe.

Such an investment would dwarf Zimbabwe's gross domestic product (GDP), which is expected to be about US$6 billion this year.
No immediate comment was available from the Chinese embassy in Harare.
Mashakada told the conference he saw gold production hitting 13t in 2011, up from 8.3t in 2010.

He also expected Zimbabwe to produce about 1.5Mt of maize in 2011, up from 1.3 million a year before. Zimbabwe also has the world's second largest platinum reserves after South Africa.

“China is looking into mining development, as well as agriculture, infrastructure development and information communication technology,” said Mashakada, a minister from Prime Minister Morgan Tsvangirai's Movement for Democratic Change party. He would not say if the investment would come this year.
China's investment in Zimbabwe has been growing steadily over the last decade.
“The Chinese are now moving towards strict due diligence, accountability and transparency.
"At the end of the day this really depends on us, and how we position ourselves as a destination for investment,” said Mashakada. “China is coming in a very big way.”

From John Robertson

2011-01-24T09:45:00.002+02:00

We have now had two full years since the Consumer Price Index was rebased on the US dollar prices recorded in December 2008 and the averages for that month were set at 100. Such were the distortions at the time that, of the twelve groups of goods and services identified, the averages for only four of them are now recording figures of more than 100. These are liquor and cigarettes at 102,26, the rent, rates, power and water category at 116,12, transport at 105,76 and education at 110,00.

As the services can be described as almost entirely of Zimbabwe origin, their costs seem less likely to be held down by their suppliers having to compete with imports, so from medical services to hairdressers and from motor mechanics to the rates charged by local authorities, the indices have all trended well above the figures for most imported goods, as well as for locally produced goods that face competition from imports.

Some of the lowest price indices are for clothing and footwear, household textiles and the types of goods that competing supermarkets are obliged to offer at attractive prices, whether imported or sourced from local manufacturers. Other prices have remained almost unchanged and among these, fuels and lubricants are a good example. Although the index for these has reached 153,9, this figure has varied very little for the past 17 months. Fuel price increases that occurred in December appear to have happened too late to be included in the December index.

The month-on-month increases show that 28 of the 67 items surveyed for the index went down in price in December, but the tightness of the market conditions is illustrated by the fact that the prices of 30 of the 67 items were lower than in December 2009. While the managements of some factories are known to have invested in plant and equipment to achieve improved production volumes and standards, the most obvious investments have been in retail premises that might have extended the areas and stocks of goods well beyond the spending power of Zimbabweans, specially as about 70% of the working-age population is sill unable to find steady employment.

In my comments after the Budget presentation in November, I pointed out that funds for the claimed doubling of public sector salaries had not been provided for in the figures. The January salaries paid to the military and civil servants reflect my concern, and we now hear of plans for strikes and other protests. As about one third of Zimbabwe’s working population draws a government salary, this disappointment is affecting the business sector too.

Reports are also being circulated about food shortages and the growing need for assistance in the rural areas ahead of the maize harvests. Hopefully the news will start improving when the crops start coming in.

Kindest regards,

John

German investor in Zimbabwe vows to press case against land seizure

2011-01-22T08:51:00.001+02:00

Harare - A German investor who has taken the Zimbabwe government to the Paris-based International Centre for Settlement of Investment Disputes (ICSID) after Harare seized his properties under its reform programme is vowing to stay put until the case is settled.

In an interview at one of his properties north of Harare, Heinrich von Pezold, 58, said he went to the ICSID after Harare refused to deal with his complaints.

He said that his three investments are covered by a bilateral investment protection treaty that Berlin and Harare signed in 1995.

'A lot of damage has been caused on my assets by settlers on my properties,' he said. 'Over the years I have tried to engage the government of Zimbabwe.'

Von Pezold called Zimbabwe 'a place to do productive investment, which is why we continue to invest here.'

He hopes for a chance to meet the government and find a solution under the bilateral investment protection accord.

'But for now we want the arbitration centre to settle this matter,' von Pezold said, declining to disclose how much compensation he was claiming.

Zimbabwe Attorney General Johannes Tomana confirmed that Harare was being summoned by the ICSID.

'We have received the papers and we are looking at them,' he said.

Von Pezold, one of the few white commercial farmers left in Zimbabwe, said he was confident that one day Zimbabwe will honour its international obligations. He vowed that he will not leave his investments until justice has prevailed.

'We have no dispute with Zimbabwe. We have dispute with some policies. Many countries go through times of difficulty,' he said, and added he believed Zimbabwe's current problems will be resolved.

But it was important for investors stand up for their rights, von Pezold said.

'Only if people have faith in the future will they risk their savings to build a future Zimbabwe,' he said, while gazing out at his tobacco fields.

Von Pezold has three estates in Zimbabwe, which he said he bought in 1988 from a commercial farmer.

'I have invested millions of dollars in Zimbabwe and just can't let that investment go,' he said.

Von Pezold last year was the focus of controversy between Berlin and Harare, after he refused to vacate his seized coffee plantation which the government wanted to confiscate for resettlement.

The German embassy in Zimbabwe protested to Zimbabwe's Foreign Ministry to help cool the dispute down.

Zimbabwe Finance Minister Says Government Unable to Lift State Salaries

2011-01-22T08:50:00.000+02:00

Despite talk of a strike, sources say civil servants are not unified on how to proceed, some arguing for a strike or other industrial action, others proposing to seek an audience with President Robert Mugabe

Studio 7 Reporters
Harare & Washington 21 January 2011

Zimbabwean Finance Minister Tendai Biti has told negotiators for state employees that the government is in a financial crisis, tightening the deadlock over the demand by public workers for a significant rise in salaries amid threats of a strike next week.

Biti and Public Service Minister Eliphas Mukonoweshuro met representatives of state employees on Thursday, when the finance minister said resources are tight.

Negotiators had issued an ultimatum demanding an increase in the base pay rate to US$500 a month, roughly equal to the monthly cost of living for an average family. Civil servants dismissed the small pay increases offered by the government early this month putting the base rate for public employees at US$168 a month.

Despite talk of a strike, sources say workers are not unified on how to proceed, some arguing for an industrial action, others proposing to seek an audience with president Robert Mugabe, who will be on annual leave until February 8.

Public Service Minister Mukonoweshuro told VOA Studio 7 reporter Blessing Zulu that negotiations with representatives of state workers will continue.

Progressive Teachers Union of Zimbabwe Secretary General Raymond Majongwe said the two ministers wanted discussions Thursday to remain secret.

Zimbabwe Teachers Association Chief Executive Officer Sifiso Ndlovu told reporter Brenda Moyo that his organization won’t call a strike until all avenues of negotiation with the government have been explored.

Elsewhere, ZANU-PF members staged a violent demonstration at Town House in Harare to protest the recent slashing of maize crops in the Kuwadzana and Glenview suburbs, but council officials said that they had not ordered the destruction of crops.

VOA Studio 7 correspondent Thomas Chiripasi reported on the protest

Big Power Cuts in Zimbabwe Cities Unrelated to 2009 Estimated Bills - ZESA

2011-01-22T08:48:00.000+02:00

ZESA Public Relations Manager Fullard Gwasira said that while the utility did not write off estimated bills , indications are that some people delay paying their bills until they can no longer afford to settle them
Gibbs Dube
Washington 21 January 2011
A spokesman for the Zimbabwe Electricity Supply Authority on Friday dismissed reports the parastatal has disconnected power supplies to Zimbabweans in urban areas based on 2009 estimated bills which a regulatory body had ordered it to write down.

ZESA Public Relations Manager Fullard Gwasira said that although the estimated bills were not written off by the electrical utility, indications were that some customers delay paying their power bills until they can no longer afford to settle them.

Gwasira said the Competitions, Pricing and Tariff Commission ordered a revision of the bills based on meter readings. He could not account for bills as high as US$600 in some cases.

Residents who have been cut off said bills were based on 2009 estimated usage.

Gwasira said consumers must pay their electricity bills in order to continue receiving power from the utility. “We are currently not disconnecting power on estimated bills but for electricity consumers used over a long time without paying for it,” he said

Fuel Shortages Resurface in Zimbabwe As Financial Woes Hit State Supplier

2011-01-22T08:44:00.000+02:00

Independent daily Newsday quoted Energy Minister Elton Mangoma as saying fuel supplies through the Beira line are erratic and South Africa has stopped supplying fuel because of its own supply issues

Sithandekile Mhlanga & Gibbs Dube
Washington 21 January 2011

Fuel shortages, once common in Zimbabwe before the introduction of a monetary system of mixed hard currencies in early 2009, have returned in many parts of the country.

Fuel market sources said shortages are related to financial problems at the National Oil Company of Zimbabwe or Noczim, often accused of mismanagement or worse. The state entity has been unable to import enough fuel from South Africa and Mozambique, from which fuel flows through a pipeline along the so-called Beira Corridor.

The independent daily Newsday quoted Energy Minister Elton Mangoma as saying fuel supplies through the Beira line have been erratic while South Africa has been exporting less fuel because it has its own problems ensuring an adequate supply.

Fuel shortages have been reported in particular in Bulawayo, Gwanda, Plumtree and Victoria Falls, which are geographically dependent on South African exports.

Zimbabwe National Chamber of Commerce President Trust Chikohora said shortages are affecting businesses which are having trouble distributing goods. "We hope this will not get out of control as it will have a devastating effect on the economy,” he said.

Former Nkayi member of Parliament Abednico Bhebhe, operator of a fuel service station in Bulawayo, said that at times the station goes two days without gasoline.

Affirmative Action Group President Supa Mandiwanzira said it is unacceptable for the country to be short of fuel at a time when the economy is attempting a recovery.

Zimbabwe Annual Inflation Slows in December But Pickup Seen in Early 2011

2011-01-19T08:21:00.000+02:00

Though current inflation rates are challenging Zimbabwean households, the scale is far from the astronomical inflation rates registered in 2008 as hyperinflation raged and living standards plunged

Ntungamili Nkomo
Washington 18 January 2011

Consumer inflation in Zimbabwe slowed in December to a 12-month rate of 3.4 percent from 4.2 percent in November, the Zimbabwe National Statistical Agency said Tuesday.
Prices declined by four tenths of one percent in the month.

Bulawayo-based economist Eric Bloch warned however that the easing of inflation pressures may be short-lived due to a recent spike in fuel prices in particular.

Bloch told VOA Studio 7 reporter Ntungamili Nkomo that he sees inflation picking up this month and February. "A recent hike in fuel prices will definitely push inflation upwards, and I predict a 5 or 6 percent year-on-year rate by the end of January," he said.

Buletsi Nyathi, a resident of Gwanda, Matabeleland South province, said recent increases in the price of key commodities are straining family budgets.

"The price increases are small, but wide-ranging and having a negative impact on our budgets," observed Nyathi. "Families are barely getting by."

Though current inflation rates are challenging Zimbabwean households, the scale is far from the astronomical inflation rates registered in 2008 as hyperinflation raged, fueled by the massive printing of money by the Reserve Bank of Zimbabwe.

But that hyperinflationary spike ended when Zimbabwe abandoned its debased dollar and turned to a monetary regimen using a mixture of foreign currencies including the US dollar, the South African rand and the Botswana pula

Zimbabwean banks miss recapitalisation deadline

2011-01-18T08:17:00.000+02:00

January 17th, 2011 in Business, NewsAPA-Harare (Zimbabwe) At least four Zimbabwean financial institutions are under stress after they allegedly missed a 31 December 2010 deadline to meet minimum capital thresholds set by the Central Bank in the country, the ZimOnline news agency reported Monday.
According to the news agency, only 20 out of the country’s 24 financial institutions were in compliance with the prescribed minimum paid-up capital requirements as of the end of last year.

Under the Reserve Bank of Zimbabwe (RBZ) regulations, for commercial banks to be operational they would need to have share capital amounting to US$12.5 million while merchant banks should have had balance sheets of US$10 million by the end of last year.
Building societies were supposed to have raised their capital to US$5 million by the end of last month.

“A number are still under-capitalised and may be forced to close or seek strategic partners if they are to remain operational,” an RBZ source told the news agency.

He refused to disclose which institutions were under stress, fearing this could trigger panic in the market.
RBZ governor Gideon Gono is expected to announce the outcome of the financial sector recapitalisation programme when he presents his 2011 monetary policy statement later this month or in February.
The failure by the financial institutions to meet the new RBZ capitalisation requirements rekindles debate as whether or not the country is over-banked.
Analysts say that with its small population, Zimbabwe only requires a minimum of five and a maximum of 10 banks.
The country currently has more than 40 financial institutions that are scrambling for a shrinking cake.
JN/ad/APA
2011-01-17

Zimstat office

2011-01-17T07:51:00.000+02:00

The Zimstat office, previously known as the Central Statistical Office, has made an attempt to restore the statistical production volume figures for the Manufacturing Sector. I have prepared graphs on the major sectors and added a comment underneath each graph to point out issues that I believe will be of interest. If you would like to add any brief thoughts, I would welcome your observations.

To read my comments, you will need to click on View on the PowerPoint screen and then call up Notes Pages.

I hope these will be helpful and I hope Zimstat will update the table regularly. However, you will note that I have expressed a few reservations about the figures for some of the sectors.

Kindest regards,

John
I have the presentation should anyone require a copy.

Mnangagwa threatens foreign firms over sanctions

2011-01-17T07:39:00.000+02:00

17/01/2011 00:00:00
by Staff Reporter
Talking tough ... Emmerson Mnangagwa

DEFENCE minister, Emmerson Mnangagwa has warned chief executives of foreign firms that they may be forced to publicly to denounce Western sanctions or face losing 90 per cent of their company shareholding.

Addressing Zanu PF supporters in Mutare over the weekend, Mnangagwa – who is seen as a possible successor for President Robert Mugabe – said bosses of foreign firms operating in Zimbabwe would have to publicly state their positions regarding the sanctions.

"We will ask them if they support sanctions or not," Mnangagwa said.

"Those who indicate that they do not support sanctions will be asked to go live on national radio and tell the nation and the rest of the world their company does not support sanctions."

Mnangagwa said companies that fail to take a public position against the sanctions would lose 90 percent of their shareholding.

The money realised from the 90 percent share takeovers would go into a new "anti-sanctions fund".

The fund will be used to finance an aggressive campaign against the restrictive measures and "all foreign companies operating in the country (will be) compelled to assist," he said.

However economic planning and investment promotion minister, Tapiwa Mashakada – a senior member of Prime Minister Morgan Tsvangirai’s MDC party – said Mnangagwa’s rhetoric was unhelpful.

"They (Zanu-PF ministers) are always pronouncing ultra-nationalist rhetoric and pseudo-socialist lines.

"Moreover, their rhetoric is based on hate speech ... which is not government policy. We have to work harder to improve our country's image,” he said.

Official figures put the number of white- and foreign-owned companies still operating in the country at around 500.
Mnangagwa’s remarks come after President Mugabe warned that companies from the European companies with operations in the country may be taken over unless sanctions were removed.

“We have been too far too good for malicious people for countries which seek to destroy us,” Mugabe told a Zanu PF conference last month. “Why should we continue to have 400 British companies here operating freely with Britain benefiting from us?

Zanu PF sees the sanctions as punishment for its controversial land reforms.

The party claims that the sanctions are economic problems experienced over the last decade and continue to hold back recovery.

Zimbabwe — uneven recovery

2011-01-13T10:37:00.000+02:00

Rudderless and gutless
Tony HawkinsThursday, 13 Jan 2011
Trade upswing, politics and policy will determine the potential for Zimbabwe’s recovery in 2011

Zimbabwe’s uneven recovery from 10 years in recession will continue — possibly even accelerate — through 2011, subject to three provisos.

The first is the global economic upswing. So long as that remains on course and Zimbabwe continues to benefit from strong demand and high prices for its key exports (platinum, gold, ferrochrome, tobacco and cotton — as well as the wild card, diamonds), GDP, which rebounded 8% in 2010, is expected to grow 9,3%, according to the finance ministry.

The second is the political climate.

This year political imponderables loom even larger than last as politicians squabble over a new constitution and the timing of fresh elections, assuming the constitutional draft is endorsed at a national referendum.

The third is economic policy, specifically the government’s controversial indigenisation legislation. President Robert Mugabe’s Zanu-PF is pushing hard for its immediate implementation.

That would require all businesses with assets in excess of US$500000 to dispose of 51% of their shares to indigenous (for which read black) Zimbabweans within five years. The other two members of the fragile, fractious coalition in Harare — prime minister Morgan Tsvangirai’s Movement for Democratic Change (MDC-T) and its breakaway wing, Arthur Mutambara’s MDC-M — say they support the principle of black empowerment but not as envisaged by Mugabe’s hardliners.
Uncertainty reigns and the longer it continues the greater will be its impact on investment decisions.
Indigenisation is not the only crucial economic issue that divides the coalition. There is no consensus on debt rescheduling, privatisation or public-service reform.

But so long as commodity prices remain strong and the economy is operating well short of its capacity levels, this policy paralysis need not disrupt the recovery. That is the view of the country’s business leaders, who want elections to be postponed so that the unpopular and dysfunctional administration hangs on to power.

Yet if opinion polls are to be believed, they are in the minority. The recent Afrobarometer survey found that 70% of Zimbabweans want elections this year.

The political parties are split on the election issue, too. Just last week, Welshman Ncube, who is expected to supplant Mutambara as leader of the tiny MDC- M, said he was against elections this year. His stance makes sense but, like the lawyer he is, he is talking his own book, since he knows that his party is almost certain to be wiped out whenever the elections are held.

Zanu-PF’s position is similarly confused. All the evidence and polls suggest it will be heavily defeated by Tsvangirai’s MDC. Despite this, the party is demanding that elections be held this year because the so-called Global Political Agreement to set up the national unity government expires in mid-February.

Though some in Mugabe’s party appear to believe Tsvangirai’s flip-flop style of governing has dented his political support , the rest hope that as long as the election rules remain unchanged, Zanu- PF will be able to fiddle the result, just as it did in 2008 and 2002.

With Mugabe himself not many weeks short of his 87th birthday in February, the party’s best hope is to hold elections as soon as possible so that a re-elected Mugabe can nominate his successor and retire before his health deteriorates further.

The MDC’s official position seems to be that elections cannot be held until a new constitution is in place, which almost certainly means 2012 at the earliest. However, in the space of just three months Tsvangirai has called for elections in 2011, threatened to boycott them and demanded a presidential election with parliamentary polls delayed until 2013. Small wonder that he has earned the reputation of a man who agrees with the last person who spoke to him.

Given these imponderables, the best bet is that Zimbabwe will have to endure another year of status quo uncertainty . There will be rumours surrounding the state of Mugabe’s health and the attitudes of President Jacob Zuma’s administration, other SADC governments and the African Union allegedly tiring of the ageing president’s intransigence.

The economy will continue to recover, though probably less robustly than government ministers predict, and investors will sit on their hands pending a resolution of the political crisis.

The political logjam could be broken by the president’s health, by internecine fighting over the succession within Zanu- PF or possibly by the SADC governments led by Zuma finally finding the courage to pull the rug out from under Zanu-PF’s feet. But, given the Zuma/SADC track record, few analysts are holding their breath.

From John Robertson

2011-01-12T10:15:00.000+02:00

Zimbabwe’s Economy 2011

Zimbabwe has started 2011 faced by a number of domestic uncertainties that are likely to complicate the planning process, mainly because they will continue to limit investor commitment and access to longer-term finance.

In political terms, the population does not know whether a revised and acceptable constitution will be ready in time for a referendum before the elections, whether, if it is, it will be accepted by the electorate, whether the far from united Government of National Unity will force an election on the electorate without first offering a revised constitution, whether this would be a presidential election only, or one for parliament as well, or whether a new voters’ roll will be completed in time for either the referendum or the elections.

To these imponderables must be added those that have their origins beyond Zimbabwe’s borders. Exchange rates are mostly firming against the US dollar, commodity prices are mostly rising, demand is being held back by concerns about disposable incomes, low interest rates are failing to stimulate demand for investment capital and rates of recovery are hesitant in most Western countries.

Zimbabwe, as a commodity-exporting country, would be in a good position to earn more from its exports of minerals and agricultural commodities if only it had not compromised its ability to produce them. The most damaging of the policy choices started when the country forfeited the bulk of its agricultural export earnings by forcing the closure of large-scale commercial farms.

One of the consequences of this political move was that the country was forced to become dependent on food imports. Another was that the lost revenues made impossible the continuing investment and maintenance of the services infrastructure.

The combined effects of lost agricultural earnings and failing deliveries of electricity and transport services, plus the disappearance of the nation’s savings, generated problems for every other sector. In mining, they forced mineral production volumes to falter or fail and much more would have been invested in gold and platinum mining if external finance had been more readily available. Manufacturing output also declined dramatically and apart from lost foreign revenues, the many other knock-on effects included shortages, job losses and much lower tax revenues for government.

All of these are now impacting on Zimbabwe’s ability to take advantage of the higher prices being offered for the commodities it exports. However, those it imports are now costing more. Crude oil prices have increased by about 20% in the past six months and basic foods have increased by about 30% in the same period.

Zimbabwe’s essential imported requirements are now even more sharply depleting the funds needed to do maintenance on the power stations, the railway and telecommunications networks or to restore capacity in Air Zimbabwe. However, the policies that inflicted damage on the country’s capacity to produce export revenues are not being addressed. Instead, government appears to have deliberately tried to make the country less attractive to the investors whose knowledge and funds might have helped.

Most of Zimbabwe’s exports are paid for in US dollars, but a high percentage of consumer goods imports are priced in rand. The stronger rand has increased the number of US dollars needed to pay for the imports.

With fuel and food prices now increasing, the strengthening rand is adding further to Zimbabwe’s procurement costs and therefore causing some concern on the inflation front.

The relative strength of the rand has become evident even against the euro and the pound, as this graph shows. Its origins appear to be related mainly to the strong capital account flows to South Africa in response to the higher interest rates being offered as well as the perceived economic stability of the country. If interest rates were to rise in Europe or the United States, some of these funds might be moved away from South Africa and cause the rand to weaken. However, given the depth of the recession affecting western countries, there is little prospect of significant change in the first half of 2011.

Inflation in Zimbabwe is likely to react to the higher fuel prices, but this is thought to become a serious issue only if consumers are affected by fuel shortages. Labour cost increases appear to be a more serious threat as many manufacturers will be trying to pass onto consumers the higher production costs that result from excessive wage awards.

However, as shoppers now have the choice of many imported consumer goods, local manufacturers who add rising labour costs to their prices might find retailers no longer offering to carry their lines. For all local producers, the higher wages being demanded will be affordable only if productivity and efficiency levels improve.

Before May 2010, the year-on-year Consumer Price Index trends were affected by the steep falls in prices in the first half of 2009, and these caused the year-on-year gaps to become temporarily exaggerated. The July to November figures saw the figures reach levels more appropriate to Zimbabwe’s use of a relatively hard currency.

In this graph, the annual rates of change are shown as the gaps between the monthly CPI figures in 2010 and the figures for the same months in 2009. The dips seen against September and November 2009 caused the year-on-year figures for September and November 2010 to rise to 4,2%.

The yet to be released year-on-year figure for December 2010 seems likely to be close to 4% and in the forecast shown in the following table, inflation estimates have been based on monthly price increased of between 0,2% and 0,5% a month through 2011. If averages of this order are achieved, the annual figures will decline to figures below 3% during the first half of this year, but would trend above 4% in the second half of 2011.

If the rates shown in the table are achieved, only by the end of 2011 is the index expected to reach its re-based starting point of December 2008=100.

However, the forecast shown could easily be affected by uncertainties that relate mainly to local production costs and to the exchange rate of the rand against the US dollar.

However, the rising costs of locally produced goods might not move the Consumer Price Index very much as shoppers can now so easily choose to buy imported goods. For this reason, current demands for higher wages are directly threatening the viability of local suppliers.

Pay awards already negotiated, some back-dated, have placed many local manufacturers at a disadvantage in their efforts to compete against South African and Far Eastern suppliers, and decisions to reduce the import duties on many imported goods, particularly clothing and footwear, have further undermined many companies’ prospects of survival.

Employers accept that, while low labour productivity makes the higher wage levels even more unaffordable, in many cases the disappointing productivity is not the fault of the employees. Frequent power cuts severely reduce efficiency and skills shortages cause time losses and the wastage of materials. These can add considerably to production costs, but when employers also have to contend with outdated manufacturing processes and the need to import industrial materials and packaging that used to be produced locally, their prospects of regaining ground lost to foreign suppliers are further affected.

However, other handicaps are also contributing to local producers’ problems, many of which relate to very high finance charges and limited access to loan capital. Borrowings are often confined to short-term industrial material purchases and working capital, when long-term capital is needed.

Most equity or longer-term development capital inflows have to be sourced from abroad, but remain beyond the reach of many companies because of the severely discouraging effect of the indigenisation laws on their ability to attract investor interest.

Recent international currency market developments, the main feature of which has been a fall in the value of the US dollar against most of the rest, have kept the rand exchange rate strong enough for it to be a source of speculation on whether South African Reserve Bank intervention might result.

So far, the South African Reserve Bank has remained adamant that the rand rate should be totally market related and this appears to have increased the attractiveness of the South African capital market.

In the year from September 2009, the rand remained close to an average of R7,50 to the US dollar, but by the end of September it had moved to R6,96 to the US dollar. By January 4 2011, it had strengthened to R6,64.

Zimbabwe’s use of relatively stable currencies in place of the collapsing Zimbabwe dollar is the factor most often cited in the descriptions of the country’s improved circumstances since early 2009. The subsequent period of reasonably stable prices, plus the removal of price controls and most exchange controls, certainly assisted the commercial sector to respond enthusiastically and brought an end to shortages, black market prices and a wide range of informal trading activities.

On the political front, the signing of an agreement to form the Government of National Unity further encouraged the population. Hopes were expressed that the unity accord would lead to inflows of investment funds as well as budget and balance of payments support from abroad. However, progress has been slow, in political as well as economic terms, even though the steps needed to place the country onto a more rapid economic recovery would not have been difficult to take.

Given its well-educated population and its resource base, Zimbabwe’s economic potential remained remarkable, but the reasons why the needed steps were not taken are very much more political than economic.

Zimbabwe’s past performance and the resilience of its population amount to convincing proof that if the political barriers could be overcome, the adoption and implementation of effective economic policies would quickly transform the business outlook. The policy changes needed would have only had to target some of the more damaging effects of recent political choices and very nearly all of the needed revisions would have involved nothing more complicated than applied common sense. At the start of 2011, they remain eagerly awaited.

If Zimbabwe were to choose forward-looking policies that showed commitment to rebuilding an attractive investment climate and to restoring the services infrastructure, experts could be invited to make estimates of the time and funding that would be needed to rebuild capacity in each of the essential public utilities and services. The same forward-looking policies would then bring within Zimbabwe’s reach the necessary funding and make contracting companies keen to compete for contracts to carry out the work.

The following percentage contributions, US dollar production values and growth rates are derived from Gross Domestic Product figures reported in the Minister of Finance’s 2011 Budget documentation.

Agriculture was able to show a few improved output levels in 2010, particularly for tobacco, but food production volumes have remained so low that a large proportion of the rural population is currently in need of assistance from the World Food Programme and other aid agencies. However, new ventures include extensions to sugar production and plantations of jatropha trees, both of which are to assist with the production of bio-fuels.

Funding constraints affected the level of commitment from most of the resettlement farmers who were allocated land following upon the Land Reform Programme. As a result, most of this land has remained unproductive since it was taken from large-scale commercial farmers. Proposals to redraft lease agreements to make leases on the land tradable in the market and to make the documentation acceptable as bank collateral are expected to transform this sector in the coming years. The sector’s initial challenges are to restore Zimbabwe’s former food-sufficiency and to again become the country’s major earner of export revenue.

Mining has become Zimbabwe’s most rapidly developing productive sector. Substantial investment capital has been attracted into recently established platinum mines and several new gold mines are being opened. Also, a substantial coal-bed methane discovery is soon to be developed. With the recovery of existing gold mines and contributions from recent discoveries of diamonds, plus increasing platinum-group metal output, mining is set to become the origin of a significantly higher percentage of total GDP. The growth projections in the tables reflect this optimistic outlook.

Manufacturing in Zimbabwe is dominated by businesses established to add value to basic agricultural and mining commodities. Some of the more important agriculturally-based enterprises produce cotton lint, textiles, clothing, footwear, shredded and blended tobacco, while others produce timber products, refined sugar, milled cereals, edible oils, dairy products, canned foods, bakery products and confectionery.

If improvements in deliveries of basic commodities and other essential inputs are achieved, manufacturing is certain to respond, but the table shows a delayed recovery to allow for the time needed to overcome power limitations.

On the value-adding processing of minerals, Zimbabwe has capacity to manufacture ferrochrome, steel, nickel cathodes, cement and other building materials, phosphate fertilisers, coal-tar, glass and pottery products. The country produces for export black granite blocks, semi-processed graphite, magnesite and lithium. Also, the Reserve Bank runs a gold refinery. Depending on improvements to electricity supplies, all of these are poised for recovery and expansion.

Current manufacturing development projects include new sugar refining capacity and an ethanol plant. Future prospects include a base metal refinery to extract nickel, copper and cobalt from the smelter matte produced by the platinum mines. A separate precious metals refinery for the platinum group metals and gold is also to be built when the expanding volumes of concentrates makes the venture economically viable.

With the recovery of agriculture, many manufacturers who have lacked the dependable flows of inputs for their processing plants are expected to regain their positions in the local market. The shrinkages of raw material supplies in recent years forced most domestic consumers to source consumer goods from foreign suppliers, but Zimbabwe’s recovery of food self-sufficiency will restore local production and permit the country to save many hundreds of millions of dollars now being spent on imports.

Among those who were affected by policy changes were producers of textiles, clothing, footwear and many household goods, for whom supplies of inputs such as cotton, leather and timber came under threat. Further uncertainties came from rising local production costs and more aggressive foreign competition, all of which kept local producers at a disadvantage until Zimbabwe’s adoption of the US dollar.

This dollarisation placed cost calculations onto a firmer footing that helped some local producers of finished consumer goods to recover some of the ground lost to South Africa and the Far East. Further progress will be made as soon as local raw material suppliers fully restore production volumes and help rebuild the manufacturers’ chances of producing equally attractive goods at competitive prices. The more successful of these will be able to return to export markets, but all of them will contribute significantly to employment growth.

Despite the difficulties Zimbabwean producers have experienced, many productive enterprises have survived. However, most businesses are in need of recapitalisation and investor commitment, both of which are dependent on the emergence of more agreeable policies that will enhance business prospects and improve the country’s access to capital.

Government has only to adopt acceptable conditions to achieve the full re-engagement of the skills and resourcefulness of thousands of Zimbabweans and to place the country onto a sound recovery path.

Electricity and water constraints are receiving some attention, but the full recovery of all productive sectors is conditional upon funding being found for the substantial repairs and maintenance needed by Zimbabwe’s thermal and hydroelectric power stations and by its mainly municipal water treatment facilities. Equally urgent challenges are to build the additional capacity that is already needed for both electricity and water.

Construction activity in Zimbabwe has been the victim of financial constraints as well as confidence in the past decade. As inflation combined with negative interest rates to erode the value of savings and as the authorities gained control over the use of pension fund contributions, the sums needed could no longer be accumulated to fund property developments. Work on most of the projects already started came to a halt.

As a result, Zimbabwe now has a severe shortage of residential and commercial accommodation. However, uncertainties and imbalances in the market have held the market prices of existing premises at figures below current construction costs. This, together with the shortage of longer-term finance, has so far prevented a resurgence of construction activity.

However, on the first indications that political stability is being rebuilt, demand for the services of the larger contracting companies is expected to start gathering momentum as fast as plans can be completed and the municipalities’ planning departments can grant approvals. Reasonably high growth rates are expected to flow from the adoption of supportive policies and improving access to longer-term finance.

Finance and insurance bore the brunt of government’s need to capture funds to meet rising budget deficits while tax revenues were falling. Hyperinflation became an automatic consequence of government having to resort to printing money to cover its costs, but by legalising the adoption of the US dollar at the end of 2008, government was forced to accept the disciplines imposed on it by revenue and liquidity shortages.

With almost no access to local borrowings and very limited, highly conditional support from donor countries, government has been constrained by the cash budgeting limitations imposed by the country’s greatly reduced taxable incomes. While these limitations have been politically painful, they have helped overcome inflation and they have dramatically reduced government’s ability to involve itself in subsidy-dependent economic activities.

During the early 1990s, government made the decision to grant banking licences to a large number of local applicants. Many new commercial banks, merchant banks, discount houses and building societies were started, leading to vigorous growth in the sector and considerable competition for limited skills.

As the economy, at that time, was enjoying an upturn because of the improved access to capital that accompanied an IMF-funded Economic Structural Adjustment Programme, most of the new banks made reasonable progress in their first years and a number of them were able to easily meet their capital adequacy requirements after successful flotations on the Zimbabwe Stock Exchange.

When the economy began to shrink, the effects on the banks were at first disguised by the rising inflation that was a natural consequence of lost of export revenues and the lengthening list of shortages affecting the economy. However, more banking licences were granted even after the economy’s difficulties had become obvious, so it was inevitable that many would soon face difficulties.

By June 2004, Zimbabwe had 16 commercial banks, six merchant banks, five building societies, nine discount houses and five finance houses. But by then, of the total of 41 institutions, five were under curatorship, two under liquidation and four were in receipt of assistance from the Reserve Bank’s Troubled Bank Fund.

By June 2010, the count was 15 commercial banks, five merchant banks, four building societies, no discount houses and no finance houses. Of the total of 24 surviving institutions, only 17 were in compliance with the prescribed minimum paid-up capital requirements. They had until December 31 2010 to raise the necessary funds. The hopes are that several mergers will bring the total number to a figure more in line with the size of the Zimbabwe economy, but growth rates for this sector are expected to remain modest in the immediate future. The outcome of this exercise has yet to be published.

However, the financial sector has a critically important part to play in Zimbabwe’s efforts to achieve a recovery. In response to improving conditions, the various business sectors could be relied upon to make their own plans to rebuild productive capacity, but as all of these would also need finance, a major part of the challenge facing Zimbabwe is the need to commit authorities as well as investors to the task of rebuilding confidence among local and foreign investors, funding institutions and international bankers.

Distribution, hotels and restaurant activity saw the most startling of the improvements when hyperinflation, price and exchange controls gave way to the use of US dollars and the abandoning of most controls. The restocking of shops throughout the country transformed the wholesale and retail environment and as improving supplies led to fierce competition among retailers, prices came down and black markets disappeared.

Revenues improved for all of the service industries and tourists numbers started to recover. This Zimbabwe Tourism Authority table shows that almost all the 2009 tourism statistics were improvements on the 2008 figures.

In the GDP table, projections of modest growth are shown for these areas as the principal limiting influences will remain the pace of recovery in disposable incomes and employment.

Transport and communication services suffered a serious loss of local business as a result of the declines recorded in agricultural, mining and manufacturing production, but the forecast improvements in all of these, plus the recovery of business from competing South African carriers, suggests the possibility of above average growth rates for this sector.

With regard to the state-run enterprises, Air Zimbabwe and National Railways of Zimbabwe, major recapitalisation challenges confront the authorities and the required funding will best be arranged on the strength of evidence derived from improved investment policies.

Education and health services have shown considerable improvements during the period since the formation of the Government of National Unity. Hospitals, clinics, schools and universities have all received increased funding and progress has been made in recovering from the loss of trained staff as many migrants have returned to the country.

Expenditures in social services have been more actively supported by aid agencies and donor countries than have other sectors. This assistance is expected to continue, particularly if Constitutional changes help Zimbabwe qualify to be taken more seriously.

In more general terms, business responses to improving conditions can all be relied upon to quickly translate into plans that will rebuild productive capacity.

As all of these will need access to reasonably priced finance, a major part of the challenge facing Zimbabwe is to rebuild the confidence needed among local and foreign investors, funding institutions and international bankers.

To be considered to be deserving of investor confidence as well as the assistance of the major banks, Zimbabwe has only to accept the need to make entirely appropriate and logical policy changes.

As successful measures would soon lead to improving export revenues, and to savings on imports as food security improves, any progress would increase the country’s prospects of honouring debt obligations and would therefore improve its chances of floating syndicated long-term loan stock issues on international capital markets.

Support for these fund-raising efforts should quickly gather momentum once the first signs of success have become evident. As some of the challenges might best be dealt with by arranging for the privatisation of certain parastatal organisations, this success would enhance the acceptability of correctly drafted prospectuses and Zimbabwe’s recovery plans would soon benefit from much more receptive market responses.

While many projects might require work to be put out to international tender to meet the requirements of funding organisations or donor countries, for other challenges the main concern might be to simply attract back to the country the skilled personnel who have left. They too will respond more willingly once evidence of improvements has begun to emerge.

Plans that covered this ground would no doubt leave further political problems in need of solutions. Government should hold to its commitment to give all of these the special attention they deserve. However, by ring-fencing the reconstruction efforts, Zimbabwe should adopt strategies that will keep the separate and distinct requirements for a recovery on track.

It could best achieve this by ensuring that the selected solutions, most of which relate to historical imbalances, would be forward-looking and carefully structured to provide for the rapidly expanding needs of Zimbabwe’s growing population and its even faster growing aspirations.

Today, Zimbabwe’s challenge is to restore the market mechanisms – financial and institutional as well as infrastructural – that will permit the acceleration of local development and attract the inflows of new technologies that will keep Zimbabwe abreast of the world’s rapidly changing markets.

And today, most Zimbabweans are more than ready to accept that the contributions of the business sectors should be nurtured and cultivated in ways that will help its business sectors to keep pace in the same demanding and competitive world markets.

These contributions from business, whether in the form of jobs, incomes, products, exports and tax revenues, or whether as the basis of training, career development plans and social stability, are now better understood and appreciated than at any time in the country’s history.
John Robertson

Zimbabwe Commercial Banks Resume Consumer Lending - At a Price

2010-12-28T09:01:00.000+02:00

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.

From John Robertson

2010-12-18T09:44:00.003+02:00

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.

Platinum Expected to Grow By 20 Percent

2010-12-16T09:52:00.000+02:00

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

2010-12-16T09:49:00.002+02:00

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

2010-12-16T09:48:00.000+02:00

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.

From John Robertson

2010-12-12T09:01:00.000+02:00

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

The 2011 Budget Statement

2010-12-01T08:45:00.002+02:00

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;

Infrastructure;

Labour Market Inflexibility;

High Cost of Utilities;

Energy;

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:

2009

2010

2010

2011

Growth

Zimbabwe's Budget

Revised

Original

Revised

Current

Rate

Framework 2010

Estimate

Estimate

Estimate

Projections

Projected

Revenue US$ 'm

1 040

1 440

2 152

2 746

27,6

Expenditure US$ 'm

1 431

2 250

2 258

2 746

21,6

6 210

6 716

6 716

9,3

4,7

8,1

8,1

20,0

26,0

32,0

28,0

40,5

33,6

37,4

-391,0

-810,0

0,0

107,2

Overall Balance % of GDP

6,3

12,1

0,0

Vote of Credit

391,0

810,0

360,2

500,0

107,2

Exports US$ 'm

2 006,4

2 018,0

2 540,0

2 790,2

0,6

Imports US$ 'm

3 659,8

3 498,0

4 043,6

4 042,5

-4,4

Exports % of GDP

35,0

36,3

37,8

38,0

Imports % of GDP

64,0

62,9

60,2

55,1

Annual Inflation Average

-5,5

5,1

4,8

4,5

Agriculture % Growth

10,0

10,0

33,9

19,3

Mining % Growth

2,0

40,0

47,0

44,0

Manufacturing % Growth

8,0

10,0

2,7

5,7

Tourism % Growth

6,5

10,0

10,0

6,0

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

2010-12-01T08:42:00.000+02:00

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.

From John Robertson

2010-11-18T07:56:00.002+02:00

Zimbabwe’s October's inflation figures show a month-on-month increase of 0,22%, which carried the index number up to 95,27. As this figure was 91,96 in October last year, the year-on-year inflation rate works out at 3,6%.

Prospects for change in the coming year seem likely to be driven mostly by wage demands and by movements of the rand against the US dollar. On the local increases in labour costs, the faster rate of increase in affected consumer goods prices might not impact on the prices people pay if they can choose a more competitively priced imported product. Local producers seeking to recover higher labour costs are therefore more likely to price themselves out of the market than to add to inflation. However, the loss of jobs for those companies that fail will cause a shrinkage in local buying power as well as in the taxes paid to government and the local authorities.

The rand exchange rate appears to be settling into a pattern of minor adjustments between R6,8 and R7,10 to the US dollar. The news a week ago that the US is to print another $600 billion to ease the liquidity has cast the US dollar’s recovery prospects into a deeper shadow, so perhaps a weakening rand is still some way off. Meanwhile, Zimbabweans will be spending mainly weaker US dollars to pay for goods priced in strengthening rand, so our import procurement costs are more likely to go up — unless we can source the goods from local suppliers. Zimbabwean factories should be trying to recapture the loyalty of local retailers now, while the rand is strong, and industrial workers will be more likely to keep their jobs if they can restrain their wage demands and improve on their levels of productivity.

Mineral output - from John Robertson

2010-11-03T13:22:00.002+02:00

Zimbabwe's mineral production volume and value figures through to August have now been released. The attached table shows the figures recorded by the Chamber of Mines and these illustrate the extent of the improvements seen in gold and coal output. However, progress has been hesitant for many of the minerals and figures for some of them, such as limestone and black granite, have not been recorded as efficiently as they were in the past, even though the minerals are still being produced.

From John Robertson

2010-11-01T06:05:00.000+02:00

The Central Statistical Office has updated its Poverty Datum Line table to August 2010. This shows the dollar amount needed by an individual and by an average family of five people to meet the cost of basic essential food items for a month and the amount needed by them to meet the total consumption needs, also for a month.

The CSO defines the PDL as the cost of a given standard of living that must be attained if a person or family is to be deemed not to be poor. Accordingly, in August 2010, if an individual were receiving an income below US$146 a month, or if a family of five were receiving a sum below US$477, and if they were entitled to no benefits, allowances or subsidies, they would be deemed to be poor.

From John Robertson

2010-10-20T08:17:00.000+02:00

The detailed Consumer Price Index table shows that during September the price changes recorded were mostly fractions of one percent and the prices dropped down slightly during the month for about two dozen of the consumer goods identified.

A similar number of goods are also shown to have decreased against their levels a year ago, but some of these decreases are quite significant, led by carpets and floor coverings, which fell by 38,7%. New and used car prices went down by 29,7% and small electrical household appliances became 22% cheaper. However, hotel accommodation increased by 45,9%, motor cycle prices increased by almost 30% and vehicle maintenance charges rose by 21,3%.

Figures for school fees remain absent from the table, but the reason for this has not been explained.. Very few new statistics are being released by the Central Statistical Office at present, but I am hoping to receive indications of manufacturing output changes within the next few weeks. Some mining production volume and value figures will also be ready soon.

Kindest regards,

John

Banker Association President Defends Bank Charges

2010-10-12T11:10:00.000+02:00

12 October 2010
Harare — THE Bankers Association of Zimbabwe has defended local bank charges saying they are comparable to the region, although they differ slightly due to high cost of utilities.

In an interview with Herald Business BAZ President Mr John Mushayavanhu said according to a recent study, also sent to the Ministry of Finance, rates levied by the local banks were not out of line with regional trends.
"We have done a study and I can confirm that our rates are very much comparable to the region. There are slight differences because our infrastructure and utilities such as power as we sometimes use generators," he said.

The BAZ president said local bank charges were not exceptional considering other countries such as South Africa even charge their clients for depositing money, which does not happen in the local banking sector.

There has been concern from the banking public, the Ministry of Finance and Reserve Bank that banks were ripping off clients with high charges yet they did not give any interest on account facilities such as current accounts.

In many instances depositors are baffled when they discover that after making bank deposits their balances would be significantly reduced by service and monthly charges, which have discouraged the use of the banking system.

Economists said current account balances are reduced each time the holder withdraws money or asks for a statement with banks charging up to US$3 per transaction. Current accounts may attract 3 percent interest in a year.

Mr Mushayavanhu said bank clients had options to operate either holding or investment accounts. Current accounts, despite the apparently high service charges, do not attract interest on deposits, as they are believed to be meant to facilitate the transfer of money from one point to the other and usually do not hold funds for a long time.

On the other hand, savings accounts, which hold deposits over a fixed period of time, hold funds for a given time allowing banks to also draw on the money for investment elsewhere meaning banks earn a return on them.

Savings accounts, which essentially are demand accounts where the holder may call on the money after a month, are able to attract interest of between six and eight percent.

Clients can also make returns from investment facilities such as fixed term deposits. On average a 60-day deposit, depending on amount, attracts between 11 percent and 15 percent.

Ninety-day deposits presently attract between 12 percent and 16 percent, but the actual rate may be determined by amount invested.

As part of efforts to encourage use of the banking system, said BAZ, banks were now advertising business conditions. He noted confidence was slowly returning to the sector after a decade of instability eroded public trust.

Mr Mushayavanhu said the imminent resumption of lender of last resort function by the Reserve Bank and the existence of the Depositor Protection Board should help improve public confidence in the operations of local banks.

"We have the Depositor Protection Board, which is more like an insurer of banks, which would compensate depositors in the event that a bank goes under," said Mr Mushayavanhu.

Confidence in the local banking sector was shaken after a decade of economic instability when thousands of people lost their money after the country dumped the local currency and adopted the multi-currency system.

China and Zimbabwe

2010-10-12T09:28:00.001+02:00

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..."

Virgin Unite, Humanity United and the Nduna Foundation announce plans to help restore Zimbabwe to a thriving nation.

2010-10-12T09:27:00.000+02:00

Zimbabwe's economy was once as rich as its culture. But today, unemployment in one of southern Africa's landlocked nations, has skyrocketed to an alarming 95 percent. If ever there was a time to help this nation, it is now. Fortunately, social philanthropists and influential leaders such as Richard Branson and Nelson Mandela have stepped up to the plate.

Enterprise Zimbabwe CEO Isabella Matambanadzo tells Tonic, "We don't have the financial resources to match the ideas we have for business." So what's a country to do when its people have great ideas and a healthy dose of entrepreneurship but no money to match their intentions? They ask for help.

Together, Virgin Unite, Humanity United and the Nduna Foundation established Enterprise Zimbabwe, an independent nonprofit aimed at fostering a transformation of the nation's economy by finding investment partners to ignite and fuel the existing entrepreneurship of the Zimbabwean people.

The program was born under the direction of The Elders, a group of leaders founded by Nelson Mandela and Craca Machel, and chaired by Desmond Tutu. The independent assembly identified the need for investment partners and quickly put this initiative to revitalize the Zimbabwe economy into motion. Of course, none of this would be possible without the financial support and efforts of Virgin Unite and Richard Branson.

"Zimbabwe was once a shining example of a thriving economy in Africa and known worldwide for having an incredible spirit of entrepreneurship," said Branson. "Now is not the time for donors to take a wait and see approach. It's critical for the global community of business leaders and philanthropists to come together to support Zimbabweans."

The scramble for Zimbabwe has already begun

2010-10-06T10:13:00.000+02:00

The Scramble for Africa, also known as the Race for Africa, was a process of invasion, attack, occupation and annexation of sovereign African territory by European powers during the New Imperialism period, between the 1880s and World War I in 1914. (Source Wikipedia).

I wager that we have begun to see the scramble for Zimbabwe but this time it will not be characterised by any attacks, occupations and annexation but rather by billions of US dollar touting investors from all over the world as they seek to get their stake of Zimbabwe's vast mineral resources. Already on Tuesday it was reported that Zimbabwe's government received five bids for its 70% stake in Zimbabwe Iron and Steel Co.

Zimbabwe has the second largest deposit of platinum reserves in the world. Zimbabwe has a good percentage of the world's known reserves of metallurgical-grade chromites. Other commercial mineral deposits include coal, asbestos, copper, nickel, gold, and iron ore and lately diamonds. In order to develop these mineral deposits, the country needs billions of dollars. Zimbabwe has well skilled population, excellent climate and numerous opportunities in all sectors going forward.

The deterioration of infrastructure and social services over the last ten years provides significant opportunities for investors; there is no doubt about that. China is quietly already there so are the Russians. Opportunities also exist in agriculture and related industries where farms and companies are lying idle in need of new capital. The one thing about Zimbabwe is that, because of ZANU (PF)'s mismanagement of the economy since 2000, basically all industries have been underdeveloped and must be recapitalised presenting huge opportunities in all sectors. According to the Infrastructure Development Bank of Zimbabwe (IDBZ), in which the Chinese now have a stake, US$20bn is required to revive the country's infrastructure. In addition to that, we have heard that Woolworths is returning, Pick n Pay has upped its stake in TM, MacDonald's will be back, DRDGold is there, the French are looking at huge energy investments, Ecobank has bought a stake in a local bank, a number of Zimbabwean companies are looking for secondary listing on the JSE to raise new expansion capital while those banks whose licences were unfairly revoked in 2008 are back in action. Lately, Richard Branson has joined the chorus and we are likely to see Americans coming aboard. Zimbabwe has also lagged behind in the ICT and Services sectors and those investors with smart ideas and capital should make a bundle.

The fundamental requirement is that Mugabe and his cronies exit and the question is, will this happen soon enough? Personally I think Mugabe is tired and it must dawn on any intelligent man as he is that, all things come to an end. However we have a serious problem with the army and those in ZANU (PF) that who would rather have the current scenario prevailing.

As the scramble begins we all do hope and pray that free and fair elections will be held this coming year and the best thing that could happen to the country is that ZANU(PF) exits and we see the emergence of a democratic dispensation and hopefully, a new leadership driven by a new value system. Something at the back of my mind, however, tells me that ZANU (PF) will not go quietly. Investors need therefore to take a calculated risk and must not underestimate Mugabe who has a penchant for doing the unexpected. Yes it's time for him to go but I can see him beating his chest and claiming that without him and his insistence that sanctions must go, the investors would not be back. I can bet my bottom dollar that the MDC will not get any credit for this.

My own personal opinion is that it is such a pity that capital is insensitive to human rights. There is much national healing that needs to go on before we can claim that things are normal. This, however, will surely be swept under the carpet as the power of capitalism rears its ugly head once more. However, if you want to be part of the action, the time to go and invest in Zimbabwe is now.

*Vince Musewe is an independent Zimbabwean economist based in South Africa and chairman and founder of Truth2Power an organisation that seeks to encourage fearless debate and dialogue on creating a new Africa. You may contact him on vincemusewe@yahoo.com

Gono gives RBZ clean bill of health

2010-10-03T09:55:00.002+02:00

Saturday, 02 October 2010 18:27

THE Reserve Bank of Zimbabwe (RBZ) say it is on course to be operationally ready to resume its lender-of-last-resort role.

The move is likely to restore confidence in the troubled financial services sector.

RBZ stopped playing the lender-of-last-resort role in 2008 creating fears that the local financial institutions were now susceptible to shocks in the event of problems in the sector.

RBZ governor, Gideon Gono told Standardbusiness on the sidelines of the Sadc Central Banks meeting on Friday that once the central bank is ready, Treasury will disburse the money.

He said they were not performing that role, not because the Ministry of Finance had not disbursed the money but for other technical reasons.

“The Minister of Finance has written to the governor and is on record as saying as soon as they are operationally ready he would disburse the money to kick-start that process.

“Unfortunately we have not been operationally ready but we are there now. We should be able to begin the process,” Gono said.

RBZ is in the process of rationalising its staff in line with the new focus of sticking to the bank’s core business.

Gono said rationalisation is one of the items on the agenda but would not commit himself on the numbers involved because “it will be pre-emptive of me to report on where we are to the public before we have concluded matters and reported to our principals”.

Meanwhile, the 31st meeting of the Committee on Central Bank Governors from the Sadc region ended in Harare on Friday with 15 central bank governors and 30 senior officials in the region in attendance.

Gono said the mere fact that the meeting was held in Zimbabwe got certain directional signals to others about their perception of the venue and the country.

“You cannot wish away Zimbabwe’s central bank, you cannot prescribe it out of existence, you cannot hope to achieve economic turnaround let alone stability and growth outside the involvement of your central bank,” Gono said.

“These men and women showing their weight to come over here is a great tribute to the country, an indication that our country is stable, turning around and they now want to see and understand Zimbabwe more.”

BY NDAMU SANDU - The Standard

ZSE rebounds as foreigners return

2010-09-27T08:18:00.000+02:00

Written by Vusimuzi Bhebhe
Saturday, 25 September 2010 13:38

HARARE – Zimbabwe’s stock market continues to be a boon among foreign investors despite negative sentiment about the overall political and economic climate in the troubled southern African country.

Latest figures from the Zimbabwe Stock Exchange (ZSE) show that net inflows from foreigners more than quadrupled in the four months to August.

According to the ZSE, foreign investors pumped in US$27.2 million to buy shares on the local bourse in August, up from US$17.7 million the previous month and an insignificant US$6.6 million in May.

The renewed foreign investor interest surpasses the performance of the ZSE before the introduction of Zimbabwe’s controversial black economic empowerment regulations in February which saw the market slip by at least 300 percent in one month under a cloud of uncertainty.

The empowerment regulations, which compelled foreign-owned firms to cede controlling stake to indigenous Zimbabweans over the next five years, have since been toned down following concerns by business and the MDC-T led by Prime Minister Morgan Tsvangirai.

Jitters over the regulations saw the bourse raking in only about US$5 million between February and March compared to more than US$20 million a month previously.

Critics fear Mugabe wants to press ahead with transferring majority ownership of foreign-owned companies as part of a drive to reward party loyalists with thriving businesses.

“We have seen an improvement in foreign inflows over the past month or so as the foreigners take positions in anticipation of the day when the country’s fortunes improve,” an analyst with a Harare-based stockbroking firm told The Zimbabwean On Sunday last week.

The improvement in foreign investor sentiment comes against the backdrop of a recent report by Netherlands-based Amstel Securities which labelled the ZSE the worst performing bourse in the sub-Saharan Africa.

Amstel said the Zimbabwean bourse declined by 7.5 percent between January and July compared robust performances by other African markets such as Kenya and Uganda which grew by more than 40 percent over the same period.

Concerns over Zimbabwe’s fragile coalition government have also lurked over the country’s economic horizon.

Constant bickering about the parties in the coalition regime has failed to restore confidence in an economy pummelled by a 10-year political crisis.

ZSE stocks remain under pressure

2010-09-27T08:14:00.000+02:00

THE Zimbabwe Stock Exchange industrial index fell last week as stocks continue to suffer from pressures of tight liquidity and other economic challenges.

The benchmark index lost 1,2 percent compared to week ending 17 September 2010 while the mining index came off 7.10 points, a decline of 4,8 percent to close at 162.41 points.

Weekly turnover amounted to about US$6,6 million from 75 736 306 traded shares.

Econet was the most liquid counter with total weekly revenue of US$1,6 million.

It was followed by Delta at US$1 million, Interfin at 945 997, Innscor at US$426 588 and OK Zimbabwe at US$326 530.

There was a special bargain involving about four million Interfin shares.

The parcel traded at a special bargain price of US24c being 14,29 percent premium to the trading price of US21c.

Market capitalisation declined from US$3 338 646 185 during the week ended September 17 to US$3 302 214 185 implying that aggregate shareholder value lost US$86,4 million.

ZSE stocks are expected to remain under pressure due to liquidity constraints.

In the short term, the money market will continue providing better returns than the equities market.

Although it has been largely anticipated that liquidity could significantly improve after the sale of Chiadzwa diamonds, money supply has remained low and the situation would remain favourable for money market investors.

Analysts say the prevailing trading environment does not encourage a passive investment strategy on the stock market.

Since the beginning of the year, the money market has outperformed the returns from equities market.

As at September 1, the benchmark industrial index had posted a loss of 13 percent whilst the mining index had shed about 31 percent.

However, there is now growing participation by foreign investors.

Foreign trades have significantly improved amid indications that the value of shares bought rose by 309 percent between May and August.

According to statistics from the ZSE, foreigners bought shares worth US$6 612 312,20 in May and the value slightly increased in June to $6 667 649.33.

The purchases by foreigners rose to US$17 727 545,61 in July and in August the value shot up to US$27 203 071.40.

Most foreign traders, whose appetite for risk is generally on the lower end, have shunned the ZSE for other less risky stock exchange due to political uncertainties and lack of clarity on the country’s empowerment laws.

Volumes of trades from foreign investors has therefore remained relatively subdued than expected, a development that has also led to depressed activity on the ZSE.

Analysts said the growing participation by foreigners reflects renewed confidence among foreign investors who had shunned the market as a result of some uncertainties, particularly the country’s indigenisation and empowerment laws.

Elsewhere, US stocks soared in opening trade on Friday, led by Nike’s strong earnings and better than expected manufacturing data as well as a rise in German business confidence.

The Dow Jones Industrial Average jumped 1.5 percent or 158.29 points to 10,820.71 shortly after the opening bell, while the broader S&P 500 index was up 1,4 percent or 15.65 points to 1,140.39 points.

The tech-rich Nasdaq composite index rose 1,36 percent or 32.06 points to 2,359.26.

Nike saw its shares jump by nearly four percent after its quarterly earnings report exceeded expectations with a nine percent rise in net income and an eight percent rise in revenue to US$5.18 billion.
Traders were also digesting data released before the opening bell showing that orders for big-ticket items decreased in August at a slower than expected rate.

Excluding the transportation equipment, mainly aircraft parts, orders of items such as household appliances nevertheless rose by a more-than-expected 2.0 percent.

The manufacturing industry is seen as one of the main engines pulling the US economy out of one of its worst recessions in decades.

Investment remains doubtful despite PM's progress speech

2010-09-22T08:14:00.000+02:00

http://www.swradioafrica.com/ By Alex Bell
17 September 2010
Delegates at Thursday's Future of Zimbabwe summit have said that serious doubts remain about investing in the country, until there are visible changes on the ground.

The summit in Johannesburg looked at the investment environment in Zimbabwe, the impact of the country's brain drain, the future of agriculture and food security and the ethics of investment in Zimbabwe.

Prime Minister Morgan Tsvangirai was the keynote speaker and made an effort to encourage investment in the country, saying there was tangible progress in economic reforms.

While conceding the pace of progress has been slow and limited, Tsvangirai said the past 18 months under the unity government had witnessed steps forward in the implementation of political and economic reforms. He went on to cite a few examples of this economic turnaround, singling out the return of health workers and availability of medicines in hospitals, teachers and books in schools, food in supermarkets and granaries, as well as water, fuel, stable currency and a single digit inflation.

But the summit went ahead against a backdrop of worrying developments in Zimbabwe that are contrary to Tsvangirai's accounts of progress and change.

On Tuesday a farm illegally seized by a ZANU PF senator was burned to the ground, despite a bilateral investment protection agreement and a protective court order, as part of the ongoing onslaught against Zimbabwe's commercial farming community. Robert Mugabe also recently insisted that the controversial business indigenisation programme will go ahead, which will see foreign companies in the country forced to hand over 51% of their shares to pre-selected Zimbabweans.
Alongside this the exercise to gather public opinion on a new constitution has faltered marred by incidents of violence and intimidation.

At the same time, a deadline set by Southern African leaders for the unity government to implement the two year old Global Political Agreement

(GPA) has come and gone, and there is still no sign from either the MDC or ZANU PF that there will be any real change.

Despite all this Tsvangirai still moved to defend Robert Mugabe as his partner in the government, saying he was committed to change. Tsvangirai told a news conference after the summit on Thursday that Mugabe could rescue his legacy as the country's liberator.

I suppose Robert Mugabe has been portrayed as a demon, he said. He himself made a contribution to that caricature because I cannot defend what he did over the last 10 years in terms of violence, in terms of expropriation and all these other activities.

Tsvangirai continued: But there is also a positive contribution to our country that he has made. Remember that he was the national liberation hero, and so those are positive years. I suppose there is the personality conflict between a hero and a villain, of which you have to make an assessment.

History will have to judge him.

Zimbabwean businessman Trevor Ncube, who owns the recently launched NewsDay paper, said the government was yet to put together policies to entice investors into the country. Ncube was one of the speakers at Thursday's summit. He told SW Radio Africa on Friday that there was still doubt that the current reforms Tsvangirai was speaking about could be sustained.

Government has to create political stability that guarantees security for people to go back home and for investors to funnel money into the country, Ncube said. There is still understandable wariness about investing in the country, because there are no guarantees of any sustainable change.

John Worsley-Worswick from Justice for Agriculture (JAG) was another speaker at Thursday's summit, and he told SW Radio Africa that the summit appeared to be a propaganda exercise.

There is a great deal of scepticism about investing in the country, and it's understandable given the lack of normalcy in the country, Worsley-Worswick said. But what we found alarming was the deliberate effort to paint over the cracks.

PM describes progress at future of Zimbabwe summit
Written by SW Radio Africa -
Friday, 17 September 2010

As the farming community mourns the loss of yet another commercial farm in Zimbabwe, Prime Minister Morgan Tsvangirai has described as tangible progress in the country.

Tsvangirai was speaking at the Future of Zimbabwe summit in Johannesburg on Thursday, where delegates gathered for a one day conference to debate the country's economic future and investment potential. Tsvangirai, the key note speaker, said he believes the country is making progress in all sectors of the economy.

'We chose progress over violence, polarisation, decline and decay.

Zimbabwe is moving forward. From the darkness of madness and self-destruction, to the new dawn of a new Zimbabwe,' said Tsvangirai in his address.

'This progress is tangible. Yes, it is slow. But it is there.'

He went on to cite a few examples of this economic turnaround, singling out the return of health workers and availability of medicines in hospitals, teachers and books in schools, food in supermarkets and granaries, as well as water, fuel, stable currency and a single digit inflation.

He added however that the failed policies of the past government, led by Robert Mugabe and ZANU PF, continued to haunt the country.

'Disdain for the rule of law and property rights continue to undermine our image as a safe investment destination,' said Tsvangirai.

'Disdain' for property rights is the closest Tsvangirai came to mentioning the ongoing farm invasions in the country, which are making a mockery of any attempts to encourage foreign investors. Many of the farm attacks have targeted properties meant to be protected by Bilateral Investment Protection and Promotion Agreements (BIPPA) with foreign countries. But these BIPPA's have done nothing to persuade Mugabe loyalists from invading commercial farms and violently evicting farmers.

Some observers have commented that the Prime Minister is showing insensitivity by trying to promote Zimbabwe has a safe investment zone, when it is so clear that there are no guarantees of investment safety.

Robert Mugabe also said this month that he will press ahead with plans to transfer control of foreign firms to local Zimbabweans, as part of the controversial indigenisation exercise. But Tsvangirai on Thursday tried to downplay this threat, saying the process would be implemented gradually and without forced sales.

'What's being implemented are minimum thresholds. You can't start with 51 percent, Tsvangirai said. But you also have to say how, over time, you are going achieve the maximum threshold.'

But with the MDC so clearly lacking any power in the unity government, it is unlikely that Tsvangirai will have any say over how Mugabe's indigenisation plan should be implemented.

From John Robertson

2010-09-17T09:35:00.000+02:00

Almost all the increases were countered by decreases in the prices of other goods and ten of these decreased by more than one percent. This left the overall index down by 0,15% at 94,96 for August, but compared to 91,66 in August last year, the figure is an increase of 3,6% for the year.

The Index has been decreasing every month since May this year, when it was 95,32. In the same months of last year, the Index was rising each month, so the narrowing gap has produced the falling year-on-year percentage change.

Comments about the Index in the last few months show that many people share the view that life in Zimbabwe is getting harder and therefore the easing inflation rate claim that is not supported by the perceived facts. Unfortunately, the very subjective perspectives that are brought into this debate make generalisations difficult, but many people agree that the hardships are mounting for reasons other than cost increases. They speak of increasing burdens imposed by family and extended family members who are unable to find steady employment and have found whatever efforts they can make in informal activities are yielding shrinking returns.

The difficulties are worsening, therefore, because the demands on those in steady employment are increasing. More jobs are needed, but employers are struggling too and a large number are more preoccupied with trying to fund retrenchment plans than with any thoughts of expansion. New investors are very few in number and the procedures and hurdles encountered by those trying to qualify for investment licences seem to have been designed to discourage them. For many families, remittances from family members working abroad were the main source of their spending power, but the evidence suggests that difficulties in Europe and South Africa have made the payment levels hard to sustain. Many are already returning from South Africa and most of them are likely to take some time to become contributors again.

Current conditions are unlikely to bring about the needed job creation. The labour unions have become particularly aggressive and very few wage settlements are reached without going to arbitration. The demands are making those employers who can fund any retooling exercise choose capital-intensive rather than labour-intensive production methods. As one example, new bottling plants in the major company referred to most frequently in claims that “the economy is recovering” need far fewer people to operate them. However, the limited bank finance available is holding back many of the business development plans, and the indigenisation policy has prompted many more of these plans to be shelved.

Even if prices remain steady for more months, the stresses at the household level seem likely to remain in place. As they will have their counterpart effects on government’s ability to collect increasing tax revenues and pay better salaries to public sector employees, we ought to be able to get government’s attention by offering thoughts on the ways that their own policy choices are to blame for many of these problems.

Kindest regards,
John

Zimbabwe inflation slows to 4.1 pct y/y in July

2010-08-24T08:54:00.000+02:00

Mon Aug 23, 2010 1:38pm GMT
HARARE Aug 23 (Reuters) - Zimbabwe's annual inflation fell to 4.1 percent year-on-year in July from 5.3 percent in June, driven down by a drop in the cost of food and non-alcoholic beverages, official data showed on Monday.

Zimbabwe, whose inflation peaked at 500 billion percent in Dec. 2008 according to IMF data, has stabilised its economy under a coalition government set up last year by bitter rivals President Robert Mugabe and Prime Minister Morgan Tsvangirai.

The price of food, which constitutes 30 percent of the consumer price index basket, has stabilised over the last year thanks to a better agriculture output.

The Zimbabwe National Statistical Agency said month-on-month inflation was -0.1 percent in July, unchanged from June.

Finance Minister Tendai Biti has projected that inflation would end the year at 4.5 percent, against a previous government forecast of 5.1 percent, although some analysts see a higher figure.

The government abandoned use of the Zimbabwe dollar last year after hyperinflation rendered it worthless and now uses the US dollar and South African rand. (Reporting by Nelson Banya; editing by Patrick Graham)

Zimbabwe economy may be bigger than thought

2010-08-20T10:07:00.001+02:00

Just how big is the Zimbabwe economy and how upbeat should one be about growth prospects?

The questions are taking on growing importance for investors who have already bought into the Zimbabwean market and those thinking about it.

The IMF and the mid-term review of Zimbabwe Finance Minister Tendai Biti incline to caution. Yet local companies are much more upbeat, according to an assessment from Imara Asset Management Zimbabwe, a subsidiary of the Pan-African Imara financial services group.

Imara has given a lead with investment facilitation into Zimbabwe and provides regular updates to international investors.

In his latest analysis, John Legat, Chief Executive of Imara Asset Management Zimbabwe, notes: “We find it hard to understand why both the IMF and government are being as cautious as they are… Their views give a rather sobering view of the economy rather than an upbeat and exciting outlook for a country barely in its second year of reform.”

The IMF believes Zimbabwe has an economy worth just over US$5 billion, though it admits supporting data has “serious shortcomings”.

Legat thinks the IMF arithmetic does not add up and uses the neighbouring Zambian economy – worth US$14 billion – as a yardstick. The countries have populations of a similar size, but until its ‘lost decade’ Zimbabwe’s economy was about 50% bigger.

Zimbabwe’s argriculture, tourism and manufacturing sectors gave it the edge over its copper-rich neighbour. By some measures, Zimbabwe still outdoes its neighbour.

Zambia’s two major breweries sold US$230 million worth of beverages last year while sales at Zimbabwe’s Delta brewery totalled $324 million.

MONETARY POLICY SUMMARY

2010-08-06T09:50:00.000+02:00

STANBIC BANK ZIMBABWE

MONETARY POLICY SUMMARY
JULY 2010
Policy Area
Key Issues

Implications
Liquid Asset Ratio
( Liquidity ratio)

With immediate effect, minimum liquidityratio increased from 10% to 20%. This was done to minimize systemic risk.
For the market, the increase in liquidity ratio has an effect of
squeezing commercial bank lending capacity.

Statutory Reserves
In an effort to release more resources for lending, the statutory reserve ratios have
been scrapped with immediate effect.

Lending capacity of banks is not
likely to immediately improve due to other considerations including the need to comply
with increased liquidity

ratios
Bank Capitalization
As at 30 June 2010, 17 out of the 24 banking institutions were in compliance with the minimum capital requirements.
The non-compliant banks have been given up to 31 December 2010 to comply
Adequately capitalized banking
sector will help in minimizing
systemic risk.

Bank Charges ( incl Interest Rates)
Government expressed concern over the wide spread between lending and deposit rates, but would, for the time being, rely
on moral suasion.

With immediate effect, all banks must post on visible boards their explicit conditions of service including deposit rates

Lender of last resort function
RBZ has been capacitated through the fiscus to perform the lender of last resort function.
Fund described as “modest”. Operational modalities to be issued in due course.
Impact on money market
developments will depend on the size of the facility.
Enhancement ofRisk Management
Banks required developing formal frameworks for risk management that incorporate the ERM concept – integrated processes.

Risk management guideline being revised.
Real Sector Developments
• GDP is projected to grow by 5.4% in 2010 and is underpinned by growths in mining(31%), agric (18.8%) and manufacturing (4.5%).
• Mining sector growth is supported by rising minerals prices i.e. platinum and nickel prices have increased by 25% and 33% respectively, since December 2009.
GDP growth forecast remains fragile due to challenges including :
• Lack of external support
• Skills flight
Energy constraints and
• Inadequate liquidity levels.

Inflation Developments
Annual inflation stood at 5.3% in June 2010 and this is comparable to regional average levels of around 7-8%.
The Governor warned institutions to refrain from paying wage levels which are
above productivity levels.
In the outlook inflationary pressures
will emanate from:
o High utility charges,
o Rising oil prices,
o Wage pressures,
o Psychological hangovers
from past hyperinflationary
behaviors.
Developments in South Africa will also have a significant impact on Zim inflation due to strong trade links.

Money Supply &
Stock Market
Developments
Money Supply &
Stock Market
Developments (continued)
• Broad money (M3) increased from US$1.4 billion in January 2010 to US$1.8 billion by 18 June 2010.
• Major sources of liquidity include
o Gold sales,
o Tobacco finance facilities,
o Off shore lines of credit and
o Workers remittances
• Loans to the private sector also increased from US$760 million in January 2010 to US$1.1 billion by 18 June 2010.
• Stock market capitalization declined from US$4.2 billion in December 2009 to US$3.19 billion by June 2010.

Monthly growth in money supply has significantly declined to 5% in 2010 from 15% in 2009. This decline clearly highlights stagnation in economic performance.
Low activity on the stock market is impacting on money supply growth.

External Sector
Cumulative to 30 June 2010, total export shipments amounted to US$871 million
compared to US$422 million over the comparable period in 2009.
Total external debt increased from US$ 5.67 billion in December 2009 to US$ 6.43
billion by June 2010. The increase was due to :
o Short term borrowings by private sector,
o Capitalization of interest on
external payment arrears.

Low donor support and the
continued deterioration of the trade balance will constrain the country’s ability to accumulate reserves and service outstanding debt obligations.
Exchange Control Issues
• In a bid to curb unwarranted
externalization of forex resources, the RBZ will seek to review the existing admin and
monitoring mechanisms for cross border transactions.
• In order to curb the illegal practice of keeping export proceeds in unapproved offshore accounts, all exporters with overdue export proceeds shall continue to be red-flagged in the CEPECS system and will remain red-flagged until they have cleared the overdue status
• The above exporters will be subject to a higher Form CD1 Accessing fee of US$ 50 as a default penalty
Companies need to ensure
compliance with exchange control requirements to avoid attention from regulators
SOURCE : STANBIC BANK

Toll fees relief for motorists

2010-08-02T09:05:00.000+02:00

Herald Reporter
Motorists living within a 10km radius of tollgates are now required to pay US$10 per month.

However, the motorists would have to meet set Government requirements for them to be eligible for such a relief.

In the past, all those living close to the country’s 22 tollgates were forking out nearly US$60 per month in toll fees.

In an interview yesterday, Zimbabwe National Road Authority chief executive Mr Frank Chitukutuku said they had taken over management of tollgates from the Zimbabwe Revenue Authority to improve accountability and efficiency.

"Locals will have to produce a registration book, proof of residence in the form of a bill and a national identification card and can purchase the tickets from Zinara offices or any post office.

"On collection of fees, we have taken over from Zimra, but we are only going to recruit management staff while Zimra officials manning the tollgates will be retained, but under Zinara," he said.

Government has realised more than US$15 million since toll gates started operating in August last year, an official has said.

In cases where there are no bills, Mr Chitukutuku said citizens would have to produce a letter signed by the local authority where they live.

He said the new management staff would be trained in South Africa by Inter Toll, a subsidiary of Group Five Limited.

Mr Chitukutuku said the road authority would now be involved in the printing of tickets to be issued to motorists to control the amount of receipts in circulation for audit purposes.

"We now have to be involved in the whole process unlike in the past when Zimra was in control. By mid-August all tickets will be bearing our logo," he said.

He said construction of proper structures at the tollgates was underway and would be followed by computerisation.

"Work is in progress at the country’s major roads. The manual system is full of loopholes but with computerisation we can remove human factors of bribery, corruption and misappropriation.

"The system will have sensors which will play a pivotal role in audit purposes," Mr Chitukutuku said.

Out of the US$15 million collected to date, US$8 355 608,58 has been disbursed to the Department of Roads while Zimra got 10 percent and the remainder was paid to police for their services.

Mr Chitukutuku dismissed reports that Zanu-PF strongholds in Mashonaland had grabbed the largest amounts of money collected from the tollgates.

"Areas which have received bigger allocations are a representative of the dualisation process which is currently underway.

"Moreover councils bring programmes which we vet to see if they are fundable and allocations for maintenance are given on first come first served basis.

"People must know that toll fees are used to maintain trunk roads—roads that have toll gates only," he said.

Mashonaland West and East were allocated US$2 273 692 and US$1 532 171 respectively.

Manicaland got US$521 953, Mashonaland Central US$801 802, Midlands US$909 318, Matabeleland South US$851 979 Matabeleland South US$741 017 and Masvingo US$681 750.

Government introduced tollgates as a way of mobilising money to rehabilitate and maintain roads.

SE, Survival, Solidity the Priorities - Mguquka

2010-07-31T08:41:00.000+02:00

29 July 2010
THE Zimbabwe Stock Exchange (ZSE), once the second largest exchange in Africa in terms of market capitalisation, is in dire need of foreign investment. In the absence of foreign investment, privatisation of government entities could be used to excite the market.

The Zimbabwe Independent senior business reporter Bernard Mpofu (BM) spoke to newly appointed ZSE committee chairman Ndodana Mguquka (NM) on Wednesday in the capital on issues affecting the equities market.

Mguquka -- who took over from Tedious Kasaira -- is the New Africa Securities MD. Below are excerpts of the interview.

What is the main priority of the ZSE committee?
The main priority for this year's committee is to turn the stock exchange into business. By that I mean we are trying to attract a lot of quality listings on our stock exchange because this country is a resource-based country.

We understand that Zimplats went to raise money in Australia because we were trading in Zimbabwe dollars. But now that we are dollarised, there is no reason why they can't list on our exchange especially when their resource is in Zimbabwe.

How do you intend to engage with such companies that are currently not listed?
NM: We have created a business development committee within the ZSE committee which will make a presentation to the Chamber of Mines of Zimbabwe sometime in August. This presentation will focus on the advantages of listing and why they are being unfair to us. We will probably talk to the Bankers Association of Zimbabwe to try and persuade some of the banks that are not listed here, but are listed elsewhere, to consider listing in Zimbabwe.

Do you think such companies will be interested in listing here given that government is expected to review the multi-currency system in 2012?

The whole issue about listings is raising money. From now on I think local pension funds have got the capacity to take up some of these IPO shares. They are recovering slowly and they are the major players on the exchange.

What impact will the anticipated stockpiled diamonds sale in Zimbabwe have on the exchange?

There is a liquidity crunch on the market. All we need is some money in the bank. So if the sales improve liquidity, that will definitely help us on the market. The reason why our market is falling is that there is no money. We are really suffering -- the viability of stockbroking firms is at its worst right now. Stockbroking firms are struggling to pay salaries and so on.

So what is keeping them going?
Innovation has become the only key (kiya kiya), but it is really getting difficult.

How come we haven't seen any stockbroking firm going under since February, apart from NDH and ISB Securities which were disposed of earlier this year?

It is us the independent firms that are going to suffer because the shareholder must put more money, but firms that are owned by big banks and parent companies will always survive. They can pay rentals and salaries until the rainy day comes because stockbroking business is called fist and famine -- it's a cyclical business and it is very sensitive to all sorts of things.

Apart from liquidity problems, what else is hampering stockbroking business in Zimbabwe?
There is so much happening. We are in dialogue with the new regulator (Securities Commission of Zimbabwe) because we are the ones who promoted the establishment of this commission. We have a feeling that they are coming up with a lot of rules that people do not understand. For example, them (SEC) trying to licence financial journalists is something that is unheard of. That should apply to CEOs of listed companies.

Disclosure is a thorny issue in your sector. Has there been any resolve on this issue since last year's dollarisation of the economy?

We are resolving our listing requirements although they are widely at par with the region. We should have new listing requirements by the end of the year and they will mainly focus on disclosure. At present we are copying and pasting listing requirements in South Africa, not entirely though because we only apply what is suitable here and leave out what is not.
What is your view on indigenisation?
Government owns about 40% of this economy. It should promote the exchange through privatisation. The only way this privatisation can be transparently done is through listings and IPO. Once you have got a viable stock exchange, you have got a viable economy and studies have proved that.

Did foreign participation on the bourse improve after indigenisation regulations were amended?
No, I did not see any improvement. Foreign investors normally have a keen interest in blue chips and there are no volumes in these counters.

Is privatisation sustainable under prevailing conditions?
That is where your diamonds come in. You must understand that when you list quality assets, foreigners are allowed to own 40% of listed companies. At present, foreigners have pulled back because of indigenisation regulations yet in countries like South Africa, foreign portfolio investment makes up about 25% of the gross domestic product. We can market these IPOs and listings in the region and worldwide for as long as they are attractive. No one will refuse to buy Zimasco or Zimplats for example.

So, should we anticipate any new listings soon?
We may have a few this year.

How is your relationship with the SEC? And when is the commission going to be fully in charge of the exchange?

We are in dialogue with them and we will continue to do so. Turning to your next question, they are in charge and they are licensing as we speak. They are licensing in terms of issuing out new licences because under the Securities Act, you are deemed licensed if you are an existing firm. We are, however, still negotiating with them because their licensing fees are too high.

Is the ZSE ready for demutualisation because this matter has been on the cards for quite some time now?

We think the stock exchange as it stands is too thin. So we can only demutualise once there is proof that it makes good sense to do so. Demutualisation is a business case, we will definitely get there but the issue right now is survival and making sure that the exchange is solid enough. We will definitely demutualise, in what form, I don't know. But we have consultants working on that.

Can you briefly take us through the day of the ZSE chairman?
It is not a paid job, but it is almost full time. I have to run New Africa and address stock broking issues which pop up daily. I spend most of the time walking up and down to the ZSE or on the phone with ZSE CEO Emmanuel Munyukwi.

Zimbabwe c.bank threatens action on interest rates

2010-07-31T08:36:00.000+02:00

Fri Jul 30, 2010 4:50pm GMT Print
Single Page [-] Text [+]
* Bank seeks market-based interest rates
* New deadline for minimum bank capital requirements
By Cris Chinaka

HARARE, July 30 (Reuters) - Zimbabwe's central bank said on Friday it would intervene to force banks to slash "punitive" lending rates of as high as 50 percent that are partly blamed for slowing economic recovery.

A unity government formed by President Robert Mugabe and rival Prime Minister Morgan Tsvangirai 18 months ago adopted the use of foreign currencies including the South African rand and U.S. dollar, which has helped to stabilise the economy and stemmed hyper-inflation.

But Reserve Bank of Zimbabwe Governor Gideon Gono said lending rates had remained too high, with banks charging between 30 and 50 percent, discouraging companies from borrowing.

"Some of the players in the banking sector have completely diverted their interest rate regimes from the co-fundamentals of inflation and fair evaluation of risk profiles in the market, more towards unexplained outrageous punitive lending rates," Gono said in a mid-year monetary statement.

"The Reserve Bank has been left with no other option but to intervene with the immediate introduction of a more robust market-based interest rates framework," he said without offering further details

EU provides $23m to improve Zimbabwe’s food security, water supply

2010-07-28T11:58:00.000+02:00

July 27th, 2010 in Development, News
-Harare (Zimbabwe) The European Union has approved a € 15 million (about $23 million) aid package to support the re-establishment of essential health and water supply services and provide food assistance, short term food security and livelihood support in Zimbabwe, APA learns here on Tuesday.

The EU said here Tuesday that the new funding would address Zimbabwe’s humanitarian concerns through a wide range of interventions including support to primary health care, the provision and distribution of medicines and medical supplies, and support to the water, sanitation and health emergency response units.

Part of the money would also be used in pilot livelihood support activities, including cash transfers and voucher systems, the EU said.

“If we want Zimbabwe to get back on the path towards longer-term development, we will need to carry on with our efforts to provide clean water and sanitation facilities to the population, alongside our food assistance programmes," said Kristalina Georgieva, EU Commissioner for International Cooperation, Humanitarian Aid and Crisis Response.

The EU has been one of the largest donors in funding emergency water and sanitation interventions in Zimbabwe as part of the integrated public health approach to tackle potential epidemics such as cholera and measles outbreaks.

The bloc is overall the main donor to the vulnerable population of Zimbabwe, having provided €572 million (about $880 million) in both humanitarian and essential development aid since 2002.

JN/daj/APA
2010-07-27

Russian spy network moved money to Zimbabwe

2010-07-22T10:01:00.000+02:00

By Lance Guma 21 July 2010

Many Zimbabweans in the United Kingdom will be familiar with a company called Southern Union, which they used to send millions of pounds in cash to their relatives back home. Unknown to the thousands who used the service the company is alleged to have been used by exposed Russian spy Anna Chapman in a money smuggling operation involving a syndicate linked to the Mugabe regime.

According to British newspaper the Daily Mail, Chapman was behind black market deals worth millions of pounds while working with a businessman introduced to her by her father, who is a diplomat in the Russian Embassy in Zimbabwe. She is said to have got the job at Southern Union via Ken Sharpe, a Harare based businessman with strong Russian and Ukrainian contacts. During her stint with the company Chapman moved cash from British bank accounts to those in Zimbabwe.

“Zimbabweans wanting to send cash home from the UK would pass it to Ms Chapman and her husband who, through international accounts with British banks, would offer a superior exchange rate to anything else on the black market, and wire the sterling to accounts in the African state,” the Daily Mail reported. Several more millions of pounds are said to have been traded in similar fashion on behalf of the business community in Zimbabwe.

On the Zimbabwean side of the operation, a ‘bagman’, known as Vitaly, distributed the money in cash to the recipients. When spiraling inflation began to affect the operation the syndicate began to trade in gold ingots and gems to secure foreign currency which would then make its way back into bank accounts. The Daily Mail spoke to a former client who said; ‘We had Russians and Ukrainians running most of the business from our offices in Harare. Businesses all over Zimbabwe relied on us. We were not the only money-smugglers but we were the biggest.’

So how do Zimbabweans in the Diaspora ensure they do not deal with companies that are involved in these sorts of activities? Exiled investment banker Gilbert Muponda told Newsreel most governments in the West had introduced stringent anti-money laundering measures and registration requirements for money transfer agents. He urged customers to make sure the companies they dealt with were registered

Zimbabwe Assembles US$8M Supplementary Budget for Constitutional Outreach

2010-07-22T10:00:00.000+02:00

Parliamentary Select Committee Co-Chairman Douglas Mwonzora said more funds were needed to complete the constitutional outreach process as it had been extended by 23 days on top of 65 days planned
Jonga Kandemiiri and Thomas Chiripasi 21 July 2010

Zimbabwean Minister of Constitutional Affairs Eric Matinenga said Wednesday that the government with the help of international donors has put together a supplementary budget of some US$8 million for the often-troubled public outreach phase of the country's constitutional revision process expected to conclude in September, followed by drafting.

VOA Studio 7 correspondent Thomas Chiripasi reported on a news conference called by Matinenga in which he said a national command center for the outreach process will shortly be established in Harare. More than 1,000 outreach meetings have been held around the country, but the process has yet to start in Harare and Bulawayo.
Co-Chairman Douglas Mwonzora of the parliamentary select committee running the constitutional revision process, said more funds were needed to complete the outreach as it was extended by 23 days on top of 65 days planned.

Mwonzora said the outreach process, initially plagued by organizational and technical problems, is now running smoothly despite reports some drivers were threatening a strike because they had not been paid. Some outreach team members received allowances this week, but sources said drivers received no explanation as to why they were left out.

Mwonzora told VOA Studio 7 reporter Jonga Kandemiiri that contracts for drivers are not the same as the contracts outreach team members have in that they are paid on the 25th of the month

Shunned by Western Investors, Zimbabwe Seeks Credit Lines in Southern Africa

2010-07-22T09:58:00.000+02:00

Zimbabwe National Chamber of Commerce President Trust Chikohora said that the country’s enterprises desperately need lines of credit to increase production and create jobs

Gibbs Dube
Washington 21 July 2010

Lacking foreign direct investment and donor funding to reactivate Zimbabwe's battered economy, Finance Minister Tendai Biti and business leaders are looking to South Africa and Botswana for credit and capital.

Biti will soon lead a high-powered government and business delegation to Johannesburg and Gaborone in search of investment and credit lines to revive manufacturing where less than 40 percent of capacity is being used.

The two countries pledged to provide a total of US$120 million following the formation of the inclusive government in early 2009, but divisions within the Harare power-sharing government have impeded implementation.

Zimbabwe National Chamber of Commerce President Trust Chikohora told VOA Studio 7 reporter Gibbs Dube that the country’s enterprises desperately need lines of credit to increase production and create jobs. “Foreign direct investment will bring in capital which is needed for rejuvenating the economy currency facing serious liquidity problems,” he said.

But Deputy Secretary General Japhet Moyo of the Zimbabwe Congress of Trade Unions voiced skepticism as to Biti's strategy, saying the Southern African region is unlikely to provide the kind of funding Zimbabwe needs.

Zimbabwe attracted just US$852 million in foreign direct investment in 2009 and a mere US$105 million so far in 2010.

From John Robertson

2010-07-19T09:03:00.002+02:00

The Consumer Price Index fell fractionally from 95,3 to 95,2 in June after declines in clothing and the prices of telephone equipment. Because the index a year ago started moving up, after its decline every month from January to May 2009, the gap measured by the year-on-year percentage change narrowed from 6,08% to 5,31%. This effect will be repeated in July and August because the index continued to rise in those months too, last year. The slowly weakening rand might also help to slow the rate of increase in Zimbabwean prices of South African-sourced goods in the coming months

INDIGENISATION REGULATIONS AMENDED

2010-07-14T12:02:00.002+02:00

INDIGENISATION REGULATIONS AMENDED

Statutory Instrument 116 of 2010 was gazetted on Friday 25th June

under the title: Indigenisation & Economic Empowerment

(General) (Amendment) Regulations, 2010 (No. 2)

The regulations giving force to Zimbabwe’s Indigenisation and Economic Empowerment Act have been amended to allow for different circumstances that might affect companies in different sectors and a few definitions have been tidied up. However, the basic unacceptability of a law that confers upon the State the power to dispossess targeted individuals or companies of productive assets is not addressed. The revised wording and more precise definitions do not make the legislation any less damaging to the investment process, nor do they make the claimed “economic empowerment” objective any less dishonest.

The belief that indigenous people are entitled to success, for which they should not be expected to work, remains unaltered. The belief rests solely on the unchanged definition of an “indigenous Zimbabwean” being “any person who, before the 18th April, 1980, was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person.

This definition does not embody proof that the people so defined were prohibited from forming companies and acquiring assets before April 1980, and claims that “this goes without saying” can be disproved by the citing the many successful indigenous business people who had emerged before that date.

Arguments that they should have been successful in far greater numbers can easily be made, but the reasons why many thousands more did not make fortunes were linked more directly to cultural constraints than to racial discrimination. This remains the case today, thirty years after independence.

While non-indigenous Zimbabweans might ascribe their relative successes to a wide range of issues, the most important of these was a set of advantages that underpinned all the others. These can be briefly described as the existence of, and respect for, individual, bankable property rights. However, a longer description would show how these rights supported everything that matters to the business of generating wealth.

Colonial governments usually had no difficulty accepting and retaining traditional feudal structures and even worked with the local Chiefs to reinforce them, knowing that they would slow the growth of political aspirations.

For the same reason, the leadership ranks of traditional indigenous cultures all over Africa are hostile to the concept of individual ownership rights. When these leaders had overcome the power of colonial governments, many of them systematically removed ownership rights in an effort to increase their own authority. Zimbabwe is no exception.

Even though the leverage of property rights made possible the capital accumulation and investment that transformed production and brought vitally important technologies within the country’s reach, Zimbabwe’s government has sought to dismantle the process that made these developments possible.

Government pretends that its objective is the empowerment of the masses, but by enforcing a process that cuts off both the ability and the inclination to invest, government is actually trying to prohibit the empowerment of everybody other than those in authority. And as a prior objective, government sees the need to dis-empower those who already wield influence through their ability to run successful businesses.

On this basis, the conclusion has to be that the real objective of the Indigenisation and Economic Empowerment Act is to gain control over the business sector. While the transfer of 51% of the shares from a few hundred non-indigenous companies might appear to empower tens of thousands of new shareholders, the considerable dilution of shareholdings and dividends will amount to, for them, no empowerment at all. But under government instruction, the new shareholders’ voting rights will no doubt be used to ensure the appointment of boards of directors of government’s choosing.

In this regard, an important amendment outlines the procedure that government will adopt to consider whether transfers of percentages lower than 51% might be more appropriate. In terms of this addition to the regulations, the Minister is required to set up about 50 sector and sub-sector committees, under the eight business classifications identified in the original Statutory Instrument. These committees have to be formed after consultations with the Ministers responsible for the sectors, these being manufacturing, mining, tourism, finance, transport, communication, construction and energy.

Once established, these committees of between nine and fifteen people will have three months to recommend to the Minister ‘the appropriate minimum net asset value threshold above which a business in the sector or sub-sector concerned is required to comply with these regulations’.

Where socially and economically desirable objectives can be identified, the wording suggests that indigenous Zimbabweans would be prepared to settle for shareholdings of less than 51%. This provision was referred to in the original Statutory Instrument and the socially and economically desirable objectives are listed as:

(i) the undertaking of specified development work in the community in which the business in question carries on its business; and

(ii) the beneficiation to a specified extent of raw materials that are extracted in Zimbabwe by the business in question before it exports them; and

(iii) the transfer to a specified extent of new technology to Zimbabwe by the business in question; and

(iv) the employment to a specified extent of local skills or the imparting of new skills to Zimbabweans to a specified extent; and

(v) any other socially and economically desirable objective not mentioned above.

The committees are also expected to submit to the Minister their recommendations on the policies needed to overcome specified barriers and challenges to indigenisation in any sector or sub-sector of the economy.

In this regard, the nature of indigenisation as a philosophical concept calls for some examination. Will the committees be allowed to point out that the word indigenisation has no meaning in the context of economics?

In trying to describe a process of indigenisation, government appears to believe that the only possible active sequence amounts to measures necessary to displace, limit or exclude non-indigenous people.

As such, it is a political concept. However, identifying the policies needed to overcome specified barriers and challenges to indigenisation could lead to a very productive economic debate, provided government does not specify the subject of property rights to be off limits.

The fact that the indigenous population, which is more than a hundred times the size of the non-indigenous population, did not totally overwhelm the business ventures of the non-indigenous is entirely related to the question of property rights.

The vast majority of the population lives and works on land that has no monetary value or collateral value because traditions prohibit land from being placed on the market and prohibit individual ownership.

Without access to funds and without security of tenure, the people on such land cannot become involved in the process of capital accumulation without taking very high risks. The modest number who made fortunes before independence had to live with the difficulties of pledging movable assets as bank security, so many of them ran transport fleets that, with the backing of carefully built good reputations, made the individuals acceptable credit risks.

Since independence, government had every opportunity to sweep aside these barriers and challenges to indigenisation, but they have chosen not to do so, claiming that the ways of the colonisers have no part to play in a post-colonial country and the time-honoured traditions must be respected.

But the real issue is that these traditions deliver enormous power to the authorities. For that reason, they prefer to retain them, and to claim that they are remaining true to cultural values, so the masses should respect their motives – and their authority.

The claim now being made on the shareholdings and control of businesses started by non-indigenous people is no less a property rights issue than was the claim that commercial farmers should be rightfully dispossessed of their land and equipment, or that pensioners could be legitimately dispossessed of their savings.

For us today, the core issue is that the enforcement of this Act and its regulations will prevent new inflows of venture capital and will prevent the recovery of the productive capacity that previously enabled the country to earn the export revenues that helped to fund and maintain an improving infrastructure.

The country’s dependable foreign earnings also gave it access to credit that supported growing industries, job creation and training, improving social services and further investment inflows, but these have also been compromised by government’s various attacks on property rights.

The other amendments to the enabling legislation more carefully define certain words. ‘dispose’ means to sell/donate/otherwise dispose; a ‘management share ownership scheme/trust’ is to enable managerial employees to acquire stock/shares/debentures and receive income; a ‘managerial employee’ is a principal executive officer, corporate secretary, CFO, HR manager, whether or not also a director, or any employee directly answerable to the board of directors, or any employee who can hire/transfer/promote/suspend/lay-off/dismiss/reward/discipline/adjudge grievances of other employees.

Net asset value means net worth, i.e. total value of fixed and other assets minus liabilities; a ‘share option scheme’ is an arrangement where shares are offered to employees for purchase at a future date at a price fixed in advance; and the definition of ‘qualifying scheme or trust’ is changed to ‘an employee, management or community share ownership scheme or trust that qualifies in terms of section 14, 14A or 14B for the purposes of being used to assess the extent to which a business that is a company has achieved or exceeded the minimum indigenisation and empowerment quota’, these references being to paragraphs in the original Statutory Instrument.

Under Objective of regulations, the word ‘cede’ is replaced with ‘dispose of’.

Under Notification of compliance with indigenisation, the changes are to insert ‘non-indigenous’ between ‘every’ and ‘business’ and to insert a cross-reference to subsection (1) into subsection (2), to confirm that the regulations only apply to businesses with a net asset value of US$500 000 or more.

The word ‘provisional’ is now to be written before ‘indigenisation implementation plans’; and the new section 5A deals with sector and sub-sector committees referred to earlier.

Employee share ownership is now extended to include new sections 14A, which identifies ‘management’, and 14B, which identifies ‘community’ share ownership as means of achieving the minimum indigenisation quota. Community schemes would apply particularly to companies exploiting natural resources in ‘distinct communities’, such as Rural District Council areas.

Counterparties to notifiable transactions are identified in Section 15, confirming that the ‘Fund’ set up in terms of section 12 of the parent Act will be financed by levies on businesses will be the purchaser of last resort in cases where an indigenous buyer of shares on offer cannot be found.

For the valuation of businesses, Section 16 changes ‘value of its assets’ to ‘net asset value’. This also requires that any ‘valuator whom the Minister may appoint’ must be a person ‘registered in terms of the Public Accountants & Auditors Act (Chapter 27:12)’.

For companies that have not submitted Form IDG 01 by tomorrow’s deadline, June 30th, they should wait until they have received notification from the Minister’s office that the absence of their submission has been noticed. If a business that has been identified in this way then fails to submit the forms during the following 30 days, penalties may be invoked.

From john Robertson

2010-07-14T09:11:00.000+02:00

Every retailer is now required to purchase electronic registers that separately record sales values, VAT charges at whichever rate applies, transaction dates, retain a three-year record and are supported by eight-hour back-up power supply units. The registers must comply with quite a long list of other requirements, among which is they must be readily connectable to a ZIMRA data network at some future date

US spy ring claims "damaging": Zim businessman

2010-07-09T08:43:00.000+02:00

Jul 8, 2010 7:43 PM
By Sapa

Media reports linking Zimbabwean businessman Ken Sharpe to a Russian spy ring uncovered in the United States contained "factual inaccuracies and damaging innuendo", he said on Thursday.

He was considering taking legal action over the “defamatory” reports concerning his business interests and his contacts with Alex Chapman and his ex-wife Anna, an alleged Russian spy “I have no business links to Russia nor to the Chapman’s. I have never done business in Russia nor exported vodka bottles to Russia. The closest I have been to doing business in Russia is in the Ukraine,” he said.

“I do however own 30% of West Bev in Zimbabwe which produces, amongst other beverages, vodka but our sales are limited to Zimbabwe and I have never done exports of any products to Russia.” Britain’s The Daily Mail reported that Alex Chapman was questioned by an MI5 agent about his ex-wife’s links to Sharpe.

The newspaper reported that Anna Chapman had worked with Sharpe at a British company based in a London flat she shared with her then-husband Alex Chapman.

According to The Daily Mail, while Anna Chapman was at the company, Southern Union, she moved millions of pounds — possibly connected to money-laundering — between Britain and Zimbabwe.

Sharpe was an importer of vodka bottles to Russia, was married to a Russian belly-dancer and spoke Russian, the newspaper reported.

Sharpe denied most of the accusations.

He described his Russian language capabilities as “conversational” and denied that his wife was a belly-dancer or lap-dancer.

“I am not fluent in Russian. When I first met my wife, Joanna, she could not speak English and I could not speak Russian.

“My wife worked in a well-known and highly-respected circus in Russia as a ballet and folk dancer. She was never a belly-dancer or a lap-dancer, and reports to the contrary from the press are hurtful to her and defamatory,” said Sharpe.

He also denied that he was involved as an owner of Southern Union.

He said the company’s business was the transfer of funds to and from Zimbabwe at competitive rates and that he had been one of its clients.

“The client base was largely limited to a large number of individuals looking to send small amounts of money to their relations in Zimbabwe.

“For this reason I would seriously doubt that the company could be involved in any large-scale money-laundering activities,” said Sharpe.

He admitted meeting Anna Chapman’s father at social functions in Harare and said that, at his request, he agreed to help her find employment in London.

He referred her to Southern Union where she was employed.

He said he was not a supporter of a political party in Zimbabwe, but had a “very good professional relationship” with the government.

Nation Needs Debt Relief to Recover, Says IMF

2010-07-09T08:32:00.000+02:00

8 July 2010

Zimbabwe is in a state of "debt distress" and is preparing a request for debt relief under the Heavily Indebted Poor Countries (HIPC) initiative established by international financial institutions, says the International Monetary Fund (IMF).

In a report released on Wednesday, the IMF says after "intense internal debate" within the Zimbabwean government, "consensus is emerging among key government officials that mineral wealth alone would not be sufficient to achieve debt sustainability.

"As a result, the government is working on a comprehensive 'hybrid' strategy involving both a request for debt relief under the HIPC Initiative to resolve external payments arrears and use of fresh IFI financing and mineral wealth to achieve sustainable development."

An IMF staff appraisal and summary of the report, drawn up by an IMF delegation which visited Zimbabwe in March, follows:

The nascent economic recovery, underpinned by significant improvements in policies in 2009, remains very fragile.
Zimplats

Mining underground at Ngezi, a Zimbabwean platinum mine

The previously implemented liberalization of prices, goods markets, and foreign exchange transactions would support economic activity in 2010. Significant improvements in tax policy and administration have increased available fiscal space. However, rapid unsustainable government expenditure growth, including of wages, a large reduction in capital inflows because of increased uncertainty about the indigenization process, and exuberant credit growth have negatively affected the macroeconomic outlook and intensified external and banking system vulnerabilities.

In light of these vulnerabilities, policies need to be strengthened to sustain the economic recovery:

The approved 2010 budgetary expenditures would need to be curtailed by about 3 percent of GDP to return to a path toward medium-term fiscal and external sustainability and reduce the economy’s vulnerability to shocks. This would also help maintain a fiscal reserve of at least $250 million of SDR holdings (2 months of expenditures). Although reaching consensus on the recommended fiscal measures is a major political challenge, delaying their implementation could increase the social and economic costs of the future necessary adjustment.

The key fiscal challenge is to reduce the wage bill relative to revenues in 2010 and beyond to leave sufficient fiscal space for urgent infrastructure upkeep expenses (e.g., electricity, water, and sanitation), maintain competitiveness, and prevent an unsustainable buildup of domestic expenditure arrears. The recent payroll audit presents an opportunity to eliminate ghost workers, and political support needs to be forged for additional measures for 2010 and the medium term to further reduce the wage bill.

To address increasing systemic vulnerabilities in the banking system, urgent measures need to be implemented: (i) improving Reserve Bank of Zimbabwe (RBZ) governance, and downsizing and restructuring it; (ii) reducing banks’ exposure to the financially distressed RBZ; (iii) containing credit and liquidity risks; and (iv) discontinuing moral suasion on banks to lend to specific sectors. The authorities’ stated intentions to implement these recommendations need to be followed through with speedy implementation.

The multi-currency system would serve Zimbabwe well during its intended lifespan (2010–12). The Zimbabwe dollar can be reintroduced as sole legal tender only once a track record of sound policies is established and a credible central bank governance framework focused on price stability is adopted.

Sound macroeconomic policies, a significant improvement in the business climate, in particular regarding enforcement of property rights and labor legislation, and debt relief are essential for moving toward external and domestic stability.

Zimbabwe is in debt distress, and the debt overhang cannot be resolved without debt relief even if policies are improved and mineral extraction is increased. The government needs to reach consensus on a resolution strategy for external debt arrears and to improve relations with the international community, whose support would be vital for obtaining debt relief and rebuilding the Zimbabwe economy.

Zimbabwe halts investor-hostile programme

2010-06-11T09:37:00.000+02:00

© PM's office/afrol News
afrol News, 10 June - The unity government of Zimbabwe has put the controversial indigenisation programme on ice, fearing investors will not return to the country. The programme demands Zimbabweans to hold a share majority in mains sectors.

The indigenisation programme will not commence until after the new changes to the legislation have been approved by new Zimbabwean cabinet, Deputy Minister of Indigenisation and Empowerment Thamsanga Mahlangu states.

Mr Mahlangu said the legislation gazetted by Minister Savior Kasukuwere early this year was under review by a government committee on legislation as there were "issues that need attention." The delay was also aimed at allowing for more consultation on the law.

President Robert Mugabe's government had originally enacted the Indigenisation and Economic Empowerment Act in 2007, which stipulates that Zimbabweans must hold 51 percent shareholding in major sectors of the economy.

Last month, Zimbabwe's "opposition" Prime Minister Morgan Tsvangirai however stated that indigenisation programmes must not scare away investors. He announced that his MDC ministers would look into possibilities to soften the controversial legislation.

Deputy Minister Mahlangu noted that, before the intervention of Prime minister Tsvangirai, the indigenisation programme had been promoted in such a way that it appeared to be a programme of President Mugabe's ZANU party and was "likely to become as chaotic as the land reform," which threw the country into economic chaos.

"There are some contents in the original law that we feel are illegal and therefore need to be changed. The whole idea should be to look at the act itself and ensure that is done in a spirit of inclusivity and common understanding between both parties," Mr Mahlangu says.

"The act was wrong from the start; it needs to go back to Parliament for amendments. No one is against empowerment, but we are all against how it is done, if we are not careful this indigenisation process would have become as chaotic as the land reform programme. It cannot be empowerment if it is only the rich who are going to benefit. The majority should benefit and not a few already-rich people," the Deputy Minister added.

He said the Zimbabwean government did not have money to sponsor the indigenisation process and it needed to consult stakeholders such as business people to ensure the smooth flow of the process.

"We need a programme that is investor friendly so that we can create employment, but rather we are chasing away the very few investors that we have and even scaring away those who want to invest in the country," concluded Mr Mahlangu.

By staff writer

HUMAN RESOURCES 25th TAX & CURRENT ECONOMIC AFFAIRS SEMINAR

2010-06-07T10:36:00.000+02:00

Mistakes that are driving away investors and donors
Presentation by John Robertson

One of my favourite economists is Henry Hazlitt, an American who became as famous for his ability to write as for his understanding of economics. He is the man who pointed out that good economics takes full account of the secondary consequences of policies, not just their immediate or primary effects. And good economics considers the effects that policies will have on everybody, not just on the group that proposed the policy changes.

Zimbabwe is now living with, and struggling with, the consequences of many policies that were adopted to sort out problems that were identified by people who had lots of influence, but who wanted to make sure that this influence would be turned into a formidable power base, just for them.

It has to be accepted that they succeeded. At the expense of everyone else, their power increased. But we can now see that they were busily acquiring more and more power over less and less. Because they chose not to look at secondary consequences, their power is now over an economy that is a shadow of its former self. Every other country in the region has overtaken us and the country has suffered sharp falls in its food security and its ability to produce goods of every other kind. These falls have taken with them the country’s export revenues, its employment levels, its ability to pay for the imports it needs, its tax revenues and its ability to settle its debts.

This sequence of falls generated a long list of other casualties. Among them, some might be classified as walking wounded, but many are severely disabled and some should be receiving expert attention in intensive care units. Unfortunately, some are dead.

You will all be able to add to my list, but I invite you to start with the institutional casualties, such as the Zimbabwe dollar and the banking sector, Zimbabwe Electricity Supply Authority, National Railways of Zimbabwe, Air Zimbabwe, Hwange Colliery, Zimbabwe Iron & Steel Company, almost every city and town council, almost every water purification plant and nearly all of the suburban roads in these towns and cities.

The hugely important social institutions, such as the hospitals, schools and universities, have been lucky enough to get some attention in the past year, but they remain in need of very much more than the country can afford. And we can afford very little because our productive capacity has been so dramatically reduced. I would argue that as almost none of the companies that do the producing has been able to pay a dividend in the last few years, almost all of them can be listed among the casualties.

I have started my talk on mistakes we have made that are driving away investors and donors with these issues because they are all contributing to the disappearance of investors, and because these issues have persuaded the donors that we Zimbabweans should make the first moves to overcome self-inflicted handicaps.

Many donors have shown willingness to help us out of the mess, but they cannot justify offering such help while we continue making – and defending – dumb policy choices, or while we tell them to stop interfering with our sovereign right to make them. They are not denying us our rights, but they see no good reason to give us money to make up for the losses caused by our behaviour, or to make it easy for us to carry on behaving badly.

A statement of a few basic economic facts might help in our discussions on this subject, simply because undisputed facts often bring important issues into sharper focus.

The facts that are undisputed are that:

• Zimbabwe is in desperate need of huge amounts of investment

• Investment requires savings

• Zimbabwe’s savings mostly disappeared during the country’s economic collapse and when hyperinflation wiped out what was left

• The savings now needed therefore have to come from abroad

• Foreign investors can choose between more than 200 countries, all of which are trying harder than we are to compete for the world’s limited investment funds

• Investors of the kind that we need the most will choose countries that respect the rule of law

• Investors will choose countries from which attractive rates of return can be earned

• Investments in high risk ventures require prospects of high rates of return

• Investors who choose high risk countries are usually looking for exceptionally high short-term gains

• More desirable long-term investments require stable political and economic environments that inspire confidence

• Current conditions in Zimbabwe offer very few reasons for investors to feel confident, and

• Far from offering security of ownership, Zimbabwe requires new investors to agree to relinquish controlling interests in their companies within five years.

Unfortunately, government seems to believe that it needs only to describe Zimbabwe’s natural endowments and economic potential in enormously positive terms to make all of these problems too small to worry about.

But this remarkable potential, which certainly does exist, has not proved to be enough to offset investors’ concerns. Investors know what they want and they are very good at making their own assessments about whether the investment climate they need is present in Zimbabwe.

Investors look at the past and present as well as the future. When we have so much going for us, they will ask how on Earth we got into the mess we are in now?

The basic answers are simple enough and while we might prefer to forget them, prospective investors quickly find out that that we are suffering from the effects of an extremely serious sequence of events:

• Recent events in Zimbabwe caused a massive decline in agricultural output.

• This forced the country to become dependent on imported food.

• However, the same events quickly reduced the country’s ability to pay for this food.

• They also damaged output from other sectors, so its ability to pay for most other imports also fell.

• For lack of maintenance, the efficiency of its services infrastructure soon declined as well, reducing further the output from all productive sectors.

• As foreign reserves declined, government reintroduced exchange controls.

• As the Zimbabwe dollar weakened, government imposed fixed exchange rates.

• When scarcities mounted and inflation rates increased, government tightened price controls.

• Controlled exchange rates and prices could not stop costs from rising, so many producers were forced out of business

• As jobs disappeared, thousands of skilled people left the country

• When tax revenues declined, government increased its reliance on public sector borrowings.

• When interest rates became too large a burden, government fixed interest rates at a fraction of inflation rates and thus began to erode the national savings stock.

• When lenders could no longer lend enough to close the financing gap, government set Statutory Reserves at figures that confiscated bank balances.

• And when all these sums became too small to sustain government subsidies, transfer payments, salaries and other expenditures, government authorised the printing of the huge amounts needed.

• The resulting hyperinflation was inevitable, and it destroyed the Zimbabwe dollar.

• Zimbabwe became reliant on US dollars, but it lacks the ability to earn or otherwise acquire enough of these for the economy to operate efficiently.

• Because the inflows of tax revenues from the crippled economy are too small and because the country has disqualified itself from receiving most forms of assistance, government is unable to sustain subsidies or most other transfer payments.

This list of government’s responses to the challenges is itself a long list of serious mistakes, and anyone studying this sequence of events will quickly see why: government’s responses almost all dealt with the symptoms, not the causes of the problems.

That is perhaps the biggest mistake of all, because by dealing with only the symptoms, the authorities permitted themselves to take detours right around the problems that need attention.

These unsolved problems all led to falls in output, the consequences of which were falls in jobs, export revenues, imports, taxes, electricity, water, education, health and in the quality of just about everything, life included.

So it started with output. If we want to start fixing the problems, we have to restore output. That means restoring our ability to produce. And for that, we need people who know how to produce, and we need investment capital.

But instead, our government has been driving away the people who know how to run the farms, factories and mines, and it has been sending messages to potential investors that seem to suggest our political leaders actually want Zimbabwe to be the least attractive investment destination on Earth.

At the same time, these politicians are trying to claim that the country has a right to donor support and international aid. Therefore, claims the Zimbabwe government, all those countries and development institutions that refuse to deliver the support to which we are “entitled” are guilty of imposing “illegal sanctions”. The claim has achieved recognition only on the absurdity scale.

This paper is entitled mistakes we have made that are driving away investors and donors, but I have to now question the assumption lurking in that title. We are certainly driving away investors and donors, so I am not arguing with that, but all the careful efforts put into deliberately generating policies that have already displaced productive people and are set to displace many more, seem to have a common purpose.

They therefore seem to have been done on purpose. In other words, they are not mistakes.

This purpose, or basic objective, can only be to put people with political authority into the driving seats of every industry. The reason why politicians might have such an objective appears to be a basic fear that business success could quickly become a challenge, or even a threat, if it is not controlled. So this would best be countered by ensuring that all those who are permitted to succeed should first prove themselves to be loyal supporters.

Although I might seem to have demolished the whole purpose of this address, I believe that I still have plenty of scope left to describe mistakes. If we go back to the start of the more recent series, the Land Reform policies, I believe government made one of its biggest fundamental mistakes in completely misjudging the importance of commercial agriculture.

For one thing, the population of Zimbabwe is vastly bigger than it was a hundred years ago. Zimbabwe’s population grew at three times the average rate achieved by the rest of Africa. The bigger population needed the greater levels of efficiency that commercial farming made possible and the population grew that much faster because commercial farming was successful.

The fact that is important here is that the processes involved are expensive. They call for and depend upon considerable amounts of investment. The costs involved in modern farming dictate that the methods can be successfully and profitably applied only on large-scale properties, or on highly capital-intensive smaller farms.

People who employed these methods therefore needed access to finance, but they had access to this finance because their lands had collateral value. That is another vital component of the system that worked. The amount they could borrow against their title to the land was determined by the value of that land in an active property market. Successful investment added to property values and increased the funding available to achieve even more success.

As a result, and over time, the commercial farming sector became much bigger than the sum of its parts. The skills and experience that had been accumulated over several generations by these farmers had become vital national assets and their investments over the years had resulted in intellectual as well as physical capital.

Today, the great-grandchildren of people who were colonising parts of Africa in the 19th Century are told that they should accept being dispossessed by the great-grandchildren of those who were being colonised, but these arguments always carefully avoid mentioning that the entire world went through incredible changes during that extraordinary century.

As a result, the needs of the populations of every country today could not be accommodated by the technologies that were use in the 19th Century. But that is specially true of Zimbabwe, where our population increased 20-fold, compared to six-fold for the rest of Africa. Zimbabwean politicians can deny the importance of this if they like, but Zimbabwe still does not have the option to go back to its pre-colonial economic or social structures.

When government believed it had successfully legalised the confiscation of all the farmers’ physical assets, the farmers still walked away with their biggest assets of all – their knowledge of these technologies and their experience. Today, if government were to accept the need to harness these available skills and to restore the collateral value of the land, it would quickly restore the dependable output of large-scale farmers. Their contribution could soon become the principal driving force in Zimbabwe’s economic recovery.

Perhaps most importantly, property rights had brought the physical resources, the financial resources and the skills together. So property rights have to be restored if the country’s fortunes are to be changed for the better.

To bring about the conditions needed for success, Zimbabwe would have only to re-install the components needed to make commercial farming function as a big, successful, subsidy-free industry in a modernising economy. These are simple requirements: property rights, title deeds, security of tenure and legal procedures to permit the transferability of land in an open market.

The events of the past decade have made obvious to everyone the complex nature of the linkages between the different economic sectors as well as between the sources and beneficiaries of bank credit. But equally obvious is the fact that credit is most readily extended to people who have bankable security.

The history of the world for the past three hundred years has shown that freehold property is far and away the best form of collateral. Proof of this can be seen in the fact that the countries that show the greatest respect for property rights are the richest countries in the world.

Zimbabwe has only to accept the validity of these facts to put into place the recovery of agriculture. Once achieved, this will underpin the recovery and expansion of the entire economy. It will also restore to Zimbabwe the respect it once enjoyed from international financial institutions, investors and even donor countries.

So, what are the mistakes we have made? I would love to be able to say that the politicians made a serious mistake in deciding that they could dispossess, victimise and impoverish the population without ever having to fear a backlash. But I can’t say that – yet. However, I believe the government will be making a serious mistake if it believes this will never change.

Zimbabwe’s dominant politicians would like me to be able to assure them that if the population becomes more prosperous, if it is empowered by the same freehold property rights that empowered the populations of the world’s wealthiest countries, this more prosperous population would not want to vote this government out of office. But I can’t offer any such assurance.

I can say that more prosperous voters are more demanding, and that politicians hoping to impress financially independent voters have to be clever, resourceful and honest. Many of our current politicians find that disturbing.

They have preferred to rely completely on being accepted as the only legitimate candidates and on being far too powerful to be challenged. But I believe they are mistaken if they hold the belief that this will be enough for the voters of the future.

Whatever way we define mistakes and whichever claims we make about who made them, the fact remains that our economy is in very bad shape and many years as well as many millions of dollars will be needed to bring it right. But what it will need most is good people. To the good people who have filled this conference room, I make this plea:

Don’t make the mistake of leaving now, just when things are getting interesting!

John Robertson

June 2 2010

news from John Robertson

2010-06-07T10:32:00.001+02:00

A summary of the IMF's Article IV assessment of the Zimbabwe economy is attached. It includes a page of indicators based on estimates for 2009 and projections for 2010. To me, it appears that the IMF personnel have accepted government's claims that significant improvements are in progress.

While I do accept that some companies have enjoyed a degree of recovery and a few are making good strides, the limited quantifiable evidence coming my way suggests that the advances have been enjoyed by too few to make the differences claimed, and that almost all of the momentum behind the slow improvements was brought to a standstill by the publication of the indigenisation regulations.

Now the demands of the trades unions are threatening to put the fragile recovery into reverse.
Unfortunately, some very brave and imaginative revisions to political policies would offer the only prospects of quick improvements. The IMF does not involve itself in public debates on such issues, but I very much hope that the right suggestions are being offered in private.

Zimbabwe: Economy Grows, but Future Is Uncertain

2010-05-26T07:57:00.001+02:00

By CELIA W. DUGGER
Published: May 25, 2010
After a decade of economic decline and hyperinflation, Zimbabwe’s economy grew about 4 percent last year, consumer prices fell about 8 percent, and bank deposits tripled, the International Monetary Fund reported Tuesday. But the I.M.F. characterized the outlook for this year as “highly uncertain.” President Robert Mugabe’s insistence on some local ownership of companies has slowed foreign investment, while higher wages for civil servants have consumed a growing share of the still limited public spending.

2010-05-26T07:47:00.000+02:00

HARARE, 25 May 2010 (IRIN) - The death of Zimbabwe's secretary for agriculture, Renson Gasela, and two other senior officials from the Movement for Democratic Change (MDC) in a car accident recently has highlighted the country's inability to respond to accidents, emergencies or disasters.

It took more than eight hours for the men to receive assistance after the accident because police in the nearby southeastern mining town of Zvishavane had no transport, and fire brigade units had no fuel to make the 25km journey. Emergency services only arrived after the MDC secretary general, Welshman Ncube, provided fuel.

"That incident alone is a small representation of how the coalition government has dismally failed the people of Zimbabwe," political analyst John Makumbe told IRIN, because the response time probably would have been quicker if senior officials from ZANU-PF - the other party in Zimbabwe's unity government - had been involved in an accident.

"The truth of the matter is that the inclusive government is failing to deliver, or to improve the lives of Zimbabweans. When schools opened recently, a majority of students were turned away because their parents or guardians could not afford to pay school fees; supermarket shelves are full of goods and food, but a visit to many households will reveal that people are starving in their homes."

The unity government - a fragile coalition between President Robert Mugabe's ZANU-PF, Prime Minister Morgan Tsvangirai's MDC, and an MDC breakaway faction led by Deputy Prime Minister Arthur Mutambara - has failed to inspire since its formation in February 2009.

Collapsing services

National Railways of Zimbabwe, the country's train service, is on the verge of collapse, as is the Zimbabwe United Passenger Company, the public bus service; domestic refuse has begun piling up in urban areas as municipalities fail to collect it; Health and Child Welfare minister Henry Madzorera revealed that 78 percent of midwife positions are vacant.

Over the last few months it has dawned on me that we are certainly going nowhere in terms of the improvement of our lives - life has become even more expensive. The present and the future are bleak

The intermittent supply of electricity is expected to get worse because Zimbabwe will be exporting 300 megawatts of electricity to South Africa during the FIFA World Cup competition beginning in June.

Barbra Mawara, a junior manager at a manufacturing company in the capital, Harare, told IRIN that she had decided against leaving the country after the formation of the unity government, but was once again toying with the idea.

"Over the last few months it has dawned on me that we are certainly going nowhere in terms of the improvement of our lives - life has become even more expensive. The present and the future are bleak; there is fatigue and lack of will among Zimbabweans. The politicians have certainly let Zimbabweans down while fighting over jobs among themselves," she said.

The exasperation over any real progress is also affecting politicians. "The MDC has been taken over by greedy people with self-serving interests. We have started campaigning among the people in preparation for elections [expected to take place in 2011 or 2012]," said Job Sikhala, a former senior official in Mutambara's party who has broken away to form the MDC 99 party. [The MDC was formed in 1999].

He said the coalition government had made little progress in improving people's lives, as Mugabe continued to control the national agenda. "In the inclusive government Mugabe remains the driver of the bus, with Tsvangirai as the bus conductor, while Mutambara is the baggage loader, and that will not result in any meaningful changes."

The latest example of Mugabe's apparent disregard for his coalition partners and the Global Political Agreement, which paved the way for the unity government, has been the appointment of George Chiweshe to head the High Court.

Chiweshe was head of the Zimbabwe Electoral Commission in 2008, which the MDC claim saw large-scale rigging to ensure that Tsvangirai did not win an outright victory in the presidential poll and the election result was delayed for month.

A band aid

"The inclusive government only managed to stop the bleeding but did not cure the wound. Some stability was attained, but there has been no progress," political commentator Luke Tamborinyoka told IRIN.

"There is no progress on the land audit, the constitution-making process, and the opening of media space; there is high unemployment and poverty, and although supermarket shelves are full, few can afford the commodities," he said.

Human rights activist and political commentator Rejoice Ngwenya told IRIN: "Politicians argue that because of the inclusive government there is little political violence and that supermarket shelves have goods, but that can hardly be an acceptable excuse because violence and the poor economic environment was brought by politicians."

Ngwenya commented: "In any case, violence is on the increase while many people can not afford to buy the food, which is expensive. Because of failure to secure credit lines to improve the performance of the inclusive government, the coalition has weakened over the months since its formation."

Zimbabwe's National Oil Company in Bid to Raise Equity Capital; Experts Skeptical

2010-05-18T09:20:00.000+02:00

Energy industry sources said NOCZIM, now operating at 30% of its capacity and laying off thousands of workers, is negotiating with the Harare government to retain a controlling 51% stake in the enterprise after raising equity capital
Jonga Kandemiiri & Gibbs Dube
Washington 17 May 2010
The National Oil Company of Zimbabwe is planning to sell a 49% share stake in an effort to raise capital to pay US$270 million in debt which threatens the survival of the state-controlled enterprise.

Energy industry sources said the company, now operating at 30% of its capacity and laying off thousands of workers, is negotiating with the Harare government to retain a 51% stake. The sources said NOCZIM had to shut down projects including plantations of jatropha intended to produce biodiesel, among and other unprofitable activities.

Harare economist John Robertson told VOA Studio 7 reporter Gibbs Dube that it is unlikely investors will buy shares in the state-run company as it lacks credibility given past losses and reports of internal abuses.

Elsewhere, the Reserve Bank of Zimbabwe has revised national totals for domestic and external debt, which now stand at a combined US$5.84 billion. Zimbabwe owes around US$5.3 billion to international lenders, much of which has fallen into arrears, preventing the country from accessing new lines of credit from public financial institutions.

Economist Prosper Chitambara of the Labor and Economic Development Research Institute of Zimbabwe told reporter Jonga Kandemiiri that the national debt has surged due to Harare’s inability to make payments

From John Robertson

2010-05-18T08:15:00.000+02:00

Zimbabwe's All Items Consumer Price Index increased by 0,12% in April, taking the index from 95,0 to 95,1 against the base of December 2008 = 100. The average increases for food, drink and tobacco products was about 0,9%, but price decreases were seen for some items, mainly vehicles, telephone services, clothing and footwear.

Compared to April 2009, prices rose by an average of 4,75%. Over the year, the largest increases were seen alcoholic beverages & tobacco, at 17,4%, transport at 13,4% and hotels & restaurants at 12,6%, but decreases over the year were seen for clothing & footwear at 9,6% and 7,7% for communications. Average prices and fees also went down for furniture & household products and for recreational equipment.

I hope to complete and send to you the more detailed table tomorrow.

Kindest regards,

Zimbabwe’s Annual Inflation Leaps to 4.8 Percent in April

2010-05-16T16:32:00.000+02:00

Zimbabwe’s annual inflation rose to 4.8 percent in April — from 3.5 percent the previous month, according to data released by the Central Statistical Office on Friday.

The CSO, however, said the indicative month-on-month inflation eased from 1.1 percent in March to 0.1 percent in April, thanks to a significant drop in food prices.
A coalition government formed by President Robert Mugabe and Prime Minister Morgan Tsvangirai last year has stabilized the once free-falling southern African economy.

A raft of pro-market macroeconomic measures introduced by the government soon after its inauguration in February 2009 saw inflation declining from a world-record 500 billion percent at the end of 2008.

The decision by the new Harare regime to discard the country’s free-falling currency, the Zimbabwe dollar, and adopt a basket of hard currencies as legal tender also helped stabilize prices of products which became readily available in shops and destroyed a thriving black market that had kept pressure on inflation.

The economic stability is however being threatened by bickering among Zimbabwe’s coalition partners amid reports that hardliners from Mugabe’s ZANU PF party want to frustrate any reforms pushed through by Tsvangirai’s party.

Observers fears that the squabbles will ultimately derail the unity government or slow down the momentum achieved over the past 15 months.

Bickering over a controversial black empowerment law has already cost Zimbabwe millions of dollars worth of foreign investment as investors wait for finalization of regulations that would see non-Zimbabweans surrendering at least 51 percent of the companies to local business.

Source African Press Agency

Zimbabwe's inflation rises to 4.8%

2010-05-14T16:51:00.002+02:00

(AFP)

HARARE — Annual inflation in Zimbabwe accelerated to 4.8 percent in April, up from 3.5 percent in March, the government statistics agency announced Friday.

Zimbabwe's economy was ravaged by runaway hyperinflation during a decade-long freefall that impoverished the country.

But prices have stabilised since the government abandoned the worthless local currency last year, allowing trade in US dollars and other foreign currencies.

The economy has shown signs of recovery since the formation of a power-sharing government last year by President Robert Mugabe and long-time rival Morgan Tsvangirai.

But Finance Minister Tendai Biti last month revised down the growth forecast for this year from 7.7 to 4.8 percent, citing slower-than-expected foreign investment.