It has just been brought to my attention by those FT nutjobs that there is some crazy firm called Imara Asset Management that has a fund called the Zimbabwe Value fund! Yes, it's true. These crazy cats are going to invest in Zimbabwe! You know, gold, diamonds, shit like that. Well, I admire them. I really do. These guys are living on the edge, man.
O Master, isn't it a bit risky?
O my child, as I said, they are living on the edge. You got a problem with that?
Well …
Jesus H. Christ! Let me tell you about risky, my child. Risky, man, risky is going on to the astral plane without a white sheet or shades. That's risky! I put my life on the line every day.
No one's asking you to do that though, are they?
Eh?
It was your choice, Master. Everyone told you it was dangerous. You knew that Jack Pickles would take advantage of the situation and try to attack you.
But he hasn't attacked me.
Not yet.
You worry too much, my child. That's your problem. Nietzsche said we should build our homes on the sides of volcanoes. Live dangerously!
And you live in West London, don't you?
So?
Well, how many fucking volcanoes have you got in West London? I know Maurice lives in Acton. There's a hill there. Acton Hill. I remember the Acton Hill cafe. That's gone now. But there is no fucking volcano!
Nietzsche wasn't speaking literally, you prick! And watch your attitude with me.
What do you mean?
You know what I mean. For fuck's sake! I was in a good mood this morning.
Posted by Michael Fowke at 09:40
Tuesday, June 30, 2009
Sunday, June 28, 2009
Zimbabwe PM rules out reviving worthless local currency
JOHANNESBURG (AFP) — Zimbabwe Prime Minister Morgan Tsvangirai on Saturday ruled out reviving in the short term the worthless local currency scrapped earlier this year to beat world record inflation.
But his comments clashed with veteran leader Robert Mugabe's assertions to the contrary a day earlier, highlighting the uneasy relationship between the two former arch-foes currently sharing power in a unity government.
"For economic reasons, there is no way you can resort to the Zimbabwean dollar currency in a situation of low production," Tsvangirai told a news conference in Johannesburg.
"You have to increase your productivity levels from the current 10 percent to about 50-60 percent, otherwise you slide back to... inflation," he said.
"It is impracticable to talk about even resorting to a currency which is worthless at this stage.
"There are no plans yet. There are discussions" to revive the Zimbabwe dollar, which was once on a par with the British pound but is now arguably the world's most useless currency.
Mugabe however Friday said the local money should be revived as multiple currencies introduced earlier this year to beat inflation were not helping the plight of the people.
"Yes, prices may have gone down but the people should have the money," the state-controlled Herald newspaper quoted Mugabe as saying.
"If they don't have the money, how will they buy the goods? We can't run a country like that. We are considering changing that and reverting to our own currency."
The government allowed shops and service providers to trade in foreign currency, mainly the US dollar and the South African rand, to help businesses acquire stocks from neighbouring countries.
Before the introduction of other currencies, most shops resembled empty warehouses as businesses failed to restock because of constantly changing prices.
Faced with a worsening economic crisis and political tensions, Zimbabwe's three main political rivals have formed a power-sharing agreement aimed at reviving the economy and easing tensions.
But his comments clashed with veteran leader Robert Mugabe's assertions to the contrary a day earlier, highlighting the uneasy relationship between the two former arch-foes currently sharing power in a unity government.
"For economic reasons, there is no way you can resort to the Zimbabwean dollar currency in a situation of low production," Tsvangirai told a news conference in Johannesburg.
"You have to increase your productivity levels from the current 10 percent to about 50-60 percent, otherwise you slide back to... inflation," he said.
"It is impracticable to talk about even resorting to a currency which is worthless at this stage.
"There are no plans yet. There are discussions" to revive the Zimbabwe dollar, which was once on a par with the British pound but is now arguably the world's most useless currency.
Mugabe however Friday said the local money should be revived as multiple currencies introduced earlier this year to beat inflation were not helping the plight of the people.
"Yes, prices may have gone down but the people should have the money," the state-controlled Herald newspaper quoted Mugabe as saying.
"If they don't have the money, how will they buy the goods? We can't run a country like that. We are considering changing that and reverting to our own currency."
The government allowed shops and service providers to trade in foreign currency, mainly the US dollar and the South African rand, to help businesses acquire stocks from neighbouring countries.
Before the introduction of other currencies, most shops resembled empty warehouses as businesses failed to restock because of constantly changing prices.
Faced with a worsening economic crisis and political tensions, Zimbabwe's three main political rivals have formed a power-sharing agreement aimed at reviving the economy and easing tensions.
Saturday, June 27, 2009
Mugabe says Zimbabwe may revive use of own currency
06.26.09, 04:45 AM EDT
HARARE, June 26 (Reuters) - President Robert Mugabe said Zimbabwe may revive the use of its own currency because the U.S. dollar introduced to tame hyperinflation was unavailable to a majority of people.
The local state Herald newspaper on Friday quoted Mugabe as saying his new unity government with rival Morgan Tsvangirai was battling to ease economic hardships, but that Zimbabwe could not have a system where rural people were forced to trade their livestock.
'We cannot have a country like that. We are reviewing this so that we can go back to the use of our own national currency,' he was quoted as telling a meeting of his ZANU-PF party in the local Shona language.
(Reporting by Cris Chinaka)
HARARE, June 26 (Reuters) - President Robert Mugabe said Zimbabwe may revive the use of its own currency because the U.S. dollar introduced to tame hyperinflation was unavailable to a majority of people.
The local state Herald newspaper on Friday quoted Mugabe as saying his new unity government with rival Morgan Tsvangirai was battling to ease economic hardships, but that Zimbabwe could not have a system where rural people were forced to trade their livestock.
'We cannot have a country like that. We are reviewing this so that we can go back to the use of our own national currency,' he was quoted as telling a meeting of his ZANU-PF party in the local Shona language.
(Reporting by Cris Chinaka)
Sunday, June 21, 2009
Zimbabwe officials wrangle over bank turf
Published: June 20, 2009 at 9:02 PM.
HARARE, Zimbabwe, June 20 (UPI) -- An effort is under way to circumvent Zimbabwe's central bank so certain donor funds can be controlled by Prime Minister Morgan Tsvangirai, observers say.
The wrangling over the Reserve Bank of Zimbabwe began when Zimbabwean President Robert Mugabe named Gideon Gono governor and another member of his ZANU-PF party, Johannes Tomana, as attorney general, the IRIN news agency reported Saturday.
Gono allegedly has admitted raiding the bank accounts of private individuals and non-profit organizations for foreign currency.
Tsvangirai's Movement for Democratic Change party argues the Gono and Tomana appointments were an end-around on a global political agreement in February that created the unity government. Mugabe has refused to concede the point and recently got the support of the armed forces, which contends Gono's position as central bank governor was "non-negotiable."
Finance Minister Tendai Biti of the MDC will have oversight of a Multi-Donor Trust Fund that will accept donations with a cabinet committee on aid coordination led by Tsvangirai, responsible for disbursing funds.
Gorden Moyo, an MDC minister of state, told local media the arrangement is meant to assuage concerns in the donor community about how their money will be spent.
"We now have a framework of operation, and it sends a clear message that Zimbabwe is ready to receive aid and use it effectively for the benefit of the people of Zimbabwe," Moyo said.
HARARE, Zimbabwe, June 20 (UPI) -- An effort is under way to circumvent Zimbabwe's central bank so certain donor funds can be controlled by Prime Minister Morgan Tsvangirai, observers say.
The wrangling over the Reserve Bank of Zimbabwe began when Zimbabwean President Robert Mugabe named Gideon Gono governor and another member of his ZANU-PF party, Johannes Tomana, as attorney general, the IRIN news agency reported Saturday.
Gono allegedly has admitted raiding the bank accounts of private individuals and non-profit organizations for foreign currency.
Tsvangirai's Movement for Democratic Change party argues the Gono and Tomana appointments were an end-around on a global political agreement in February that created the unity government. Mugabe has refused to concede the point and recently got the support of the armed forces, which contends Gono's position as central bank governor was "non-negotiable."
Finance Minister Tendai Biti of the MDC will have oversight of a Multi-Donor Trust Fund that will accept donations with a cabinet committee on aid coordination led by Tsvangirai, responsible for disbursing funds.
Gorden Moyo, an MDC minister of state, told local media the arrangement is meant to assuage concerns in the donor community about how their money will be spent.
"We now have a framework of operation, and it sends a clear message that Zimbabwe is ready to receive aid and use it effectively for the benefit of the people of Zimbabwe," Moyo said.
Zimbabwe seeks foreign investors
A host of British business leaders, including Sir Richard Branson, the creator of the Virgin brand, and Martin Sorrell, the chief executive of WPP, yesterday met Morgan Tsvangirai, the prime minister of Zimbabwe, to explore the possibility of private investment into the troubled country.
By Rupert NeatePublished: 9:22PM BST 20 Jun 2009
Mr Tsvangirai told the meeting, chaired by David Miliband, the Foreign Secretary, that Zimbabwe has made substantial progress towards rebuilding the economy and is actively seeking investment from multinational companies.
"Over the last few decades Zimbabwe has radically changed, but the people, natural resources and some of the basic infrastructure are still in place and ready to be invested in once again," Mr Tsvangirai said. "We have a real chance to turn Zimbabwe into a success story in partnership with the international community".
Mr Tsvangirai said the country has brought inflation down from 500bn pc to just 3pc in the four months since he formed a coalition government with Robert Mugabe.
Sir Richard said: "Zimbabwe is at a critical turning point and needs the support of the global community. This isn't just a job for aid organisations, and governments. There is a lot business can do to help bring humanitarian support and inspire investment."
Other business leaders at the meeting included James Hussey, of De La Rue, Ian Farmer, of Lonmin, and Dr Nicholas Blazquez, of Diageo.
By Rupert NeatePublished: 9:22PM BST 20 Jun 2009
Mr Tsvangirai told the meeting, chaired by David Miliband, the Foreign Secretary, that Zimbabwe has made substantial progress towards rebuilding the economy and is actively seeking investment from multinational companies.
"Over the last few decades Zimbabwe has radically changed, but the people, natural resources and some of the basic infrastructure are still in place and ready to be invested in once again," Mr Tsvangirai said. "We have a real chance to turn Zimbabwe into a success story in partnership with the international community".
Mr Tsvangirai said the country has brought inflation down from 500bn pc to just 3pc in the four months since he formed a coalition government with Robert Mugabe.
Sir Richard said: "Zimbabwe is at a critical turning point and needs the support of the global community. This isn't just a job for aid organisations, and governments. There is a lot business can do to help bring humanitarian support and inspire investment."
Other business leaders at the meeting included James Hussey, of De La Rue, Ian Farmer, of Lonmin, and Dr Nicholas Blazquez, of Diageo.
Friday, June 19, 2009
Zimbabwe is dreaming of the World Cup tourist dollars
Jun 19, 2009
Zimbabwe, its economy in ruins, is dreaming of millions of tourist dollars and even training visits by international soccer stars when the World Cup comes to South Africa next year. Scottish explorer David Livingstone is said to have written after first seeing the Victoria Falls in 1855: "On sights as beautiful as this, angels in their flight must have gazed."
The magnificent waterfalls were once one of Africa's biggest tourist attractions, but Zimbabwe's political violence and economic collapse have reduced visitors to a trickle both here and at the country's other attractions. Tourist income has slumped from $360 million at its 1999 peak to $29 million last year.
An influx of soccer fans before or after the tournament would be a godsend for this once prosperous nation and visits by teams like Brazil, Germany or even England would offer a rare morale boost for millions of impoverished but soccer-mad fans.
The sight of David Beckham marvelling at the Victoria Falls or bending a trademark free kick on a local pitch would be a huge coup for a nation battling to shake-off its bad-boy image.
Tourism officials believe Zimbabwe could reap as much as $100 million from the World Cup, a windfall for a government which is broke and continues to be shunned by foreign donors.
The country has made international headlines for all the wrong reasons in the past decade, from violent seizures of white-owned farms, to election violence and political repression to the world's highest rate of hyper-inflation."This would be the perfect opportunity to showcase the other side of Zimbabwe by cleaning up our pariah image and showing the world that we have much to offer especially to tourists," said economist John Robertson.
UNREALISTIC DREAM?
But while the dream is almost painfully enticing for long-suffering Zimbabweans, it may well be unrealistic.
Teams looking for high altitude training to acclimatise for the June 11-July 11 World Cup may feel more comfortable in countries like Angola, Botswana, Namibia and Zambia, who do not have the baggage of an economy in ruins and a new power-sharing government that still has not won wide recognition.
A decade of crisis has wrecked infrastructure, including soccer stadiums and roads.
The 55,000-seater National Sports Stadium in Harare has been under repair for the past two years with no indication it will be ready in time.
Only one other stadium is up to scratch while plans to construct new ones were abandoned last year.
"When you look at the state of the pitch (at the national stadium), it is deplorable. We are a bit worried with the rate at which construction is going," said Henrietta Rushwaya, chief executive of the Zimbabwe Football Association (ZIFA).
Zimbabwe needs $2 billion to revamp decaying infrastructure, according to Public Works Minister Theresa Makone, and the dangerous state of the crumbling roads is another major concern.
But Western governments, who distrust President Robert Mugabe, are holding back on direct aid pending political and economic reforms.
Paul Matamisa, the tourist authority's 2010 coordinator, also cited a patchy telecommunications network, the slow upgrade of airports and the parlous state of loss-making Air Zimbabwe.
The Victoria Falls airport is too small to handle larger aircraft, even though Zimbabwe is only 90 minutes from Johannesburg, heart of the World Cup matches next year.
A decade ago nearly a dozen airlines flew to Zimbabwe but only four remain on the route.
"Those are the issues that Zimbabwe needs to address if we are to say we are ready to receive our visitors for the 2010 World Cup," Matamisa told Reuters.There are also deep concerns over the country's health services after the biggest cholera outbreak in Africa in recent times left more than 4,200 dead and close to 100,000 infected.
ODDS
But while the odds seem stacked against Zimbabwe, officials are not giving up on winning some benefit from the World Cup. They personally handed Brazilian President Lula da Silva an invitation for the five-time world champions to train in Zimbabwe.
ZIFA has formally invited the English FA and is still awaiting a response.The Premier League is enthusiastically followed in Zimbabwe, like much of the rest of Africa, and if England accepted it would not only thrill thousands of fans but be a big public relations boost for Harare, given the former colonial ruler's strident opposition to Mugabe.
Zimbabwe has also invited Germany and the United States -- both which have now removed travel warnings -- and several other teams from Africa and Asia.
"This place is so beautiful and I do not see anyone not wanting to come here," said Anne Nielsen, a 29-year-old Danish tourist as the Victoria Falls, known locally as Mosi-oa-Tunya or "Smoke That Thunders" roared behind her.
Apart from the falls, Zimbabwe can offer safari hunting, some of Africa's largest game reserves, scenic resorts and the ancient Great Zimbabwe ruins, one of the most important archeological sites on the continent.
German Ambassador Albrecht Cronze said he was hopeful his country's national team and supporters would visit Zimbabwe on their way to South Africa.
"We now see a bright future in Zimbabwe and as we prepare for 2010, we expect German soccer players and fans not only to see the Victoria Falls but the animals in Hwange (game reserve) and the beautiful scenery throughout the country," Cronze told a local travel magazine.
Source: guardian.co.uk
Zimbabwe, its economy in ruins, is dreaming of millions of tourist dollars and even training visits by international soccer stars when the World Cup comes to South Africa next year. Scottish explorer David Livingstone is said to have written after first seeing the Victoria Falls in 1855: "On sights as beautiful as this, angels in their flight must have gazed."
The magnificent waterfalls were once one of Africa's biggest tourist attractions, but Zimbabwe's political violence and economic collapse have reduced visitors to a trickle both here and at the country's other attractions. Tourist income has slumped from $360 million at its 1999 peak to $29 million last year.
An influx of soccer fans before or after the tournament would be a godsend for this once prosperous nation and visits by teams like Brazil, Germany or even England would offer a rare morale boost for millions of impoverished but soccer-mad fans.
The sight of David Beckham marvelling at the Victoria Falls or bending a trademark free kick on a local pitch would be a huge coup for a nation battling to shake-off its bad-boy image.
Tourism officials believe Zimbabwe could reap as much as $100 million from the World Cup, a windfall for a government which is broke and continues to be shunned by foreign donors.
The country has made international headlines for all the wrong reasons in the past decade, from violent seizures of white-owned farms, to election violence and political repression to the world's highest rate of hyper-inflation."This would be the perfect opportunity to showcase the other side of Zimbabwe by cleaning up our pariah image and showing the world that we have much to offer especially to tourists," said economist John Robertson.
UNREALISTIC DREAM?
But while the dream is almost painfully enticing for long-suffering Zimbabweans, it may well be unrealistic.
Teams looking for high altitude training to acclimatise for the June 11-July 11 World Cup may feel more comfortable in countries like Angola, Botswana, Namibia and Zambia, who do not have the baggage of an economy in ruins and a new power-sharing government that still has not won wide recognition.
A decade of crisis has wrecked infrastructure, including soccer stadiums and roads.
The 55,000-seater National Sports Stadium in Harare has been under repair for the past two years with no indication it will be ready in time.
Only one other stadium is up to scratch while plans to construct new ones were abandoned last year.
"When you look at the state of the pitch (at the national stadium), it is deplorable. We are a bit worried with the rate at which construction is going," said Henrietta Rushwaya, chief executive of the Zimbabwe Football Association (ZIFA).
Zimbabwe needs $2 billion to revamp decaying infrastructure, according to Public Works Minister Theresa Makone, and the dangerous state of the crumbling roads is another major concern.
But Western governments, who distrust President Robert Mugabe, are holding back on direct aid pending political and economic reforms.
Paul Matamisa, the tourist authority's 2010 coordinator, also cited a patchy telecommunications network, the slow upgrade of airports and the parlous state of loss-making Air Zimbabwe.
The Victoria Falls airport is too small to handle larger aircraft, even though Zimbabwe is only 90 minutes from Johannesburg, heart of the World Cup matches next year.
A decade ago nearly a dozen airlines flew to Zimbabwe but only four remain on the route.
"Those are the issues that Zimbabwe needs to address if we are to say we are ready to receive our visitors for the 2010 World Cup," Matamisa told Reuters.There are also deep concerns over the country's health services after the biggest cholera outbreak in Africa in recent times left more than 4,200 dead and close to 100,000 infected.
ODDS
But while the odds seem stacked against Zimbabwe, officials are not giving up on winning some benefit from the World Cup. They personally handed Brazilian President Lula da Silva an invitation for the five-time world champions to train in Zimbabwe.
ZIFA has formally invited the English FA and is still awaiting a response.The Premier League is enthusiastically followed in Zimbabwe, like much of the rest of Africa, and if England accepted it would not only thrill thousands of fans but be a big public relations boost for Harare, given the former colonial ruler's strident opposition to Mugabe.
Zimbabwe has also invited Germany and the United States -- both which have now removed travel warnings -- and several other teams from Africa and Asia.
"This place is so beautiful and I do not see anyone not wanting to come here," said Anne Nielsen, a 29-year-old Danish tourist as the Victoria Falls, known locally as Mosi-oa-Tunya or "Smoke That Thunders" roared behind her.
Apart from the falls, Zimbabwe can offer safari hunting, some of Africa's largest game reserves, scenic resorts and the ancient Great Zimbabwe ruins, one of the most important archeological sites on the continent.
German Ambassador Albrecht Cronze said he was hopeful his country's national team and supporters would visit Zimbabwe on their way to South Africa.
"We now see a bright future in Zimbabwe and as we prepare for 2010, we expect German soccer players and fans not only to see the Victoria Falls but the animals in Hwange (game reserve) and the beautiful scenery throughout the country," Cronze told a local travel magazine.
Source: guardian.co.uk
Wednesday, June 17, 2009
Market Movements and Outlook - John Robertson - Zimbabwe
June 2009
The International Monetary Fund’s recent Executive Board decision to lift the suspension on technical assistance to Zimbabwe resulted in an eleven-day visit by IMF finance experts. Having gathered the needed information, the team has now returned to Washington to prepare their report, which will be mainly on payments systems, lender-of-last-resort operations, banking supervision and central banking governance and accounting.
As all of these Reserve Bank functions had been compromised by policies that impacted directly on production, employment, export earnings, savings, investment and government’s tax revenues, we have to hope that the IMF’s recommendations will go further than offers of advice on central banking procedures. The country needs desperately to get back to work, but essential as the administrative functions of the monetary authorities might be, they will serve little purpose if the country fails to re-engage its producers.
The IMF’s Executive Board will review the technical assistance decision when it next reviews Zimbabwe’s overdue financial obligations to the Poverty Reduction and Growth Facility-Exogenous Shock Facility (PRGF-ESF) Trust,
Meanwhile, in taking the decision to offer some help, the Executive Board appears to have been fairly generous in its assessments of progress made and it has repeated some of these sentiments in the Article IV Consultation Assessment, which has now been released.
In these comments, the IMF claims to have taken into account “a significant improvement in Zimbabwe’s cooperation on economic policies to address its arrears problems and severe capacity constraints” and it “welcomed the authorities’ commitment to refrain from quasi-fiscal activities”.
These can be considered generous because, as for the similarly welcomed adoption of hard currencies in place of the Zimbabwe dollar, Zimbabwe’s authorities had no option but to meet basic economic requirements once their conduct had made the Zimbabwe dollar useless. Congratulatory comments will be more appropriate when government announces the reversal of the policy decisions that did the damage, but this has yet to happen.
A new team of IMF officials has now arrived to continue with work already started in areas of banking supervision and payments procedures. Hopefully, it will insist upon the adoption of practical measures that will actually strengthen the country’s prospects of attracting productive investors and actually restore productive capacity.
Going further than recognising the existence of problems calls for the use of leverage to force into place policies that actually work. Government – even the new coalition government – continues to exhibit a belief that the policy mix now in place can be made to work if enough money can be found.
Regrettably, those who are being pressured to supply the money seem never to respond with a blunt rejection. Too many aid and development agencies seem content to offer funding as well as advice on how policies chosen for their political effects might be coaxed into delivering slightly better economic results, even though very much more suitable and successful policies could have been chosen.
The IMF is clearly in no doubt that Zimbabwe’s economy is severely crippled and that its debt burden is more than big enough to discourage all those who have the option to choose other places to invest. However, it appears to have decided that for the limited IMF support on offer, given Zimbabwe’s long-standing arrears, it will be enough if government keeps its promises about property rights and the rule of law in the future.
Questions about government’s abuse of these in the past and whether anything should be done to restore productive assets to those from whom they were confiscated appear to be off limits. This could prove to be the most severe weakness in the IMF’s approach.
What views might be exchanged in closed meetings with the Zimbabwean authorities can only be guessed at, but the message between the published lines appears to be that if government wants to break highly efficient, capital-intensive large farming enterprises into small, inefficient family allotments, no outside agency should presume the right to challenge that decision.
Many of the outside agencies go further to suggest that the rich countries should generously contribute aid to make up for the very poor results yielded by ineffective policies. Various campaigners for this aid have generated beliefs among the leaders in the poorer countries that aid is an entitlement.
Zimbabwe’s Deputy Prime Minister showed himself to one of these believers when, in his presentation at the launch of the 100-Day Plan, he expounded on the costs of meeting its targets. Waving his hands at the assembled diplomats, he shouted, “Pay up! Pay up!”
Zimbabwe has been in continuous arrears to the IMF since February 2001 and the amount outstanding is now about US$133 million. By failing to meet the repayment terms, Zimbabwe disqualified itself from receiving more financial assistance. This response has been described as “sanctions” by the Zimbabwe government. When this so-called “non-cooperation” had persisted for too long, even the technical assistance was suspended.
The technical assistance suspension has now been party lifted, but Zimbabwe is still not eligible for financial help from the IMF. The views now being expressed by many donor countries and other development agencies suggest that only when Zimbabwe re-qualifies for IMF assistance will the country be given serious consideration. Until then, the only aid that should be expected will be in the form of humanitarian or social services support.
Business environment
Zimbabwe’s business prospects remain under the severe constraints of limited liquidity as well as continuing political uncertainty. However, a slow build-up of bank deposits is being supported by highly conditional lines of credit that are being offered from banks abroad. A number of producers of consumer goods are beginning to offer consignments of goods to retailers, but the imported goods on the shelves are still thought to be occupying 80% of the space.
Inflows to meet health and education, funded partly by donor countries, are also making a difference to the quality of social services being delivered. As much of this money finds its way into pay packets, it has helped to stimulate demand and to support business activities in some productive sectors.
However, many of businesses concerned are working against severe competition from imported goods and are facing many challenges as they try to match prices and quality after being held back by years of price controls and shrinking supplies of local inputs.
The IMF commended the Zimbabwean authorities for removing price controls, but a more helpful response would have been more strenuous efforts to talk them out of the ideas when they were imposed. The efforts made by locals fell on deaf ears, but their warnings have all proved to be painfully accurate: the controlled prices soon became the prices at which the goods ceased to be available, the businesses were forced to cut back on investment because of their declining ability to service debt, maintenance programmes had to be abandoned and many produces were able to continue only by cannibalising their own equipment for needed spares.
Through this decline, many skilled people left the country in search of better career development prospects and in those external markets, new production methods were being developed and perfected. Now, Zimbabwe’s producers have to recover lost ground while having to contend with inadequate supplies of raw materials, particularly from the farming sector, shortages of skilled workers, low income flows with which to meet recurrent costs and shortages of the capital needed to re-equip and restock their businesses.
In the financial services sector, funding levels have not been sufficient to meet the needs of borrowers or to bring down the cost of borrowing. Overdraft rates, when the money can be found, are therefore likely to remain relatively high while banks have to continue competing for fixed deposits. Continuing uncertainties about the security of foreign exchange balances still appear to be discouraging investors from taking advantage of the very much higher interest rates available from Zimbabwean banks. Many of the banks are hoping that the right assurances will be offered to persuade fund managers and others to take advantage of the rates on offer, but another concern often expressed is about the size of Zimbabwe’s banking sector and which of the banks would be likely to survive if the sector restructures to a size more in keeping with the size of the economy.
To further confuse the issues, the instability and uncertainties that continue to affect the western world have generated pressures on the US dollar, which is the currency of choice in Zimbabwe. Although the rand was given more prominence in the early statements from Zimbabwe’s new Ministry of Finance, South Africa’s direct involvement seems not to have translated into the levels of funding expected. However, many Zimbabwean exporters are pleased not to have incurred debts in rands, considering the degree to which it has strengthened. The graph shows a comparison of the trends against the US dollar, which is represented by the horizontal line at 100.
The signs to watch for in the developed world under these conditions will be interest rates, metal prices and LME stocks. Some importers seem to be trying to build up stocks now while prices and interest rates are low, but decisions to slow or suspend mine output might have a bigger bearing on stocks than purchase orders. The Chinese are the ones to watch, but they face the possibility of more protracted demand declines after they saturate their own markets with the goods that cannot be so easily exported.
No matter how much the big economies argue against protectionism, it is likely to come back in various disguised forms. Zimbabwe’s chances of getting its own factories back to work are going to be affected by whether schemes, exhortations or private sector campaigns to “Buy Zimbabwean” are brought to bear on consumers and retailers to offer support to local suppliers, even if their prices are not yet competitive.
The May figures should be out by now, but have not yet been released. However, the April Consumer Price Index percentage change, shown in this table at minus 1,1%, together with the strengthening rand and the fact that more than half Zimbabwe consumer goods are presently being sourced from South Africa, suggests that the costs will start moving up again in June. Zimbabwe must expect the cost of sourcing things from South Africa to move up if the traders have only US dollars to spend.
Further upward price movements seem likely to be a continuing trend through the rest of the year, but the very rough forecasts shown will take the index to only about the same level as in December 2008. By that date we will have the first opportunity to calculate a reasonably accurate year-on-year inflation rate from the new index series and it will hopefully show that Zimbabwe has experienced a very modest increase over the year.
---------------
John Robertson
June 16 2009
The International Monetary Fund’s recent Executive Board decision to lift the suspension on technical assistance to Zimbabwe resulted in an eleven-day visit by IMF finance experts. Having gathered the needed information, the team has now returned to Washington to prepare their report, which will be mainly on payments systems, lender-of-last-resort operations, banking supervision and central banking governance and accounting.
As all of these Reserve Bank functions had been compromised by policies that impacted directly on production, employment, export earnings, savings, investment and government’s tax revenues, we have to hope that the IMF’s recommendations will go further than offers of advice on central banking procedures. The country needs desperately to get back to work, but essential as the administrative functions of the monetary authorities might be, they will serve little purpose if the country fails to re-engage its producers.
The IMF’s Executive Board will review the technical assistance decision when it next reviews Zimbabwe’s overdue financial obligations to the Poverty Reduction and Growth Facility-Exogenous Shock Facility (PRGF-ESF) Trust,
Meanwhile, in taking the decision to offer some help, the Executive Board appears to have been fairly generous in its assessments of progress made and it has repeated some of these sentiments in the Article IV Consultation Assessment, which has now been released.
In these comments, the IMF claims to have taken into account “a significant improvement in Zimbabwe’s cooperation on economic policies to address its arrears problems and severe capacity constraints” and it “welcomed the authorities’ commitment to refrain from quasi-fiscal activities”.
These can be considered generous because, as for the similarly welcomed adoption of hard currencies in place of the Zimbabwe dollar, Zimbabwe’s authorities had no option but to meet basic economic requirements once their conduct had made the Zimbabwe dollar useless. Congratulatory comments will be more appropriate when government announces the reversal of the policy decisions that did the damage, but this has yet to happen.
A new team of IMF officials has now arrived to continue with work already started in areas of banking supervision and payments procedures. Hopefully, it will insist upon the adoption of practical measures that will actually strengthen the country’s prospects of attracting productive investors and actually restore productive capacity.
Going further than recognising the existence of problems calls for the use of leverage to force into place policies that actually work. Government – even the new coalition government – continues to exhibit a belief that the policy mix now in place can be made to work if enough money can be found.
Regrettably, those who are being pressured to supply the money seem never to respond with a blunt rejection. Too many aid and development agencies seem content to offer funding as well as advice on how policies chosen for their political effects might be coaxed into delivering slightly better economic results, even though very much more suitable and successful policies could have been chosen.
The IMF is clearly in no doubt that Zimbabwe’s economy is severely crippled and that its debt burden is more than big enough to discourage all those who have the option to choose other places to invest. However, it appears to have decided that for the limited IMF support on offer, given Zimbabwe’s long-standing arrears, it will be enough if government keeps its promises about property rights and the rule of law in the future.
Questions about government’s abuse of these in the past and whether anything should be done to restore productive assets to those from whom they were confiscated appear to be off limits. This could prove to be the most severe weakness in the IMF’s approach.
What views might be exchanged in closed meetings with the Zimbabwean authorities can only be guessed at, but the message between the published lines appears to be that if government wants to break highly efficient, capital-intensive large farming enterprises into small, inefficient family allotments, no outside agency should presume the right to challenge that decision.
Many of the outside agencies go further to suggest that the rich countries should generously contribute aid to make up for the very poor results yielded by ineffective policies. Various campaigners for this aid have generated beliefs among the leaders in the poorer countries that aid is an entitlement.
Zimbabwe’s Deputy Prime Minister showed himself to one of these believers when, in his presentation at the launch of the 100-Day Plan, he expounded on the costs of meeting its targets. Waving his hands at the assembled diplomats, he shouted, “Pay up! Pay up!”
Zimbabwe has been in continuous arrears to the IMF since February 2001 and the amount outstanding is now about US$133 million. By failing to meet the repayment terms, Zimbabwe disqualified itself from receiving more financial assistance. This response has been described as “sanctions” by the Zimbabwe government. When this so-called “non-cooperation” had persisted for too long, even the technical assistance was suspended.
The technical assistance suspension has now been party lifted, but Zimbabwe is still not eligible for financial help from the IMF. The views now being expressed by many donor countries and other development agencies suggest that only when Zimbabwe re-qualifies for IMF assistance will the country be given serious consideration. Until then, the only aid that should be expected will be in the form of humanitarian or social services support.
Business environment
Zimbabwe’s business prospects remain under the severe constraints of limited liquidity as well as continuing political uncertainty. However, a slow build-up of bank deposits is being supported by highly conditional lines of credit that are being offered from banks abroad. A number of producers of consumer goods are beginning to offer consignments of goods to retailers, but the imported goods on the shelves are still thought to be occupying 80% of the space.
Inflows to meet health and education, funded partly by donor countries, are also making a difference to the quality of social services being delivered. As much of this money finds its way into pay packets, it has helped to stimulate demand and to support business activities in some productive sectors.
However, many of businesses concerned are working against severe competition from imported goods and are facing many challenges as they try to match prices and quality after being held back by years of price controls and shrinking supplies of local inputs.
The IMF commended the Zimbabwean authorities for removing price controls, but a more helpful response would have been more strenuous efforts to talk them out of the ideas when they were imposed. The efforts made by locals fell on deaf ears, but their warnings have all proved to be painfully accurate: the controlled prices soon became the prices at which the goods ceased to be available, the businesses were forced to cut back on investment because of their declining ability to service debt, maintenance programmes had to be abandoned and many produces were able to continue only by cannibalising their own equipment for needed spares.
Through this decline, many skilled people left the country in search of better career development prospects and in those external markets, new production methods were being developed and perfected. Now, Zimbabwe’s producers have to recover lost ground while having to contend with inadequate supplies of raw materials, particularly from the farming sector, shortages of skilled workers, low income flows with which to meet recurrent costs and shortages of the capital needed to re-equip and restock their businesses.
In the financial services sector, funding levels have not been sufficient to meet the needs of borrowers or to bring down the cost of borrowing. Overdraft rates, when the money can be found, are therefore likely to remain relatively high while banks have to continue competing for fixed deposits. Continuing uncertainties about the security of foreign exchange balances still appear to be discouraging investors from taking advantage of the very much higher interest rates available from Zimbabwean banks. Many of the banks are hoping that the right assurances will be offered to persuade fund managers and others to take advantage of the rates on offer, but another concern often expressed is about the size of Zimbabwe’s banking sector and which of the banks would be likely to survive if the sector restructures to a size more in keeping with the size of the economy.
To further confuse the issues, the instability and uncertainties that continue to affect the western world have generated pressures on the US dollar, which is the currency of choice in Zimbabwe. Although the rand was given more prominence in the early statements from Zimbabwe’s new Ministry of Finance, South Africa’s direct involvement seems not to have translated into the levels of funding expected. However, many Zimbabwean exporters are pleased not to have incurred debts in rands, considering the degree to which it has strengthened. The graph shows a comparison of the trends against the US dollar, which is represented by the horizontal line at 100.
The signs to watch for in the developed world under these conditions will be interest rates, metal prices and LME stocks. Some importers seem to be trying to build up stocks now while prices and interest rates are low, but decisions to slow or suspend mine output might have a bigger bearing on stocks than purchase orders. The Chinese are the ones to watch, but they face the possibility of more protracted demand declines after they saturate their own markets with the goods that cannot be so easily exported.
No matter how much the big economies argue against protectionism, it is likely to come back in various disguised forms. Zimbabwe’s chances of getting its own factories back to work are going to be affected by whether schemes, exhortations or private sector campaigns to “Buy Zimbabwean” are brought to bear on consumers and retailers to offer support to local suppliers, even if their prices are not yet competitive.
The May figures should be out by now, but have not yet been released. However, the April Consumer Price Index percentage change, shown in this table at minus 1,1%, together with the strengthening rand and the fact that more than half Zimbabwe consumer goods are presently being sourced from South Africa, suggests that the costs will start moving up again in June. Zimbabwe must expect the cost of sourcing things from South Africa to move up if the traders have only US dollars to spend.
Further upward price movements seem likely to be a continuing trend through the rest of the year, but the very rough forecasts shown will take the index to only about the same level as in December 2008. By that date we will have the first opportunity to calculate a reasonably accurate year-on-year inflation rate from the new index series and it will hopefully show that Zimbabwe has experienced a very modest increase over the year.
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John Robertson
June 16 2009
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