By Alois Vinga
CALEDONIA Mining Corporation Plc has successfully installed and commissioned a new oxygen plant at Blanket Mine in a move which will see overall metallurgical recoveries as well as environmental safety improving.
In a statement, the corporation explained the new plant will go a long way in improving operating efficiencies.
Said the company’s chief executive officer, Steve Curtis, “We are pleased to have successfully commissioned the new oxygen plant at Blanket and look forward to improved operating efficiencies as a result.
“This marks the latest in a series of investments to increase production and improve operating proficiency at Blanket as we continue our growth trajectory to 80,000 ounces per annum by 2022.
“The new oxygen plant will provide up to six tonnes of improved oxygen supply to the Blanket Carbonin-Leach plant which is expected to increase recoveries to approximately 94 percent.”
The new oxygen plant is expected to improve metallurgical recovery and reduce cyanide (a carbon – nitrogen containing chemical) consumption at Blanket.
Based on test work conducted, it is anticipated that the plant will improve overall metallurgical recoveries at Blanket to approximately 94 percent.
Recoveries have averaged approximately 93 percent in 2019.
Added Curtis, “We also anticipate that the oxygen plant will result in slightly lower operating costs as cyanide consumption is expected to be reduced as a result of the improved oxygen supply; and the operating costs of the new oxygen plant are predicted to be lower than those of the previous two tonne plant.”
The corporation reported an increase in after-tax profit of US$9,3 million in the first quarter of 2019 compared to US$3,1 million last year due to foreign exchange gains and the profit on disposal of a subsidiary, the combined effect of which outweighed a lower gross profit.
Gross profit at US$4,2 million was lower due to a reduction in the number of gold ounces sold and increased on-mine cost per ounce.
All in sustaining costs increased from US$832 to US$943 per ounce due to the higher on-mine cost per ounce, the effect of which was partially offset by lower sustaining capital investment and lower administrative expenses.
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Zimbabwe’s RTGS currency is crushing! Crushing so fast that if there is no immediate solution to this, we are soon going to be removing zeros again. This is the elephant in the room we must all be focusing on.
We have all complained about the cost of living and yes, communication as well, citing sharp price increases at face value, but easily forgetting the fact that it’s not just price increase but a currency losing value.
Our Zimbabwean dollar has been made to trade at 1:1 for a very long against the USD, creating a false impression that our currency was strong, yet in reality, it was just the backing that was sustained, but for a certain period.
Everything is changing prices, but balancing off against the USD which in fact is reducing actual cost. This is a case that we need to confront with a critical mind.
With the internet fast becoming a part of everyday life for a large section of the Zimbabwean populace, data consumption has increased exponentially as almost all forms of communication are internet-based.
Although price hikes have become a day-to-day occurrence in the country, the cost of data remains a heated debate amongst peers, with local telecoms companies becoming victims of public scrutiny.
Currently, a 1GB monthly data bundle on the Econet network, will cost you ZWL$110.
While these amounts may send customers into a state of panic; when converted, Zimbabwe’s average cost of data remains competitive.
The official interbank rate of the ZWL$15.5 to the US$1 leaves the cost of 1GB monthly data bundle at $7.10, a competitive price given the current economic standing of the country.
According to a study by Cable.co.uk, a site which compares broadband prices, the global average for 1GB is $8.53; which proffers a difference of $1.43.
There are many elements to consider when analysing the cost of data, including infrastructural capacity of the service provider, the cost of international bandwidth, cost of licence fees and economic stability of the country in question.
Most of these require foreign currency, which resource is currently scarce in Zimbabwe.
The exchange rates for ZWL to USD have reached alarming levels.With the incessant drop in value of the RTGS, local operators are incurring daily loses for services provided, some of which are imported & paid for in USD.
Someone who is in touch with the reality of the Zimbabwean situation would be cognisant of the latter and realise that the main issue is not the supposedly high cost of data but the economic instability within the country.
Addressing this issue would not only make for a fair playing field but also see significant changes and reduction in cost of living expenses for all Zimbabweans.
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The Zimbabwean business operating environment continues to weaken with an ever unpredictable rising cost structure.
This comes as production inputs are always on the rise with weekly fuel price increases leading the charge while load shedding has also crippled production with unstable exchange rates further worsening the situation.
Businesses across various industries are failing to keep up with these ever increasing costs, hence passing the burden to the customers by continuously pushing up prices to maintain the profit margins has become the norm.
The latest fuel price review by ZERA, hiking petrol prices by 27, 5% – from ZWL 11. 76 to ZWL14, 97 per litre – and that of diesel by 20, 7% from ZWL 12,42 to ZWL 15, 64 has once again punched the wind out of the business community’s lungs.
Speculation confirms that we shall see the price of a litre going up beyond $20 by end of this month.
With less than 6 hours of electricity provision per day, most businesses are running using generators which consume the expensive and not so easy to get fuel.
Network base stations that keep the entire telecoms ecosystem up and running are now fuel powered with each consuming over 100 litres per day. This puts pressure on the cost of running a network thus creating a whirlwind of price increases so as to sustain the business, as fuel is guzzling a significant proportion of their budgets.
The telecommunication industry has been affected by all these inputs of production which are exchange rates to procure equipment, fuel to run base stations and ZESA unavailability and the recent tariff increase acerbates the situation.
Faced with all these insurmountable challenges and unfriendly environment, business sustainability will hinge on price changes to cushion their costs allowing businesses to break even.
Most businesses are now pinned on survival over profits. Other business objectives such as growth and expansion are now difficult to chase as the market’s disposable income is ever eroded by the hyper-inflationary environment (currently pegged at 390%) they are reeling under.
Telecoms customer pocket share has been reduced drastically leaving them with less active daily or monthly customers plunging the entire operator and industry’s revenue streams into turmoil.
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By Mary Taruvinga
A Harare Central Prison inmate will finally get his wish to be treated outside the correctional institution after enduring two months with assault injuries by wardens.
Nyasha Ndangarazi was in August this year assaulted by prison wardens after he was found in possession of an MP3 player inside his cell.
The assault left him with damaged kidneys while he was also releasing bloodied urine.
Zimbabwe Prisons and Correctional Service (ZPCS) authorities initially tried to evade the allegations until Ndangarazi’s brother Charles Meda sought court intervention.
Meda early this week filed an urgent chamber application seeking to have his brother treated by a private hospital.
“My brother is now unable to walk and will be carried around by fellow inmates for mobility,” Meda said.
ZPCS held a meeting with his lawyers Denford Halimani and Idirashe Amanda Chikomba of Zimbabwe Lawyers for Human Rights (ZLHR) on Thursday morning, in which the prison undertook to immediately allow Ndangarazi to seek treatment at a private hospital.
“The undertaking necessitated the withdrawal of an urgent chamber application which had been filed in the High Court on Monday 14 October 2019 seeking to compel ZPCS to immediately facilitate the treatment of Ndangarazi, whose health has deteriorated after he sustained some injuries from the assault by prison guards and is now discharging blood when he urinates, an indication of kidney problems,” the lawyers.
Ndangarazi’s family will furnish ZPCS with the name of the private hospital and the name of the medical practitioners within Zimbabwe to enable prison authorities to accompany the inmate and make the necessary security arrangements.
The post Bashed MP3 player Harare prison inmate to finally get treatment appeared first on NewZimbabwe.com.
By Matabeleland North Correspondent
Zimbabwe and Zambia on Wednesday signed a Memorandum of Understanding (MoU) which will see the two neighbours cooperating in fighting corruption and cross border crimes.
Some of the crimes identified include money laundering, tax evasion and drug trafficking.
Zimbabwe Anti-Corruption Commission (ZACC) chair Justice Loice Matanda-Moyo signed the MoU with her Zambian counterpart Rosemary Nkonde-Khuzwayo who is acting general manager of the Anti-Corruption Commission (ACC) in the Zambian border town of Livingstone.
Both countries are signatories to the United Nations Convention Against Corruption (UNCAC) which encourages member states to enter into bilateral relations for cooperation of law enforcement agencies.
ZACC hopes to use the MoU to trace and recover proceeds of crime.
“Corruption is a complex and global social phenomenon which permeates across borders and therefore can never be fought in isolation. We need joint efforts at local, regional and international levels to win in the fight against this menace and this MoU will strengthen our skills capacity through sharing expertise and creating easy coordination in the investigation of corruption cases.
“Today we are here to formalise this collaboration in the exchange of information, joint investigations, mutual assistance in the recovery of proceeds of crime and exchange of skilled personnel among other areas,” said Justice Matanda-Moyo.
The Zimbabwean High Court judge said ZACC is interested in investigating some individuals who are suspected to have been involved in money laundering with some assets having been identified in Britain.
ZACC will be working with a UK based company to trace proceeds of crime and repatriate funds and forfeit some assets if investigations prove they were acquired illicitly using stolen money.
Zambia’s Nkonde-Khuzwayo blamed cross border crime on globalisation which she said makes it easier for people involved in illegal activities and corruption to hide their crime proceeds in other countries.
“Challenges in one of the two countries affects the other hence the need to work together to fight the common enemy, corruption through an MoU,” she said.
The MoU will be valid for five years when both countries hope to have gone far enough in attempts to control the prevalence of graft.
Gerald (not his real name) was a chief executive officer of a leading manufacturing company in the country almost half of his life but is now dying a poor man.
He tendered his resignation at the company on his 65th birthday. However, he feels like he has lost a piece of himself by leaving the company.
Now as he lies on a hospital bed, he reminisces about the once flashy life he lived before he retired five years ago. It all now seems like a dream. He is struggling to pay medical bills from the little he is receiving.
What is worse for him is that his children are not helping with his upkeep.He remembers the holidays he enjoyed as he travelled across the globe. None of it had prepared him for this. He has come to a conclusion that he failed to plan for his future after retirement.
Gerald’s situation is similar to the one faced by many other senior managers in Zimbabwe who are failing to cope with the paltry pension payouts they receive after retirement, leading to early death as a result of stress.
In Zimbabwe, however for many pensioners, the monthly stipend is woefully inadequate as it is heavily eroded by runaway inflation. Many pension beneficiaries bear the brunt of loss of value of their benefits.
This issue of target replacement ratio was widely discussed at the Zimbabwe Association of Pension Funds (ZAPF) principal officers and chairpersons convention held recently in Nyanga where it was revealled that many senior executives were failing to live beyond five years post retirement.
The target replacement ratio (TRR) seeks to provide a pension benefit that, when added to social security and other benefits, is a percentage of the income one earned before retirement. It speaks to the portion of the pension that one has to survive on when the salary stops coming.
Director of Insurance and Pension Commissions (Ipec) pensions’ department, Josphat Kakwere said this was an issue of concern as research has shown that most if not all pension funds do not have any target replacement ratio.
Kakwere said there was need to educate the working class especially the senior executives on how to plan for life after retirement.
“When you have been working all your life and on retirement start earning ZW$20 then your investment ratio is 20%. We have moved around the country and most said they did not have any target replacement ratio . It is a cause of concern,” he said
“The issue is actually worse for those in senior management. They have huge salaries made up of benefits and their pensionable salary is actually a very small fraction. At the end of the day their target replacement ratio is very low.”
“You see them having very big cars that get serviced by (expensive workships) unlike most of us but when they retire all bills now become their personal responsibility. They do not easily integrate into the community and most of them die just five years after retirement. They are not dying because of anything else but stress because they did not plan for their retirement. You need to educate them,” he added
Kakwere said most of them were not willing to contribute to pension funds because they think pension money is cheap finance for their performance targets for the results they want, so they would rather go to borrow to banks on high interest rates.
This leaves them worse off than most of their retired colleagues.He, however, said the employer also has a critical role to play in TRR.
“What has happened over time under defined benefit schemes, the employer would actually target on average of about 50% and on average 60%, so they will be simply saying on retirement I want to replace your income up to 60% so under the DB scheme it now depends how much the pension is made,” Kakwere said.
A defined benefit pension plan is a type of pension plan in which an employer or sponsor promises a specified pension payment, lump-sum or combination thereof on retirement that is predetermined by a formula based on the employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns.
Traditionally, many governmental and public entities, as well as a large number of corporations, provided defined benefit plans, sometimes as a means of compensating workers in lieu of increased pay.
In Zimbabwe, we have two major phases of a pension, one which is accumulation normally referred to as the saving period which then goes into de-saving or de–accumulation where one is seen as having built a pot from which he will draw from on retirement.
In other words one would have postponed consumption until he gets to retirement.Head client relations and business development, Minerva Risk advisors, Noel Zvareva said it was curricula for any employee to plan for their retirement as much as they plan for their day to day live whilst they working.
He called for member engagement on the issue as well as retirement counselling to avoid surprises upon retirement as well as early deaths that comes with failure to cope with woes of retiring on poor savings.
The other delegates, however, argued that it was difficult under the economic circumstances given the fact that even the salary itself was not sufficient. They moved a motion to have early access to their pensions benefits, saying it will aid their efforts for planning for retirement.
Speaking from his hospital bed, Gerald said: “If only I can survive the stress and the trauma that I’m going through due to lack of proper planning for my retirement I will start classes to educate people on why its important to plan for retirement. No one should go through what I have gone through. Come to think of it, the doctors say I have no terminal illness, but here I am.”
THE Moti Group’s African Chrome Fields (ACF) has pleaded with President Emmerson Mnangagwa to address a number of factors hampering its operations before the miner can bounce back in Zimbabwe where it is currently under care and maintenance.
The meeting between ACF representatives and Mnangagwa’s team which took place at in Harare was necessitated by the challenges facing the chrome miner’s operations in Zimbabwe and the recent scaling down by the company in terms of production and investment.
ACF, based in Kwekwe, has invested over US$250 million in Zimbabwe in the last five years and of late the directors of the company have been quoted as saying it was very difficult to do business in the country.
“The meeting was to discuss the way forward,” an official who attended the meeting told the Zimbabwe Independent.Among the issues they brought to Mnangagwa’s attention was the issue of currency and the exchange rate.
When the group invested in Zimbabwe, the country was using a multi-currency system where the United States dollar was at 1:1 with the bond note. As of yesterday, the Zimbabwean dollar was officially trading at $15,3 to US$1 on the inter-bank market.
The company says the currency volatility has hampered not only the operations of ACF but has also affected its most valuable asset — its employees — in various ways.
ACF said economic conditions will determine further foreign direct investment (FDI) in various other sectors and this principle is a standard requirement for FDI in any country, adding that Mnangagwa should also address issues of macro-economic policy to ensure macro-economic stability.
The ACF team also spoke to Mnangagwa about the issues of energy, that is electricity and fuel and infrastructure and accessibility. Zimbabwe has been experiencing massive power blackouts and fuel shortages.
“They said there was need to improve the invironment to facilitate investment,” the official said ACF also advised Zimbabwe to develop financial and fiscal incentives to help investors and improve on the ease of doing business.
ACF spokesperson and project liaison director Ashruf Kaka confirmed the meeting and dispelled reports of the company disinvesting in Zimbabwe.
The company is also monitoring the chrome price, which has gone down, in order for them to bounce back.
“We reduced operations to an extent and continue to attend to the necessary care and maintenance of the remainder of the plants such that we can upscale when the conditions improve,” Kaka said.
However, the company said it was impressed with the quality of the pool of skills and the work ethic of the labour in Zimbabwe.
Mnangagwa on his part said he was happy that they were not disinvesting in Zimbabwe and said he would also be pleased to see them come back and put more money into the country, adding that government was working towards creating an enabling environment for FDI and local investment.
The company also met with Mines and Mining Development minister Winston Chitando to discuss the same issues.
ACF has also engaged the Minerals Marketing Corporation of Zimbabwe pertaining to various unfounded allegations against the company in the media in recent times.
ZIMBABWE’S central bank deputy governor Jesimen Chipika says the nation is grappling with symptomatic challenges instead of tackling structural problems in the economy as she that the multi-currency system will comeback.
“We are grappling as a nation to separate the structural challenges versus the symptomatic challenges and a lot of times it is the symptomatic challenges that have appeared more frequent than the structural.
We should go back to addressing the structural challenges and I would want to agree with those of you that keep on saying let’s go back to production. The real economy is on production. Those are the structural issues of the economy,” she said.
Chipika made it clear that there were no prospects of Zimbabwe returning to the multi-currency regime.
There were murmurs from the audience when she insisted that prices of basic commodities were no longer rising at a brisk pace on a month-on-month basis.
Zimbabwe’s inflation rate was last recorded at 300% in August and computed at 353% in September 2019.
Just last week, the Public Accountants and Auditors Board (PAAB) advised that there was broad consensus within the accounting and auditing professions to apply International Accounting Standard 29 (Financial Reporting in Hyperinflationary Economies), when reporting on accounts in Zimbabwe.
Chipika said the introduction of the Zimdollar has seen a sharp decline in the parallel market activities and an increase in the demand for the local currency.
On the untimely introduction of the Zimbabwean dollar and the outlawing of the US dollar as a legal tender in June, she said there was no way an inter-bank exchange rate was going to co-exist with a multi-currency regime.
“The opportunities for arbitrage were totally out of control.This led us to the june 24 decision. Multicurrency was no longer working in our country, we had to go back to the mono-currency. The Zimdollar helped hold other worries of post-dollarisation,” she said.
Chipika said the US dollar, a strong currency, made local production uncompetitive.The Zimdollar’s introduction has also assisted companies to re-enter the export market, she added.
Chipika said the monocurrency was the new normal for Zimbabwe although it might not be perfect.
“We have seen from analysis that it was very difficult for exporters when we had a 1:1 parity policy. The exporters are our blood,” Chipika said.
“Remember the bond notes were in produce as an incentive.”
She said exporters were failing to enter the other markets as they were producing in a high-value currency.
“The Zimbabwe dollar may not be perfect but we are getting there,” Chipika said.
“We have seen the reduced trading of foreign currency on the black market and we are seeing stronger demand for the local currency.”
Tinashe Kairiza/Andrew Kunambura
A LEGAL showdown is looming between the Diaspora Infrastructure Development Group (DIDG) and government after cabinet this week dramatically terminated the US$400 million National Railways of Zimbabwe (NRZ) recapitalisation deal, nearly two years after the authorities awarded the consortium the tender to implement the project.
The termination of the multi-million dollar deal comes after the NRZ had already taken delivery of 13 mainline locomotives, three shunting locomotives, 200 high-sided wagons and six passenger coaches on a lease agreement. In a statement obtained by the Zimbbawe Independent yesterday, DIDG said it will explore all legal options available to bring the deal back on track.
“We are briefing our lawyers to look into this issue and provide DIDG with a comprehensive report of its legal options based on the litany of transgressions that have bedevilled this transaction particularly by the office and person of the Minister of Transport, (Joel Biggie) Matiza.
“It is unfortunate that while all this happens, it is NRZ, the employees, the youth and customers that suffer as the recapitalisation project will unavoidably be delayed,” part of the statement reads.
Sources close to the aborted project, which was now being assessed by Treasury pending approval, told the Independent this week that the consortium, which had appointed the African Export-Import Bank (Afreximbank) as the mandated lead arranger, was “weighing its legal options” to recoup the cost of the equipment provided to the NRZ, among other issues. DIDG will also challenge cabinet’s decision through a range of legal options. “We are consulting our legal team on the way forward following the termination of the deal,” an official said.
“All legal options are on the table now. And our legal team is currently studying what he (Matiza) said in cabinet.”
ANDREW KUNAMBURA/TINASHE KAIRIZA
CABINET’s shock decision this week to cancel the US$400 million National Railways of Zimbabwe (NRZ) recapitalisation deal won by the Diaspora Infrastructure Development Group (DIDG) and South African rail, ports and pipeline utility, Transnet, has sharply divided government and sucked in the military, as the battle to control one of Zimbabwe’s largest parastatals intensifies.
Informed multiple sources said the resolution, which follows unrelenting lobbying, cajoling and threats by Transport minister Joel Biggie Matiza has angered a number of ministers, government bureaucrats and security bosses who have been involved in the project since 2017.
The fight over the deal pits rival groups of officials led by Foreign Affairs and International Trade minister Sibusiso Moyo and Matiza. Senior security service chiefs — from the military and intelligence — had vetted and endorsed the deal. Zimbabwe Defence Forces’ Major-General William
ube has been sucked into the issue as NRZ deputy chair. Advocate Martin Dinha is the chair.Sources said most ministers have joined forces with the NRZ management and board, bureaucrats and security bosses to fight back.
This comes as sources also warned that a massive legal battle could be looming over the project. Matiza and his forces are also digging in, sources said.
Even though some ministers did not speak in cabinet on Tuesday, sources said, they left fuming as they have put sustained efforts to ensure the project — which is critical for economic recovery — is implemented.
President Emmerson Mnangagwa had been supporting the deal until cabinet’s shock decision on Tuesday. Mnangagwa officially commissioned the project in Bulawayo last year.
However, in a dramatic resolution on Tuesday cabinet terminated the multi-million dollar deal.The cancellation of the deal came after Mnangagwa highlighted during his state-of-the-nation address and the official opening of the 2nd session of the 9th parliament on October 1 that the money required for the project has been secured through DIDG.
Announcing the termination of the deal, recently approved by the NRZ board and now being assessed by Treasury, Information ministry permanent secretary Nick Mangwana said parties to the transaction had failed to conclude ongoing negotiations within the stipulated timeline, prompting government to re-tender the project.
As repeatedly reported by the Zimbabwe Independent in its exclusive series on the protracted transaction, Matiza had been making calculated manoeuvres and a spirited bid to derail the project to bring in via the back door a Dubai-based entity, Feonirich Investments LLC, which had failed to meet the tender process deadline.
After failing to persuade the Dinha-led NRZ board to muscle out DIDG from the deal, Matiza — following a series of meetings involving Mnangagwa and other parties involved last week — then turned to cabinet where he presented a damning report focussing on the Transnet-DIDG internal dynamics, technical partner matter, framework agreement issues, timeframes and funding availability.
Sources said Matiza urged cabinet to cancel the deal on the basis of these issues. DIDG and NRZ, among other parties, were not given a chance to respond to Matiza’s report.
“In his report, the minister told cabinet that the deal had virtually collapsed mainly because of the fallout between DIDG and Transnet; he also claimed that the consortium had failed to raise the required funds,” a source said.
“Matiza also reported that Transnet undertook due diligence on DIDG and found no evidence of it being in a position to raise the required equity capital. Matiza further claimed the local security has passed a negative opinion on Transnet, raising a geo-political dimension.
“He (Matiza) reported that it is not ideal to have a neighbouring country invest in such a strategic state enterprise. He claimed the army’s concern was that in case of mutual hostilities, the deal would leave the country extremely vulnerable since South Africa would be having knowledge and control over our systems and signals.”
Historically, South Africa has always used its economic leverage to influence politics and events in Zimbabwe.For instance, during the apartheid era, when problems arose between the then South African prime minister John Vorster and Rhodesian prime minister Ian Smith, the South Africans would simply disrupt the rail system and prevent critical goods — including fuel — from being transported into the country.
Matiza also tried to pour cold water on DIDG’s recent funding deal from African Export-Import Bank (Afreximbank) which was appointed lead arranger to co-ordinate the syndicated loan.
Afrexim has agreed to coordinate funding and provide its own US$100 million funding. The balance will come from South African and regional banks which have provided term sheets for about US$1 billion.
Although cabinet resolved to cancel the deal, government sources said the battle is still far from over.“There is a huge mobilisation behind-the-scenes which started soon after the cabinet meeting ended on Tuesday. Since then, there have been endless meetings and caucuses over the deal. Some ministers who did not attend the meeting have also vowed to fight for the deal to survive. It has triggered a messy fight in official circles.
Next week’s cabinet meeting will definitely be interesting as sleeves have surely been rolled. We are also likely to witness a series of fightback manoeuvres starting next week. There will be blood on the floor.
DIDG yesterday came out fighting back, pulling no punches against Matiza.“We have been inundated by enquiries from media houses to explain if the NRZ recapitalisation US$400m has been cancelled by cabinet. As it stands, legally, the deal has not been cancelled.
We are yet to receive any communication from NRZ as we can’t take a media article as the basis of communication of such an important national matter,” DIDG said.
“The official position as communicated to us by NRZ is that we are waiting for the Ministry of Finance to review and engage us and Afreximbank on the funding which will lead to formal and procedural recommendations to cabinet.
“Out of respect of the President, his office, government and our adherence to the dictates of professionalism as guiding our restraint, we have to date observed with shock and dejection how single-handedly the honourable minister Matiza has been using his position and office to misrepresent our company’s capacity and the progress we have made in closing this deal which is pivotal to the economic recovery of our country Zimbabwe.”
DIDG said Matiza has been on a warpath against them and the project for sometime now.
“We are gravely concerned by the conduct of the minister who has been consistently misinforming the populace, the President, cabinet and the entire government by misrepresenting the facts on a number of things relating to DIDG and the recapitalisation project,” it said.
“For instance, only a few weeks ago Matiza has been claiming that DIDG has no funding knowingly and sitting on the term sheets reflecting over a US$1 billion that were first given to him on 1 October 2018 which means he has known the truth but denied and distorted if for more than a year.
“Since then, DIDG proved its ability to fund the project with Afreximbank support having been confirmed at the highest levels of both government and the funding institution, in which Zimbabwe is itself a shareholder. Matiza has now found an alternative reason being Transnet’s failure to obtain its shareholder’s approval from the government of South Africa. His actions fly in the face of government’s concerted efforts in various local, regional and international fora to bring investment into Zimbabwe. His actions completely negate the government’s re-engagement process and investment drive.”
DIDG said Matiza made fundamental misrepresentations and committed a “grave mistakes” in the process of misinforming Mnangagwa and cabinet about the project.
“The minister has, in pursuit of an agenda we will never understand, contradicted the President’s state-of-the-nation address position and NRZ board resolution which clearly affirmed that DIDG had made tremendous progress on the transaction… Matiza’s move is unilateral and confirms his relentless desire to scuttle the deal for his own unknown interests.”
By Robert Tapfumaneyi
MALAWIAN nationals living in Zimbabwe have been severely affected by their host country’s economic tailspin.
Zimbabwe is home to thousands of Malawian migrants and their descendants who settled in the country from nearly 50 years ago.
When the Zimbabwean economy was still stable, the migrants used to send their earnings to relatives back home.
But this has been affected by Zimbabwe’s economic mess that has seen ordinary workers fail to make ends meet.
Likewise, Malawians living in Zimbabwe have been caught up in the quicksand.
In an interview with NewZimbabwe.com Thursday, Kholisile Kaclepa, who chairs Malawi National Association (MNA), singled out sanctions imposed on Zimbabwe by America and Europe as the main cause of Malawians’ misery.
“Our parents came here to Zimbabwe 49 years ago looking for greener pastures, worked here for the rest of their lives. They are now retired and life has not been rosy,” said Kaclepa, who is based in Malawi and is visiting Zimbabwe.
“So now, we have to send them money from Malawi looking after them but they used to send money back to Malawi because they were having surplus.”
“Now the story has changed and because of these illegal sanction; it’s very painful. We can feel the pinch even our children too feel the pinch.
“It has affected trade….”
Meanwhile, Zanu PF national commissar Victor Matemadanda has called on all Zimbabweans regardless of political affiliation to join the October 25 anti-sanction march.
Matemadanda said the campaign was not a Zanu PF preserve but concerned all Zimbabweans affected by the Western embargo.
“This is a national event and we all upon all Zimbabweans to come on the day and show solidarity for the removal of the illegal sanctions,” he said.
“We are also calling upon political parties to mobilise their supporters to come and march on the day so that we show the world that the sanctions have affected ordinary people.
“Let their supporters come in numbers and fill up the National Sports Stadium.”
Zimbabwe was 2001 and 2003 slapped with restrictions by the US and the European for alleged rights abuses and poll theft by the now defunct Robert Mugabe regime.
Since the time, calls by the Zanu PF led government to scrap the embargo have fallen on deaf ears as the foreign powers have kept the clamp on the country.
Amid the calls, SADC countries have agreed to join their troubled neighbour in calling for the removal of the measures during concurrent activities set to be held October 25 in their respective territories.
The post Malawian migrants blame financial woes on Zim sanctions appeared first on NewZimbabwe.com.
By Staff Reporter
PROMINENT banker Enock Kamushinda and four of his Zimbabwean colleagues within the trade are being sued in the Namibian High Court by their former employer the southern African country N$247 million (US$17.6 million) for theft and fraud.
They were once employed by Namibia’s Small and Medium Enterprises (SME) Bank which has brought the action against them.
The five are Kamushinda, who is a former board chairperson of the bank; Tawanda Mumvuma, a former finance manager of the bank; Chiedza Goromonzi, who was employed in the bank’s finance department; Joseph Banda and Lyndon Gaidzanwa.
The bank is now under provisional liquidation.
SME Bank’s joint provisional liquidators, Ian McLaren and David Bruni, are claiming in a lawsuit filed recently that Kamushinda and colleagues were involved in theft, fraud and money laundering that resulted in the bank losing N$247 million from December 2013 to January 2017.
The liquidators are also claiming that Kamushinda, through his companies, Crown Finance Corporation and Heritage Investment Holdings, of which Kamushinda is the sole director, Mumvuma, Banda, Goromonzi and Gaidzanwa all acted in connivance to engage in the crimes for their own benefit.
According to the bank, the Zimbabwean expatriates were recipients and distributors of proceeds from unlawful activities as defined in Namibia’s Financial Intelligence Act.
McLaren and Bruni further allege that the five were involved in the creation and execution of false payment instructions in the SME Bank from December 2013 to January 2017.
It is further alleged that a total amount of more than N$247.6 million was stolen from the bank through payments made as a result of those instructions.
However, in their first response to the lawsuit, Kamushinda, his two companies, Mumvuma and Goromonzi have given notice that they are raising exceptions to the claim, which they describe as “vague and embarrassing”, and thus not comprehensible to them.
Banda is denying that he either received or distributed any proceeds of unlawful activity and that he ever worked in cahoots with any of the other defendants.
He says he neither worked with anyone else to defraud the SME Bank, and that he personally or in collusion with anyone, ever falsified any payment instructions of the bank.
Gaidzanwa is also denying that he received stolen money from the bank.
However, he states in his plea, he was paid for consultancy services that he performed for the company World Eagle.
McLaren and Bruni are claiming that the five Zimbabweans rewarded themselves from time to time for their participation in the fraud and theft.
They are also claiming that Gaidzanwa received payments totalling about N$971 500 from May 2015 to May 2016 after money stolen from the SME Bank had been laundered through a bank account of a South African company, Asset Movement and Financial Services (AMFS).
A total amount of at least N$64 million stolen from the SME Bank was channelled through an account of AMFS and delivered in cash to a Johannesburg resident, George Markides.
Markides, it is further alleged, in turn delivered the loot in cash to Kamushinda, Mumvuma, Banda, Goromonzi and Gaidzanwa.
They are further claiming that a total of N$2,47 million was paid by the SME Bank to Crown Finance Corporation from April to July 2015, while a total of N$1,8 million was paid from the bank’s accounts to Heritage Investment Holdings from April 2015 to August 2016.
“The entire purpose of the transfer of the monies from the SME Bank was to hide and appropriate the proceeds of unlawful activities, and constitutes a grand scheme of money laundering,” McLaren and Bruni charge.
Kamushinda is the founder of Metropolitan Bank of Zimbabwe.
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By Alois Vinga
EXTREME poverty in Zimbabwe has risen to 34 percent, with 1 million more citizens now added to the existing 4.7 million, World Bank (WB) said in a recent Poverty and Equity brief.
The global lender said there has been a significant growth in the country’s poverty rate over the past years owing to natural disasters, among other factors.
Said WB in part, “Extreme poverty is estimated to have risen from 29 percent in 2018 to 34% in 2019, an increase from 4.7 to 5.7 million people. The increase is driven by economic contraction and the sharp rise in prices of food and basic commodities. Contraction of agricultural production following an El Nino induced drought worsened the situation in rural areas.”
The update says one tenth of the rural households constituting about double the proportion of urban households are going without food for a whole day.
Natural disasters are also cited as part of the factors which have worsened the poverty situation.
“Cyclone Idai has worsened the situation in three key provinces that typically account for 30% of agricultural output.
“The drought has also led to broader impact on the electricity and water sectors, causing widespread rationing and tariff adjustments to manage costs,” says the report.
WB said inflation has been increasing since October 2018, driven by monetisation of sizable fiscal deficits of the past, price distortions, and local currency depreciation.
Observed the update, “Annual inflation reached 230% in July 2019 compared to 5.4% in September 2018, with food prices rising by 319% in July 2019 while non-food inflation increased by 194%.”
Going forward, poverty is projected to remain stagnant in 2020 as positive impacts of a rebound in agricultural production will be countered by the negative effects of continued high inflation, further undermining the purchasing power of the poor.
Added the brief, “Poverty is likely to have risen further since 2017 given the sharp rises in food prices, which rose by 319 % from June 2018 to June 2019. Together with poor rainfall in the 2018/2019 season. This increased the portion of food insecure people to 51%.”
However, the national poverty rate, measured at the relatively high poverty line decreased marginally from 72 to 70 %.
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By Staff Reporter
PRESIDENT Emmerson Mnangagwa has vowed action against businesses which continue to hike their prices beyond the reach of poor locals.
This comes as prices of the staple bread surged from RTGS$10 to RTGS$16 this week.
Local businesses continue to peg prices according to the prevailing US dollar parallel market rates, arguing this was the most viable strategy to maintain their operations.
But President Mnangagwa sees nothing beyond sheer mischief by businesses operating in a volatile economy.
“Wherever I am going these days, people are complaining about the ever-increasing prices of basic commodities, saying you promised to whip such business into line. So where is that whip?
“As a father, you don’t discipline your children every time they do something wrong, but just warn before taking any action.
“However, I think we have reached a point where action has to be taken because we don’t see any reason why there is this continuous rise in prices.”
Mnangagwa was speaking while addressing the first edition of the Rural District Councillors Meeting.
The President has since summoned business leaders to a crisis meeting next week with hopes to find ways of resolving “unwarranted price increases”.
Government has maintained it will not impose price controls fearing a repeat of the 2007 scenario in which goods disappeared from supermarket shelves only to resurface on the black market with exorbitant prices with some sold in foreign currency.
While government has not been forthcoming with statistics, independent sources have put the country’s inflation at above 500 percent.
The under-fire Zanu PF led government insists the tough economic situation in the country were signs of a recovering economy following decades of mismanagement by late former President Robert Mugabe’s regime.
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THE Platform for Concerned Citizens (PCC) congratulates the Zimbabwe Heads of Christian Denominations (ZHoCD) for its timely intervention in the deepening crisis that afflicts our country. This follows the equally important statement that the ZHoCD issued in 2015, as well as the founding document in 2006.
The current statement indicates the continuing concerns of the churches for the plight of the ordinary citizens of Zimbabwe, and proposes a way forward out of the crisis.
The criticisms assist in highlighting the deep distrust of both the state and the political parties and the weariness of all citizens to the escalating and unresolved multi-faceted crisis.
Firstly, the analysis of the crisis centred on the adverse effects of the economic collapse, the political paralysis unresolved through successive elections, and the deep unhealed wounds of political violence are likely acceptable by the majority of the citizens.
Secondly, careful reading of the document reveals the major thrust, the ZHoCD proposed transitional arrangements to resolve the national situation. The steps and goals for such an arrangement are stated clearly:
The PCC is certain these are goals that resonate with most Zimbabweans. The PCC has been advocating for these goals, through a National Transitional Authority (NTA) arrangement, since 2016, in protracted attempts to develop a soft landing for Zimbabwe.
Thus, it is of concern that the critics focus mostly on the period of a transitional arrangement, the suspension of elections, constitutionality, and the suggestion of a referendum. These are not trivial issues, but are secondary to the acceptance that only a transitional arrangement can resolve the problems the country faces.
Acceptance of a transitional solution leads logically to the suspension of elections until the transitional period is complete, the reforms necessary to addressing the four goals above are complete, and the country is in a state of stability in which bona fide elections can take place, free of political interference by the “captured state”.
The process of developing an NTA is a matter for discussion, and the ZHoCD statement is not prescriptive. The PCC strongly supports the rationale of the ZHoCD for a process to develop a solution for the national crisis. Thus, the PCC wishes to support and amplify the statement, and re-iterate our previous position:
l A national dialogue with all the major church, civil society, labour, women, and youth organisations;
l Internationally mediated talks between the two major political forces in the country, with a neutral mediator.
In this process, the following will be critical to a positive outcome:
l A political and economic reform agenda: the restoration of constitutional rule;
l The restoration of national institutions, including the return of the soldiers to the barracks, reform of the public service, and the restoration of independence in the judiciary;
l Regional and international scaffolding in the form of an International Rescue Plan; namely, the establishment of a US$10 billion sovereign/rescue fund, to be held in London or New York, but with the objective of stabilising the economy, engendering international confidence and investment, and securing a national currency;
l A social development fund: to attend to the urgent needs in education and healthcare; revival of agriculture, industry, and employment creation; and the establishment of programmes designed to rescue the population from the scourge of poverty, as well as the re-institution of rural development; and
l The engagement of the Diaspora, as both investors (in such programmes as the privatisation of parastatals) and joint venture partners with external factors We offer these views as complementary to the position outlined by the ZHoCD.
We believe that the way forward is to engage soberly with the ZHoCD position, to discuss the development of a common civil society position, to develop a broad national response to the crisis, and to ensure that the voice of the Zimbabwean citizen is central to the solution.
We must be very clear that simple rejection of the only suggestion for a solution to the country’s crisis will lead to either an elite pact, or another stolen election, and the continuance of the suffering of the ordinary Zimbabwean.
The Institute of Chartered Secretaries and Administrators (Icsa) is worried about Zimbabwe’s economic challenges, saying these were acting as stumbling blocks to the corporate governance watchdog role of chartered secretaries and accountants in Zimbabwe.
This was said at the Institute of Chartered and Administrators in Zimbabwe (Icsaz) annual conference held in Victoria Falls recently where the professionals were meeting to map out strategies to influence economic recovery.
Icsa director-general Timothy Sheehy, speaking on the sidelines of the conference in Victoria Falls last week, said the economic environment in Zimbabwe was difficult, but emphasised Icsaz was mandated to be a leader in corporate governance.
This comes as the issues of corporate governance have been overlooked in Zimbabwe given the prevailing economic environment.
“What worries us the most is that the institute has a mission to be a leader in good corporate governance.
“Even if you do well and you are in an environment which is troubled, there is a disconnect. This profession and the people within it need to be sensitive to the environment they are working in. The economic environment in Zimbabwe is without question difficult. However, while Zimbabwe is slightly unique compared to the rest of the organisation, it has an inspiring membership which is much more populated by accountants,” he said.
Sheehy said although there is a thin line between bad corporate governance and corruption, there is also hope was that these professionals would work tirelessly to expose it.
He said while it is difficult to stop individuals from engaging in corrupt activities, he challenged the Icsaz membership to expose it and prevent it.
“The hope is that good corporate governance will always expose corruption and can prevent it. Well, individuals will always find ways to commit fraud and to be corrupt. Hopefully if you have an overwhelming response you can minimise the opportunities of corruption,” he said.
He said while the profession started decades ago, large institutional investors such as pension and sovereign wealth funds were driving the change with worldwide pressure on such funds to ensure sustained growth through good governance having grown over time. He added that social impact, climate change and diversity were issues being raised by today’s major international investors with environmental, social and governance issues, as well as risk management and cyber risk, being the current growth topics.
According to Sheehy, the company secretary’s role has always been the link between management, the board and shareholders.“Now this role was extended to management, the board, shareholders and stakeholders. The chartered secretary and chartered governance professional is even better placed to play a key role in facilitating better communication to shareholders and stakeholders,” said Sheehy.
The congress was run under the theme: Chartered Secretaries — Influencing Economic Successes. Unsustainable costs are forcing most companies to lay-off workers.
GOVERNMENT has engaged Embraer over delays in releasing crucial operating manuals for its Embraer ERJ145, six months after taking delivery of the aircraft from the manufacturer, the Zimbabwe Independent can report.
Transport minister Joel Biggie Matiza told the Independent this week that government has begun engaging Embraer over the grounded twin-engine ERJ145 jet, which was initially set to take off within the first six weeks of delivery.
Matiza said Air Zimbabwe (AirZim) had satisfied local registration requirements. The moribund airline, which has been flying only one aircraft since January, had pinned its recovery plan on the small aircraft purchased under the controversial Zimbabwe Airways.
The small bodied jet has been earmarked to service the local routes.“On the Embraer there are discussions going on with Embraer in terms of registration. The local registration is done, so we await Embraer to complete registration because we have to get access to the data.
There has been communication as to the urgency of the matter. But I can’t give you timelines as of now,” Matiza said.
To gain access to the manuals, AirZim is supposed to complete a rigorous “know your customer” (KYC). Under the KYC exercise, clients have to prove their ability to maintain the aircraft, as well as show the competence of its cabin crew, among other requirements.
The completion of the KYC guarantees access to the requisite manuals, which will allow the aircraft to become serviceable.
AirZim took control of the aircraft which was purchased in controversial circumstances by murky private airline ZimAirways from the United States in 2017.
In the absence of the operating manual, the plane cannot take off.
“The KYC is still in progress. Every other thing that we can do, we have done. But other processes cannot continue without those manuals,” an AirZim executive said.
The ERJ145 is expected to ease pressure on the Boeing 767, which AirZim is currently flying. The Boeing 767 survived a mid-air scare when it caught fire in May.
Matiza said two additional long-haul Boeing 777s will be delivered in December as government seeks to recapitalise AirZim, which was last year placed under reconstruction due to a gargantuan debt.
“Two Boeing 777s will be delivered sometime in December, although the other one could come sometime in November,” he said.
Only one of the three planes is currently flying, as the embattled airline battles to return to viability after decades of mismanagement and corruption. At Independence, AirZim had a fleet of 18 planes.
The insolvent AirZim has also failed to attract an investor, 11 months after government invited bids from potential suitors to take over the embattled entity.
The government has failed to regularise AirZim’s US$381 million debt assumption plan, weakening the airline’s chances of courting new partners.
The airline attracted 10 potential investors this year, but they have been spooked by the company’s legacy debts.
AirZim was last year placed under reconstruction after creditors threatened to sue the state-owned airline. Before the company was placed under reconstruction last year, creditors, including former employees, airlines, insurance companies and other service providers had been pushing for legal action against the airline.
Reconstruction cushions the troubled airline from litigation by creditors seeking to attach property. AirZim has is in the past indicated that its defunct aircraft will be auctioned to service part of the debt.
Principal officers and chairpersons of the country’s’ pension funds recently convened in Nyanga to discuss the emerging trends in the pensions industry and devise possible ways to keep pace with them.
Converging under the banner of the Zimbabwe Association of Pension Funds (ZAPF), the delegates identified key trends that needed immediate attention to secure the future of pension funds, which include making the right investment choices, relooking into pension fund structures as well was coming up with new and innovative products.
The outcome of the convention, held under the theme Emerging Trends in the Pension Industry, was expected to see these executives, who are tasked with the implementation of policies which are now often unpalatable, come up with solutions and adjust to the emerging trends in the pensions industry.
In his opening remarks, ZAPF chairperson Reginald Chihota said the role of trustees and chairpersons of pension funds has now become more prevalent in the midst of emerging trends in the pensions industry, where people are now asking about the viability and relevance of industry.
Chihota said what is confronting the industry is in one way or the other connected to what has been happening in the legislative space, where the country has witnessed statutory instruments that are coming “fast and furious”.
“Notwithstanding the daunting challenges, concerted efforts are being made at industry to ensure preservation of value and growth of assets. In the midst of all these emerging trends, principal officers and chairperson’s role assume an even more critical role and pivotal role,’ he said.
This comes at a time the industry is buffeted by erosion of pension investment values, unresolved loss of value issue and tumbling coverage in the wake of excessive expenses and high contribution arrears topping $600 million. This also comes when the sector is experiencing weak corporate governance and hamstrung by out-dated legislation.
Chihota added chairpersons still have to provide leadership and direction to the pension board in a Vuca (Volatility, Uncertainty, Complexity and Ambiguity) context together with principal officers and CEs for the funds who are responsible for the day to day management and running of their funds in the chaotic environment.
The unrelenting shocks rocking the industry and the economy have resulted in increased product termination of policies as contributions, premiums and benefits can no longer keep pace with the rate of inflation, which is growing at astronomical rates that would not allow investment returns to keep pace.
Making a presentation that the convention, First Mutual Wealth general manager Thomas Muswiti, who spoke about financial blunders, said portfolios ought to be created for purposes of meeting consumptive, risk management and retirement purposes.
He added that consistent portfolio management and re-balancing is a necessity, as pension members progress, through their income life cycle and ordinarily migrate on the risk matrix.
“Wealth accumulation activities should be maximised at reasonably early stages of members’ career paths while value preservation is maintained throughout. Expert and personally managed investments aligned towards retirement funds form total funds; along the way ignorance, risk aversion and opportunity misses culminate regrettable mistakes,” he said.
Muswiti said investment advice and planning are equally relevant across all stages, but the general trend has been a sudden drop of professional advice and services, the day someone walks into retirement.
The move, while being a default for most, Muswiti said it had negative effects, as fund existence persists into post retirement and management of it is still relevant.
In another twist to the convention deliberations, the recently gazetted Marriages Bill came under scrutiny, with a partner in Muvingi and Mugadza legal practitioners, Norbert Phiri, saying the pensions industry could not afford to ignore the bill, as it would take a toll on allocations of pension fund beneficiaries. The proposed new marriage law has courted controversy, with various interpretations of it and questions as to whether it would not undermine the family unit and traditional marriage institution.
However, in July, Cabinet withdrew a clause in the Marriages Amendment Bill that provided for “civil partnership”, saying such a union was alien and not consistent with the country’s cultural and Christian values.
Phiri, who was making a presentation titled Till Pensions Do Us Part: Marriage Bill and the Harmonisation of Marriage Bills, told the convention that the shortcomings of Marriage Act and Customary Act were still not addressed.
THE latest move by the Reserve Bank of Zimbabwe (RBZ) to manage the exchange rate yet again is another experiment doomed to fail as laws of supply and demand will prevail.
Economists say Zimbabwe has never had a free floating exchange rate in the absence of upward and downward movement on the formal market that is normally consistent with a free floating market.
In response to a massive sell-off of the Zimbabwean dollar that saw the local unit plunge against the US dollar from around 1:11 to as high as 1:23 within a three-week period, the RBZ on September 27 2019, through an exchange control directive RU131/2019, fundamentally ditched the semi-free-floating system to a managed floating exchange rate.
Among some of the key changes, all foreign exchange transactions by banks and bureaux de change would be referenced to the inter-bank mid-rate which is published daily by the RBZ, and there would be a restriction on bank and bureau de change margins to 3% and 5% respectively from the inter-bank mid-rate published by RBZ.
Bureaux de change are now only restricted to buying and selling forex to individuals. Initially, the bureaux were allowed to buy free-funds from individuals and non-governmental organisations and sell to individuals, small and medium enterprises, businesses and personal travellers, as well as for international subscriptions for professional bodies, tuition and entertainment.
Immediately after the directive was issued, the exchange rate dropped from above ZW$20:US$1 on the black market to around ZW$16,5:US$1. However, the black market exchange rate has since last week rebounded to above 19 despite the shackles placed on banks and bureaux.
In contrast, the inter-bank rate has been stuck around ZW$15,3:US$1 for the better part of a fortnight.In light of all this, the central bank will only push the economy deeper into the parallel market, analysts say.
Africa Economic Development Studies (AEDS) executive director Gift Mugano said the country has always had a managed exchange rate despite claims it was free-floating.
He said the critical question at the moment would be whether the central bank could sustain it in the absence of adequate forex reserves.
“We had no free float in the beginning. When you have a free floating exchange rate regime, the rate should have a visible hand that allows the rate to fluctuate up and down. Zimbabwe’s inter-bank rate has been stuck for months. We would rather say we have a fixed rate. I don’t think anything has changed,” Mugano said.
“The question is: can Zimbabwe sustain it? Do we have enough supply of forex? The central bank should be able to release forex into the market when demand goes up to match the demand. For many years, we have always had at least three weeks’ reserves but we need at least six months to a year’s reserves to be able to manage foreign exchange.”
He said the central bank has no capacity to manage the exchange rate, adding this latest attempt would fail spectacularly.
Mugano said this was the reason Zimbabwe had a runaway black market.
“If you look at Angola, Zambia and Mozambique, who did that, they had reserves. In our case, the RBZ went on to introduce a currency without the backing reserves,” he said.
Economist Clemence Machadu said the monetary authorities should put more emphasis on ensuring that the Zimbabwean dollar first meets all the characteristics and functions of good money.
Machadu says this also ensures it has adequate foreign currency reserves to effectively manage this sort of regime before trying to fight the symptoms of a problem.
“I understand that this migration was necessitated by the rapid weakening of the Zimdollar, which has hitherto shed circa 140% of its value, which already indicates that the local currency is not stable. But it is not stabilised by trying to manipulate its value through a managed float, but by understanding what really determines the value of our currency and address that,” he said.
“Granted, there is need somehow for the monetary authorities to intervene with a view to containing the harmful effects of some fluctuations and to extricate the economy from exigencies. But what we should remember is that the managed float will not be the perfect forex allocation mechanism for the republic. It creates shortages on the formal markets as rational suppliers of forex will see an incentive to sell on the parallel market, as opposed to lower and controlled rates in formal markets. It also increases demand for forex on formal markets and arbitrage activities by rent seekers.”
Machadu said the central bank should also have adequate foreign currency reserves to effectively manage this sort of regime. He, however, said this was not the case.
A state of the economy report produced by AEDS says before the introduction of the new currency, the market was moving towards re-dollarisation as companies were moving to protect their working and fixed capital in the face of rising inflation and market exchange rate on a freefall.
“In light of the prevailing high inflation and foreign currency shortages, fiscal prudence and aggressive mopping up of excess liquidity by the RBZ should be the priority policy issues to anchor the currency stability and achieve price stability. The RBZ would need to consider more costless interventions to drain the market liquidity swamp. And raising the reserve requirements for banks to around 8% will be able to achieve that,” economist Brains Muchemwa in the report said.
Zimbabwe’s case fits in the classic first-generation model of currency crisis, which states that whenever government persistently spends more than it collects in revenues through a combination of money printing and central bank overdrafts while trying to maintain fixed exchange rate, the result is high money-supply growth, emergence of a forex parallel market and eventual official depreciation of the local currency.