Tinashe Makichi Business Reporter
LOCAL cotton company, Sino-Zim has invested more than US$3 million towards funding 32 000 hectares of cotton around the country for the 2013-4 farming season.
In an interview with Herald Business, Sino-Zim development chief operating officer Mr Thomas Meke said his company has injected US$3 million to fund its cotton projects around the country.

“Cotton production has been low for the past decade and Sino-Zim has rolled out a considerable amount to empower the cotton farmers through contract farming.

“This year we are funding 32 000 hectares across the country and this goes in line with AMA’s directive which states that every company that wish to venture into cotton should surpass the US$1 million input supply scheme,” he said.

In the past cotton industry was dominated by Cargill Cotton and Cottco Zimbabwe and therefore Sino-Zim is coming as a new player in the industry having started its operations in 2010.

“Side marketing of cotton and the inputs has been a major challenge, but from the results of the ground we think this year we are going to bring back the cotton industry to its original status,” he said.

Mr Meke said much needs to be done towards resuscitation of cotton production in the country because it remains the biggest income generator for many rural families.

About 98 percent of cotton in Zimbabwe is grown under contract schemes which were introduced after farmers failed to access finance from the banks due to lack of collateral.

Negotiations on a global trade package considered crucial to the WTO’s future went into overtime on Friday, with hopes for a deal brightening as former holdout India backed a revised version.
New World Trade Organization chief Roberto Azevedo of Brazil is pushing world commerce ministers to agree on a set of measures at a conference on the Indonesian resort island of Bali.

The package is relatively modest compared to the WTO’s broad vision of tearing down trade barriers around the world. But it would nevertheless mark the first global deal struck by the body since its 1995 founding.

The meeting began Tuesday with stark warnings from ministers that the Geneva-based WTO’s credibility as the arbiter of global trade negotiations would be severely wounded if it could not deliver on even the limited Bali deal.

But the language of a revised text appeared to assuage concerns expressed by India. “Yes we are more than happy. It is a great day,” Indian Commerce and Industry Minister Anand Sharma said of the new wording.

“It’s a historic decision.”
The WTO was still working to obtain the endorsement of other members and a final decision was not expected until late in the evening. India which aims to stockpile and subsidise grain for its millions of poor had demanded that such measures be granted indefinite exemption from WTO challenge.

The United States and others had said India’s grain policy violated WTO rules on subsidies and expressed fear the grain could enter markets, skewing world prices. A revised text appeared to remove any hard time limit on such exemptions. A deal could have major repercussions for the WTO’s larger agenda of freeing up trade through the Doha Round of talks launched in Qatar in 2001.

Those talks aim to slash trade barriers and establish globally binding rules fair to both rich and poor countries.
But protectionist disputes among the WTO’s 159 members have foiled agreement. The Bali package involves a commitment to limit agricultural subsidies, simplify customs procedures to facilitate trade, and policies to aid least-developed countries. Azevedo hopes it may lead to a future kick-start of the Doha Round.

On Thursday, French Trade Minister Nicole Bricq said India may be held responsible if the conference fails.
Sharma has denied suggestions New Delhi was holding up an international deal for domestic political reasons. India’s ruling Congress party faces tough elections next year. Azevedo has said without an agreement the WTO risks being eclipsed by alternative regional pacts emerging between major trading nations.

These include the 12-country Trans-Pacific Partnership spearheaded by Washington. TPP negotiators were due to meet in Singapore at the weekend as they worked to hammer out a deal. – AFP.

Embattled Australian carrier Qantas’ credit rating was downgraded by Standard & Poor’s to “junk” status on Friday after the airline issued a shock profit warning and slashed jobs.
Qantas on Thursday flagged a half-year loss of up to Aus$300 million (US$271 million) and said it would axe 1 000 jobs as it struggles under the weight of record fuel costs and fierce competition from subsidised rivals.

In response, S&P cut the airline’s rating from BBB-, the lowest investment grade, to BB+ and placed it on a credit-watch with negative implications. Qantas shares closed 3,74 percent lower at Aus$1,03, having lost more than 10 percent on Thursday.

The rating puts Qantas in what is known as “junk” status among professional investors, increasing the cost of financing for the carrier and restricting access for investors that do not put their money in lower rated companies.

“The downgrades reflect our view that intense competition in the airline industry has weakened Qantas’ business risk profile to ‘‘fair’’ from ‘‘satisfactory’’, and financial risk profile to ‘‘significant’’ from ‘‘intermediate’’,” S&P said in a statement.

“We don’t expect Qantas to recover to a credit profile commensurate with a ‘BBB-’ rating in the near term.”
The move comes after another ratings agency, Moody’s, on Thursday put the airline’s investment-grade Baa rating on review for a potential downgrade, saying the forecast conditions were “outside the rating expectation”.
Qantas chief executive Alan Joyce on Thursday said the challenges facing the airline were “immense”.

“Since the global financial crisis, Qantas has confronted a fiercely difficult operating environment including the strong Australian dollar and record jet fuel costs, which have exacerbated Qantas’ high cost base,” he said.

“The Australian international market is the toughest anywhere in the world.”
As well as axing 1 000 jobs, Joyce said he would take a 38 percent pay cut while the airline would conduct a review of spending with top suppliers and put in place a salary and bonus freeze.

Qantas chief financial officer Gareth Evans said the downgrade was not unexpected.
“It highlights the unprecedented pressures that the Qantas Group is facing from several external forces but particularly from an uneven playing field in the Australian aviation market,” he said.

The airline claims domestic rival Virgin Australia, which is majority owned by state-backed Singapore Airlines, Air New Zealand and Etihad, is waging a campaign to weaken it in the lucrative domestic market with cheap seats underwritten by foreign cash injections.
Joyce has been lobbying the government for the easing of restrictions that limit foreign ownership in the national carrier to 49 percent, or state intervention to shore up Qantas.

But Prime Minister Tony Abbott said government help was unlikely.
“If we subsidise Qantas, why not subsidise everyone?” he told commercial radio.
“If we subsidise everyone, that’s just a bottomless pit into which we will descend and if we offer a guarantee to Qantas then why not offer a guarantee to everyone?”

Despite the downgrade, Evans said Qantas retained a strong financial position, including a large cash balance and a significant asset base.
“The cost cutting and structural review we announced yesterday is aimed at leveraging these strengths to ensure the Qantas Group continues to deliver for its shareholders and customers,” he said.

“It remains business as usual across the Qantas Group.”
An update on the structural review is expected in February, prompting speculation a sell-off of its Jetstar assets in Asia could be on the cards. — AFP.

Hwange Colliery is expected to double its current production after signing a deal with Portuguese firm Mota-Engil

Martin Kadzere Senior Business Reporter
COAL miner Hwange Colliery Company last Friday signed a US$260 million mining contract with Portuguese firm, Mota-Engil which is expected to double production from current levels.
The contract, expected to commence in April next year will run for the next five years with production expected to reach 200 000 tonnes per month by December next year, Mota-Engil managing director Mr Blake Mhatiwa said last Friday in an interview.
“It is a fairly big project and our plan is to ramp up production from the day we commence operations to 200 000 tonnes per month in eight months,” said Mr Mhatiwa.

“Thereafter our next target would be the second phase, but it depends on how we perform.”
Hwange is currently producing 140 000 tonnes per month, but if properly capitalised, it can raise capacity to 400 000 tonnes, acting managing director Mr Jemmester Chininga said.

“The company is facing challenges in terms of capitalisation due to liquidity constraints and as such, we have decided to acquire capacity without raising capital,” said Mr Chininga. “We will use it as a base to build our own capacity.”

According to the agreement, Hwange Colliery would pay Mota-Engil on a set price per tonne for coal mined. Some of the workers will also be absorbed by the contractor.

Under most contract mining agreements, the contract miner is generally responsible for providing all equipment, financing its operation, internal mine capital needs, employee salaries and benefits and all other requirements associated with an independent business

Hwange recently commissioned equipment bought from Sany Heavy Equipment Corporation of China, but there was need for additional capacity to achieve optimum output levels, Mr Chininga said. Hwange requires US$175 million for full recapitalisation.

Mr Chindori said the board would soon meet to consider recommendations by Infrastructure Development Bank of Zimbabwe on a US$50 million bailout offer by Mr Nicholas van Hoogstraten, the single largest shareholder in the country’s biggest coal miner.

Hwange is operating below capacity, largely due to production inefficiencies associated with the use of old machinery, shortage of working capital and skilled labour force.

The company is also failing to meet domestic demand due to low production levels.
Mota-Engil operates in 20 countries in Europe, Africa and Latin America. Apart from mining, it is also involved in areas such as engineering and construction, hydro power stations, dams, roads, ports, railway as well as underground tunnels.

In Africa, it has operations in Malawi, Mozambique, Angola, Zambia, South Africa, Cape Verde and Ghana.
It is currently looking for opportunities in Tanzania and Namibia.

Zimbabwe commemorates National Tree Planting on the first Saturday of December each year. Trees have enormous effect in neutralising atmospheric concentrations of carbon dioxide and thus minimising the risk of dangerous climate change

Jeffrey Gogo Climate Story
Beyond the National Tree Planting Day, celebrated every first Saturday of December since 1980, the gesture of burying the roots of a plant under the earth remains crucial, but even more importantly it is to ensure that tree lives to maturity.
This is where it matters most, nurturing the plant to full growth. After that, trees will be very capable to look after themselves.
Unfortunately, while Zimbabwe has been, on the average, planting 10 million trees annually through the Forestry Commission, the country is devoid of follow-up mechanisms that attend to continuity and long-term sustainability.

It’s a painstaking job, really, however necessary.
The only existing paper evidence that those trees were ever planted in the first place are sales records from the Commission.
These figures exclude tree planting projects being undertaken in the private sector, such as the one by the Friends of the Environment, which has been planting millions of trees since 2010 and aiming to grow that figure to 500 million by 2026.

Therefore, more than anything else, both the number of trees planted in any one aggregate year and those that survive and grow to maturity, under public programmes, remain a guessing game.

After many years of running campaigns to encourage tree planting, we cannot exactly measure, as a country, the rate of success or failure of such projects with any degree of assured accuracy.

We are aware of the costly impacts of inaction, which is why President Mugabe started the initiative at independence.
However, with all that religious action, Zimbabwe continues to lose more forests than gain new ones.

The area of land covered by forests as a percentage of Zimbabwe’s total land mass declined to 40 percent by end of last year from 66 percent in 2000, according to the Environment, Water and Climate Ministry.

The reasons for this accelerated and unsustainable loss of forest cover are many. They range from pressures for need of more agricultural and developmental land to fuelwood and to damage caused by uncontrolled veld fires among many.

Population growth, which added three million people to the national register in the last 15 years, has also had multiple long-lasting impacts on the country’s forestry sector, as demand for everything escalates.

Critically, at the current rate of forest loss, estimated at 330 000 hectares per year (an area equalling the entire district of Zaka), the reafforestation programme here is planting only a fraction of trees lost, a mere 20 percent precisely.

By any measure, this kind of action represents an insignificant proportion of what is actually needed and could never make up for the trees lost, not by a long shot.

The Forestry Commission says at the current rate of tree loss, there will be no forests to speak of in Zimbabwe within the next 50 years, with thundering socio-economic and environmental repercussions.

As Zimbabwe commemorates yet another day of planting trees in another year, which happened on Saturday (December 7), this is a time for some sober reflections.

It is now beyond debate the scale of action needs to be drastically escalated but have you, as an individual, considered the role that you can play in preserving and conserving forests, which ooze out precious oxygen for your survival?

For corporates this should not be another public relations exercise. Forests are too important to be reduced to some mere publicity tool.

The country has already built some critical mass around the importance of trees within the private sector, which has now begun to implement own projects. But momentum in communities remains disappointingly weak with a lot of destruction emanating from this quarterly, partly due to lack of awareness.

Environment, Water and Climate Minister Saviour Kasukuwere told a stakeholders meeting in Harare last Thursday that the aim was to plant 50 million trees in five years, all things being equal, and continue to engage and encourage communities to actively participate in the projects.

“But we are against the continuous movement of people to new land for agriculture,” he said.
“As people move in to new habitats, they also destroy forests but what we are encouraging people is that if they move they must commit themselves to the planting and reafforestation programmes.”

Minister Kasukuwere needs to significantly raise the stakes on trees. The future we face is uncertain and a five to ten year target of 50 million trees can barely begin to address the disaster within the forestry sector.

Factoring in the number of trees planted since 1980 under public projects that will amount to just 100 million trees in 40 years.
Yet, forests remain indispensable to human livelihoods.

Trees have enormous effect in neutralising atmospheric concentrations of carbon dioxide (CO2) and thus minimising the risk of dangerous climate change.

Trees have played this carbon sink role for millennia although that has significantly diminished over time, as a result of unrestrained global forest loss facing too much man-made carbon emissions.

Along with numerous other factors, this has resulted in climate change and global warming, which have made life extremely difficult especially for the poor. Trees can help reverse that and keep global temperatures from rising beyond the dreaded 2 degrees Celsius limit.
Trees grown to maturity are able to soak up an average 440 tonnes of atmospheric carbon dioxide per hectare. That may mean of the 330 000ha of forest lost per year in Zimbabwe, some 145,2 million tonnes of CO2 are being allowed to roam unchecked in our skies.
In the reverse, that much could be prevented from aiding the climate change horror if trees covering an area the size of Zaka were planted and cared for each year.

Worldwide, tropical forests remove 4,8 billion tonnes of carbon dioxide from the atmosphere per year.
So, from a climate change perspective, trees are crucial. To be effective, however, trees must be planted on a colossal scale, nursed to maturity and aided by change in attitudes, which supports sustainable forest management practices. Trees perform other important tasks.

Zimbabwe’s forests generate a wide range of both timber and non-timber products, sustaining over 7 000 jobs.
They also provide food, raw materials and habitats for wildlife. Nearly 21 million hectares of the forests land are indigenous trees and 156 000 hectares under plantations.

Last year, the Standards Association of Zimbabwe announced plans for unveiling a standard for the forestry industry.
The standard was expected to help promote sustainable forest management practices as well as support and strengthen the framework of policy and regulation that delivers improved economic, social, environmental and cultural outcomes from well managed forests.

God is faithful.

Email: jeffgogo@gmail.com

Mr Rwodzi

Business Editor
trust Bank became the fourth bank to be closed since dollarisation while Capital Bank is winding down operations after failing to attain viability. At the same time, there are indications that Allied Bank might follow the same route and that the situation at Tetrad Investment Bank has just started to boil over.
All these events have raised the issue of whether the Government should be doing more to regulate the operations of the banks and prevent such losses particularly on depositors. The lack of even a single arrest or prosecution of these bankers who selfishly abuse depositors’ hard-earned funds is fomenting financial impropriety after which founding directors continue to live lavish lifestyles, driving sleek top of the range vehicles and being show-offs in social places.

The poor and unsuspecting depositor in the meantime is wallowing in anguish and poverty and faces the possibility of an even bleaker Christmas, simply because the banking regulations are too weak to deal with the failed bankers. Continued failure of indigenous banks will certainly further dent public confidence in the operations of banks, which is believed to be the reason why an estimated US$4 billion is thought to be circulating outside the banking sector. President Mugabe at the launch of the Finscope SME survey in June this year slammed some indigenous bankers for abusing depositors’ funds through a get-rich-quick mentality.

The point is, people will always remember especially when it comes to where they keep their money. Banking is all about trust. That’s why one of the current shining lights, never mind the low level publicity in the locally owned banks, is NMB Bank. The bank is profitable and strong not only because it restructured quickly and set about raising capital early on post dollarisation. Never mind that the logos and colours look archaic and tired. The bank is performing solidly because it has managed to retain the trust of its clients.

The failed banks have huge loan exposures to related parties while at the same time most of them have a high concentration risks in its deposits.  The biggest problem is that the directors wrongly adopted the model of diversified investment or risk spreading as was the case at Interfin. An approach which has failed to work in this dollarised environment. What happens when the flood of credit-fuelled investment schemes that lifted all investment boats in recent years begins to subside? The answer is, everything that went up together starts to go down together, and diversified portfolios will sink with it.

Royal Bank surrendered its licence last year in June after the Reserve Bank discovered the directors of the institution were involved in serious abuse of depositors’ funds. At that time, the bank was burdened by non-performing insider loans.  Royal, like Trust Bank, had been reissued with a licence after suffering the same fate in 2004.

When Royal shareholders surrendered their licence, the bank had a thin capital base of US$1,9 million against the requisite US$12,5 million for commercial banks and cumulative losses of US$6 million to June 2012. About 99,2 percent of the bank’s portfolio was not performing while some shareholders refused to sign off its accounts.

The Royal Bank closure fell hard on the heels of Interfin Bank’s placement under curatorship and Genesis Investment Bank voluntary surrender of its banking license after failing to meet minimum capital thresholds. Royal Bank was founded in 2001 but three years later, the Reserve Bank closed it together with Barbican Bank and Trust.

Renaissance Merchant Bank, now, Capital Bank was placed under curatorship in June 2011 after it emerged top shareholders of its holding company borrowed millions of dollars of depositors’ funds in breach of banking regulations, driving the bank into negative equity.

Central to the outflow of cash to top shareholders was Mr Patterson Timba, who was the largest shareholder and effective controlling shareholder in Renaissance Financial Holdings, which owned 100 percent of Renaissance Merchant Bank.  Investigations by the Reserve Bank of Zimbabwe found the two borrowed millions of dollars through loan schemes that had not been sanctioned by the systems the bank was supposed to use.

The unsanctioned loans taken by the directors left the bank with a capital deficit of US$16,6 million and in need of a capital injection of US$31 million to restore the capital base to the required levels at that time. The central bank probe also established that besides taking the lion’s share of the bank’s loans, Mr Timba also compromised the bank’s liquidity through obtaining loans or funds from other financial institutions on the back of money market deposits placed by Renaissance.

Herein lies the challenge facing the new governor; more action is needed to reduce risks posed by the country’s banks to the broader economy. The sooner the Banking Act is amended to give more protection to depositors and to punish rogue bankers, the better it will be for the banking sector bearing in mind stability in the banking sector is an indispensable necessary condition for macroeconomic stability, rapid economic growth and broad-based social development.

Mrs Shonhiwa

Government disbursed about US$42 million to distressed companies through facilities targeted at struggling firms in the first nine months of the year, an official said on Friday.
The amount is, however, a drop in the ocean compared to the US$2 billion required for capacitating the local industry, which is teetering on the brink of collapse.

Having survived a decade of economic meltdown, most local companies are failing to secure long funding for retooling and working capital due to the liquidity crunch.

Some of the factors that have constrained the industry include low aggregate demand due to low disposable incomes across households has resulted in the manufacturing sectors operating below capacity.

Individual consumption is skewed towards basic commodities thereby negatively affecting the rest of the industry outside the value chain of basic commodities.

Lack of demand has also been worsened by the fact that Government has little to spend. In a country with a Government with less expenditure, the economy goes into stagnation in the absence of stimulus package.

Lack of long-term loans caused by transitory nature deposits has also made it difficult for industry to obtain long- term credit for retooling and working capital.

With Zimbabwe’s debt at close to US$11 billion, this on its own raises the country’s risk profile and makes it difficult for companies to source offshore finance.

Zimbabwe has also suffered from stiff competition from foreign trade leading to a situation where the country is literally running trade deficits with most of its trading partners.

As such, the Government established two facilities — the Zimbabwe Economic and Trade Revival Facility and the Distressed and Marginalised Areas Fund — to support struggling firms.

In total, the facilities were supposed to avail US$110 million in company revival funding this year.
But Industry and Commerce Permanent Secretary Mrs Abigail Sho-nhiwa said only US$41,7 million out of approved applications valued at US$71,8 million, had been disbursed.

“The pace of disbursements has, however, been slow in relation to industry’s requirements and has been limited to a few companies,” she said.

Under Zetref, a US$70 million joint venture facility between the Government and the Africa Export and Import Bank, only US$17 million was disbursed between January and September out of the applications worth US$39 million which were approved.

Under Dimaf, a US$40 million facility between the Government and Old Mutual, a total US$24,7 million was disbursed against applications worth US$32,8 million approved.

The two facilities are available to companies across all sectors of the economy through selected financial institutions.
Mrs Shonhiwa said the Government, also battling a cash crunch, had failed to meet its part of the bargain under Dimaf where it is supposed to provide half of the funding for the facility.

Some companies have criticised the facilities for unfavourable lending conditions which have resulted in some failing to access bail out support.

The on-going cash crunch has severely impacted on ability of industries to produce at competitive prices and quality, given that the economy has largely become a net importer of foreign manufactured goods.

Industry capacity utilisation continues to decline, with last estimates by the Confederation of Zimbabwe Industries showing that productivity had slumped to 39,6 percent this year from 44 percent in 2012.

With a Government that is unable to print money to improve the liquidity situation due to the current use of multi-currencies, the situation remains precarious as alternative funding sources have largely remained dry. — Business Reporter-New Ziana.

Businessmen pass before a share prices board in Tokyo recently. Japan’s share prices dropped 341,72 points to close at 15 407,94 points at the Tokyo Stock Exchange, dragged down by a stronger yen and profit-taking after the Nikkei hit a near six-year high. — AFP

London. — European stock markets rose last Friday, before key US payrolls numbers that could shed fresh light on how soon the Federal Reserve might begin withdrawing its stimulus.
London’s benchmark FTSE 100 index added 0,36 percent to 6 521,78 points in midday trading, Frankfurt’s DAX 30 index climbed 0,44 percent to 9 125,44 points and in Paris the CAC 40 gained 0,14 percent to 4 105,73 compared with Thursday’s closing values.
Later on Friday, at 1330 GMT, investors digested the non-farm payrolls report, which will provide vital clues on the health of the world’s biggest economy.

“Equity markets remain relatively subdued in the run-up to today’s US employment number,” said Rebecca O’Keeffe, head of investment at online stockbroker Interactive Investor.

“Despite the probability that the Fed will wait until February or March next year to start tapering, the strength of the US economy has increased the possibility of this happening in December.”

In foreign exchange activity last Friday, the euro climbed to US$1,3670 from US$1,3595 late in New York last Thursday.
Gold prices meanwhile rose to US$1 229,05 an ounce on the London Bullion Market, up from US$1 222,50.

“US labour market data is closely watched by market participants as it is the main factor the Fed is looking at at the moment because of its importance in the context of a potential decision regarding winding down” its bond-buying stimulus programme, said Verengold Bank analyst Anita Paluch.

“Euro/dollar will be driven by the sentiment of NFP numbers,” she added.
Asian equity markets mostly fell last Friday as better-than-forecast US growth data added to expectations the Fed will start to wind down its stimulus programme as early as this month.

Sydney lost 0,23 percent, Shanghai finished 0,44 percent down and Seoul slid 0,22 percent, while Tokyo gained 0,81 percent in value.
The downbeat session followed overnight losses on Wall Street, where dealers were spooked as weaker-than-expected data on private jobs creation underscored weakness in the US economy.

The Commerce Department reported the US economy grew at speedy 3,6 percent in the third quarter, far above the 3,0 percent many analysts had expected.

In reaction, the Dow Jones Industrial Average lost 0,43 percent to 15 821,51 points and the broad-based S&P 500 fell 0,43 percent. Both indices have declined for the last five trading days.

In company news last Friday, Anglo-Dutch oil giant Shell announced that it has abandoned plans to build a US facility to convert natural gas into diesel and other fuels, citing high costs.

The news sent Shell’s “B” share price jumping 2,81 percent to 2,155 pence in London. — AFP.

From Victoria Ruzvidzo in Cape Town,  South Africa
Zimbabwe’s largest financial services group, Old Mutual, has disbursed at least US$100 million to businesses through its lending arm the Central Africa Building Society since dollarisation.
This emerged yesterday as the group chief executive Mr Jonas Mushosho expressed confidence in the economy and pledged more funds to companies to aid recovery. The funds have been allocated to firms across the entire economic spectrum at an average interest rate of 10 percent per annum.

“In Zimbabwe some see a lot of risk, but we see opportunities,” said Mr Mushosho in an interview on the sidelines of the  of the Old Mutual Emerging Markets, Nedbank and property and Casualty.

The insurance, investment, banking and property giant expressed confidence  and total support for the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset), stressing it was the right framework with potential to transform the economy while empowering the Zimbabwean people.

The funds disbursed by Cabs are in addition to the Distressed and Marginalised Companies Fund under which US$23 million has been disbursed to businesses, mostly in Bulawayo — previously Zimbabwe’s industrial hub,  and the US$10 million for youth projects that has supported at least 5 000 projects. Mr Mushosho  said his company would soon inject more funds to recapitalise businesses. Presently, it is in consultation with Government for the establishment of an infrastructure fund and a finance facility specifically for agriculture.
“We think it is important for us to support the economic recovery of Zimbabwe. We are supporting it by setting p a number of funds targeted at areas that will drive the economy.”

“We are a Zimbabwean business and we will do our part to help economic recovery,” he said.

Business Reporter
air Zimbabwe intends to raise US$50 million through the issue of a local aero bond in order to fund its working capital and to pay of its crippling debt.
Initially, Air Zimbabwe was scheduled to resume the Harare-London route in September this year but could not due to financial constraints.

According to well- placed sources, Air Zimbabwe has since applied for prescribed asset status from the Finance Ministry to give the bond a more attractive investment status for insurance companies, pension funds and other relevant institutions. This would also enhance the tradability of the bonds.

The national airline is currently sitting on debt of over US$100 million that is owed to various creditors and it has depended on Government bailouts now and again in recent years.

“They are now targeting to sell the bond early next year hoping the bond will be granted a prescribed asset status,” said one source familiar with the developments.

Efforts to get a comment from Air Zimbabwe chairman Mr Ozias Bvute were unsuccessful.
According to reports, Air Zimbabwe is also said to have approached controversial British tycoon Mr Nicholas van Hoogstraten for cash to help revive its operations. It was alleged that the airline was in discussion with Mr van Hoogstraten, a claim which Mr Bvute denied.
Air Zimbabwe resumed domestic flights in November last year after securing a US$8,5 million bailout from Government. Since then it has been on a major drive to reclaim lost market share through the introduction of service on most of its former routes.

This was after the national airline’s domestic market share had fallen to less than 5 percent in 2012, from over 10 percent in 2010 due to the grounding of its planes. The airline has been operating flights between Harare and Bulawayo and Harare and Victoria Falls using an 50-seater Embraer and Boeing 737.

It also reintroduced flights between Harare and Johannesburg in May this year after leasing an A320 Airbus and managing to retire part of its debt mostly to South African creditors.

The leasing of the new aircraft has enabled Air Zimbabwe to save on costs and improve on viability as the new aircraft are not only fuel efficient and have a smaller carrying capacity which are more suited for the passenger numbers on its routes.

The A320 is a fly-by-wire modern aircraft with a configuration of 12 business class and 138 economy class seats, which has already proved popular with passengers.

It has also had to seek Government protection to fend off claims from employees both present and former. Air Zimbabwe is one of the parastatals earmarked by Government for privatisation to restore viability but efforts to rope in an investor has not succeeded due to the myriad of problems besetting it.

Beijing. — HSBC Holdings Plc, Europe’s largest bank, agreed to sell its 8 percent stake in Bank of Shanghai Co to Banco Santander SA as it exits minority investments to boost profitability. HSBC didn’t disclose a price for the shareholding valued at about US$468 million on its balance sheet, according to a statement from the London-based bank yesterday.

The lender paid about US$63 million in 2001 for the stake. HSBC chief executive Mr Stuart Gulliver has closed or sold at least 54 businesses since taking the top job in 2011 as he cuts costs and focuses on places where the firm is most profitable.

In China, HSBC also owns 19 percent of Bank of Communications Co, which had a 2012 profit that was almost eight times Bank of Shanghai’s earnings.

“The stake in Bank of Shanghai doesn’t seem to bring much synergy to HSBC’s China business,” Rainy Yuan, a Shanghai-based analyst at Masterlink Securities Corp, said yesterday.

“It’s understandable for HSBC to reallocate the resources to other Chinese lenders with more potential.”
HSBC is the biggest foreign bank in China by assets and branch network.

The lender, which operates 150 outlets on the mainland, boosted its China profit by about 12 percent last year to 3,8 billion yuan (US$626 million), according to its website. The UK lender will continue expanding its business there through Shanghai-based Bank of Communications, the nation’s fifth-largest bank, Peter Wong, HSBC’s Asia Pacific chief executive, said in the statement.

“With such a large and important market as China, our ability to focus on core businesses becomes much more vital,” Wong said.
The bank has 55 million customers and 6 600 offices worldwide, according to its website. Bank of Shanghai, which has 294 outlets, had a profit of 7,5 billion yuan in 2012, according to its earnings statement.

That compared with the 58,4 billion yuan earned by Bank of Communications, which is known as BoCom.
“We don’t think that HSBC’s disposals in Bank of Shanghai would have any implication on HSBC’s investment in BoCom,” Grace Wu, a Hong Kong-based analyst at Daiwa Capital Markets Hong Kong Ltd, said yesterday.

“HSBC has a much closer tie-up with BoCom because they have a credit-card joint venture and other strategic cooperation.”
Santander’s stake purchase comes before a possible initial public offering by Bank of Shanghai. The lender is among about 180 firms that have applied to the China Securities Regulatory Commission for a listing on the Shanghai Stock Exchange, according to a November 21 postings on the CSRC’s website.

The bank had planned to seek about US$2 billion from a Hong Kong IPO, two people with knowledge of the matter said in April.Bank of Shanghai’s shareholders approved a plan to extend the expiration date of its domestic and Hong Kong listing plans to May 28, 2014, the lender said the same month.

Under the terms of the accord, Santander and Bank of Shanghai will jointly develop a wholesale banking business, the Santander, Spain-based bank said in a separate statement.

The acquisition and the costs of providing “strategic and technical co-operation” to Bank of Shanghai will total about US$647 million, Santander said.

The purchase increases Santander’s business in China after it received regulatory clearance in May to buy 20 percent of Bank of Beijing Co’s consumer finance unit.

Santander also signed an agreement two years ago with Chinese carmaker Anhui Jianghuai Automobile Co to create an auto-financing joint venture.

Yesterday’s acquisition will reduce Santander’s capital by one basis point, the bank said.
Global banks from HSBC to Bank of America Corp and Gold Sachs Group have raised at least US$14 billion from divesting shares in Chinese financial institutions since the start of 2012. The UK lender raised US$9,4 billion from selling shares of Ping An Insurance Co  this year.
New rules set by the Basel Committee on Banking Supervision made minority holdings less appealing as they require capital deductions for such investments in other financial institutions. — Bloomberg.

Nyararai Musengi Business Correspondent
Mines and Mining Development Minister Walter Chidhakwa has been in the news since his appointment with many of his public comments seemingly suggesting that the country remains frustrated with the attitude of global mining giants.  Only recently he told a 2013 Africa for Results Forum that mining companies were always complaining and asking for tax breaks yet they did little to improve infrastructure locally. The minister fits very well with what the international media likes to call the push for resource nationalism.

Resource nationalism is the tendency of people and governments to assert control over natural resources located on their territory.
Zimbabwe is indeed endowed with an array of natural resources, a good climate, relatively good infrastructure and these are well complemented by a hardworking and well-educated people. In fact, the country ranks very high when one looks at the deposits of some of the mineral wealth that it has.

For instance, Zimbabwe and South Africa are said to hold more than 80 percent of all known platinum group metals in the world and that underlines just how rich the country is. The country is a major producer of gold and still has a lot of gold deposits which are unexplored.
Diamonds are the latest resource to be discovered in the country, which again underlines why this country remains a stand-out case in terms of resource endowment. Zimbabwe is also a major producer of chrome, granite rock and nickel, to mention just a few.

However, it is fair to say the country has not been getting due rewards or benefits for possessing such an amazing amount of mineral resources. There are no easy answers as to why this is the case but clearly ignorance as well as deceitful conduct by large mining corporations has played a part. To illustrate, gold and platinum prices have been at record highs since the mid 2000s as the demand for metals, particularly from China remains very high. However, there is a sense that the record prices have not exactly trickled down to the general economy when mining corporations have raked in huge profits despite operational challenges that they face.

For example, Zimplats announced that its profits after tax dropped from US$200 million to US$122 million last year after its sales dropped from US$527 million to US$473 million during the same period. However, by Zimbabwe standards, Zimplats remains a highly profitable venture and it even achieved such results in spite of the power shortages, the poor state of the rail and other key infrastructure.

In fact, Zimplats would have realised more revenues had it processed the platinum locally but the miner, just like its counterparts, has been reluctant to do that citing infrastructure deficit in the country. This therefore means Zimbabwe will continue to lose potential revenues and jobs because it currently cannot provide the infrastructure that the miners are demanding as a pre-condition for setting up processing plants.

Such a scenario has spurred the debate on what the international media likes to call resource nationalism. Since the Government cannot provide the necessary environment for mining corporations to set up processing plants, the Government has sought to raise extra revenues from miners like Zimplats by introducing new royalties. Of course, mining corporations have cried foul charging that this was akin to nationalisation and that this would hurt the country’s mining in the long run. However, mining corporations conveniently forget that they are earning huge profits in the same environment that has the said infrastructure deficit.

In fact, the move by Government to raise royalties was not without precedent and it cannot come any better than Australia. Australia is a developed economy that is also endowed with a rich base of natural resources.

It is home to Implats, the parent company of Zimplats, and two years ago the Government in Australia caused a storm when it announced it was raising taxes paid by mining companies because it had come to a realisation that Australians deserved more.

Former Australian prime minister Julia Gillard told miners in May 2012: “You don’t own the minerals, I don’t own the minerals, governments only sell you the right to mine the resource. A resource we hold in trust for a sovereign people. They own it and they deserve their share.”

While miners were shocked, her sentiments seemed to make sense with the general people. Since then, a Mineral Resources Rent Tax (MRRT) has been introduced in Australia despite threats of disinvestment by miners.

In fact, Australia was not the only developed country that was trying to cash in on the boom in commodity prices. In the United Kingdom the government hiked taxation of North Sea oil and gas production in the same year as it realised it needed to get more for its citizens from its natural resources.

Russia has remained steadfast in its conviction that the country needs to realise more from its oil and gas resources. Brazil, the leading member of the so-called BRICS countries, has over the past few years pursued policies that have been deemed resource nationalism.

In Brazil’s présal fields, an area rich in oil, Petrobras – an energy giant from Brazil – must be the operator with a minimum 30 percent stake. This means any international corporation seeking to drill oil in that field has to cede 30 percent stake to Petrobras. In 2010, when Brazil issued US$67 billion worth of stock in Petrobras – the biggest share offering in history -  it structured the deal to increase its share in the company from 40 percent to 48 percent. African countries have not been spared either in this resource nationalism movement. The boom in commodity prices may have prompted these governments to ask what they were getting out of the mining of non-renewable resources in their countries.

Ghana, Africa’s second-biggest gold producer, last year announced a review and possible renegotiation of all mining contracts to ensure that mining profits are maximised for the good of the country.

It planned to raise taxes on mining companies, from 25 percent to 35 percent, and a windfall tax of 10 percent on “super profits” in addition to existing royalties on output of five percent. Zambia, which is Africa’s biggest copper producer, doubled its royalties on the metal, to 6 percent. Guinea, home to the world’s largest bauxite reserves as well as one of the world’s biggest iron-ore deposits, is helping itself to a 15 percent stake in all mining projects and an option to buy a further 20 percent. Namibia has decided to transfer all new mining and exploration to a state-owned company.

Meanwhile, Australia has done even better by showcasing its new tax regime on mining to African countries and even offering advice on how other countries can follow suit. This has led to charges that Australia was now exporting its brand of resource nationalism to African countries, thereby, by diminishing the states that will accept the mining companies blatant domination of mining policies.

Unfortunately,  these developments rarely get mentioned in the local media and national discourse. As a result, when Government raised royalties for some minerals there was an outcry that this was going to destabilise economic recovery or even result in disinvestment.

Beneficiation is another important objective that is embedded within this resource nationalism that has not been adequately addressed in the current empowerment discourse. Beneficiation will benefit the country long after the current commodity price boom is gone and again the general person in the streets will need to appreciate this.

Last, but not least, is the issue of knowledge of exactly what minerals we have and in what quantities. Foreign mining corporations have a very significant advantage over local Zimbabweans when it comes to having the knowledge about the country’s minerals resources.
Local exploration has traditionally been carried out by foreign mining companies meaning they will have total control of information they gather and we only know what they tell us.

This uneven relationship does not advance the interests of the host country since we may not be told everything even if we demanded to know.

For instance, De Beers carried out exploration work for diamonds in the Marange area and after some 15 years of exploration the company pulled out citing the non-viability of mining in that area. Surprisingly, there are now four or more companies operating in that area and according to the Zimbabwe Mining Development Corporation in 2012 nearly US$700 million was realised from diamonds mined there.
This raises questions about the transparency of major mining companies that operate here, while further highlighting the need for us to bridge this knowledge gap.

The Government has since said it plans to start its own exploration company though this will likely face funding challenges as the Government is currently incapacitated to do that.

Clearly those advocating for the so-called resource nationalism have a valid case and there is need for further debate on just how Government can approach this.

JOHANNESBURG. — The largest union at Lonmin Plc’s South African mines got permission to strike after a mediator failed to resolve a deadlock over wages between the labour group and the world’s third-biggest producer of the metal. The Commission for Conciliation, Mediation and Arbitration yesterday issued a certificate of non-resolution over the dispute after the Association of Mineworkers and Construction Union rejected Lonmin’s wage-increase proposals for the year through September, AMCU National Treasurer Jimmy Gama said.

The certificate allows workers to strike without the risk of dismissal from their jobs.
“Whether a strike will happen depends on what our members say,” Gama said.

The CCMA permit allows the AMCU’s members to stop work within 48 hours of giving the company notice. A decision on a strike would only be made next year, Gama said.

The AMCU usurped the National Union of Mineworkers in the past year as the biggest representative of employees at the world’s three largest platinum producers. The union is demanding that basic monthly wages for the lowest paid underground workers be more than doubled to 12 500 rand. South Africa’s annual inflation rate was 5,5 percent in October.

Sue Vey, a spokeswoman for Lonmin, declined to comment.
The AMCU has already received permission to strike at Anglo American Platinum, the largest producer, and Impala.
The union’s members on October 28 voted to strike at Impala, without setting a date.

Impala and AMCU will again meet for talks on December 12 after the union lowered its demand for a basic monthly wage to 8 668 rand on November 12.

The producer that day revised its offer for the lowest-paid below-surface workers to an increase of 8,5 percent for the first year of a three-year deal.

Impala employees currently earn 5 500 rand per month, excluding benefits. The AMCU will ask members to decide on a possible strike at Anglo Platinum once they return in January from a two-week break, Gama said. Amplats has offered increases of 7 percent.

A strike led by the NUM at Northam Platinum Limited, owner of the world’s deepest platinum mine, remains unresolved, the union’s chief negotiator, Ecliff Tantsi, said yesterday. The strike started November 3.

Lonmin was disrupted by a six-week, unauthorised strike last year, during which at least 44 miners died, including 34 killed by police in a single day near the company’s Marikana mine in August 2012. — Bloomberg.

NAIROBI. — Coca-Cola Kenya, the major beverage firm, is embroiled in a major legal tussle with the Kenya Revenue Authority over more than KSh 500 million on advertisements currently running on Kenyan media outlets. A tribunal had earlier rejected Coca- Cola Kenya’s bid to overturn KRA’s demand for SH 516 million as tax on the commercials which were produced by the parent company.

“There is an ultimate aim behind the marketing service that the people should be made aware about brand name of a product and if they are aware of the brand name of the product associated with export (parent company) which is bottled by the local companies under licence,” ruled the tribunal.

The beverage company, however, maintained that the adverts did not attract tax since it was commissioned by the Atlanta-based Coca-Cola Export Corporation.

KRA, on its part, states that the owners of the advert or the company that commissioned it were immaterial saying that the advert had helped to grow sales for the companies that dealt in products of the Coca-Cola Company.

The KRA’s position was further reinforced by the tribunal which gave its verdict on November 26, a move which has led to Coca-Cola appealing the decision of the tribunal.

KRA stood by its position. Coca-Cola Kenya reckons that it had not benefited directly from the profit made by the local bottlers and thus its aim was only to increase brand awareness and nothing more.

The beverage company is also locked in a separate lawsuit with the taxman.
“As earlier stated, what is material is the place of use or consumption of the service for if it is physically used or consumed in Kenya, it is subject to Kenya VAT,” said the tax authority. — CAJ News.

Business Correspondent
ECONET Wireless Zimbabwe walked away with four prestigious awards at the Marketers Association of Zimbabwe 2013, Super Brand annual awards plus the prestigious overall business Super- brand 2013 award closely contested by Coca-Cola. The MAZ Superbrand Awards are Zimbabwe`s biggest event so far recognising the best of the best  in Zimbabwe`s marketers across all sectors from  service providers, agricultural, industry, FMCG and technology included.

Officially opening the event, the ex-South African ambassador and currently Zimbabwe’s Senior Minister Hon Simon Khaya Moyo officially opened the Super Brand Awards for the year 2013.

Among the announced top 36 awards, Econet Wireless Zimbabwe first scooped the Top ICT sector award. The telecoms  company then followed up by winning two awards under the top 10 overall Superbrand for consumers where EcoCash ranked seventh and Buddie took the second place after the Coca-Cola brand.

However, Econet Zimbabwe bounced back in the top 10 overall business Superbrands Awards where it contested as a brand and battled against Telecel Zimbabwe and Coca-Cola to reclaim the first position.

Last year, Econet Wireless Zimbabwe scooped the same award again across technological and non-technology related players in Zimbabwe. Their major, direct rival Telecel Zimbabwe landed the sixth position in the same category.

DSTV also took two awards for the electronic media among the top 36 categories and ranked in the top 10 category as a digital electronic player.

Speaking during the official opening, Mr Herbert Nkala, the chairman of the Marketers Association of Zimbabwe, pronounced that the awards are not going to be based on how popular the brand is at some local areas but also the greater impact at national level.

MAZ president Mrs Ruth Ncube thanked all the players for their commitment and urged them to avail value for money being pumped in by their clients as they also grow their business.

The MAZ awards have been running for the past four years and hundreds of top Zimbabwean brands subscribe to the organisation.

Sanderson Abel Business Correspondent
In  a modern economy, economies are usually run on credit with corporates, individual, societies and clubs providing credit to one another. A cycle of credit is thus created in an economy where each economic agent is one way or the other in receipt of credit from another.

Any hiccup within the cycle might end up disturbing the smooth flow of resources among the economic agents.
It is then important that the economic agents understand the centrality of keeping the cycle ongoing without deliberate actions to disturb it.

This is so given that credit is important especially for the industry responsible for producing goods and services.
In Zimbabwean scenario, this cannot be overemphasised.

With the current level of capacity underutilisation, credit either from suppliers or banks helps firm to expand the control of production which means more goods and services, more surplus.

Credit for the producers also serves as a channel for greater profit — well — if they retail product for credit more income will gather.
The important part of it is that the banks are usually at the end of the spectrum through underlying the majority of credit flowing in the economy.

The weaknesses currently inherent in our corporate sector makes banks more reluctant to provide much credit which result in decreases in aggregate demand leading again, to an even worse borrowers’ condition.

Whilst from household perspective, inadequate access to credit limits poor people from a fair share of resources in society, depriving them of basic needs and opportunities in life.

Universally, the credit providers are now facing the big challenge of non-repayment of credit.
These credit providers include banks, credit retail shops, telecommunication companies, service providers and other involved in providing credit.

The challenge of non-payment of credit is hence derailing economic progress as the good candidates for credit are being denied credit as the credit providers are not sure of their creditworthiness.

This brings to the fore two important interrelated terms in economics which need to be dealt now rather than later: adverse selection and moral hazard.

Adverse selection: is the problem created by asymmetric information before the transaction occurs.
Adverse selection in financial markets occurs when the potential borrowers, who are the most likely to produce an undesirable (adverse) outcome — the bad credit risks — are the ones who actively  seek out a loan  and are the most likely to be selected.

Moral hazard: is the problem created by asymmetric information after the transaction occurs.
Moral hazard in financial markets occurs when the lender is subjected to the hazard that the borrower has incentives to engage in activities that are undesirable (immoral) from the lenders point of view, because those activities make it less likely that the loan will be repaid back.

The problem of moral hazard and adverse selection can be overcome through monitoring the behaviour of borrowers and this can be done through well-established institutions underpinned by strong legislation. These institutions are the credit reference bureaus.

The credit reference bureau should be a privately-owned, profit-making establishment that as part of its regular business, collects and compiles data regarding the solvency, character, responsibility and reputation of a particular individual or business in order to furnish such information to subscribers, in the form of a report allowing them to evaluate the financial stability of the subject of the report.

Credit bureaus ordinarily prepare and issue reports for lending institutions and stores that investigate the financial reliability of an applicant for credit prior to the execution of the credit agreement

The Credit Reference Bureau should be established so as to assist banks in determining credit worthiness of their borrowers.
CRBs allows for credit information sharing among the financial institutions and other credit providers.

In this case the lemons in an economy (those who have reputation of failing to honour their obligations) are distinguished from oranges (those with good credit record).

This will resolve the question of how can banks differentiate oranges from lemons or how can we resolve the challenge of moral hazard and adverse selection.

Studies around the world have shown that there are benefits associated with the establishment of credit reference bureau in an economy.
The legislation is important because of the nature of information that is supposed to be held by these institutions.

Given the extent of confidentiality of the information and the associated sensitivities, it is important that the Government through its various arms comes up with legislative framework that will create a win-win scenario for the economy and the various economic agents without prejudice to any one section.

Some of the benefits of creating a credit reference bureau are:
CRB reduces borrowing costs and loan delinquencies to a significant extent;
CRB can enhance effective risk identification/monitoring and credit extension and
CRB can ensure that credit flows to deserving borrowers and reduce to those less deserving ones.
Given that ultimately all credit providers are reliant on banks to some extent, a well-functional credit reference bureau will help in maintaining financial stability in an economy.

Sanderson Abel is an economist. He writes in his capacity as Senior Economist for the Bankers’ Association of Zimbabwe. He can be contacted on abel@baz.org.zw <mailto:abel@baz.org.zw> or on 04-744686, 0772463008

Business Reporter
GOLD production at Freda Rebecca fell 11,2 percent to 32 252 ounces in six months to September this year, its parent company Mwana Africa plc said yesterday. The decrease in gold produced during the period under review was attributable to disruptions due to the leach tank incident, lower grade and lower recoveries, which were partially offset by an increase in milled tonnage.

Profits fell for the six-month period relative to the same period in the previous financial year, attributable to lower head grade and recoveries and a lower gold price.

Recoveries suffered due to the leach tank incident, falling to 81 percent for the six months to September compared to 82 percent during the comparable period last year.

However, recoveries began to improve towards the end of the period with the quarter to September 2013, showing recoveries of 84 percent versus 78 percent in the quarter to June 2013. Average monthly production for the period was 5 375 ounces of gold.

The average gold price achieved by Freda Rebecca for the six months to 2012 was US$1 642 per ounce compared to US$1 352 per ounce for this six month to September 2013.

At Bindura Nickel Corporation, the six-month period to September was characterised by efforts to ramp up production and the shift to the new mine plan, with record production in both August and September. BNC sold 2 191 tonnes of concentrate and achieved revenue of US$21,4 million, Mwana Africa said. During the period, BNC implemented a new mine plan targeting the higher grade zones of the ore body, known as “massives”. This has seen mining cost dropping from US$19 251 per tonnes in the June 2013 quarter to US$9 689 per tonne in the September 2013 quarter.

Nickel prices fell with BNC achieving an average nickel price of US$14 268 per tonne for the six months to September 2013, compared to US$18 000 per tonne in January 2013.

Commenting on the operations of the two companies, Mwana Africa chief executive Mr Kalaa Mpinga said: “The fall in gold and nickel prices earlier in the year resulted in a difficult period for Mwana.”

“We reacted swiftly to the challenge, commencing a corporate cost cutting exercise and raising approximately US$6 million to resolve the immediate working capital shortfall. Mwana is now stable and we are focused on delivering value from all of our projects.

“Despite the difficulties brought on by lower commodity prices, the company has achieved considerable progress on all of its main projects. Significantly, in Freda Rebecca and Trojan, we now have two mines in production, and our resource base in gold and nickel, together with the copper potential under our Joint Venture with Hailiang underpins a promising future for Mwana.”

Minister of Mines and Mining Development Cde Walter Chidhakwa

Blessing Bonga Business Reporter
GOVERNMENT is currently reviewing beneficiation licences and tax laws on diamonds as a way of creating an enabling operating environment for players within the processing value chain of diamonds, an official has said. In a speech read on his behalf at the inaugural beneficiation workshop in Harare yesterday by the director in the ministry, Mr Valentine Vera, Mines and Mining Development Minister Walter Chidhakwa said the move would encourage more players to venture into beneficiation of the country’s gems.

“Just recently, the ministry decided to review beneficiation licences on diamonds, while we are also looking into the taxes charged on these diamonds and we are also looking into various other aspects of the diamond and jewellery policies.

“This will enable us to come up with measures that influence business growth in the sector,” he said.
Minister Chidhakwa also noted that value addition to natural resources is the fastest way to trigger the economy so that revenue realised in value-added products can benefit other critical service sectors.

Speaking at the same occasion, Diamond Beneficiation Association of Zimbabwe chairman Mr Richard Mvududu said his association is prepared to support Government in order to ensure the country generates more revenue through value addition of diamonds and other precious and non-precious stones.

He commended Government for recognising in its new economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, that value addition and beneficiation clusters are key in the revival and growth of the ailing economy.
“We are committed to support Government for total citizen participation in value addition and beneficiation of our natural resources as enunciated first in the national trade policy, the industrial development policy and more recently Zim Asset.

“It is our hope that the current review of laws relating to the trade and processing of our gems will touch on the issue of very high operating licence fees,” he said.

Mr Mvududu said that in 2011, licence fees for diamond cutting and polishing were pegged at US$20 000 per annum with at least 29 companies licensed, but some were, however, cancelled the same year following allegations of misconduct.

Last year, the fees significantly rose by 400 percent to US$100 000 per annum resulting in a sharp decline in licensed operators from 29 to nine while this year the number has dropped to just one.

Mr Mvududu added that members of DBAZ have invested over US$20 million in polishing and security equipment, training of local skills and research and development.

He said there is need for Government to expedite the review process so that capacity utilisation can be significantly improved.

Dr Misheck Sibanda

Business Reporters
GOVERNMENT has directed heads of public entities to provide schedules of their salaries and benefits, but the reasons behind the move were still unclear yesterday. According to sources, the directive, by Chief Secretary to the President and Cabinet Dr Misheck Sibanda, was issued to heads of public entities through their parent ministries.

“The letter from Dr Sibanda was delivered on November 28 to Cabinet ministers and it basically required heads of public enterprises to avail information specifically on monetary and non-monetary benefits for chief executives and fees for board members,” said a CEO with one of the public entities who requested anonymity.

“The letters, were, however, received on different dates, but the schedules were needed in seven days.”
While the reasons behind the latest development remained unclear, Government has in the recent past expressed reservations over salary scales for heads of public entities.

It is understood that while public enterprises were required to routinely submit remuneration and board fees schedules of public entities, but some institutions failed to comply.

Despite earning hefty salaries, with some getting better more than private sector executive, most State entities are struggling, with some said to be technically insolvent.

The directive comes at a time when Government has instituted investigations into outrageous salary and benefits of the suspended Zimbabwe Broadcasting Corporation chief executive Mr Happison Muchechetere, who was earning a salary and allowances totalling nearly US$40 000 per month.

This was despite the fact that most workers at the corporation had gone for more than six months without pay.
The broadcaster was also struggling to meet other critical operational obligations.

Mr Muchechetere, who became substantive chief executive in May 2009, is said to have drawn salaries and allowances approximated at US$2,28 million to date. Mr Muchechetere’s salary included US$3 000 as entertainment allowance, a US$2 500 allowance to pay his domestic workers, US$3 500 for housing allowance and US$3 000 as a general allowance.

Apart from this, Mr Muchechetere was also receiving unlimited access to fuel every month, five business class air tickets for him and his family to any international destination of his choice, three regional tickets and unlimited local air tickets every year.

FLASHBACK. . . Then Acting Finance Minister Chinamasa poses for a photo before presenting the 2009 National Budget

Golden Sibanda and Martin Kadzere
Finance Minister Patrick Chinamasa faces the perennial daunting task synonymous with his portfolio when he presents the 2014 National Budget next week seeking to spread his thin purse across listless competing interests and inject pace in a tiring economy. The much-awaited Budget will be presented on December 19, but considering the resource constraints, economic analysts believe the fiscal plan should do more to inspire confidence in the economy in order to attract investment.

Only through increased investment can Government achieve the main objectives set out in its new economic blueprint, Zimbabwe Agenda for Socio-Economic Transformation, covering the period 2014 to 2018.

Minister Chinamasa, as has become the norm, has the unenviable responsibility of carrying the entire nation’s hopes of performing a special balancing act of allocating little available resources to rejuvenate economic growth and allow the creation of new jobs.

The economy certainly requires a significant dose of fresh capital to spur productive sectors yet the country faces one of its worst liquidity crises since dollarisation.

Very little is flowing in terms of foreign direct investment due to a number of reasons including perceived country risk profile, debt arrears and reservations about some of Government’s policies, characteristic of the cynicism among Western investors.

Other sources of liquidity such as lines of credit have also not been performing well due mainly to almost similar reasons while inflows from the Diaspora are too little to create the liquidity required to drive the economy.

Following a decade of economy instability characterised by hyperinflation, local industry also cannot export to generate liquidity required to boost economic activity as the firms themselves also need fresh capital.

With the main sources of funding or liquidity largely constrained, the responsibility solely lies with Treasury to manoeuvre ways that create the liquidity needed to oil the economy and return the economy onto a growth path.

More than ever, Zimbabwe ill affords to remain a pariah state in global socio-economic and political affairs and without necessarily abandoning the ideals of its historic liberation struggle, Zimbabwe should find ways to inspire confidence into the economy to register growth.

Economist Dr John Robertson said the country faced serious deficit in terms of financial resources required to rejuvenate the economy, and the option would have been to borrow, but this was not feasible for Zimbabwe.

“We need to build productive capacity and attract investment, but investment will not come when they do not feel comfortable. Some have been telling investors around the world that Zimbabwe is the least friendly country and they have not come,” he said.

“We need to change our political policy; the economy cannot work when investors are discouraged. There are linkages between economic sectors and when you talk of recovery in agriculture you cannot do it because you have got to revive industrial confidence first.”

He said after creating confidence, the country could then revive agriculture to feed raw material into manufacturing, which would reduce imports, create new jobs and create more tax revenue for the Government. Dr Robertson said that the Budget would simply indicate what ministries will get and how it will use the funds, which would mainly be paying salaries, but leaving the ministries without capacity to fulfil their mandates.

It is mind boggling how Minister Chinamasa will be able manoeuvre available space to ensure liquidity in the economy after growth slowdown in 2012.

The economy registered an average 7,1 percent recovery growth after dollarisation, simply reflecting the little growth in a stable environment, but production remained subdued by Zimbabwe’s potential.

The situation appeared to get better, masked by ready availability of goods because imports filled up supermarket shelves as people chased the greenback.

Barring any surprises Minister Chinamasa will present a National Budget that will be plus or minus US$4,3 billion, which he intimated on during a pre-Budget seminar for parliamentarians in Victoria Falls last month.

The minister is also expected to announced a projected economic growth for 2014 of around 6 percent and increase capital expenditure from 10 to 20 percent from, though he has hinted he might move towards off-budget financing of capital projects to joint ventures and public private sector partnerships.

The Budget comes at a time when Zimbabwe’s economic sectors are performing below par, largely as a result of biting liquidity constraints, the effects of illegal sanctions, fall in prices of commodities on global markets and the poor performance of agriculture.

Zimbabwe’s economy is expected to grow 3,4 percent this year, having been revised from 5 percent projected earlier. The manufacturing sector is struggling, under pressure from lack of capital, high cost of utilities, finance and lack of competitiveness. According to the Confederation of Zimbabwe Industries, activity at manufacturing firms fell from 44 percent in 2012 to 35 percent this year, signalling the need for s stimulus package to help the firms find their feet.

Many companies have closed down while some are scaling down. Agriculture was initially projected to grow by 11,6 percent this year, but the rate was revised to -5,8 percent, while mining is expected to expand from an initial projection of 17,1 percent to 5,3 percent.
The country is experiencing severe power cuts and poor social services. There is huge infrastructure backlog. The minister will also be under pressure to improve salaries for civil servants who for a long time have been demanding Poverty Datum Line-linked salaries.

A summary of areas which need quick (funding) attention include: manufacturing, which needs US$2 billion for sector; agriculture sector US$2 billion; national debt (over US$7 billion) and current account deficit, which stands at an unsustainable US$1,5 billion.

These funding requirements exclude other pressing issues such as electricity imports and infrastructure rehabilitation and food imports after a poor agricultural season and other safety net obligations in an economy where most people are not gainfully employed.

“These miracles can come through borrowing from friendly countries. Government must also moot other policy strategies aimed at mobilising resources such as public private partnerships and luring Foreign Direct Investment by creating a conducive environment for business,” economist Mr Gift Mugano.

Economic analysts said the upcoming Budget should seriously address recapitalisation of critical sectors such as agriculture and manufacturing for sustainable recovery.