National Pension Scheme and Worker’s Compensation Insurance Fund pensioners are receiving a bonus with their monthly pension this month. National Pension Scheme retirement pensioners will receive a US$50 bonus along with their monthly pension. Any other NPS pensioners receiving a pension that is above US$50 will also receive a US$50 bonus.

Those whose monthly NPS pension is below US$50 will receive a bonus equivalent to their monthly pension. Retirement pensions depend on contribution period and insurable income when they retire or reach the maximum retirement age for pensionable purposes, which is 65.

Those who have contributed to the NPS for 10 years or more are eligible for a retirement pension when they retire at age 60 or more or reach the age of 65. The longer they have contributed and the higher their insurable income on retirement the higher their pension will be. There is an early retirement age of 55 for those who have been engaged for seven of the preceding 10 years in agricultural work, heavy vehicle driving or certain jobs in quarrying, mining and forestry. The minimum retirement pension is US$60. The minimum invalidity pension and survivor’s pension is US$30.

Workers Compensation Insurance Fund pensioners whose pensions are below US$45 will receive a bonus equivalent to their monthly pension. Those WCIF pensioners whose pension is US$45 and above will receive a bonus of US$45.

Every employer, apart from the Government, is required to pay a WCIF premium for each employee to ensure that every employee is covered by the Worker’s Compensation Insurance Fund. It is only the employer who pays WCIF premiums, unlike with the pension fund, where both employee and employer contribute.

If an employee suffers a dis- ability of less than 30 percent as a result of a work-related accident or disease, then the WCIF pays a lump sum in compensation.

The WCIF also assists those who do not suffer a permanent disability but are unable to work for a period as a result of the accident. Where income has been lost or stopped by a work-related accident, the WCIF scheme guarantees continued payment of the person’s normal monthly wage for the first 30 days following the accident and a percentage of the normal monthly wage thereafter.

NSSA pays all medical costs associated with the accident, like transport and drugs and hospital fees, using the Association of Healthcare Funders of Zimbabwe rates. It will pay or reimburse medical expenses for treatment outside the country where prior approval has been obtained from the general manager.

Talking Social Security is published weekly by the National Social Security Authority as a public service. There is also a weekly radio programme, PaMhepo neNSSA/Emoyeni le NSSA, discussing social security issues at 6.50pm every Thursday on Radio Zimbabwe and every Friday on National FM. There is another social security programme on Star FM on Wednesdays at 5.30pm.

• Readers can e-mail to mail@mhpr.co.zw  or text to 0772-307913. You can also telephone NSSA on (04) 706517-8 or 706523-5.

Bradwell Mhonderwa Business Ethics
Companies are unique in terms of their size, complexity, resource base, industry, product line and management, and this uniqueness has a strong bearing in determining whether the business becomes successful or not. However, one other aspect that is central to the success of a business, which has tended to be subordinated to other factors, is business ethics.

Acting ethically and meeting reasonable stakeholder expectations is a business success factor that is grounded in the development of a business culture that is sensitive to both the short-term and long-term needs of the business and its stakeholders, including those of the nation as a whole.

Amongst a business’s stakeholders are customers, shareholders, employees, suppliers, investors, regulators, the nation, and communities in which it does business.

From the business, customers want quality products and employees want their welfare to be taken care of.  Investors want a return on investment, and shareholders want value for their money. Communities want schools, roads and hospitals to be built, and the natural environment needs preservation for posterity. Suppliers want timeous payment for services rendered, and the nation wants to see the business contributing towards national development.

A responsible enterprise should therefore generate revenue by satisfying customer needs. It should attract funding by meeting investor expectations, and it must increase efficiency and effectiveness by attracting competent staff.

A responsible business must secure community goodwill by genuinely involving the community in its operations, and should contribute towards national development by providing employment and contributing to the fiscus. A responsible business should practise transparency and accountability in financial matters, and must not short change customers.

It should comply with the laws of the land, and must observe industry rules and regulations, including its own policies and procedures.
Businesses, whether small or large, should act responsibly towards their stakeholders all the time because sound business performance and profitability only come to those that foster good relations with their stakeholders.

Businesses must integrate their major goal of making profit and increasing shareholder value with ethical and sustainability variables.
Profits made using unethical means, though gratifying in the short term, clearly don’t guarantee that more profits will continue to be made in the future, and when these profits suddenly dry up, the business become exposed to catastrophic risks that may include a sudden and painful loss of income and even going under.

Responsible businesses should therefore see the value of embracing the triple bottom line.  Businesses must adopt operational processes that anchor their activities on the provision of clear behavioural guidelines and signposts to staff, including a sound corporate social responsibility (CSR) policy.  A business strategy anchored on these sustainability standards will differentiate a business from its competitors making this a source of competitive advantage.

Businesses that choose to be thoughtless through reckless business decisions and actions have no future in today’s highly competitive business world, and this includes companies that are continuously seized by their everyday challenges and blinded from seeing the future of the business.

A responsible business enterprise holds an enduring purpose that goes beyond its short-term needs to inspire everyone to focus on the long-run survival of the business.

The sustainability of businesses matters because this has a bearing not only on the lives of those directly dependent on the company through employment and services provided, but also on the well-being of communities in which it does business and the whole nation. Economic growth and development and the improvement of the people’s living standards must anchor the broader objectives of every business entity.

Businesses should understand that they have a moral obligation to champion the fight against corruption, and that they play a big role in promoting the equitable distribution of wealth in the country.

A responsible business is a fortress of hope in a sea of endemic corruption and economic difficulties.

Like salt in water, it permeates to influence the whole nation bringing positive change to households and communities.

• Feedback to bradwellm@businessethicscentre.org or call 0772 913 875

Business Reporter
ANNUAL inflation continued on a downward spiral, as the tight liquidity situation in the economy continues to hold the price of goods and services constant. According to the Zimbabwe National Statistics Agency, the annual rate of inflation for November shed 0,05 percentage points to 0,54 percent, meaning that the prices went down by an average 0,54 percent in the 12 months to November 2013.

Monthly inflation for November stood at 0,09 percent after gaining 0,1 percentage points on the October rate, implying price increases averaged 0,09 percent between November and October.

The month-on-month food and non-alcoholic beverage inflation was minus 0,60 percent in November, shedding 0,64 percent percentage points on the rate for the prior month.

Food and non-alcoholic beverages annual rate of inflation, prone to transitory shocks, came in at minus 1,51 percent while non-food inflation stood at 1,58 percent.

The rate of inflation measures the magnitude at which prices of goods and services increase over a given period, usually a month or year. A decrease in inflation does not imply a fall in prices, but simply a slower rate in price hikes.

While it is considered positive that annual inflation has continued to trend downward, economists say Zimbabweans should not be overly excited about this. This is because of the fact that while, overall, the rate of inflation has decreased, there will still be some price increases on selected basic goods and services.

These include selected food- stuffs, transport, health care services, and education and essentials utilities such as water, electricity and accommodation. The minimal increase hits hardest on the low-income earners.

But the overall reduction in the pace at which prices of goods and services are going up in Zimbabwe is a reflection of the tight liquidity situation in the economy.

With millions of people outside gainful employment after the closure of thousands of companies due to difficult economic conditions and salaries low for those still employed, the buying power of the majority of people is diminished. Even for the millions engaged in informal employment, the majority earn enough just to get by, with their expenditure limited to a few basic commodities.

Inflation rate trends in Zimbabwe are a sign of deep-seated economic problems masked by a stable currency and these include low disposable incomes, business inability to make cost induced price adjustments and tight liquidity.

Economist Dr Eric Bloch said that Zimbabwe was experiencing depressed inflation, because the spending power of most Zimbabweans was low. Salaries are low, few companies are running and fewer people are gainfully employed.  Government, which is the biggest spender in most economies, also currently has little spending power, with only a budget of way less than US$5 billion this year, as it cannot collect much from taxpayers as their capacity is constrained.

“Any reduction in inflation is positive, but we cannot be overly excited. While inflation is going down, inflation on basic goods and services is much higher,” he said.

South African-based economist Mr Gift Mugano said the continued decline in annual inflation was not exactly a positive trend for Zimbabwe as it reflected low aggregate demand due to the prevailing tight liquidity in the economy.

He added that the scenario was not good for the purposes of attracting investment as potential investors would not invest in an economy heading for deflation, where aggregate demand plummets, prices fall and production drops. An inflation rate of 2 percent to 3 percent is considered reasonable as it reflects demand for goods and services and allows producers to adjust for cost increases. High inflation is, however, bad as it diminishes the value of currency.

At the same time a continued decline in inflation leads to deflation, which is equally bad as it means prices, instead of going marginally up, actually fall as consumers stop buying in the hope their money will buy more in future.

Zimbabwe is facing tight liquidity following the  adoption of multi-currency system in 2009 to escape from the destructive force of hyperinflation stalking local currency.

With the economy still frail after a decade-long macro-economic instability, the export capacity of industry is seriously constrained, foreign investment is limited, Diaspora inflows are limited and most international lines of credit blocked.

Tinashe Makichi Business Reporter
Zimbabwe Glass Industries has applied for an undisclosed amount of money under the Distressed and Marginalised Areas Fund to raise fresh capital in a bid to resume operations, managing director Mr Gilbert Tapfuma said. The Gweru-based glass manufacturing company suspended operations last month due to working capital constraints and unsustainable utility charges.

Zimglass resumed operations in August this year, after two years of inactivity. The furnace rebuild was funded by a local consortium of local banks to the tune of US$8,5 million, but was not sufficient to meet working capital requirements.

“Zimglass has applied for DiMAF funds but (the challenge we are having is) the funds are not available at the moment, but we are optimistic,” said Mr Tapfuma.

The Government established the DiMAF to avail financial support to struggling companies at concessionary rates, in light of the high cost of credit.

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.

Mr Tapfuma added that the glass manufacturer, upon resuming operations, would explore new markets by targeting regional countries to boost revenue.

“At the moment there is no change of business model as the company is still capable and can produce glass packaging for beverages, liquor and pharmaceuticals We are working on identifying new markets in the region with the main target being Zambia where there is high demand for flint glass which is used to bottle soft drinks,” he said

The company suspended operations in September 2010 to embark on a refurbishment exercise of the blast furnace as well as replacement of obsolete equipment.

Sanderson Abel
Agriculture is the backbone of Zimbabwe’s economy insofar as the bulk of Zimbabwe’s population remains largely rural based.
Zimbabwe’s agricultural potential has thus always hinged on a few factors one of which has been the demographic influence of a dominant rural population of people who derive their livelihood from agriculture and other related rural economic activities.

The success of the agricultural sector in the earlier years had hinged on the fact that the agricultural sector was a properly regulated industry. It was largely composed of various structures which were meant to promote the interests of the various stakeholders.

These structures included a variety of public institutions such as the Agriculture Marketing Authority, Dairy Marketing Board and Cotton Marketing Board, The Tobacco Industry and Marketing Board and the Cold Storage Commission among others. These were set up to oversee and champion the marketing of the various agricultural commodities.

The private sector also played its part through the formation of the various farmer organisations. These included the umbrella farmers associations (e.g. Commercial Farmers’ Union) and specific sector boards such as the Horticulture Promotion Council, the Pig Industry Board and the Tobacco Research Board dealing with a specialty area.

The success of agricultural development was reliant on the creation of a large group of professional local farmers producing high volumes of marketable output of a consistent quality. This had a positive effect on reducing the transaction costs throughout the whole value chain.

The important aspect of these farmer organisations was that all those involved shared a common vision on development and contributed in effective, constructive, and committed ways. To prove this, these were mostly funded through member subscriptions showing greater commitment to respective organisations.

Strong and vibrant farmers’ organisations that genuinely represent their constituencies can play a vital part in informing and influencing agricultural policy and practice.

In other countries farmer organisations are playing a critical role to complement government efforts.

In the case of Malawi and, to a lesser extent Kenya and Ethiopia, they are increasingly serving as key partners to the private sector, particularly in the production of high-value horticultural and commodity crops

However, following the land reform programme, the country experienced the advent of other farming bodies besides the Commercial Farmers’ Union and the Zimbabwe Farmers’ Union.

The coming aboard of various farmer organisations should have been a welcome move but unfortunately it wasn’t because the benefits that arose from these were minimal as the majority of them failed to take  on board the smallholder communal farmers.

It is important that this group of farmers be taken aboard given their contribution to various crops with tobacco as an example.

Farmer organisations are important because the help farmers in a variety of ways and these include:

Identify agriculture as a business, from production to marketing.

Advocated for shifting the incentive structure to favour production.

Facilitated access to land and credit (Land markets).

Assist farmers to ensure there is no information asymmetry through ensuring timeous dissemination of information to the members

Engage with suppliers to ensure appropriate timing for inputs in the right quantity and quality.

Minimise uncertainty through market research to improve the output quality and also the availability of the markets.

Promote productivity and efficiency through sharing ideas and better methods of agriculture.

They help foster synergies through backward and forward linkages; value addition and technology                                                                       transfer.

It has been shown that farmer organisations are able to bring out smallholder  farmer revolution through facilitating farmer access to inputs, credit, output markets, technical training and to increase engagement with policy processes and improve coordination with the agricultural sector.

Farmers as rational human beings would want to weigh the cost and benefits of joining any farmer organisations. There are hence factors that influence participation in farmer organisations. The following are some of the issues that will influence the extent of participation:
The degree of the farmer’s dependence on the outputs of the organised activity.

The degree of certainty of the availability of the outputs.

The extent to which the outputs will be available only as a result of collective action.

The extent to which the rewards associated with the collective action will be distributed equitably.

The extent of availability of rewards within a reasonable time frame.

The extent to which the rewards are commensurate with the costs associated with continued participation.

There is need to borrow from success stories of farmer organisations from other countries. The following are some of the critical success elements of  farmer organisations; clarity of mission, sound governance, strong, responsive and accountable leadership, social inclusion, demand-driven and focused service delivery, high technical and managerial capacity and effective engagement with external actors.

As we move into the year 2014, our farmers can make the agriculture sector a success by becoming part and parcel of at least farmer organisation.  This will also make it easier for planning and the banking sector to be effective in service delivery.

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 or on 04-744686, 0772463008

GOVERNMENT says it will focus on regular maintenance of existing power generation and transmission equipment to increase generating capacity, while waiting for new power plants to come on line. Energy and Power Development Deputy Minister Engineer Munacho Mutezo said this would be part of a raft of measures  to be implemented by Government to improve power generation capacity.

Munacho Mutezo

He said Government would also pursue a number of “low hanging” projects in the short term.
“The other aspect we are attending to very much is the issue of maintenance so that the downtime on the equipment is reduced. This obviously is related to our ability as consumers to pay Zesa bills timeously and in the right quantities so that we enable Zesa to better service their equipment,” he said.

“However, we are also looking at alternative sources of energy particularly solar where we know the gestation period, that is the time from project conception to power generation, is much shorter than it is for the conventional ones, that is hydro and thermal power stations. That one we can do if we can get all the funding we need within a year.”

Eng Mutezo also urged consumers to conserve energy as this would help reduce load shedding.

He said while the country would also continue importing electricity, it would boost its internal capacity.

“We are appealing to everyone to use power sparingly and also to make sure we pay our bills on time so that Zesa is able to generate more power.

“The other low hanging fruit is the repowering of the small thermal stations Harare, Bulawayo and Munyati power stations and we are actively looking at that so that we can make power available to the nation,” he said.

The Zimbabwe Energy Regulatory Authority has in recent years licensed about 12 IPPs with a capacity to generate about 5 000MW of electricity but most of them are yet to become operational.

Zimbabwe is presently facing power shortages with the country’s sole power utility Zesa Holdings generating about 1 200MW of electricity against demand of over 2 000MW.

However, to remedy the situation various projects are being undertaken to improve power supply including the expansion of Hwange and Kariba South power plants as well as construction of the Batoka Gorge project. — New Ziana.

Mr Charles Msipa

Golden Sibanda Senior Business Reporter
THE Confederation of Zimbabwe Industries, the country’s biggest sector lobby group, says the manufacturing sector has not realised new inflows of foreign direct investment over the last three years. As such, CZI says Finance and Economic Development Minister Patrick Chinamasa’s 2014 National Budget should contain measures to create the confidence required to woo foreign investment and save industry from collapse. Minister Chinamasa will present the 2014 National Budget to an expectant nation on Thursday after skipping the traditional practice of presenting it in November. This was done to allow for extensive stakeholder consultations.

While a myriad of factors are at the centre of Zimbabwe’s economic crisis, lack of access to capital remains the single biggest problem to recovery efforts.

Although a number of alternatives to unlocking capital exist, most would take much longer compared to unlocking international lines of credit and foreign investment provided the right signals are sent to inspire investor confidence. The call for policy measures that could inspire investor confidence in the domestic economy is informed by the understanding that Treasury has little resource capacity to manoeuvre in order to rejuvenate the frail economy.

“We have not had significant inflows into the manufacturing sector in terms of foreign direct investment over the last three years,” said CZI president Mr Charles Msipa.

The CZI boss said while sectors such as the mining sector have realised some notable new FDI in recent years, there has only been fresh capital for replacement, refurbishment or rehabilitation of old equipment.

“We should actually be actively promoting FDI into the manufacturing sector for both existing new investors because without value addition and beneficiation you cannot export and create meaningful economic activity.”

Without fresh capital inflows, Zimbabwe’s manufacturing industry has struggled to produce at reasonable costs and to compete against imported products. Capacity utilisation plunged from 44,9 percent in 2012 to 39,9 percent. Even the fresh capital to replenish existing machinery and equipment has been limited and spread over time due to limited resources.

Meanwhile, low-priced South African and Asian imports have flooded the local market.

Imports have thus continued to drain the little available liquidity in the economy while increasing the trade deficit to unsustainable levels in what has also stalled efforts aimed at rebuilding local productive capacity.

And the CZI believes the fiscal policy would need to pronounce measures that enable access to affordable capital or lines of credit, as tight liquidity and deteriorating macro-economic conditions in 2013 have further dented business and consumer confidence in the domestic economy.

Mr Msipa said the National Budget should spell out measures to address bottlenecks in consistent power and water supply, the major constraining factors cited by industry in the CZI 2013 Manufacturing Survey.

Apart from addressing the issue of access to fresh capital or affordable lines of credit and resolving utilities infrastructure deficit, Mr Msipa said Minister Chinamasa should restore the Reserve Bank’s lender of last resort capacity.

“It is like an eco-system, when you do not have a healthy financial system; the rest of the economy suffers. The minister needs to capacitate the Reserve Bank Zimbabwe as the lender of last resort,” Mr Msipa said.

The CZI also implored Minister Chinamasa to expedite securitisation of the country’s minerals to use the resources for purposes of attracting lines of credit to improve liquidity in the economy.

Further, the industrial lobby group believes that privatisation of underperforming parastatals and State enterprises was critical to mobilising resources required to improve liquidity and economic activity.

Mr Charles Chikaura

Martin Kadzere Senior Business Reporter  
THE Infrastructure Development Bank of Zimbabwe has secured a US$10 million line of credit from the Industrial Development Corporation of South Africa to support projects in the tourism sector. The loan will be  extended at an interest rate of six months-London Interbank Offered Rate plus 8 percent for tenure of six years, chief executive Mr Charles Chikaura said.

“It has been approved and we are now waiting to sign,” he said in an interview yesterday.

“We would like to finance tourism projects in Victoria Falls, Harare and Bulawayo.”

IDBZ, a State-owned infrastructure bank, has been facing challenges in mobilising lines of credit as it remains under the sanctions list of the Office of Foreign Assets Control, an agency of the US Department of Treasury and the perceived country risk.

While the bank was recently pardoned by the US Treasury Department to freely transact with US firms and individuals, potential investors still perceive risk in the institution due to sanctions.

“The IDBZ is still looking forward to be removed from the sanctions list and anything short of that would still leave the bank in that disadvantaged situation,” said Mr Chikaura.

He added that the bank was looking at mobilising lines of credit worth at least US$100 million, “but it would really help if we are to be removed on the OFAC sanctions list”.

Mr Chikaura noted the bank was failing to fully discharge its mandate as a long-term financier of infrastructural projects due to the prevailing liquidity constraints.

Meanwhile, Mr Chikaura said IDBZ will, during the first half of next year, issue bonds to raise US$72 million for Zimbabwe Power Company and TelOne. The bond will have a tenure of between three and five years while the interest rate will “depend on market conditions”.

“The US$40 million will be for Kariba Power Station (part of the Government’s contribution towards the construction of Kariba South) and US$32 million will go towards TelOne’s fibre optic project,” said Mr Chikaura.

The bond will be open to both local and foreign investors and will have a prescribed asset status 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.

In October this year, the IDBZ floated a US$30 million bond for the Zimbabwe Electricity Transmission and Distribution Company. The three-year bond had a 10 percent fixed rate.

Sanderson Abel, Business Correspondent
Fiscal policy involves the use of Government spending, taxation and borrowing to affect the level and growth of aggregate demand, output and jobs. To this end, it is a tool that is meant to change the pattern of spending on goods and services and by which a redistribution of income and wealth can be achieved in the economy. Fiscal policy is usually complemented by other government policies including monetary policy, industrial policy, trade policies among others.

In Zimbabwe, the public finance has been precarious with revenue generation of the fiscus heavily compromised. The Government has been able to maintain a near balance budget over the last three years with revenue being equal to expenditure.

This was mostly as a result of the cash budgeting system where the Government had to stay within the budget without overruns. This budgeting system meant the Government did not seek recourse from the banking system to finance its recurrent expenditures hence avoiding the crowding out system. The Government only resorted to the financial system when it borrowed from old mutual and NSSA to finance the constitutional referendum and this resultantly squeezed resources from the whole financial system hence crowded out private sector expenditure.

The cash budget system is commendable though it has the disadvantage of constraining the Government expenditure especially the delivery of social services and infrastructural development. Salaries and wages continued to consume the bulk of the resources generated leaving little for programming purposes.

The efficacy of fiscal policy to stimulate economic growth in the country has become centre of controversy among the various stakeholders in the country: academics, business people, labour and other critical stakeholders especially after the adoption of the multi-currency system in 2009. Of major concern t to the whole debate has been the issue around fiscal space which has been reducing government ability to manoeuvre.

Fiscal space can be defined as the availability of budgetary room that allows a government to provide resources for a desired purpose without any prejudice to the sustainability of a government’s financial position (IMF). Usually, the idea is that in creating fiscal space, additional resources can be made available for some form of government spending (or tax reduction). In principle, there are different ways in which a government can create such fiscal space. Additional revenues can be raised through;

1. Improving on tax measures or by strengthening tax administration.
2. Lower priority expenditures can be cut in order to make room for more desirable ones.
3 Resources can be borrowed from domestic sources
4. Resources can be borrowed from external sources.
5. Governments can use their power of seigniorage (that is, having the central bank print money in order).

Looking at the above options shows that the Government is not able to use the majority of the options due to the structural challenges currently facing the country. The multi-currency system adopted by the Government closed the door to the printing of money in the country.  Not only has this option closed this door but it has also reduced to greater extent the availability of monetary policy instruments which the central bank uses to compliment fiscal policy.

Currently, the Government is buoyed by an external debt of more than US$10 billion of which the majority of it the Government is in arrears. Given this scenario the majority of international sources of credit have since blacklisted the Government hence no new lines of credit are available to the country hence compromising the ability to finance infrastructural development.  It becomes critical at this juncture that the current discussions as tabled in the staff monitored programme as this has the potential to unlock some of the international lines of credit as the majority of the lenders take a cue from the Bretton Woods institutions.

The domestic money markets continue to be characterised by great deal of illiquidity emanating from the lack of sources of liquidity as the majority of them continue to under-perform. The sources of liquidity under the multi-currency system are usually the export proceeds diaspora inflows, offshore credit lines, foreign direct investment inflows, and capital transfers including grants. All these sources have not been perfectly improving the liquidity in the economy as the country has money supply of only US$4 billion.

The effect of the Government trying to finance its operations from this source was ample when the Government borrowed to finance the constitutional referendum, the whole economy felt the heat as the crowding out effect gripped the whole economy. The Government borrowed  (US$40 million) from Old Mutual and NSSA and the banking sector was deprived of the same amount which could have gone to productive use and this was felt throughout the economy.

Given the structure of the country’s expenditure, it is very difficult to streamline expenditure. The recurrent expenditure is dominated by the wages and salaries accounting for 71 percent of total expenditure (as of June 2013). This implies that the Government can reallocate all other expenditure within the remaining 29 percent to cater for other recurrent expenditures and capital expenditures.

International best practice requires that capital expenditure should be around 25 percent of the national budget but the current fiscal policy set up cannot allow  this to happen as it will the government with no room to manoeuvre with other recurrent expenditures.

Given the limited fiscal space and the huge infrastructure deficit facing the country, alternative infrastructure financing options will be required to ensure scaling up of  infrastructure investments.

Presentation of the Fiscal Policy Statement on Thursday by the Minister of Finance and Economic Development is not an easy task but must do task.

Lower priority expenditures can be cut in order to make room for more desirable ones is a political decision which requires the government of the day needs to make, as defined by its agenda. This equals the standoff currently obtaining in the United States of America between the Democrats and the Republicans on where resources should be channeled. Given our scenario and the developments past years will show that almost all sectors need attention in one way or the other.

Fiscal Performance in the Multi currency regime
Year    Revenue    Expenditure
2009    0.934 Billion
2010    2.008 Billion    2.239 Billion
2011    2.998 Billion    2.972 Billion
2012    3.640 Billion    3.647 Billion

Currently, the prevailing situation shows the situation is not going to change in the fiscal circle since revenues are now projected to grow to US$.437 billion and US$ 4.965 billion in 2014 and 2015. The implication of this trajectory is that the current scenario of the domination of the expenditure by the labour costs will continue and little development will be implemented in the country.

International best practice requires that employment cost take up around thirty percent of the total expenditure hence the government should come up with measures that will reduce the current unsustainable wage to total cost ratio in the forthcoming years.

This will go a long way reducing the compromised effectiveness of government operations, financing of various planned public investment projects and programs. Moving forward it is also important that the fiscal authorities avoid budget overruns since this has the potential to lead the government abandoning the cash budgeting system and resorting to the money marketing financing which will consequently lead to crowding out effect hence increasing the cost of funds for the private sector.

It is important to note that the current government initiative is in the right direction especially for enhancing the fiscal space.

Government efforts towards normalizing relations with the international community and current efforts in respect of the Staff Monitored Program with the IMF are particularly commendable.  Given the potential of this program to unlock resources for the country, the government needs to pursue this in letter and spirit. It is also important that the debt issue be resolved. Resolving the debt issue; hence implementation of the Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy (ZAADDS) should be prioritized as it will show the level of commitment of the government.

Presentation of the Fiscal Policy Statement on Thursday by the Minister of Finance and Economic Development is not an easy task but must do task.

• 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

Cabinet has approved the re-establishment of Special Economic Zones to create a vibrant, self-sustaining and robust manufacturing industry with capacity to produce goods and services for both the domestic and export markets

Martin Kadzere Senior Business Reporter
GOVERNMENT has approved the re-establishment of Special Economic Zones to create a vibrant, self-sustaining and robust manufacturing industry with capacity to produce goods and services for both, the domestic and export markets. According to a concept paper done by Ministry of Finance and Economic Development on the re-establishment of the SEZs, the ministry said “Cabinet approval of the re-establishment of SEZs is a great indication of Government’s initial commitment”.

The SEZ follow a similar concept to the Export Processing Zones, established in 1987 through an Act of Parliament.

The EPZ programme was managed and administered by the Export Processing Zones Authority. However, the formation of the Zimbabwe Investment Authority through the ZIA Act repealed the EPZA Act, which was the legal instrument governing the operations of EPZA.

The move meant that, administratively, the programme could not continue to run.

By 2004, projects under EPZ created over 32 000 jobs and US$172 million worth of investments. The EPZ incentives, which were used under the four instruments of the Finance Act were the Income Tax Act, Customs and Excise Act, Capital Gains Act and Value Added Act.

Meetings had been going on among Zimra, Finance Ministry, Economic Planning and Investment Promotion Ministry and ZIA with the objective of bringing back an export incentive scheme. The result of these meetings was that either the ZIA Act or the four instruments of the Finance Act be amended to make the EPZ incentives accessible.

Zimbabwe is facing one of its worst de-industrialisation crises as many companies are closing down due to economic challenges. The export-oriented sectors, particularly manufacturing, have not realised meaningful investment over the past three years, according to the Confederation of Zimbabwe Industries.

Zimbabwe’s export base is narrowing, with the country literally trading in deficit with most of its trading partners.

Zimbabwe remains unattractive to international financing, largely due to external debt estimated at about US$11 billion.

This has resulted in the un- availability of sustainable long- term funding. The available short-term loans are too expensive to assist industry. Zimbabwe’s once vibrant manufacturing base has shrunk, reducing the country into a nation of traders.

The net effect of this has been a debilitating liquidity crunch which has worsened the operating environment for companies in Zimbabwe.

The liquidity crunch, which started towards the end of 2011, has gradually worsened in 2013 resulting in several firms collapsing and many more struggling to meet their costs.

The July 2013 National Social Security Authority Harare Regional Employer Closures and Registrations Report for the period July 2011 to July 2013 shows 711 companies in Harare only closed down, rendering more than 8 000 unemployed. As such, the Government is in the process of creating an environment for macro-economic sustainability and restoring the economy’s capacity to produce goods and services competitively.

Such efforts include initiatives like the National Trade Policy, which seeks to focus productive sectors of the economy towards export orientation and international competitiveness while ensuring that Zimbabwean firms and households enjoy continuous access to a wide range of high quality goods and services.

In addition, the recently launched Zimbabwe Agenda for Sustainable Socio-Economic Transformation seeks to restore the manufacturing sector’s previous significant contribution to GDP while seeking to improve production and export of goods and services through value addition and sees this thrust as anchored in establishment of SEZs.

“To realise the above, Zimbabwe needs to encourage exports and foreign exchange earnings at the same time addressing the massive unemployment rate, broaden the economic base and attract development and new technologies,” reads excerpts from the concept paper.

“This can be achieved through an industrial policy legal instrument that encourages export-oriented manufacturing sectors in the country in an environment that offers the ideal business climate for manufacturing companies wishing to export to new markets from a restriction-free environment.

To address the above challenges, the Ministry of Finance and Economic Development seeks to re-introduce the Export Processing Zones under Special Economic Zones.”

The concept paper notes that the previous legislation on EPZ needs to be reviewed so that a legal and regulatory framework based on international best practices is put in place.

There should be a legal framework outlining private zone designation criteria, incentives and rights of developers and operators as well as for public, private partnership zones, outlining rights, obligations and commitments of both parties with respect to all aspects of zone development such as financing, regulation and promotion.

For SEZ to achieve the desired results, there is need for strong leadership and high levels of political oversight.

The paper notes SEZs should offer tailored solutions.  Citing China’s experience, SEZ should target particular industries that offer solutions to the challenges faced by those industries.

International best practice for successful SEZs models involves strong linkages and co-operation between the public and private sectors and as such Government should formulate policy to encourage PPPs, which are very vital for the growth of the economy. There is need to develop proper regulations to govern the SEZs before setting them up.

“This helps to define the rules of operation and brings clarity to potential investors on the opportunities, incentives and expectations upon them,” according to the concept paper.

“The SEZs should also ultimately be globally competitive. Studies have shown that it is not enough to be better than the host economy; few investment decisions are made on the basis of fiscal incentives alone.

“Investors consider location, market access and logistics, labour market prices, and favourable regulatory framework among others. As recommended from the COMESA Business Forum; a holistic approach is needed where the reforms will need to be introduced that will make the country more attractive to investors, which is good for the economy.”

Richard Sainsbury Business Correspondent
IN the face of a crippling liquidity crunch that has threatened to force the economy back into a recession, it has become apparent more than ever that the multi-currency regime which had stabilised the economy can also be very destructive if stakeholders such as Government and industry are not disciplined in planning and managing their finances.

Against such challenges, there has been a certain amount of warranted suspicion lately in regard to the return of the Zimbabwe dollar, which some purport to be an antidote to the perennial liquidity crunch that has bedevilled the economy. Amidst the speculation, there have been two main options discussed for how it could return; these are, namely, the gold-backed currency and the fiat currency.

The first option which has been discussed is Zimbabwe issuing gold-backed currency. Gold- backed currencies were the standard prior to 1947. The gold standard has since been abolished, with no currency currently in existence using the standard. The world currently uses a new currency standard called fiat money, which is a currency that has no intrinsic value but whose value is derived from the common understanding that it can be traded for goods and services.

In the ruins of the financial crisis in 2008, there has been much debate on the gold standard and its viability in comparison to fiat currencies. Without getting into too much detail, the following basic conclusion can be made on the economic effects of the gold standard in comparison to those of a fiat currently standard; “the gold standard curbs inflation but is prone to deflation and fiat money is prone to inflation but curbs deflation”.

Inflation in moderation is better economically than its proportionate amount in deflation, because deflation generally paves the way for a depression as declining prices lead to a decrease in incomes, and debts and unfunded liabilities become much more expensive to repay. Against this background, we do not think a return to the gold standard is viable.

In addition, it is also certain that no other country will move back to the gold standard because of its many limitations. By examining the option of issuing a gold-backed currency while the rest of the world does not, really highlights the impracticality of this idea. With the recent history of the behaviour of the Reserve Bank, and the memories of the hyperinflation that went with it, there is still distrust in the value of any currency that may be issued by that institution.

Because of such perceptions, if a gold-backed currency were to be introduced in the near future, the value of each gold-backed dollar must be 100 percent backed in value by gold. Any attempt otherwise would see an immediate run on the central bank. It would be more practical to debate about a gold-backed currency if the country had gold reserves at the Reserve Bank to back the currency, but unfortunately the RBZ has been technically bankrupt for a very long time. However, if we were to hypothetically assume that the country’s gold reserves are worth US$500 million and every dollar must be accounted for, the total value of all issued currency must therefore be equivalent of US$500 million. Against these assumptions, if Zimbabwe’s GDP is approximately US$10 billion, then applying the gold standard would effectively shrink the economy from US$10 billion to US$500million, which does not make any sense and also the reason why most countries in the world have abandoned this form of currency. There is no upside to such a currency, let alone the impracticality of any attempt to implement it. In addition, minerals beneath the ground are not commodities and cannot be sold until they are in a position to be sold. What this means is that they are essentially worth nothing until extracted and as a result cannot be leveraged into a currency as well.

The second issue that has arisen recently is that Zimbabwe needs its own currency so that it can implement tools such as monetary policy to stimulate the economy. So let’s explore the viability of Zimbabwe issuing a fiat currency. In our opinion there are so many problems with this but we will explore the two clear ones. Fiat currencies by nature are just notes that are legal tender, meaning that they can be traded in Zimbabwe for their value in goods and services. The value of fiat currencies is therefore derived from the two principle forces, namely, the supply of the currency and demand for the currency.

The central bank, which issues the currency, has complete control over the supply of currency and herein lies the first problem, which is that during the previous decade Zimbabwe went through the worst hyperinflation in history, the Reserve Bank issued/printed too much currency for the same amount or less output. The result of this was that there was too much money chasing too few goods causing inflation. It was compounded by a lack of confidence in the issuer as a result of its increased money printing which decreased effective demand and made the currency even less valuable. This continued until the currency became worthless and Zimbabwe moved to US dollars. Zimbabwe was able to do this because most transactions by this stage were already taking place in US dollars and the local currency didn’t have any value. Those memories are still fresh in many people’s minds; therefore there would be no confidence in the currency if it is reintroduced in the short or medium term, rendering the idea disastrous.

There is also a further problem with a premature reintroduction of a local currency, which would exacerbate the above situation. To explain this we will have to give a brief overview of how banking works. The world uses what’s called fractional reserve banking. Basically what this means is that when a deposit is made to a bank they now have an asset in cash and a liability in deposits. The bank must also have certain requirements of capital reserves. Now, when the bank receives a deposit it puts a proportion of this deposit into reserves and advances the remainder in the form of a loan. Thus the bank has effectively created more money in existence. In theory this money exists, however, the money is not available or liquid until the loan is repaid. This effectively means if everyone went to the bank demanding their money at any one time i.e. a bank run, the bank would not have enough money to pay the depositors their money back.

This situation is not unique to Zimbabwe and occurs everywhere. Another important point to keep in mind is that a large proportion of this money is not in physical notes and coins, it is held in accounts within other banks around the world. This is important because in theory if Zimbabwe issues its own currency, it would require all US dollars to be exchanged for Zimbabwe dollars at a certain exchange rate.

However, Zimbabweans, with recent memories of hyperinflation will more than likely not trust the newly issued currency and will attempt to keep the US dollar notes they already have and will attempt to withdraw their US dollars from the banks causing a bank run which will more than likely bankrupt the financial sector. To avoid this situation, the government would have to freeze all accounts which contain US dollars and convert them to the newly issued currency. This forced exchange will likely lessen the confidence of the newly issued currency, and by association the demand and the currency will collapse from the very moment of its existence.

However, the biggest obstacle if by some miracle Zimbabwe did manage to issue a new currency in the short or medium term is its impact on trade. Zimbabwe perennially struggles from a large trade deficit which has consequently made it difficult for the country to build its foreign currency reserves. A premature return to the Zimbabwe dollar or any new local currency in the absence of adequate foreign currency reserves would also render such a currency useless, as an overwhelming demand to exchange the local currency into foreign currency so as to import goods and services, will destroy the currency’s value over a very short space of time. Therefore, there is no upside to this and the clear lack of viability and benefit acts as the reasoning that there will be no Zimbabwe dollar return in the short to medium term.

• This article was written by Zimnat Asset Management for FinX.

Golden Sibanda Senior Business Reporter
GULLIVER Consolidated Limited is now firmly poised to bring in new equity investors or float a rights issue to raise funding required to clear liabilities to creditors following confirmation of Mr Reggie Saruchera as final judicial manager.Mr Saruchera has been overseeing the recovery process of the company as provisional judicial manager, but will now move a gear up to turn the firm around amid revelations there is “enough interest from prospective (equity) investors”.

Gulliver is struggling due to the depressed level of infrastructure development projects in Zimbabwe and was suspended from the Zimbabwe Stock Exchange in June 2012 after failing to produce financial results within the mandatory period.

It urgently requires funding to clear between US$4million and US$5 million creditors with financial obligations to about 100 of the firm’s workers also top of the priority list.

Technically insolvent, the company has operated without a managing director for close to three years, but the judicial manager is hopeful an upturn in heavy infrastructure and engineering projects will lift its fortunes.

To that end, prospects include a number of key projects in Government’s new economic plan, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation.

Mr Saruchera was recently confirmed final judicial manager having acted as provisional judicial manager since last year. He now has ample time and space to nurse it back to healthy state in terms of a viability plan he crafted for the firm.

Gulliver has over the years transformed into a steel engineering company. The group offers products and services ranging from the supply of all types of steel to fabrication of structural steel work, trailers, tankers, railway rolling stock, pressure vessels, hot dip galvanising and transport. While the industrial engineering company needs funding to clear different liabilities including to workers, the firm is most desperate to clear liabilities to creditors and a number of initiatives have been lined up to raise the required funds.

Grant Thornton Camelsa advisory manager Mr Bulisa Mbano said in terms of the company’s viability plan the company had come up with a number of initiatives including equity injection, disposal of some identified assets and a rights offer.

A couple of assets have since been earmarked for disposal, although it was not clear which ones would be sold with the possibility of a sale and lease back arrangement.

He said the fact that Grant Thornton Camelsa partner Mr Saruchera had been confirmed final judicial manager meant a number of key turnaround initiatives would be rolled out with priority on paying off creditors.

In terms of raising fresh funding, Mr Mbano said, preference would be given “to current shareholders and if they cannot, we will go for an open tender for new investors”.

“Gulliver is a business that depends on heavy infrastructure as well as industrial engineering and steel fabrication projects. Once projects pick up there is lots of prospects in Zim Asset and we think this will drive Gulliver,” Mr Mbano said.

“Over and above that, we will bring in somebody who wants to invest (and inject funding) as we can’t keep waiting because creditors want to be paid,” he said.

The judicial manager will also look at streamlining operations to cut costs, but it was not immediately clear if this would affect workers with some on shifts.

Happiness Zengeni and Golden Sibanda
THE ugly fight between banks and Econet Zimbabwe, the country’s largest telecoms company, has sucked in its subsidiary Steward Bank, amid revelations other banks have refused the bank entry onto the popular ZimSwitch platform, which is controlled by the banking industry.
Sources within the banking industry said ZimSwitch, majority owned by the banks in Zimbabwe that hold varied shareholdings, has been sitting on an application by Steward Bank to join its clearing and settlement network, in the wake of the ongoing wrangle between the banks and Steward Bank’s parent company, Econet.

Steward Bank has never been connected to the ZimSwitch platform.
Econet invested in the bank, formerly TN Bank, after pumping in about US$20 million to acquire a 45 percent shareholding in the financial institution.

Efforts to get a comment from Econet were fruitless yesterday as the company did not respond to e-mailed questions from the Herald Business. Similarly, no comment could be obtained from ZimSwitch yesterday.

“Other banks have lobbied against the admission of Econet’s banking unit (Steward Bank) in retaliation over the mobile phone operator’s refusal to allow banks free access to use its network platform,” said a source.

Banks have accused Econet Wireless of playing big brother in the financial market by engaging in practices bordering on monopolistic behaviour by refusing equal and unrestricted access to its mobile phone network for the provision of mobile based banking services.

Mobile phone-based banking services use USSD platforms that ride on third generation or GSM telecommunication networks, enabling mobile phone subscribers to access banking services from their cellular phones.

Financial analysts said that Steward Bank needed to be connected to ZimSwitch to link with automated teller machines, point of sale machines and other related online financial service systems banks offer.

Banks have in the recent past expressed reservations about the conduct of Econet and whether the mobile phone operator was behaving ethically.

The Reserve Bank of Zimbabwe has in the past said it was important to have co-operation among the players to ensure financial inclusion and advised that if not happy about the conduct of the company, banks should approach the firm’s regulators.

The feud between Econet and banks comes as Zimbabwe’s biggest mobile phone telecommunications operator has been rolling out a number of mobile phone-based financial services for its eight million subscribers including EcoCash, EcoCashSave and more recently EcoCash Payroll using Steward Bank as its focal point.

Just yesterday, Econet issued a Press release saying that its banking subsidiary was strong, safe and liquid.
Sources said banks recently approached the central bank again to intervene in finding common ground between the BAZ and the mobile phone operator.

The banks questioned whether mobile banking was properly regulated particularly around the issues of KYC (Know Your Customer) and platform sharing.

In response the RBZ, is said to have emphasised the need for co-operation between players in order to fully maximise the promotion of financial inclusion in the country.

Recently, BAZ president Mr George Guvamatanga said that Zimbabwe does not have a legal framework that governs mobile phone-based banking services, opening up the sector to unacceptable practices.

According to sources, Econet does not want players with equal financial muscle on the market to compete with its mobile phone-based financial product, particularly, EcoCash, because “they want to monopolise mobile space”.

The Zimbabwe Revenue Authority would like to remind its valued clients of the need to ensure that all outstanding and the remaining tax obligations for 2013 and prior years are fulfilled before the end of the current tax year.
Tax obligations for December 2013 include the following:
For your own information please be advised that:
Interest is levied where the tax due is not paid by the due date
In addition to the interest charged, penalties may also be imposed for late remittances of tax.

The respective tax returns are also required to be submitted by the due dates.
Penalties will be levied for late submission of returns at the stipulated rate of up to US$30 for each day that the return remains outstanding per Statutory Instrument 97 of 2013.

It is therefore in your interest to ensure that tax remittances are paid and tax returns submitted by the due dates. Taking into account the fact that some businesses may remain closed in early January, you are reminded of the need to ensure that remittances and returns due in early January are attended to before the end of the year.

Final Deduction System for 2013 tax year
Employers on FDS are also reminded to make the necessary end of year adjustments to employees PAYE in order to take into account the full year’s income, deductions and credits that will enable correct tax deduction for 2013 tax year.

You may apply for Tax Clearance Certificates (ITF 263) for the period from January to June 2014 in advance provided you have complied with all tax obligations up to the end of the current tax year. For tax returns please visit your nearest ZIMRA office or download from the website, www.zimra.co.zw

Due dates for January 2014 include the following:
To contact ZIMRA: Visit our website: www. zimra.co.zw; Follow us on Twitter: Zimra_11; Like us on Facebook: www.facebook.com/ZIMRA.11; Send us an e-mail: pr@zimra.co.zw; Call us: 04 –758891-5; 790813; 790814; 781345; 751624; 752731.

Business Editor
LOCAL private equity firm Brainworks Capital has been appointed as one of the key financial advisors to the US$325 million Atlas Mara investment vehicle.
Atlas Mara is a banking investment cash shell sponsored by Mr Bob Diamond, former Barclays Plc CE, together with Ugandan Mr Ashish Thakkar, which seeks to reinforce a rising sense of business opportunities in Africa.

Market watchers say although Atlas is a broad-based fund focused on Africa, having a Zimbabwean among the financial advisors would ensure that some of the funds will be channelled to the local market, which has over the years been starved of investments. Others say the move will provide a boost to financial sector investments linked to Brainworks such as Ecobank and ABC Holdings.

Brainworks, which arguably has been more active on the corporate finance side than most of its peers, is headed by Mr George Manyere.
Mr Manyere previously worked at the International Finance Corporation.

In fact, most of the team members assembled by Mr Diamond have had some work experience at IFC.
Mr Arnold Ekpe, a former boss of Africa’s Ecobank, was appointed chairman of the company, on an annual fee of US$125 000. The company also named a number of non-executive directors, including Ms Rachel Robbins, a former vice-president of the IFC, who will get US$85 000 a year.

In its prospectus, Atlas Mara has established a founder network from which to identify and generate acquisition opportunities. The company has engaged Jyrki Koskelo who has more than 30 years experience in emerging markets and in various roles at the IFC.

The company said: “In addition, the founders have relationships with the following local advisors across the African continent who they may call upon to assist the company in respect of the sourcing of an acquisition in the region.

These are (including Mr Manyere) Serengeti Capital’s Mr Francis Kalitsi, who was formerly the head of Real Estate Private Equity Business at Renaissance Capital in Africa, and prior to that worked at the IFC; Africa Consulting and Trading’s Mr Ibrahima Cheikh Diong, who also previously worked at the IFC and Bridge Capital Holdings; Mr Reuben Warirah, a Kenyan national who previously worked at the IFC.

The group will “focus on acquiring a company or business in the financial services sector with all or a substantial portion of its operations in Africa”, it said in the prospectus. The cash shell is likely to focus on a lender that banks the business sector, where the lack of capital availability is greater, rather than consumers.

Atlas raised US$325 million in an initial public offering in London.
Citigroup Inc was sole co-ordinator and bookrunner for the London IPO.

The group will seek to generate returns through operational improvements at the target company and from possible complementary acquisitions, according to the statement. The acquired company will probably have operations in markets with strong underlying fundamentals, “clear broad-based growth drivers” and an established regulatory system, the group said.

Economic growth in sub-Saharan Africa is forecast to accelerate to 6,1 percent in 2014 from an expected 5,6 percent this year, according to data from the International Monetary Fund. Investment is expected to rise to 23,2 percent of GDP from 22,8 percent in this year, according to the data.

“There are significant gaps in the market today including the need for capital created by European financial institutions retreating to their home territories due to the sovereign debt crisis and the Basel III regulatory framework at a critical time for growth in Africa,” the company said in the statement.

Martin Kadzere Senior Business Reporter
FIDELITY Printers and Refinery, a State-owned gold refiner, resumed operations on Tuesday this week after a major facelift of its Harare plant, senior officials said yesterday.
The company, a subsidiary of the Reserve Bank of Zimbabwe, ceased operations in 2007 after gold output hit a record low of three tonnes in eight years, making running the refinery unviable.

Since then, Zimbabwe has been sending its bullion for refinery and marketing to Rand Refinery of South Africa. The resumption of gold refining will pave way for Zimbabwe’s re-admission to the London Bullion Marketing Association, officials said.

“The plant is now up and running and they are refining between 10 and 13 kilogrammes per day,” said one source. “But even though we have resumed operations, we will continue marketing our gold through the Rand Refinery until we are readmitted on LBMA . . . maybe for the next three years before we can make an application.”

For a country to be re-admitted to the LBMA, it has to produce a minimum 10 tonnes per year.
The LBMA cancelled Zimbabwe’s membership in 2008 after it produced three tonnes of gold. Most gold mining companies had suspended operations after the Reserve Bank raided their foreign accounts, leaving the miners with very little or no working capital.

In the nine months to September this year, gold output rose 29 percent to 10,4 tonnes from the previous comparable period, earning the country US$483 million, the Chamber of Mines of Zimbabwe said.

Last year, gold production was 14 743kg, earning the country US$1,9 billion. Zimbabwe is targeting 17 tonnes of the yellow metal this year, but may fall of the target due to the fall in international prices. At its peak, Zimbabwe produced 27 tonnes in 1999.

The gold price peaked in August 2011 at US$1 883 per ounce, the culmination of a decade-long bull run. Ever since the dot.com bubble burst, investors have poured cash into the so-called safe haven, pushing the price skywards. This gold bull market coincided with the “lost decade” in equity markets, when prices slid sideways.

But since the 2011 peak, the value of gold has fallen more than 30 percent to just US$1 255.
Fidelity Printers has the capacity to refine gold and silver to purities of 99,5 percent and above using the miller chlorination and electrolytic refining processes.

The company is licensed to buy gold from large-scale producers, small-scale producers and holders of gold buying permits. Over the years, it decentralised its buying activities from Harare to cover the entire country, thereby significantly reducing the security risks associated with transporting gold for the small-scale sector.

Gold delivered to the centres is paid for on the spot after carrying out a specific gravity determination of the gold content. At the election of the customer, payment can be effected after performing the fire assay analysis.

London. — The British pound rose for the first time in six days yesterday versus the dollar after UK unemployment fell to the lowest since April 2009, fuelling speculation the central bank will need to raise interest rates sooner than it plans.
Sterling strengthened against all of its 16 major peers, even after minutes of the Bank of England’s December policy meeting showed policy makers said a further appreciation could hamper the economic recovery.

Britain’s government bonds fell, pushing the 10-year yield up from the lowest in two weeks.
“A large drop in the UK unemployment data is revitalising the pound,” Neil Jones, head of European hedge-fund sales in London, wrote in an e-mailed note.” — Bloomberg.

Business Reporters
ZIMBABWE’S life insurance companies wrote US$183 million in net premiums in the half quarter to September 30, 2013, according to figures from a report by the Insurance and Pensions Commission.
The report is based on 10 life companies.
This was an improvement from the parallel period last year when they recorded net premiums to the tune of US$129 million.
It also reflected a 33 percent and 86 percent annual and quarterly growth rates, respectively. This is attributable to improvements in policyholder confidence and the addition of two former funeral companies as highlighted above.

In terms of business composition, the IPEC report shows that for the period under review, the US$186 million in gross premium terms was constituted by 93 percent from recurring business and the balance of 7 percent was new business.

Corporate (employee benefit) business contributed US$132 million or 71 percent in gross premium whilst the balance was individual lines business.

“This trend may be attributable to the generally low disposable incomes moreso on the part of individuals and the shift of the economy towards the informal sector,” explained the report.

On the other hand, in terms of business composition by policy type, it was noted that the three major classes of business were from fund business (US$107 million or 58 percent), funeral (27 percent or US$50 million) and GLA (US$18 million or 15 percent).

IPEC says it encourages product innovation both to dilute this concentration risk and for sustainability of the industry in the long haul given the ongoing changes in the socio-economic environment.

Business Reporter
The Diamond Beneficiation Association of Zimbabwe says modalities are currently underway to set up of a funding vehicle for its members worth between US$30 million and US$50 million to allow full-scale operations in diamond cutting and polishing.
DBAZ chairman Mr Richard Mvududu told Herald Business that the association was optimistic that whatever funding model they were going to come up with after negotiations with potential financiers, the fund would go a long way in enhancing capacity utilisation.

“We realise that once we manage to establish a fund whether through issuance of bonds or assistance from the Treasury or any other model that we would have agreed on with financiers we are currently engaged with, members would benefit through accessing loan facilities.

“Currently, our members are sitting on capacity to process 75 000 carats of rough diamonds monthly which they intend to increase by 100 percent in the next one years. As such, funding remains critical in order to achieve this goal,” said Mr Mvududu.

He added that the actual value to be realised from the processing varied with different prices that the various companies access the gems at, but the association projects gross turnover to be around US$22 million per month.

Mr Mvududu said that once cutting and polishing capacity was enhanced, this also places Government in a position to widen it revenue collection base that is currently narrow.

The DBAZ chairman also said they would establish a diamond grading laboratory which would eliminate under-valuation of the gems.
“Value addition goes beyond cutting and polishing rough diamonds, but instead the value chain consists of about six stages, and as such our model as an association is to capacitate ourselves to get involved at all the stages.

“As such we also want to channel part of the funds that we are seeking to mobilise in the establishment of a diamond grading laboratory that will enable our rough diamonds to increase in their value,” he added.

The diamond value addition chain involves selling, cutting and polishing, cleaning and sorting, laboratory grading, jewellery making and retail of the finished product.

By participating in all these stages, Zimbabwe could fetch five times more in terms of monetary value.
Mr Mvududu expressed satisfaction at Government’s willingness to see the value addition and beneficiation agenda bear fruit, saying that they had already started the process of 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.

Minister Chinamasa

Victoria Ruzvidzo Business Focus
THE cash crunch that has afflicted the financial sector, in recent weeks particularly, is certainly cause for concern, especially in instances where demand for money by depositors has become riotous.
Such behaviour is not proper at all but I can understand them. People want their money and they should be able to get it on demand. All things being equal, of course. It is difficult to explain to a hungry man in the queue that such and such economic fundamentals are not in sync such that your US$400 is  presently inaccessible.

That all begins to sound Greek for someone who simply wants to put food on the family’s table.
The current scenario is most unfortunate but it is something that the banks themselves and monetary authorities have always been aware of or anticipated.

Indeed, the past few years have seen November/December experience long queues in banking halls and mumblings by depositors as they fail to withdraw their salaries and savings for the festive period.

It has always been a given that this time of the year experiences high demand for funds as families prepare for Christmas and this is also the time they may want to purchase whatever it is that they have been saving for, for the whole year. It is thus painful, if not traumatising, to then fail to access the funds.

We hope the Reserve Bank of Zimbabwe, the Bankers’ Association of Zimbabwe and other authorities will come up with an immediate solution to this challenge.

Words by a banker recently that we have no money and it is not coming from anywhere anytime soon continue to ring in my mind and I want to believe there is a way out.

The need to promote plastic money also becomes obvious in situations like these. I was amazed last week when one of the officials at the African Caribbean and Pacific group of countries secretariat in Belgium asked me to hand over a 50 euro note I was holding to acquaint herself with it.

She has been working in that country for more than 20 years so I could not understand how she would consider the currency they use everyday as something so rare in her life given her decent position.

She said she does not need to handle cash for most of her transactions including purchasing a train ticket. They use plastic money.
Of course, this is the developed world we are talking about, but Zimbabwe now needs to fully embrace this system of transacting. We always want to use cash and feel so much confident and in charge when we have wads of US dollar bills in our handbags and wallets.

Most of these queues will disappear once we use more of the cards. Banks are not helping matters though because in one shop you find a single dysfunctional point of sale machine while in some the machines are conspicuous by their absence.
The infrastructure to promote the use of cards needs to be put in place.

In the meantime, the advent of mobile banking has helped somewhat.
The bottomline though is that the economy needs a massive financial injection sooner rather than later.
I certainly do not envy Finance Minister Patrick Chinamasa on a day like today when he must bring hope to the millions that are experiencing one difficulty or another.

After his presentation, someone must be smiling but the question is, will Minister Chinamasa be able to make someone smile? Anyone for that matter.

We will wait to see the few tricks in his bag. It’s a difficult time he is going through and we commiserate with him.
The feedback I have received throughout the week in response to my column last week tells a story of a people desperate to get things working again.

Indeed, many feel that there are sections of the population that are wasting critical resources while corruption, a vice that has taken the economy two steps backwards for a long time, has continued to gnaw at the economy.

Some feel expenditure patterns by those in public office leaves a lot to be desired and that those found guilty as charged in this instance have failed to be exemplary leaders, betraying people’s trust in the process.

Others feel as suggested in my column, ministers and Members of Parliament should show the way by toning down their packages or buying local so the economy can make better use of the funds saved.

Too many leakages in the economy need to be plugged and strategies sought for normalcy to return. Below are some of the emails I received in response to last week’s instalment entitled “Time We Changed Our Priorities”.

“Nice article, my comments are below
1. If civil servants such as ministers and perm secs have two cars allocated to them, and the cars are top range vehicles, it’s difficult to absorb your line of thinking. When Zim had lots of money back then, these civil servants had one allocated car. If you wanted to go for a journey which requires an off-road vehicle, you had to surrender the one you have, park it at CMED, then they give you the off-road vehicle. Am sure you have understood where I am going.

2. Have you looked at the rate of business failures in Zim? Generally, they say 10 percent of startups see it into the next two years. This is a global ratio. What more of Zim. Business is tough. Really tough.

3. I don’t own a Merc but I desire to. But not at the expense of salaries, working capital for the current business. If you talk of expanding, am afraid I can’t do that at the moment. I would rather go property buying.

4. People in Zim are not paying. Just below your article is properties being auctioned by Agribank. I hereby invite you to our business in Willowvale.”
***

Another, who called himself “Nationalist”, said:
“I always appreciate your thought-provoking articles. You might like to consider the role that churches might play in mobilising thousands of their members to start companies and to invest in some of the cash-starved local companies.

“It might also be useful to undertake an investigative research into the banking habits of foreigners, mainly Chinese and Nigerians cos we hardly see them in banking halls.”
***

Farai Mazhandu, Administration, MCFC, had this to say:
“Your article in last week’s Herald Business makes interesting reading and refers.
“We are Millionaires Cashflow Club and happen to be a platform for the youth which focuses on elevating the financial well-being of Zimbabweans.

“We note with great sadness that there is a lot of money flying around individuals whilst the country is reeling under a liquidity crunch. We feel it is lack of financial education that makes people fail to deploy that money to make available goods and services thus driving the economy.

“In the process, these individuals improve cash flow problems in the economy and create more wealth for themselves. Until such a time that we have cultivated such a culture through improving financial literacy we may have to struggle as a country.
“Thank you for such great insight and we look to working with you to elevate the financial well-being of Zimbabweans.”

There you have it!

In God I Trust!

Feedback: victoria.ruzvidzo@zimpapers.co.zw