Indigenisation not friendly

By Daniel chigundu

THE Indigenisation Act and Regulations have rendered the operating environment unattractive to investment especially in platinum mining, Tetrad Securities has said.

Under the Act (indigenisation) foreigners with businesses operating in the country are required to cede 51 percent of shareholding to locals, reportedly at no cost.

High ranking Zanu PF officials have repeatedly ascertained that by virtue of being indigenous Zimbabweans, locals are automatically entitled to free majority shareholdings in any foreign own business because they own the country and the resources being exploited.

However this type of indigenisation has been castigated by both local and international economists who argue that it is not suitable for the current economic situation obtaining in the country.

Earlier in the year Paul Jourdan, a consultant hired by the Ministry of Mines to craft the country’s Mineral Policy said the current indigenisation policy was wrong because the country is desperate for FDI to address skills and capital gap.

In its weekly market watch for the week ending November 15, 2013 Tetrad said while the country could benefit from the anticipated platinum deficit, the lack of investment in platinum mining due to indigenisation presents a worrying situation.

“We are encouraged by the platinum report in as far as Zimbabwe’s export earnings are concerned. With Zimbabwe having the second largest deposits of platinum, we believe the deficit position will somehow support prices.

“With platinum prices expected to trade between US$1,360 and US$1,580 an oz we are of the view that Zimbabwe will be able to lift its export earnings.

“Our major worry however relates to the indigenisation regulations which have been reported to be dragging down total production from Zimbabwe.

“Whilst the platinum sector has to a larger extent not been affected by indigenisation compared to other mining sectors, we maintain our view that the investment climate is not conducive.

“There is need for policymakers to formulate policies that encourage investment inflows in platinum production and also need for value addition so that Zimbabwe generates more value from its minerals,” said Tetrad.

Overall, the interim platinum market is set to record a much wider deficit of 605,000oz in 2013 compared to last years’ 340,000oz.

This will be the third consecutive year in deficit for the metal. Platinum prices have however been soft during 2013 as they have been unresponsive to supply side concerns mainly from strikes in South Africa.

The metal’s prices have fallen from a peak of US$1,730 in February to trade below US$1400. Into the future, Johnson Matthey forecasts another deficit for 2014 as demand will continue to outstrip supply.

Global supply for platinum on the other hand is expected to grow by a marginal 1.59 percent to 5.74million oz in 2013. According to the report much of the 1.59 percent growth is expected to come out from Zimbabwe.

This country is expected to register a record production of 400,000oz of platinum, which is an 18 percent increase compared to 2012’s production of 340,000 oz.

The growth is expected to emanate from Zimplats’ Phase 2 expansion which is expected to ramp up production at the mine. South Africa’s production which accounts for close to 75 percent of platinum supplies is expected to remain largely unchanged mainly affected by the legal and illegal strikes that have hit the sector.-

Economy in auto-cruise: Biti

By Daniel Chigundu

FORMER finance Minister Tendai Biti has said the lack of confidence and trust in the country has driven the economy into auto cruise mode.

Biti said the only possible solution that can take the country out of the situation was through moving towards building and restoration of the lost trust.

“If the wage bill is now 110 percent of total expenditure, self evidently there is no fiscal leg room to finance social services and public sector infrastructural programs. The truth of the matter is that the economy is on auto cruise to a melt down and fast.

“Economic fundamentals do not change dramatically within the space of three months. What has altered is confidence and trust. A trust deficit has emerged and with it all the things that happen in low trust high cost economy.

“The starting point is therefore not one of money or some dubious ill written policy. It has to be the building of, and restoration of trust and confidence.

“Speeches alone will not be sufficient but bold actions that will deal with issues of transparency, bilateral aid, foreign direct investment and the issue of the disproportionate wage bill,” Biti said.

Speaking on the delayed budget presentation Biti said it is wrong economics to assume that there is a Santa Claus out there who will fork out the billions of dollars that are required for a budget, arguing that  one must work with what is available, which he said is a lot of money were it to be well managed.

“…credit has a correlation with the debit that is the golden rule of accounting. As every accountant student or teacher knows out there, you give to the right what you take from the left. Some would prefer to call it “you eat what you kill”.

“So budget presentation cannot be delayed because of hope or ambition. The bad signals being send by delayed budget are just not worth the delay.

“Hard decisions must be made particularly on the expenditure side. There is too much hubris being carried which if boldly addressed can save a lot of millions,” he said.

Zimbabwe is experiencing a sluggish economic situation driven by such challenges as erratic power supplies, liquidity constrains and depressed capacity utilisation of 40 percent which continue to adversely affect the economy.

The Zimbabwe Revenue Authority (Zimra) last month published its third quarter (Q3) revenue collection performance in which it collected US$897.3 million against a target of US$904.9 million representing a negative variance of 0.84 percent.

This became the second consecutive negative variance after the six percent miss recorded in the second quarter (Q2).

In its weekly market watch surveys seasoned market watchers Tetrad Securities said the revenue collections by Zimra serves to highlight the difficult situations obtaining in the country and that if it continues it will create deficits that might bring headaches.

“Zimra’s Q3 report mirrors the slowdown in the economy. The revised revenue target of US$3.91 billion for 2013 according to the Mid-term Fiscal policy may be difficult to attain. This is so because we expect the current subdued environment to persist for the remainder of the year. More so, Zimra has only managed to report a positive variance of 5 percent in Q1 whereas for Q2 and Q3had negative variances of 6 percent and 0.84 percent respectively.

“Unless there are other sources of revenues for the government the 2013 revenue target seems unachievable. With government revenues expected to be below target we foresee the government failing to maintain its “eat what you kill” policy as government expenditure is not declining and not expected to decline anytime soon.

“For an already cash strapped government, low revenues may create deficits that may be difficult to fund especially given the fact that we are not using our own currency.

“The little contribution coming from mining royalties is also worrying. There is need for government to increase transparency on how mining revenues are accounted for especially on diamonds. This is also the same view shared by IMF,” Tetrad said.-

Long way before media uhuru

By Ndafadza Madanha

IN 2008 following a disputed poll Zimbabwe's three major political parties appended their signatures to the Global Political Agreement (GPA).

The deal brokered by former South African president Thabo Mbeki contained several reforms that were to be implemented by the inclusive government.

Amongst the reforms were media reforms and article 19 of the GPA spelt out the agenda for the inclusive government regards the proverbial fourth estate?

During its tenure the inclusive was expected to bring about several changes to the media environment that would have led to greater plurality of opinion accessibility and affordability for the people.

However, taking stock of the inclusive government against article 19 one cannot help but feel shortchanged.

The challenges that faced media practioners and the ordinary citizens in disseminating and receiving information are still entrenched.

One of the major concerns of media practioners was the criminal defamation law and some sections of AIPPA and POSA and expectations were high that the inclusive government would tackle these issues.

Unfortunately the inclusive government failed to deal with these issues and it had to take a constitutional court ruling to strike down the criminal defamation law.

To his credit the new minister of information and broadcasting services Jonathan Moyo had spoken against the law before the constitutional court intervened.

AIPPA still remains a big challenge to the quality of news as it restricts the amount of information journalists can receive and impart to the public.

The law places too much power in ascertaining what can and cannot be released for public consumption.

The African Commission of Human and Peoples Rights Special Rapporteur on Freedom of Expression have in the past called upon African states to repel criminal defamation laws.

The law is also in contravention of the Model Access to Information Law (MAI) by the African Commission on Human and Peoples’ Rights which seeks to give effect to the right of access to information as guaranteed by the African Charter on Human and Peoples’ Rights, to any information held by a public body or relevant private body; and any information held by a private body that may assist in the exercise or protection of any right.
The laws also demands the establishment of voluntary and mandatory mechanisms or procedures to give effect to the right of access to information in a manner which enables persons to obtain access to  information of public bodies, relevant private bodies and private bodies as swiftly, inexpensively and effortlessly as is reasonably possible;
MAI also seeks to promote access to information in public bodies, relevant private bodies and private bodies by obliging the same to keep and maintain information in a form and manner that facilitates the right of access to information.
It is a further objective of this Act, generally, to promote transparency, accountability, effective governance and development by, empowering and educating everyone to understand their rights in terms of this Act.
Indeed in some instances governments are justified in restricting information for security and national interests but this discretion must be used judiciously and ensure it does not unduly curtail the access of vital information.While proponents of the inclusive government point to the several licences issued to the private media as a sign of plurality one has to question whether more papers have meant more opinions and greater space for the marginalized voices.Granted more papers are a barometer for plurality but in a polarized Zimbabwe plurality has been meant for either or that position virtually narrowing voices that can be heard.Zimbabweans have over the past decade been deprived of new opinions our media has been polarized to an extent that anything outside the mainstream is regarded as fringe and not worth reporting on. The plurality in media titles has dismally failed to seek the opinions of the rural folk and statistics indicate the bulk of population resides in the countryside. Even the circulation of the newspapers is confined to urban centers.

According to the Zimbabwe All Media Products Survey (ZAMPS) for the first half of 2013 readership of daily papers continues to decline with a merge 1 percent of the rural pollution having moved from the abject poverty to the cash economy this hampers their ability to purchase newspapers if they are available on the market.The existing newspapers have failed to pay into a levy created to help in the establishment of community owned newspapers owing to the difficult economic environment prevailing in the country.The inaccessibility is not limited to the print media but also the electronic media with indications that only 30-50 percent is able to access the national broadcaster.While the BAZ granted two licenses during the tenure of the inclusive government the accessibility of these stations is largely confined to large cities and their content is skewed in favor of the urbanites.Far flung communities such as Beitbridge, Binga, Mt Darwin fail to receive information from the public broadcaster owing to lack of infrastructure.The formation of BAZ was underpinned by the desire to create an environment to ensure communities could receive and disseminate information.

Unfortunately the authority has failed to issue community licences owing to the restrictive measures, the status quo has effectively ensured communities that have no access to the national broadcaster cannot be part of the national discourse.

Failure by government to relax its stringent licensing requirements has ensured information remains elitist and accessible to small segment of the community largely urban dwellers.

The absence of community radio stations in Africa’s most literate state is at variance with the African Charter on Broadcasting which envisions public, private and community broadcasters.

The use of the internet as a source of news, while growing in Zimbabwe is still largely an urban phenomenon and government has in recent year’s shown propensity to monitor activities.

Going forward there seems to be need for greater accessibility of the country’s media avenues by all citizens. Diverse opinions must be accommodated if the country is to effectively deal with the challenges it faces. Laws that curtail the fundamental right to expression must be struck of all our statues.

Chibuku drives Delta earnings

By Daniel Chigundu

DELTA Corporation earnings per share rose nine percent to US$3.83 cents driven by an increase in Chibuku Super volumes, the company has said.

The positive result in sorghum beer has helped  grow the company’s total beverage volumes by four percent at a time when lager beer sales have slumped.

Lager beer volume was down 10 percent to prior year yielding to a soft consumer demand occasioned by liquidity and affordability constraints.

In a statement accompanying its half year results ended September 30 2013,  Delta said because of the impressive growth shown by sorghum beer they are focusing on commissioning a second plant for Chibuku Super in the second half.

“Sorghum beer volumes grew nine percent, driven by a successful introduction of the premium Chibuku Super. Investments are being accelerated to support the growth in Chibuku Super.

“Total beverage volumes grew by four percent over prior year, driven mainly by the recovery in sorghum beer,” the company said.

Currently the popular Chibuku Super is only being manufactured at Chibuku Brewery in Chitungwiza where the company has invested in access of US$6.5 million in a state of the art fully automated bottling plant purchased from a German company Krones.

In an interview earlier in the year,  company technical services manufacturing development manager at the brewery Brian Karemba said they are failing to keep the product in stock because of huge demand.

“We are excited by the level of demand that we have seen ever since the introduction of this product to the extent that we are not even stocking anything as trucks will already be waiting to deliver to customers.

“After packaging Chibuku Super, it is only taken into a warehouse as a formality for accountability purposes but it is not staying there for more than 10 minutes and as you can see the warehouse is empty and trucks are actually waiting for the product and such has been the demand since we started,” said Karemba.

Chibuku Super is brewed in the same way as the standard Chibuku but is fermented longer to a consistent alcohol level and is said to be smoother, has consistent quality taste and a longer shelf life of 21 days.

The Zimbabwe Stock Exchange listed blue chip company said they specifically invested in new equipment that has new technology to produce the desired results of the product.

While the Chibuku Super is being distributed in specific urban markets, investing in additional bottling lines will enable easy rolling out the product to other centers, including rural areas.

Meanwhile Delta has heaped blames on an increase in excise duty and liquidity challenges prevailing in the economy for the poor performance of its lager beer volumes arguing that it might hamper the benefits set to be achieved from the success of its barley contract scheme.

“Our 2013 barley contract scheme is expected to deliver record crop of over 40 000 tonnes indicating an improvement in yields to over 5.5 tonnes per hectare.

“Unfortunately the benefits of the contract scheme could be curtailed going forward in view of the downward trend in lager sales.

“The challenges of the disruptions to recommended retail prices arising from the excise duty increase remain. Our premium brands contribution have helped to mitigate the impact of this volume loss on revenue,” said Delta.

Liquidity crisis to persist

By Daniel Chigundu

THE liquidity crisis bedeviling the economy is likely to continue, unless government finds ways to attract long term deposits, seasoned market watchers have said.

Unavailability of long term deposits has been used by financial institutions as a panacea for not extending long-term loans to the productive sector at a time when most companies are in need of funds to recapitalise after a decade of misfortune.

Reserve Bank of Zimbabwe (RBZ) indicated that in September, demand deposits accounted for 58 percent, under 30-day 21 percent, long term 14 percent, while savings stood at 12 percent.

In their weekly market watch report for the week ending November 8 2013, Tetrad Securities said lack of long term deposits will affect the country’s economic growth.

“We are still of the view that policy makers need to find a way of attracting long term deposits as a way of reviving the sector and economy at large.

“The monthly trends by the RBZ on the monetary developments do not paint a sunny picture as the same old challenges continue to haunt a key sector within the economy. We are mainly concerned with the decline in the annual growth in total deposits.

“Such a trend implies that liquidity conditions will remain tight in the economy further curtailing economic growth prospects. Further to this, the transitory nature of deposits continues to create a mismatch as the industry requires long term capital compared to the available short term expensive capital.

“This explains the decline in capacity utilisation from 44 percent to 40 percent in 2013,” Tetrad said.

Meanwhile, the central bank published its monthly economic review paper for September 2013, where it said annual broad money supply growth declined from 5.77 percent in August 2013 to 4.89 percent in September 2013.

Tetrad said this decline mirrors the slowdown in the economy which has seen other sectors contracting leading to the gross domestic product (GDP) downward revision from 5 percent to 3.4 percent by the Ministry of Finance.

However, money supply increased by 3.01 percent on a monthly basis to US$3.91 billion in September compared to August’s US$3.79billion.

And this increase in money supply was attributed to inflows of US$87.83million at commercial banks according to the RBZ. However, deposits remained transitory in nature with demand deposits and under 30- day deposits accounting for a combined 74 percent.

Annual growth in credit to the private sector was down by 1.88 percent from 12.84 percent in August to 10.96 percent in September according to the central bank.

Tetrad said it also noted that the decline in private sector credit on an annual basis relates to the above mentioned factor of depressed demand in the economy.

Credit to the private sector on a monthly basis rose by a marginal 0.64 percent from US$3.69 billion in August to US$3.71billion in September. Outstanding loans and advances were mainly in respect of manufacturing (16.71percent), agriculture (18.38 percent) and distribution activities (16.72 percent).

The RBZ monthly economic review also highlighted that households accounted for 17.77 percent of total loans and advances to the private sector. As a result, the 3.01 percent growth in deposits compared to the 0.64 percent growth in credit saw the loan to deposit ratio for the sector improving to 95.07 percent from August’s 97.32 percent.

SMEs are own enemies

some of the SMEs at work

By Daniel Chigundu

 PERMANENT Secretary in the Ministry of Small to Medium Enterprises and Co-operative Development Evelyn Ndlovu has accused SMEs of pulling themselves down when it comes to accessing loans.

The permanent secretary who was guest of honour at a business conference held on the side-lines of the just ended third edition of the SMEs International Expo said SMEs can only get loans if they start banking.

“Our people (SMEs) are keeping money under pillows; they are not banking at all.

“If you are not banking you are actually killing the goose that lays golden eggs, because loans come from deposits, how then do you expect banks to give you money if you do not bank, let’s try and help banks to get money, let’s bank with them,” she said.

Ndlovu sentiments are in line with remarks made by Bankers Association of Zimbabwe president George Guvamatanga earlier in the year that it was not fair to encourage banks to give loans without encouraging people to first bring their money to banks.

The permanent secretary added that while her Ministry was doing all it can in trying to encourage SMEs to employ best practice in their businesses, it is the issue of record keeping that still remain a challenge.

Most SMEs in the country are reluctant to formalise their businesses with government for fear of being taxed and this has also put them at a disadvantage in accessing loans from financing institutions.

Zimbabwe is said to have about four million small businesses that mushroomed as a direct result of company closures that swept across the country in the last decade due to bad economic policies by government.

Statistics from the FinScope MSME Survey Zimbabwe 2012 SMEs account for close to six million jobs across all sectors of the economy.

Chinamasa unhappy with cotton

Cotton field

By Daniel Chigundu

FINANCE Minister Patrick Chinamasa says he is unhappy with the way farmers are dumping cotton in favour of the high paying tobacco.

The number of farmers who are turning to tobacco farming has been on a sharp increase in the past three farming seasons, and the increase has been attributed to competitive prices being paid for the “golden leaf”.

Tobacco Industry and Marketing Board (TIMB) a few weeks ago announced that 23 000 more farmers have registered to grow tobacco in the 2013/2014 farming season, taking preliminary figures of tobacco farmers somewhere in the region of 87 000.

Just in the past selling season close to 161 million kilograms (Kgs) of tobacco went under the hummer compared to 142 million Kgs sold in the 2011/2012 season.

Minister Chinamasa said the situation cannot not be allowed to prevail arguing that cotton provides more opportunities for the country, than any other crop.

 “…we are most unhappy about what is happening cotton industry; the Minister of Agriculture is going to look into that issue about cotton production. We are very unhappy that traditional cotton growers are migrating from cotton to other crops such as tobacco; this is a very unsatisfactory development.

“It’s something we should not accept, why because cotton throws up more opportunities for us, because it has more value chain. If you are talking about serious industrialisation, it should be along cotton value chain.

“So we would want to see that the growing of cotton is not collapsed and so we are going to formulate and come up with a policy to see that we do something and see what interventions we can make in cotton.

“We have to look at each value chain, who are the players, and what are they doing, who is abusing who and the necessary interventions have to be made,” he said.

Although cotton prices were increased early in the year from a minimum of US$0.35 per Kg to a maximum of US$0.58, farmers still feel the prices are low and not attractive enough compared to US$ 3.50 fetched by tobacco.

Statistic from the Cotton Ginners Association indicate that production of cotton has been on the retreating side failing to meet the 2012/2013 target of 250 000 tonnes and only settling for something in below 145 000 tonnes.

The increase in tobacco farming has not only taken its effects to cotton farming but also the critical maize production.

Zimbabwe recorded its all-time peak of 353 000 tonnes of cotton in 2000 and from that time production has been on a downward spiral.

The downward trend in cotton production and side-marketing by some unscrupulous farmers has also been attributed for causing the collapse of the country’s textile industry.-

Duty increase dangerous

Some imported goods being offloaded

By Daniel Chigundu

 MARKET watchers Tetrad Securities have warned government on the dangers associated with increasing import duty as it embarks on efforts to revitalise the country’s crumbling industry.

In its weekly market watch Tetrad said while clamping down on imports through duty increase will be good for local industry, the move is inflationary and will only serve to increase prices of goods.

“… regarding the influx of imports coming through the normal channel we are of the view that increasing duty is not a sustainable measure to ease the industrial challenges.

“Our view is that with the local industry capacity utilization shrinking, hiking import duty will be inflationary.

“This is explained by the fact that Zimbabwe is a net importer of most goods mainly from South Africa; hence hiking duty will only increase the cost of accessing imports.

“An increase in imports will ultimately see the consumer feeling the impact through increased prices which with static and declining disposable incomes will see citizens becoming worse off.

“The only long term solution to the challenges being faced in the sector is recapitalisation,” said the report.

Tetrad added that recapitalisation is the only sustainable root compared to protectionism in the form of hiking import duty; arguing that retooling will help corporates to buy updated plants and equipment which will improve quality whilst lowering overall costs of production.

Former Prime Minister Morgan Tsvangirai had also expressed concern over what he termed “absolute equipment bought in 1963” which he had said must go.

Economists are also of the view that with the current status quo, Zimbabwe cannot compete with imported goods as the country is relatively a high cost producer compared to regional peers.

Thus recapitalising will be a step in the right direction.

The only impediment however to solving the recapitalisation woes in the sector relates to how long term affordable capital can be unlocked considering the illiquidity in the economy.

Zimbabwe is facing serious liquidity challenges since the adoption of the multi-currency regime in February 2009 at the consummation of the now defunct inclusive government.

So dire is the financial situation in the country that banks are literary refusing to finance businesses on long term basis arguing that they have no capacity owing to the unavailability of the lender of last resort, a role normal played the central bank.

Bankers Association of Zimbabwe president George Guvamatanga has even made it abundantly clear that banks have no money of their own to lend on long term basis highlighting that majority of deposits are “money of call” and can be demanded at any time.

Former Minister of Finance Tendai Biti was in the process of trying to privatise the lender of last resort role when his term came to an end.

Zimbabwe is also said to be lacking clear economic policies and investor protection laws which are critical drivers in attracting foreign capital.