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.