The ZIMBABWE Situation Our thoughts and prayers are with Zimbabwe
- may peace, truth and justice prevail.
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Business Report

      Zimbabwe hopes privatisation will attract cash
      April 1, 2004

      By Reuters

      Harare - Zimbabwe would speed up the restructuring of state-owned
assets over the next two years to attract foreign direct investment,
Priscilla Mapuranga, the spokesperson for the Privatisation Agency of
Zimbabwe, said yesterday.

      The government was emphasising the turnaround of public enterprises,
most of them debt ridden and a drain on the budget, she said.

      "The focus will be on restructuring between 2004 and 2006, with
privatisation being one of the options. Given the state of some of the
utilities, there is an urgent need for restructuring to ease the pressure on
the [budget]," said Mapuranga.

      Attention would focus on domestic carrier Air Zimbabwe, abattoir Cold
Storage Company, rail operator National Railways of Zimbabwe, iron and steel
firm Zisco and fuels group Noczim.

      The generation business of power utility Zesa would be restructured,
while the sale of 30 percent of telecommunications group Tel-One and mobile
operator Net-One would be resuscitated. The process to dispose of part of
the government's shareholding in the two entities was initiated two years
ago, but has since stalled.

      The government wants to sell 49 percent of Zesa's generation business
and will look for a strategic equity partner for Zisco once it has
strengthened the steel producer's balance sheet.

      Following the souring of relations with western countries, there are
indications that the government will be looking to the Far East for
partners.

      A strategic alliance partner in the Far East would be sought for Air
Zimbabwe.

      "The government's strategic vision for the restructuring programme is
to ... attract foreign direct investment, reduce the public sector borrowing
requirements and create effective market structures in sectors dominated by
these state enterprises," Mapuranga said.

      Subsidy figures for state enterprises were not immediately available,
but the government regularly carries the debt of the loss makers, sometimes
running into billions of Zimbabwe dollars.

      The Privatisation Agency of Zimbabwe had submitted a proposal document
for cabinet approval, listing problem areas and revenue targets.

      "The restructuring programme was not accelerated in 2003 as the
government was being cautious in the process as it embarked on agrarian
reforms. 2004 will see the intensification of the restructuring," she said.

      The economy is teetering on the brink of collapse, with donors such as
the World Bank withholding aid because of policy differences with President
Robert Mugabe's government. Foreign direct investment inflows have virtually
dried up on concerns over property rights.

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The Herald

Troubled banks fail to repay loans

Business Reporters
THE fate of some financial institutions that received liquidity support
under the Reserve Bank of Zimbabwe's Troubled Banks Fund hangs in the
balance amid revelations that some have failed to repay the loans extended
to them.

In February, the governor of the Reserve Bank, Dr Gideon Gono, set March 31
as the deadline for the repayment of all loans that were extended to
financial institutions under the fund.

Dr Gono said at the time that those banks failing to honour their financial
obligations before the deadline would have to seriously consider ceasing
operations as an option.

The banks that were assisted with liquidity support include Trust, Barbican,
Metropolitan, Time, and Century.

Apart from Century Bank and Barbican Bank, it was not immediately clear
whether the other financial institutions had repaid their loans by close of
business yesterday.

Sources at the central bank say that at least three of the six banks that
were assisted with liquidity support have managed to repay the loans with
the interest while the rest are still battling to repay.

While there are reports of some struggling banks receiving preferential
treatment from the regulators, it is understood that the defaulting banks
are likely to be placed under the management of curators if no immediate
remedy, such as a takeover by a sound institution, does not occur.

The RBZ has disbursed over $400 billion to the five distressed banks at an
interest rate of about 300 percent per annum.

Asset management firms seeking registration might also be facing the music
following the lapse of the period of granting of licences yesterday.

It emerged yesterday that several asset firms were also likely to wind up
their operations as only two entities have been granted operating licences
by the RBZ since it assumed the position as asset managers' regulator at the
beginning of the year.

Out of over 100 institutions that applied for registration, only Kingdom
Asset Management and Old Mutual Asset Management were issued with operating
licences before the expiry of the March 31 deadline.

Apart from the two, Sunpol Asset Management is likely to receive its
registration certificate after submitting the relevant documentation.

While no comment could be obtained from central bank officials yesterday,
the market remained anxious to see whether the country would be served by
two asset managers since a large number are understood to have failed to
meet the new registration requirements.

Registration fees for one to operate as either a fund manager or portfolio
manager or both now stand at $5 million.

The companies are expected to present a certificate of incorporation,
memorandum and articles of association and paid-up share capital of $500
million, which should not be borrowed funds.

Asset firms are also required to furnish the central bank with past
financial performance statements, proof of capital, details of directors and
the management structures and tax clearance certificates, among others.

Financial sector sources said the central bank had embarked on a "serious"
inspection exercise on asset firms during the past week and indications were
that the regulator was going to scale down profoundly the number of asset
managers operating in the country.

"Reserve Bank officials have been carrying out some intensive audits on a
number of firms in the past few weeks.

"The intention is to ensure that asset firms stick to their core business
and abide by the regulations," said a source from one of the affected asset
management institutions. Actually, indications are that may be 10 to 15
companies would be issued with operating licences as most of the other
companies' books are not in order," said another source.

Analysts said the firms had been allowed to continue in operation despite
the expiration of the registration deadline until the next week or two when
eligible companies are granted licences.

It is understood that of the few companies that are likely to be issued with
licences, the RBZ has prioritised asset managers linked to insurance
companies and banking institutions.

However, a very small number of independent institutions might also be
registered.
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unicef

$124 million humanitarian appeal launched for children in Zimbabwe
Zimbabwe Revised 2003/2004 Consolidated Appeal is Launched

ZIMBABWE, 1 April 2004 - The UN called on the international community for
USD $ 124 million in humanitarian funding for Zimbabwe today to meet the
urgent needs of the population. The Appeal will help UNICEF respond urgently
to prevent the further breakdown in essential health and education services
and to ensure that the country's growing number of orphaned and vulnerable
children are not forgotten.  The Appeal, known as the Consolidated Appeal
Process (CAP), stresses that five years of deterioration in the social and
economic sector have led to a serious humanitarian crisis. The Appeal is
being extended from 2003 to December 2004.
With high levels of unemployment, more than five million people food
insecure, and HIV/AIDS continuing to have a devastating impact on the
country, larger segments of the population are unable to afford or access
health services and education, increasing their risk of disease,
malnutrition, and destitution.

"We know that the brunt of this humanitarian crisis is being hardest felt by
the country's children, but especially the growing population of orphans,
who are most likely to end up hungry, out of school and at risk of abuse,"
said Dr. Festo Kavishe, UNICEF Representative.  "If we do not respond, the
price will be paid by these children, who deprived of an education, good
health and emotional support, will be ill-equipped to cope in a world as
adults."

Under the Appeal, UNICEF and its partners are calling for immediate
assistance in the following areas:

Emergency Nutrition Interventions - The nutritional status of the
population, especially children and households affected by HIV/AIDS, is
worsening.  Under the Appeal, priority would be given to strengthen
nutritional surveillance and co-ordination, to be better able to respond to
high risk communities.

Health Interventions - To prevent the further deterioration of child, infant
and maternal mortality, priority will be given to strengthen the health
services system's ability to respond to the outbreak of disease,
particularly cholera and malaria, and to ensure the maintenance of
immunization services for children.

Water and Sanitation Interventions - The agricultural drought of 2002, along
with 45% of the country's water systems not functioning, has led to
increasingly limited access to safe water and sanitation.  Funding is
urgently needed to repair and construct water facilities, and to respond to
the outbreak of water borne diseases.

Education Interventions - as school fees and levies have increased, in some
cases more than 2000%, many children are unable to afford to attend school
and drop out rates are rapidly increasing.  Funding is desperately needed to
ensure that children, especially orphans, are receiving a minimum standard
of education.  Priority will be given to providing basic materials to
satellite, peri urban schools and to schools with feeding programmes to
ensure that the most vulnerable children are reached.

Child Protection - The humanitarian crisis has affected not just the
physical but also the emotional and social welfare of children, especially
orphans.  Priority will be given to ensuring that these children have access
to counseling support, nutrition gardens, and basic services.

Emergency HIV/AIDS Interventions - Priority will be given to provide support
to those infected and affected by the disease, strengthening the Prevention
of Parent to Child Transmission and increasing HIV/AIDS prevention
activities.

To obtain a copy of the Consolidated Appeal or for more information, please
contact:

Shantha Bloemen, Communications Officer, UNICEF Zimbabwe,
Tel: +263 4 703941/2   Ext. 222     Mobile: +263 (0)91 276120
E-mail: sbloemen@unicef.org

Kate Donovan, Communications Officer, UNICEF New York,
Tel : +212 326 7452 Email : kdonovan@unicef.org
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Press Release No. 04/67
March 31, 2004
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA

IMF Statement on the Conclusion of 2004 Article IV Consultation Discussions with Zimbabwe

The following statement was issued in Harare on March 31, 2004:

A staff team from the International Monetary Fund (IMF) visited Harare from March 17-31, 2004 in connection with the annual Article IV consultation between the IMF and Zimbabwe. The purpose of the visit was to hold discussions with the Zimbabwean authorities on the economic situation and macroeconomic policies. The staff team also met with representatives of civil society, such as NGOs, the business and financial communities, political parties, and trade unions, as well as the diplomatic community.

Zimbabwe's economy has experienced a sharp deterioration in the last five years. Real GDP has declined by about 30 percent, and is still contracting. Inflation doubled in each of the last three years to reach 600 percent at the end of 2003. This has had dire social consequences: unemployment is high and rising, poverty has doubled since 1995, school enrollment declined to 65 percent in 2003, and the HIV/AIDS pandemic remains largely unchecked.

While this in part reflected exogenous shocks, such as inclement weather, structural changes in agriculture related to the way in which the land reform was implemented negatively affected agricultural production. In recognition of Zimbabwe's grave food shortages, foreign donors have provided large amounts of humanitarian aid, but other donor assistance has been curtailed because of concerns over governance issues.

Economic policies have not adequately addressed the difficulties. In particular, loose monetary policy intensified inflationary pressures and has left interest rates highly negative in real terms, imposing a heavy tax on savers, encouraging excessive borrowing, and increasing financial sector vulnerability. Excessive liquidity growth led to a flight to alternative assets that contributed to record increases in real estate and stock prices, hoarding of goods, and the depreciation of the parallel exchange rate. Exports suffered because of the uncompetitive official exchange rate, and official imports were severely constrained. However, reflecting strong performance in the last quarter, budgetary operations of the government were almost balanced in 2003. This was due to higher sales tax collections after the mid-year liberalization of most prices, including fuel, and the further compression of expenditure in real terms, including wages.

The staff team welcomed some of the steps taken in the 2004 budget, the December Monetary Policy Statement, and subsequently, the efforts to strengthen banking supervision. It encouraged the authorities to accelerate and broaden these efforts.

Among the recommendations discussed were:

  • The importance of a commitment to consistently focus monetary policy on taming inflation and reducing pressure on the exchange rate, taking into account the vulnerability of the banking system.

  • The need to gear fiscal policy to support monetary tightening.

  • Use of the exchange rate decisively to reinvigorate exports and contain import demand.

  • And, restarting tripartite discussions on Zimbabwe's economic challenges in a concerted and comprehensive way involving all social partners.

While Zimbabwe's arrears currently preclude access to IMF lending, further strong policy efforts would be an important signal of Zimbabwe's determination to address its serious economic difficulties. Such efforts would also begin to lay the basis for regularizing Zimbabwe's arrears to the IMF (US$290 million at end-February 2004) and other creditors. The staff team welcomed the authorities' recent payments to the IMF of US$6 million, and the renewed commitment to make further small quarterly payments of US$1.5 million. The IMF's Executive Board will closely examine the progress made on policies and payments when it considers the Article IV consultation report and the issue of Zimbabwe's overdue payments to the IMF in early July.



IMF EXTERNAL RELATIONS DEPARTMENT
Public Affairs: 202-623-7300 - Fax: 202-623-6278
Media Relations: 202-623-7100 - Fax: 202-623-6772
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Financial Times

      Industry wants 'conflict diamond' reports
      By Nicol Degli Innocenti in Johannesburg
      Published: April 1 2004 5:00 | Last Updated: April 1 2004 5:00

      The World Diamond Council yesterday recommendedthat all its members
submit an annual report detailinghow they are implementing measures to
prevent "conflict diamonds" from being sold in the world's jewellery shops.

      The proposal, at the close of the WDC's annual meeting in Dubai, is a
response to added pressure on the industry in the wake of a damning report
released on Tuesday by Global Witness - the non-governmental organisation
that first exposed how illicit trade fuelled and financed wars in Africa.

      "We proposed for consideration an annual reporting mechanism by all
members, patterned on the system currently in place for governments,"
Matthew Runci, WDC executive director, told the FT yesterday. "We will have
discussions on the merits of this idea, but I am sure there will be a
positive response from members."

      The WDC, representing all areas of the diamond industry from mining to
retail, has a driving force of the Kimberley Process, a UN-backed scheme to
halt illicit trading by compelling all trading or producing countries to
issue a certificate of origin for every diamond, to guarantee it does not
come from a conflict zone.

      But the spotlight at the summit turned on the WDC and on US jewellery
retailers , accused by Global Witness of not doing enough to implement the
system of warranties agreed by Kimberley Process participants.

      The WDC has accepted Global Witness's criticism that it is not doing
enough, but strongly rejects the accusation that the industry's commitment
to the Kimberley Process is "not much more more than a public relations
manoeuvre with little credibility behind it".

      Both Global Witness and the WDC yesterday reiterated support for the
process.

      Tim Martin, chairman of the Kimberley Process, yesterday praised the
United Arab Emirates for volunteering to be the first country to be reviewed
for compliance by a mission made up of government, industry and NGO
representatives.

      Half of the 61 member countries have already put themselves forward
for a "peer review" and 19, including the Democratic Republic of Congo,
Congo-Brazzaville and Zimbabwe, will be inspected in the next year.

      Countries' willingness to be inspected showed the process was working
even if the monitoring process was not mandatory, Mr Martin said.
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The Herald

GMB pays $80 billion to farmers

By George Chisoko
The Grain Marketing Board has paid $80 billion to farmers for the maize and
wheat delivered to the board's depots countrywide in the just ended
marketing season.

The GMB's marketing season runs from April 1 to March 31. During this period
the board bought 250 000 tonnes of maize and 52 000 tonnes of wheat from
farmers.

In a wide-ranging interview, GMB acting chief executive Colonel Samuel
Muvuti said the board was confident that all farmers had been paid for their
maize and wheat.

Farmers who had still not been paid, if there were any, said Col Muvuti,
were free to approach the board to establish how they could have been left
out.

For the coming marketing season, the board expects to buy about one million
tonnes of maize from farmers.

Buoyed by the late rains, a bumper maize harvest has been forecast, with
production expected to be around 1,8 million tonnes of maize, which is what
the country needs to meet national food requirements.

The strategic grain reserve should hold 500 000 tonnes of maize at any given
time, while the remainder would be in the form of cash.

"We are expecting a production of 1,8 million tonnes of maize although
farmers will not deliver the whole tonnage to us. They will certainly retain
some for household consumption,'' said the acting chief executive.

The GMB, however, continues to grapple with the problem of side-marketing of
controlled crops, such as maize and wheat.

"This is a real problem we face - that of externalisation of maize and
wheat. We want to warn people against this practice as the GMB Act has since
been tightened, making the exportation of maize as serious an offence as
that of dealing in gold.

"We want to warn the public strongly that if they are found dealing
illegally in maize and wheat, there will be no excuses as they will face the
full wrath of the law,'' said Col Muvuti.

The board was making frantic efforts to ensure funds to pay farmers this
marketing season were available. It hopes to pay farmers promptly for their
crops and that payment would not exceed five working days.

The depot network has been increased from 68 to 90, in addition to several
collection points that would be set up. This should speed up payment and
help farmers cut down on transport costs.

"We are also adequately prepared in as far as empty grain bags are
concerned. In fact, we are buying 26 million grain bags but given the
expected intake, they may not be enough. We should not have any problems
sourcing the bags.''

The GMB has warned companies that had signed Memorandums of Understanding
with the Government to finance farmers against engaging in side-marketing.

"We have information that some of these private companies have been
exaggerating the levels to which they had supported the farmers," Col Muvuti
said.

"They talk of financing a farmer's 10 hectares and give a production of 300
000 tonnes. That is impossible from 10 hectares. The idea to mislead is to
allow them to mop up all the grain around the farms they financed.

"We must strongly warn them against this and if we find them doing this,
then they stand to lose out totally, even the grain they financed.''

To ensure that all farmers deliver their maize to the GMB, the board has
finalised a contract with the National Oil Company of Zimbabwe for the
supply of fuel to designated points for GMB maize transporters.
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The Herald

Police descend on school heads

By Tsitsi Matope
POLICE have quizzed and charged 32 headmasters of private schools who
allegedly increased fees and levies without approval by the Ministry of
Education, Sport and Culture.

The headmasters are expected to appear in court as soon as police finalise
their investigations.

Police yesterday said they are charging the heads of Arundel, Bishopslea, St
George's College, Heritage, Eaglesvale, Gateway High and Primary, St John's
College and Preparatory, Chisipite Senior and Junior and Lusitania schools,
from Harare, with breaching the Education Act.

In other parts of the country the schools are Hillcrest College in
Manicaland, Barwick Primary in Mashonaland Central, Peterhouse and Watershed
in Mashonaland East, Rydings and Bryden Primary, Lomagundi College and
Lilfordia in Mashonaland West, and Kyle High and Primary schools and
Riverton Academy in Masvingo.

Carmel Primary, Dominican Convent and Petra College in Matabeleland North,
Falcon College in Matabeleland South and Midlands Christian College complete
the first list.

The action against the heads of these private schools follows the suspension
of almost 70 heads of Government schools whose school development
associations raised levies without obtaining approval from the ministry.

It is known that many disciplinary hearings have been heard but the results
have not been made public. Hearings are conducted by the Public Service
Commission, not the ministry.

The Zimbabwe Teachers' Association yesterday criticised both high fees
charged and the delays in the ministry making decisions when schools apply
for approval of new fees or levies. The association called for negotiations
by all stakeholders to resolve the issue.

Zimta secretary-general Mr Dennis Sinyolo yesterday said his association
does not support the stance taken by some schools to increase fees and
levies.

"This promotes segregation among students. We believe education and access
to education is a basic human right and the situation must be corrected," Mr
Sinyolo said.

But from an analysis his association had carried out, it was clear, he said,
that not all headmasters wilfully or unilaterally increased fees.

"The Ministry of Education, Sport and Culture is also to blame at some
instances where the schools had sought authority in writing and the
paperwork was delayed by the ministry."

Mr Sinyolo said the Ministry of Education, Sport and Culture should know
that not only the headmasters were involved in increasing school fees and
levies.

"School development associations and other committees are also consulted
before fee increases are approved and effected," he said.

Mr Sinyolo said all stakeholders should come together and find an amicable
way of resolving the matter through negotiations.

Although the school governors set fees at private schools and school
development associations set the levies at Government schools, the Education
Act lays the burden on the head, hence the ministry and police action
against these heads.

Many schools have been holding meetings in recent days and weeks to seek
parental approval for new fees and levies for next term. The figures being
mentioned are significantly above the amounts that have led to the
suspension and charges against school heads this term.

At least five schools have achieved 100 percent approval from parents at
these meetings while others have achieved votes in excess of 90 percent. The
small minorities have cited affordability as the reason for their dissent.

Parents at some schools are known to be organising referendums, without the
involvement of school authorities, to gauge the feelings of all parents,
including those who did not attend meetings. Others are considering taking
direct action to persuade the ministry that what their school applies for is
what they want.

Since the early 1980s the ministry responsible for primary and secondary
education has demanded detailed budgets from boards of governors or school
development associations before considering whether to approve increases in
fees at private schools or levies at Government schools.

But it has almost always gone along with what was applied for once satisfied
that a significant majority of parents agreed, or at least did not disagree.
Government and local government schools were forbidden to close their gates
to children whose parents did not pay the levies.

Only this term has the policy changed.

This term a minority of schools affected in the list of about 100 where
action has been taken did not apply. Most who applied have received no
answer and assumed that this meant the ministry did not disagree, as was the
case in the past. A few did receive either approval or had a directive to
reduce the fee or levy applied for.
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The Herald

Zanu-PF probes own companies

Herald Reporter
THE Zanu-PF Politburo yesterday set up a high-powered committee to take
stock of the ruling party's full portfolio of companies, investigate their
financial operations, directorships, shareholding structures, business
performance and benefits to the party and its membership over the last five
years.

The five-member committee is chaired by the party's secretary for finance,
Cde David Karimanzira, who is also the Resident Minister and Governor for
Mashonaland East, and includes retired army commander General Solomon
Mujuru, former Minister of Finance and Economic Development Dr Simba Makoni,
Resident Minister and Governor for Matabeleland North Cde Obert Mpofu and
the party's deputy secretary for transport and welfare, Cde Thoko Mathuthu.

The committee, which started working yesterday, is expected to first come up
with detailed terms of reference before proceeding with work which will
involve looking at a range of companies said to be either owned by or linked
with the ruling party to determine the true position.

The work of the committee is likely to spill beyond Zimba-bwe's borders as
some of the companies are said to be international and registered elsewhere.

This comes against the background of a recent shake-up of the financial
sector in which a number of companies have been caught on the wrong side of
the law, accused of externalising foreign currency and violating the
Companies Act, with many facing serious problems of corporate governance.

One of the firms said to be linked with Zanu-PF is the Treger Group of
Companies that is embroiled in illegal foreign currency dealings.

A number of companies which illegally dealt with the Treger Group of
Companies in foreign currency have been fined millions of dollars after
being convicted at the courts.

Cellphone operator Telecel Zimbabwe is expected to be sentenced today after
being convicted of illegally dealing in foreign currency.

A Telecel board member, Jane Mutasa, is also awaiting sentence after being
convicted of illegally dealing in foreign currency.

Observers said this move by Zanu-PF is significant as it demonstrates the
party's commitment to clean Government, clean politics and clean business.

President Mugabe has recently said no stone will be left unturned in the
fight against corruption and promotion of good values in the national
interest.

Last year, Cde Mugabe noted that some Zanu-PF members were in the party to
use their positions to seek riches instead of serving people.

The Government last week gazetted the Anti-Corruption Commission Bill, which
seeks to establish a commission to fight graft, giving a major boost to its
clampdown on corruption.
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From: "Trudy Stevenson"
Sent: Thursday, April 01, 2004 3:07 PM
Subject: Parliamentary Committee report on National Youth Service camps

(Even the whitewashing done by ZanuPF could not clean up everything!  Full
report not yet available. T)
.......................
Herald
Last Updated: Thursday, 1 April 2004
Committee rebuts reports on national service

Herald Reporter
THE parliamentary portfolio committee on Youth Development, Gender and
Employ-ment Creation yesterday dismissed reports alleging that there was
rampant sexual abuse at the national youth service training centres.

Moving a motion to present the committee’s report on national youth service
training centres, committee chairperson and Gokwe West MP Cde Ester Nyauchi
(Zanu- PF) said at its inception the programme had not been adequately
marketed and so the public had no idea about it.

"Mystery surrounding the training ensued, resulting in negative publicity,"
she said.

"Your committee questioned instructors and students on whether girls have
heard, seen or experienced molestation either from the instructors or from
other trainees and the answer was no."

Cde Nyauchi said girls that were interviewed at Guyu, Mushagashe and Border
Gezi training centres testified that they were safe and were treated equally
as the boys while contact with boys was strictly supervised. She, however,
said girls must be given adequate sanitary ware.

The national youth training programme, Cde Nyauchi said, could be of value
to the Zimbabwean youths if planned more carefully and more resources should
be channelled to support it.

"The duration of the training has been reduced from six to three months,
because of the financial constraints," she said.

Cde Nyauchi said there was need for the training centres to improve on the
food given to trainees as the diet was inadequate at all the three centres
that the committee visited.

The legislator said the trainees should also be supplied with training kits
as some of them were wearing civilian clothes during training.

Cde Nyauchi said living conditions at some of the training centres should be
improved as the committee was distressed at the conditions at Guyu where
both male and female barracks had no doors.
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FinGaz

      Minister outwits RBZ, suitors

      Hama Saburi
      4/1/2004 7:43:50 AM (GMT +2)

      CORPORATE vultures on the cusp of taking over Zimbabwe Building
Society (ZBS) have been gazumped after it emerged that former owner Francis
Nhema, who had an inglorious exit from the society, has clinched an out of
court deal to retain control of the troubled mortgage lender.

      This brings to an end the long drawn shareholding dispute between the
ailing society's former shareholders led by Nhema, the Minister of
Environment and Tourism, and the Reserve Bank of Zimbabwe.

      The shareholding dispute, which arose after it emerged that the RBZ,
which put ZBS on a life support system through its liquidity support and
equity injection, had made a costly error by overlooking the transfer of the
society's ownership into the Finance Trust of Zimbabwe (FTZ). FTZ is a
subsidiary of the RBZ, which had, to all intents and purposes, become the
new owner of the institution after it injected the $400 million bail out
package.

      The assistance by the RBZ was supposed to result in the restructuring
of the society's shareholding, but this did not happen. It only occurred
much later to the low-profile Privatisation Agency of Zimbabwe, which was
advising the central bank that the RBZ had overlooked the transfer of ZBS'
ownership into its name when it hurriedly moved in with the rescue package
in August 1998. It is this technical glitch which was threatening to spill
into a legal minefield, that Nhema and other shareholders have taken
advantage of. It was first revealed in The Financial Gazette in July 2003
that the minister was digging in his heels over the ZBS shareholding issue.

      The same misunderstanding also threw spanners in the government's
failed plans to spin-off the society, which has since projected cumulative
losses of close to a billion for the six months to June this year. Nhema - a
founding shareholder and managing director of ZBS - scuppered the RBZ's
plans to dispose of its stake in the building society in February 2003 when
he demanded the right to first refusal, saying he and other shareholders
whom he represented still owned the society.

      Impeccable banking sector sources said that Nhema, who has never made
secret his reluctance to let go of the society he founded in the 1990s,
emerged a relieved man last month after a meeting with the central bank.
They said that at the meeting held some time this year, the minister agreed
to buy out the central bank and look for other shareholders.

      The sources indicated that the minister, who is also the son-in-law of
the late vice-president Joshua Nkomo, bought back the society from the RBZ
at a cost of $1.6 billion. Nhema is understood to be currently putting
together the finance package to pay off the central bank.

      Other sources close to the minister indicated that according to the
agreement to terminate loan and other facilities signed between the FTZ and
the ZBS, the funding would be in place by April 15 2004.

      Four institutions - the National Social Security Authority, ZimRe
Holdings, the People's Own Savings Bank and the National Investment Trust -
had expressed interest in ZBS before the sale was put on ice, resulting in
the building society operating on a thin capital base.

      Lawyers representing Nhema confirmed the latest twist to the
controversy surrounding the ownership of ZBS. They said they had
successfully presented their client's case to the monetary authorities, who
appeared reluctant to inject fresh capital into the society before the
dispute was resolved.

      "We didn't go to the courts, we just wrote a letter to the Reserve
Bank, which led to a settlement, which is documented," said Canaan Dube of
Dube, Manikai & Hwacha Legal Practitioners.

      Nhema could not be contacted for comment as he was said to be out of
the country on business. He is only expected back after about two days.

      Sources said the outcome would mean that Nhema and other shareholders
namely Continental Capital, the disgraced Nicholas Vingirai's Transnational
Holdings, Real Time Computers, the National Insurance Company of Zimbabwe
and Fidelity Life would have to repay whatever the RBZ had invested into
ZBS, which now boast of a network of 16 branches.

      The Financial Gazette could not immediately establish whether all the
investors had not signed over their share to the central bank.

      An official for Fidelity Life said the issue was being dealt with "at
a very high level", adding that the only person who could respond to issues
raised by this newspaper was the managing director, Mr Simon Chapereka, who
is currently on business in Malawi.

      The RBZ took over 100 percent control of ZBS in November 1998 when the
society almost collapsed due to a serious liquidity crunch that emanated
from its exposure to fake Cold Storage Company bills issued by the collapsed
United Merchant Bank owned by the late business magnate Roger Boka.

      It was the RBZ's intention to whittle down its shareholding by 94
percent through the privatisation of ZBS, but it ran into a wall of
complications before spinning off the shareholding after Nhema stuck to his
guns to retain control of the society, which is said to be in stress and
facing financial difficulties that could only be sated by a huge cash
injection.

      Sources said given the status of the society, there was an imperative
need for the shareholding dispute to be resolved urgently. Doing so would
place the society on a sound financial footing.

      The immediate task confronting the new shareholders would be to
recapitalise the bank, which they could do by involving other institutional
partners given the size of the capital needed by the central bank as of
September this year.

      Sources said indications were that Nhema would remain a shareholder in
ZBS and might appoint someone to represent his interests on the bank's board
of directors.
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FinGaz

      $400 billion bailout for banks

      Staff Reporter
      4/1/2004 7:45:28 AM (GMT +2)

      THE Reserve Bank of Zimbabwe (RBZ), accused of high-handedness in
handling the unfolding crisis in the overcrowded banking segment, has in
actual fact doled out close to $400 billion in just three months to throw a
lifeline to troubled banks - indicating that the authorities are wary of
letting banks twist in the air.

      The temporary but critical life support offered under the central bank
's Troubled Banks Fund between January and March this year, gave most of the
banking institutions vital breathing space although it is too early to give
them a clean bill of health as some of them are still stuck in the woods.
There had been heightened fears that the central bank, which recently
announced a tight monetary policy, could allow weak banks to fail.

      Some of the institutions are understood to be frantically casting
around for possible white knight bidders to save them from imminent
collapse. Most of them have confirmed that they are in exclusive talks for
strategic tie-ups as a quick route to stability. A couple, among them
Century, have since indicated that they are on the verge of agreeing
strategic marriages.

      The banking sector, the erstwhile bright spot in an otherwise sagging
economy, had until now been seemingly in fine fettle, realising thumping
earnings growth. It however touched off what has turned out to be a rough
and tumble-trading period after the RBZ pierced through the corporate veil
and uncovered a façade of stability. Most of the banks experienced a
life-threatening liquidity crunch due to speculative non-banking activities
and business dealings with insider and related parties, which negatively
impacted on their capital adequacy ratios.

      Former banking bellwether stock, Trust, founded by William Nyemba, the
first high profile institution to be caught at the scene of the financial
accident which has spawned boardroom coups and wholesale management changes,
was given a liquidity assistance of $223 billion under the fund. Impeccable
banking sector sources said up until last week, Trust had repaid only $80
billion towards the facility which, according to the sources, expired
yesterday. It could not be ascertained whether the banking monolith had
fully repaid the RBZ before the facility expired.

      Intermarket Holdings Limited, founded by self-proclaimed born-again
Christian Nicholas Vingirai, who is now in self-imposed exile, was thrown a
lifeline of $100 billion at the beginning of last month. This was after it
emerged that Intermarket Discount House was saddled with a delinquent loan
portfolio of $192 billion and required specific provisions of $170 billion,
which rendered it technically insolvent. Despite the liquidity support, the
institution continued to be dogged by solvency problems. Three of its
subsidiaries were placed under curatorship as the central bank moved to
ring-fence troublespots to stave off contagion and protect depositor funds.

      This comes as it emerged that the Bank of Zambia had also unearthed
"serious corporate governance and risk management malpractices" at
Intermarket's Zambian subsidiary. Sources at the Zambian central bank, who
declined to be named for fear of reprisals as they are not allowed to talk
to the press, yesterday confirmed this. The sources said that Zambian
regulatory authorities had recommended the removal of Vingirai as the
chairman of Intermarket Zambia as well as the entire senior management team
to rectify the deteriorating situation at the institution.

      Century Bank, one of the banks that lost its way during the financial
sector mayhem, received $30 billion in liquidity support in January. Century
which insiders said had contracted Corporate Excellence, an advisory
services firm to do a due diligent for a strategic partner, was also exposed
to the collapsed ENG through Century Discount House. ENG, which ironically
had an 18 percent stake in Century Holdings, is facing bankruptcy
proceedings and creditors left in the lurch to the tune of hundreds of
billions of dollars are reportedly scrambling for the collapsed institution'
s assets. Century is however understood to have repaid $23 billion by
mid-February and the remainder was expected to be repaid by mid-March.

      Metropolitan Bank, owned by ZANU PF sympathiser Enock Kamushinda, owes
the central bank $22 billion. It could however not be established how much
the bank was advanced as liquidity support. Metropolitan, which had a
defective corporate structure prior to the forced recent board and
management changes, was given the money after it hit stormy waters in the
midst of the all-embracing banking sector malady. The bank is also owed a
whopping $32 billion by the troubled Zimbabwe United Passenger Company.

      Another bank which has since been placed under curatorship and owned
by Dr Mthuli Ncube is the heavily undercapitalised Barbican Bank which
however managed to repay the $6 billion it was advanced by the central bank
under the temporary liquidity support.
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FinGaz

      Banking firms queue at Old Mutual's door

      Nelson Banya
      4/1/2004 7:46:47 AM (GMT +2)

      CASH-RICH Old Mutual is reported to be inundated by pleas from
distressed banking institutions keen on offering the financial giant equity
as an escape strategy from the current crisis that set upon the financial
sector since the turn of the year.

      Old Mutual, which through its various subsidiary companies holds
significant stakes in a multitude of Zimbabwe Stock Exchange (ZSE)-listed
firms, has, hitherto, given most of the indigenous financial institutions a
wide berth.

      However, most of the banking institutions, which were afflicted by a
debilitating liquidity crisis and had to be bailed out by the Reserve Bank
of Zimbabwe (RBZ) through its Troubled Bank Fund on condition that they
brought in shareholders who would inject new money, have reportedly lined up
at Old Mutual's stoep.

      Although only Trust Holdings has gone public on its intention to ask
Old Mutual, a holder of about six percent shareholding in the group, to pour
in fresh money, several other institutions are believed to have expressed
the same desire.

      "No less than a dozen banking firms got liquidity support, which some
of them are failing to repay because deposit mobilisation efforts have been
compromised by sagging public confidence in the so-called new banks.

      "The only option would be to bring in shareholders endowed with cash
to inject fresh money, hence the popularity of Old Mutual among these
institutions. But the problem lies in that that particular institutional
investor is not counted among many of the new banking institutions, and the
major cause of that is lack of faith in their business," a financial sector
source said.

      Old Mutual, which has largely stayed out of most of the newer banks
and shown an inclination towards "quality", is a significant shareholder in
Trust, Kingdom Financial Holdings Limited (about 14 percent), African
Banking Corporation (16.06 percent), Barclays (about 17 percent), NMB
Holdings (about 20 percent) and Zimbabwe Financial Holdings Limited (8.66
percent).

      Sources said apart from the cash resources Old Mutual possessed, most
institutions were drawn by the near apathetic approach of Old Mutual as an
investor.

      "Almost typically, Old Mutual has never been an active institutional
investor, does not ordinarily demand a say in board and management issues.
Old Mutual's recent history at South Africa's Nedcor testifies to this when
management came under fire and minorities expected Old Mutual, as the major
shareholder, to act. they were greeted with indifference. So maybe that is
what some of these institutions have been hoping for," a source said.
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FinGaz

      MDC challenges ZANU PF win

      Acting News Editor
      4/1/2004 7:48:10 AM (GMT +2)

      THE Movement for Democratic Change (MDC), defeated by ZANU PF in the
recent Zengeza parliamentary by-election held last weekend, said it will
challenge the results of the poll in the High Court citing violence prior to
and during the voting period as having cost them the seat.

      This brings the number of election petitions by the opposition to 38
excluding the presidential petition where the MDC leader, Morgan Tsvangirai,
is seeking the nullification of President Robert Mugabe's victory in 2002,
arguing the poll was marred by unprecedented human rights abuses.

      Of the previous 37 petitions, 14 have gone through the High Court.
Following the MDC petition results for eight constituencies were nullified
on the grounds that violence had prevailed before and during the election
period.

      MDC spokesperson Paul Themba Nyathi said the party wants the High
Court to nullify the victory of ZANU PF's Christopher Chigumba in a
by-election that saw the young life of MDC activist, Francis Chinozvinya,
come to an abrupt and tragic end. The poll also left several others severely
injured.

      Chigumba garnered 8 744 votes while the MDC's imposed candidate James
Makore polled 6 706 in a constituency where there are 47 256 registered
voters.

      The figure represents only a third of the potential voters and
indicates voter apathy which analysts had predicted would work against the
opposition MDC.

      Nyathi said the electoral process had been fraudulent and failed to
meet the required standards of the Electoral Act as ZANU PF supporters were
allowed to mill around polling stations intimidating voters by taking down
their names.

      "When there is a result such as that, our legal department quickly
moves in and looks at the merits and demerits of our case and in this one,
we clearly have strong reasons to challenge the results," Nyathi, the Member
of Parliament for Gwanda North, said.

      "Most by-elections have been fraudulent, with Zengeza being the worst
of all. We are going to challenge the results as a matter of principle
because we want it recorded in history that these elections were not free
and fair.

      "We will always seek recourse from the courts and will not give up in
participating in any elections as that would be suicidal no matter how much
they (ZANU PF) beat up people."

      In the hotly contested June 2000 parliamentary elections in which the
opposition gave the ruling party a run for its money, the MDC won 57 of the
120 seats in a plebiscite condemned by Europe and the United States as not
free and fair.

      But ZANU PF spokesperson Nathan Shamuya-rira scoffed at the MDC's
intentions, saying: "That's the pastime for a party with nothing to offer to
the people of Zimbabwe. They always do that.

      "There is nothing new. We knew they were going to take that route.
When they win, it's fine, but if they lose, then 'the elections were unfair'
. What is this?

      "This is not kindergarten politics. Let them go ahead and spend
millions of their donor funds because that is part of their pastime and they
have to justify their existence to their masters."

      On Chigumba's victory, Shamuyarira, a former Cabinet minister, said:
"The result was a breakthrough for ZANU PF and it's going to turn the public
tide in our favour."

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FinGaz

      Paradza tribunal kicks off Monday

      Acting News Editor
      4/1/2004 7:49:04 AM (GMT +2)

      THE tribunal to probe allegations of misconduct by suspended High
Court Judge Justice Benjamin Paradza begins at the five-star Sheraton Harare
Hotel on Monday.

      Paradza's lawyer, Jonathan Samkange, confirmed the trial date and
proceedings to be chaired by Justice Dennis Kamoni Chirwa of Zambia. He will
be assisted by two other judges, namely Justices Isaac Mtambo of Malawi and
John Mroso from Tanzania.

      "The trial starts on Monday at the Sheraton," Samkange said.

      "The state does not want the case to interfere with the day-to-day
operations of the courts, that is why it is being held at the Sheraton."

      President Robert Mugabe, whose government is currently under the
international spotlight for alleged intimidation of the judiciary, swore in
the trio on Monday. In an unprecedented move in the history of the judiciary
in Zimbabwe, Paradza, a former freedom fighter, was arrested while in
chambers on February 24 last year on allegations of trying to influence
Justice Maphios Cheda in Bulawayo to release the passport of his alleged
business partner, Russell Wayne Luschagne, through the court registrar.

      The travel document was being held by the court as part of Luschagne's
bail conditions in a murder case in which he was accused of killing
fisherman Wilson Mudimba he had caught poaching.

      Luschagne was later convicted of murder with constructive intent and
sentenced to an effective 15 years in prison.

      Paradza's arrest sparked outrage and widespread condemnation from his
colleagues and 10 High Court judges queried the constitutionality of his
arrest, challenging the manner in which the case had been handled.
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FinGaz

      Tsvangirai talks tough

      Staff Reporter
      4/1/2004 7:50:13 AM (GMT +2)

      ZIMBABWE'S main opposition leader, Morgan Tsvangirai, increasingly
disillusioned by endlessly searching for a way in the vicious political
circle, has raised the ante in the run-up to next year's parliamentary
election - pledging to bring pressure to bear on the government to review
the country's flawed electoral laws.

      There has been speculation in recent weeks that the opposition party
would boycott next year's plebiscite. This was given credence by the
Movement for Democratic Change (MDC) leadership, which has given conflicting
signals about the party's participation in the next round of parliamentary
polls.

      However, in what could be a political volte face, Tsvangirai is
increasingly showing signs that the MDC is game for what is increasingly
shaping up to be a watershed poll.

      Speaking in the aftermath of the Zengeza parliamentary by-election,
which the MDC lost to ZANU PF last weekend, Tsvangirai said the result
showed the futility of engaging the ruling party in any election under the
present legislation governing the country's plebiscites.

      "If ZANU PF maintains its stubbornness and refuses to yield to
pressure, how should Zimbabweans behave? Do we still participate in
conditions similar to what we witnessed in Zengeza?

      "I have a responsibility as the leader of the largest political party
in Zimbabwe. I have a contract with the people. Do I still urge them to
soldier on in the face of death, beatings, ballot theft and a direct denial
to exercise their sovereign will?

      "The people say they have tried to use the democratic route available
to them. They say they have given the MDC their support, they have come out
and tried to vote. But their voice has been repeatedly stolen," Tsvangirai
said.

      He said if the party went ahead and took part in the 2005
parliamentary election under the current conditions and the outcome was
tampered with, there was not likely to be any recourse from the courts.

      "We tried that route in 2000 and it took us nowhere."

      The MDC has, in recent weeks, ignited debate over the merits of
participating in next year's elections and the leadership has strongly
hinted that the party could boycott the polls.

      Analysts and party members alike have remained divided over calls to
boycott the polls, although there have been growing calls to contest and
avert absolute ZANU PF rule.

      Tsvangirai, who last week warned the ruling party that its hegemony in
the rural constituencies was over, said his party was still in consultation
with its supporters before coming out with an official position.

      "Our consultations with our supporters and party structures are
continuing. We shall announce our intentions after we have exhausted debate
on the strategies we seek to deploy to compel ZANU PF to change the
conditions for the 2005 election.

      "We need to pressure ZANU PF to listen to the voice of reason and
create an enabling climate for the registration of a genuine will of the
people through free and fair elections. We are concerned about the secrecy
of the ballot and the process leading up to the day of voting," Tsvangirai
said.

      The run-up to the Zengeza by-election was typically characterised by
violence that rendered the non-violence pact signed by all the contesting
parties, including the National Alliance for Good Governance and ZANU, of no
effect.

      The violence, which reached fever pitch during the election weekend,
claimed the life of Francis Chinozvinya, who the MDC claims belonged to the
party.

      Tsvangirai said a post-mortem of the Zengeza poll revealed "that
political competition here remains a bloody affair, 24 years after
independence. ZANU PF is prepared to kill and satisfy its hunger for power
and oppression".

      Voter apathy was once again evident, with just 33 percent of the
registered voters in the constituency casting their ballots.

      The Zengeza by-election was largely viewed as a critical election in
that it would provide the opposition party with a yardstick of its grip on
the urban electorate, while ZANU PF, which has won 11 of the 14 by-elections
since the 2000 parliamentary elections, is slowly approaching the two-thirds
majority which it was denied by the MDC in the historic polls three years
ago.
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FinGaz

      Massive ZESA tariff hikes ruled illegal

      Staff Reporter
      4/1/2004 7:56:48 AM (GMT +2)

      BULAWAYO - In a ruling that could plunge the Zimbabwe Electricity
Supply Authority (ZESA) into serious financial problems, the High Court has
declared illegal the recent 450 percent tariff increases effected on
industry by the power utility as it emerged that more companies were
refusing to pay the new charges.

      The judgment handed down by Justice George Chiweshe here last week
followed two urgent applications by Bulawayo companies O' Connolly and
Company and NIMR & Chapman contesting the legality of the new ZESA tariffs
and the threat on their viability.

      The firms also contested the legality of charging some portions of
last year's electricity bills for exporters in foreign currency.

      Justice Chiweshe ruled that it was unlawful for ZESA to partly demand
payment from exporters in foreign currency for bills incurred before the
enactment of the Exchange Control Act (Payment for Electricity in Foreign
Currency by Exporters).

      The instrument directing that exporters pay part of their electricity
bills in foreign currency was enacted in January 2004 under the Exchange
Control Act (Payment for Electricity in Foreign Currency by Exporters Order
2004, Statutory Instrument4/04).
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FinGaz

      MDC pays for complacency

      Brian Mangwende
      4/1/2004 7:54:34 AM (GMT +2)

      VOTER apathy, as widely predicted, systematic bullying, intimidation
and complacency have worked against the Movement for Democratic Change
(MDC) - a party that has in the past thrived on voter anger and a general
wave of panic over the economic meltdown.

      In the weekend Zengeza parliamentary by-election which saw violence
rearing its ugly head once again and resulting in the death of MDC activist
Francis Chinozvinya, the opposition party, previously with a strong urban
power base, lost to the ruling ZANU PF, blamed for the socio-economic
crisis.

      Despite the deep well of disenchantment among urban voters who have
felt the brunt of the recession, the MDC's imposed candidate, James Makore,
polled 6 706 votes against 8 744 for ZANU PF's Christopher Chigumba.

      Two smaller parties, the National Alliance for Good Governance and
ZANU, which do not register on the relevance radar, only managed 37 and 96
votes respectively.

      There are about 47 256 registered voters in Zengeza, but only a third
of these cast their votes.

      There were 102 spoilt ballot papers and several people were turned
away for various reasons while, in a strange twist, an unusual number of
these urban voters, seen as among Zimbabwe's literate, were reportedly
assisted to cast their votes.

      The seat fell vacant following the resignation while in the diaspora
of the MDC's Tafadzwa Musekiwa citing political persecution by ZANU PF
activists.

      During the 2000 election, Musekiwa garnered 14 814 votes against
Chigumba's 5 330 in a poll where 22 406 people cast their votes out of 47
251 registered voters.

      In the June 2000 parliamentary election, the MDC won 57 of the 120
contested seats and since then, there have been seven by-elections. ZANU PF
has won four - namely Kadoma Central, Insiza, Bikita West and Zengeza -
while the MDC retained Kuwadzana, Highfield and Harare Central.

      But what was the significance of the Zengeza by-election? Why and how
did the MDC lose what was generally viewed as its stronghold?

      Political commentators this week warned that despite the
well-documented voter apathy, intimidation, violence and an uneven playing
field, the MDC, which did not campaign much for the Zengeza seat, risked
losing its grip on its urban constituencies which collectively blame ZANU PF
for turning the country into a basket case.

      They said the first mistake by the MDC, some of whose officials are on
record as having said that democracy had limits, was to impose a candidate
for the constituency. The second, they said, was the opposition party's
complacency and failure to campaign.

      The results of the poll, the analysts said, could therefore be the
beginning of an anti-climax in the fortunes of the MDC, whose leader Morgan
Tsvangirai recently claimed an upsurge in the party's rural support base
because of the economic crisis.

      The MDC leadership - rocked by a major rift stemming from sharp
differences involving two candidates ahead of the Zengeza by-election - is
being perceived as failing to demonstrate the capacity to consolidate its
gains from the 2000 parliamentary polls but instead, relaxing and resigning
itself to fate.

      A clique of trade unionists linked to Tsvangirai and former Zimbabwe
Congress of Trade Unions vice president Isaac Matongo, now MDC national
chairman, allegedly put its full weight behind Makore and frustrated all
efforts to hold primary elections.

      But there was resistance from an equally powerful camp in favour of
primary elections as a democratic way to find a suitable and popular
candidate.

      "Both ZANU PF and the MDC are equally to blame for the violence that
took place in Zengeza," political analyst Joseph Kurebwa said.

      "Since Zengeza was an MDC stronghold, one would have thought the party
had the upper hand in dictating events there. The imposition of a candidate,
if true, could have worked against them. I am not surprised that ZANU PF has
been able to clinch some urban constituencies. They have been on a winning
streak," he said.

      He added: "The MDC is failing to consolidate its gains. There is lack
of solidarity within their ranks. On one hand they say we want to boycott
the 2005 parliamentary elections, while on the other, they say 'no' boycott.
These conflicting statements frustrate and confuse the supporter who has
endured torture in the past. Come 2005 and the general feeling remains the
same, ZANU PF will win and gain more of the urban seats."

      Heneri Dzinotyiwei, a lecturer at the University of Zimbabwe and
political commentator, said: "The MDC lost as a result of a low turnout.
Voter apathy has affected the opposition much more that the ruling party.
This gives messages to the opposition to find out what they need to do to
motivate their supporters.

      "The general climate is not exciting for people to participate in
elections," Dzinotyiwei added. "If there is no motivation, the people will
continue to concentrate on bread-and-butter issues rather than go and vote."

      On Makore's alleged imposition, Dzinotyiwei said: "They know their
constituency and they have to come up with ways of producing the best
candidate for any election. They should tell their people whether they
should follow the imposition way or hold primary elections. The aspect of
imposition could have dampened the excitement for people to go and vote."

      Another political analyst, Alois Masepe, said the MDC had lost because
its supporters had stayed away.

      "Seventy percent of MDC supporters stayed at home," Masepe said. "They
were not bothered to vote because of the confusion in the party on whether
to participate or not in elections. I said before, apathy would be the MDC's
enemy and here we are.

      "On the other hand, ZANU PF really campaigned and capitalised on the
confusion within the MDC. The MDC were nowhere to be seen and they now have
to re-strategise."

      Meanwhile, the United States this week condemned the conduct of the
by-election in Chitungwiza.

      In a statement on Tuesday, the US State Department said: "We condemn
the violence, intimidation and irregularities that occurred prior to and
during the March 27-28 Zengeza parliamentary by-election.

      "The election's improprieties preclude it from being deemed free and
fair. The by-election should have been a routine and peaceful expression of
a local constituency's political will. Instead, it became another symbol of
the ruling party's pursuit of electoral victories at the expense of peaceful
expression of democratic rights in Zimbabwe."

      The US, together with Zimbabwe's former colonial master Britain, has
been accused by ZANU PF of trying to effect regime change in the southern
African country.

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FinGaz

      Matabeleland boils over lid on succession

      Njabulo Ncube
      4/1/2004 7:55:18 AM (GMT +2)

      BULAWAYO - The defeaning silence over the succession debate among ZANU
PF politicians in Matabeleland is worrying ruling party supporters, with no
clear candidate emerging as a front-runner for the presidential post that is
likely to fall vacant in 2008, if not earlier.

      There are genuine concerns that political heavyweights in the
semi-arid region famed for cattle ranching could be elbowed out of the
succession race that has been blowing hot and cold in recent months.

      The late vice president, Dr Joshua Nkomo, who led the now defunct
Zimbabwe African People's Union (ZAPU) which waged the liberation war
alongside the Zimbabwe African National Union (ZANU) mainly from Zambia,
hailed from the region. Matabeleland was also ZAPU's stronghold before it
merged with ZANU PF.

      ZANU PF politicians in Matabeleland, including former central
committee members privy to the ruling party's goings-on, told The Financial
Gazette this week that both Matabeleland North and South were seemingly
reluctant to freely debate or speculate on which candidate was suitable to
challenge for the honours.

      Political analysts said the silence in Matabeleland on the highly
explosive debate, which many in ZANU PF consider a political hot potato, at
a time when other regions - namely Manicaland, Midlands and Mashonaland -
are throwing forward candidates to take over from President Robert Mugabe,
pointed to marked differences on the choice of a suitable candidate from the
volatile region.

      They said the silence would eventually render Matabeleland irrelevant
in the succession race as prospective presidential candidates from
Mashonaland and the Midlands had already orchestrated covert moves to
position themselves for the coveted post, which President Mugabe has clung
onto for nearly 24 years now.

      There are indications that President Mugabe may step down when his dis
puted term of office ends in 2008, possibly after anointing a successor from
among the present crop of ZANU PF politicians.

      Speaker of Parliament Emmerson Mnangagwa is widely seen as the heir
apparent, although President Mugabe himself has kept a lid on his preferred
choice for successor.

      "John Nkomo, Dumiso Dabengwa and Joseph Msika have been projected as
the three people who can challenge for the presidency, but we can't debate
this issue among ourselves as it is considered taboo.

      "People are afraid to talk about the issue and our local daily (The
Chronicle) and weekly (The Sunday News) have also not helped matters by not
initiating the debate," said a former ZANU PF central committee member who
spoke on condition of anonymity.

      Msika, Nkomo and Dabengwa have refused to publicly comment on their
presidential ambitions, adding another veil of secrecy over the succession
debate in the region.

      "There is a general consensus among some of our former ZAPU and ZIPRA
colleagues that ZANU PF is not ours. We are visitors in ZANU PF and, as
such, it is difficult for us to make such a decision. How can a visitor make
a decision in a family?" asked another central committee member who also
spoke on condition on anonymity.

      "ZANU PF has its own people to make such decisions for us . . . that
is the general feeling as far as the succession debate is concerned, hence
the silence in Matabeleland. We (politicians from the old ZAPU) have
conditioned ourselves to playing second fiddle to our colleagues in the
original ZANU PF. We are waiting for them (the original ZANU PF) to provide
the leadership and we will sheepishly follow," he said.

      ZAPU and ZANU PF, key allies during Zimbabwe's bloody war of
independence, signed a unity accord in 1987, ending a seven-year internal
struggle that followed the elections in 1980.

      In an effort to seek national reconciliation, President Mugabe's first
cabinet included ZANU PF and ZAPU members as well as independent white
Members of Parliament and senators.

      Apart from Nkomo and Dabengwa, other politicians from the region who
could influence the succession debate include Joshua Malinga, a former
mayor, government spokesman Jonathan Moyo, Thenjiwe Lesabe, new governor for
Matabeleland South Angelina Masuku, new governor for Bulawayo Cain Mathema,
Matabeleland North governor Obert Mpofu, and Naison Ndlovu, a former
legislator.

      Jabulani Sibanda, the war veterans national chair and provincial
chairperson, has also been mentioned as an influential person in the
succession race. But some politicians accuse the former bodyguard to the
late vice president Nkomo of drumming up support for Mnangagwa in the
succession race at the expense of politicians in the region.

      Sibanda has in the past vehemently denied charges that he was
Mnangagwa's blue-eyed boy.

      Max Mkandla, a war veteran and spokesman for the Zimbabwe Liberators
Peace Initiative, said the absence of debate on the issue confirmed that
ZANU PF was an intolerant party which had cowed its Matabeleland leadership
and reduced it to "yes-men".

      "We have people with leadership qualities in the region, but the
problem is that all of them are not in ZANU PF. The people to lead Zimbabwe
to Canaan are elsewhere," said Mkandla.

      Nevertheless, Heneri Dzinotyiweyi, a political commentator who teaches
mathematics at the University of Zimbabwe, said the silence on the
succession debate in Matabeleland could be a tactic by politicians in the
region to outmanoeuvre their Mashonaland colleagues.

      "It shows different tact at looking at issues," said Dzino-tyiweyi.
"Why should they waste time on something they do not know when it will
happen? The silence from Matabeleland is a reflection of looking at this
political issue in different ways," he added.

      Malinga said: "I do not want to comment on such an issue when there's
no vacancy. President Mugabe has up to 2008 and then people will decide."

      Others blamed the silence in Matabeleland on President Mugabe's
successor on what they described as a "leadership vacuum" in Matabeleland
since the death of vice president Nkomo in 2001.

      "There is a leadership vacuum. Support for the people that you are
mentioning is doubtful in the region so it is difficult to debate their
names.

      "The long and short of it is that I do not see the next ZANU PF
leader, let alone a president of this country, coming from Matabeleland. It
might sound cruel, but that is the reality on the ground," added another
ruling party official.
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Comment

      Unmask them

      4/1/2004 7:26:16 AM (GMT +2)

      Credibility, that non-negotiable value in whatever we do is, as we say
in journalism, like virginity. You only have it once and that is why it has
to be guarded jealously. Unfortunately, by just sitting on the fence and
instead allowing the devil to run with the Bible - letting the specious and
spurious claims of victimisation by some uncouth bankers go unchallenged,
Reserve Bank of Zimbabwe governor Dr Gideon Gono and his team risk losing
their credibility.

      Most of the worse-than-feared problems besetting the banks and now
distressing the psyches of investors who had considered banks as the safest
place to park their money were self-inflicted. The bank owners, who now
claim that the RBZ's actions are weighing down public confidence and
investor sentiment, lacked integrity and sound corporate governance. In
short, they pushed the envelope too far. Not to mention risk management,
which was more of a less-developed discipline. That is why we feel that the
RBZ could only shoot itself in the foot by allowing those caught on the
wrong side of the new monetary regulations to continue claiming
victimisation. Silence can be golden but sometimes it is simply yellow
because it can be taken to be a tacit admission of the unfounded
allegations.

      The allegations, which border on the absurd and ludicrous, did not
surprise us though. It was George Bernard Shaw who once said that the moment
we want to believe in something, we suddenly see all the arguments for it
and become blind to the arguments against it. Those alleging victimisation
in the current banking sector clean-up, simply because they are consumed
with anger and hatred over losing control of the institutions they
established, will not stop knowing full well that the repeated lie will
ultimately gain currency. As such, they will keep on propagating those
threadbare and empty platitudes to discredit the central bank, which we feel
has finally awoken to its responsibilities.

      Yet they know, as much as Zimbabwe does, that concern about the
financial health of their institutions had percolated through the market
long before the monetary policy which they would want to make the public
believe was designed with specific banks in mind - even though nothing could
be further from the truth. Their future was perilous and the RBZ, whose
intervention is now the scapegoat for the banking storm, faced a serious
dilemma. If it had not intervened, it would have been charged with neglect
as these banks were likely, as surely as the sun rises from the east and
sets in the west, to implode under their absurdities.

      Understandably, the RBZ, which we feel has been a bit lenient because
it has not yet allowed any bank to twist in the air, might be wary of making
public problems besetting certain institutions. Apart from issues of
confidentiality, such disclosures will inevitably result in depositors
shifting accounts from weaker to stronger banks.

      Opinion is also obviously split over whether the RBZ should make these
issues public, but for the sake of putting everything on a perspective which
justifies its actions, it should bare all. This is what the bankers are
asking for through their accusations. Of course this is likely to raise a
hue and cry from the sector but the central bank should know that one who
wants to lead the orchestra must turn his back on the crowd. And like we
said in our comment of January 21 2004, what better way to assuage the
general perception that the central bank is bent on victimising some banks
than making public all the malpractices that went on behind the scenes?

      We say so because in the highly polarised Zimbabwe where everything
done is defined in terms of perceived political party affiliation and is,
therefore, supposed to have a political innuendo and twist to it, the
central bank is likely to be believed without question if it said there are
a billion or a trillion stars in the sky. But just telling the nation that t
he situation in the banking sector was like a grenade whose pin had been
removed would be a hard sell. Zimbabweans would, just like the case with the
proverbial bench with wet paint, have to touch it in order to believe it.

      The central bank should, therefore, make public, in footnote detail,
the fundamental flaws characterising the affected banks. The facts and
figures should indicate which banking institution has a liquidity squeeze
and the imprudent practices that spawned this crunch. Which ones have
capital inadequacies, the management ineptitude and malfeasance that went on
in each institution, the abuse of depositors' funds and the magnitude of
insider loans because what some of the bank owners did had gone beyond the
bounds of rational lending. Zimbabwe should also be told what measures are
taken before a bank is placed under curatorship, how many times the central
bank met the concerned banks to consider escape options, how many corrective
orders it gave the institutions and how many took heed, ad infinitum. This
and more is what the people would like to know.
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FinGaz

      The leadership cancer in the MDC

      4/1/2004 7:34:20 AM (GMT +2)

      RECENT developments within the opposition Movement for Democratic
Change (MDC) portray a serious leadership crisis which has a potential to
blow up into unmanageable proportions if caution is not exercised on the
part of both the supporters and the leadership.

      RECENT developments within the opposition Movement for Democratic
Change (MDC) portray a serious leadership crisis which has a potential to
blow up into unmanageable proportions if caution is not exercised on the
part of both the supporters and the leadership.

      From whatever perspective one looks at developments in the MDC, it
cannot be doubted that the party is suffering from a serious leadership
cancer.

      As opposed to the euphoria that characterised its formation in 1999,
the current political idleness and paralysis gripping the party has now bred
a general sense of disenchantment, suspicion, mistrust, betrayal and
alienation within the general cadreship of the party.

      Having realised the mood of the cadreship, it appears the leadership
has now entrenched its positions by closing all democratic space in a
desperate effort to nip in the bud the loud voices critical of the
leadership. This is a perfect recipe for an internal combustion of the kind
taking place within the party at the moment.

      The kind of outburst against party president Morgan Tsvangirai that we
heard a few weeks ago from MDC supporters speaks volumes of the extent to
which the lines of synergy between the leadership and the general membership
of the party have been dislocated. The outburst from the group, led by one
Kurauone Chihwayi, calling itself MDC Supporters for Democracy, smacks of a
lot of cumulative anger, bitterness and frustration over the way the party
affairs are being conducted.

      It would appear that before this group decided to go public, it has
been involved in behind-the-scenes efforts to have the anomalies corrected
and it would further appear that such efforts were hitting a brick wall.

      There has been a progressive "Zanufication" (to borrow Brian Kagoro's
coinage) of the MDC structures of late and the party, like ZANU PF, is now
run from a façade of consultation and popular participation which is
ultimately ineffectual.

      This gives credence to Kagoro's theory of "substitutionalism"as a
cancer bedevilling political institutions in this country. A decision taken
at the cell level which is further substituted by the decision at the
provincial level and on and on it goes until the final decision is made by
only one person or perhaps a privileged clique.

      This vertical process of substitution of decisions is what causes
despondency within the lower ranks of political organisations in this
country.

      Developments in the MDC are reflective and symptomatic of the kind of
leadership style that we have come to celebrate as Zimbabweans - a
leadership style that is devoid of ethics, integrity and consistency. Many
political organisations in civil society, the opposition and of course the
ruling party, are run like personal fiefdoms where power is centralised in a
plutocracy and where a personality cult is celebrated. This is coupled with
a startling revulsion against "emerging talent" from within their own ranks
and this is causing a lot of frustration and bitterness, resulting in the
kind of denunciation of the leadership that is happening in the MDC.

      It would appear that the idea of a "shadow cabinet" has also fuelled
these internal contradictions in the MDC. The majority of MDC leaders are
not what one would call "politicians" in the strict sense of the word, but
they happen to be the majority of those who hold influential positions in
the party. There was a shortage of cadreship at the time the MDC was formed
and it was just before an election so most of the people who were voted into
parliament on an MDC ticket may not be worth their salt.

      They were put there hurriedly at a time when the focus was not on
quality and calibre of candidates but on fielding candidates in all the 120
contestable constituencies and winning as many seats as possible.

      What is even worse is that these people have now dug in their heels
and because of their fear of emerging and competitive talent, and those who
hold opinions that differ from their own, they have now closed all
democratic space within the party as a desperate attempt to cling onto their
positions by silencing dissenting and divergent opinions from within their
own ranks.

      It is crucial and strategic to avoid premature "shadow cabinets" or
"governments-in-waiting" so as to allow time for more talent to surface or
emerge for inclusion in such shadow cabinets.

      The shadow cabinet idea by the MDC has created a lot of scope for
attracting and insulating mediocrity in that party and eventually in power.
This should be the more crucial consideration. The past teaches us to be
wary of this.

      Some of us suspected all was not well in the MDC when Munyaradzi
Gwisai was expelled from the party. Gwisai's conflict with his leaders was
basically an ideology conflict and if the party leaders are reading
political developments in this country well, they ought to be regretting why
they dispossessed themselves of such an asset, for in spite of his momentary
ideological lapses, the man was clearer than many of the MDC leaders I have
heard speak.

      If one talks of Gwisai's expulsion, the controversy surrounding the
Zengeza by-election culminating in the attempted attack on Tsvangirai by his
supporters, the denunciation of Tsvangirai by his party supporters and the
resignation of acting Harare Mayor Sekesai Makwavarara from the MDC and
related incidents, one would be forgiven for thinking the MDC lacks the
requisite capacity to deal with internal problems afflicting the party.

      It has been turned into a movement for change and not for "democratic
change". Not all change is progress and this is the time for soul-searching
and self discovery on the part of the MDC.

      Of course Makwavarara can easily be dismissed as a ZANU PF mole but if
her resignation is taken together with related incidents, the picture is not
so pleasant.

      Now let's come to the real issue. The "MDC Supporters for Democracy"
who called for the resignation of Tsvangirai as party president are quite a
brave lot. It was an elephantine stride to promote a robust culture of
democracy within the party but, as I have already pointed out, there was a
lot of bitterness and frustration behind that call.

      It is true that Tsvangirai is found wanting in many respects as
opposition party leader but I think the problem lies more with his advisers
and consultants. Naturally an incompetent leader must be booted out by the
masses but looking at the situation in the MDC, it doesn't look like there
is a more competent person from within the ranks of the party, especially
from his immediate subordinates.

      Even those who were calling for Tsvangirai's resignation did not
forward any name, suggesting the lack of such a person. If such a person
does exist, he/she is likely to come from within the general cadreship of
the party, otherwise the other alternative would be to settle for an
outsider to lead the party, but I know this is an unpopular option.

      So, as things stand, the only realistic option is to keep Tsvangirai
where he is while ensuring that he is put under appropriate pressure to
address pertinent issues in the party. He may not be the best but he is the
only hope the party has and, instead of embarrassing him, the party cadres
should actually try to prop him up. After all, the issue can easily be
resolved at the party's congress in due course.

      It is easy to be emotional about the issue but I hope wise counsel
will prevail in the party. Tsvangirai himself must also know that his power
resides in the people and he must not be unnecessarily big-headed and stiff
necked.

      The point can never be over-emphasised though that the leadership
crisis in this country cuts across all spheres of Zimbabwean life from
politics, business, civil society, to the church and you name it. In that
respect, a multi-sectoral approach is required to bring back ethics into the
concept of leadership.

      Leadership necessarily entails integrity, dignity, honesty,
consistency, predictability and related traits. A simple and general
definition of leadership includes the capacity to influence, inspire, rally,
direct, encourage, motivate, induce, move, mobilise and activate others to
pursue a common goal or purpose while maintaining commitment, momentum,
confidence and courage. These are some of the qualities we look for in our
leaders.

        .. Isaya Muriwo Sithole is a Harare-based legal practitioner and
social commentator
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FinGaz

      Onus is on ZANU PF, not MDC

      4/1/2004 7:35:00 AM (GMT +2)

      THE governance problem we find ourselves in has its genesis in that
there is no consensus on the constitutional framework upon which to build a
democratic Zimbabwe.

      Zimbabwe might be the only country in the modern world that is being
ruled on the basis of a constitutional framework that was not mandated,
blessed and canonised by its people.

      We are being governed by a constitution that was developed and
formulated by the rulers and for the rulers.

      Attempts were made in 2000 to develop a popular constitution after
pressure from the opposition and the free world on the government.

      The government half-heartedly agreed to the process of developing a
new constitution, only to manipulate the resultant draft, which was then
resoundingly rejected by the people in a referendum.

      The rulers have never forgiven the people for rejecting the doctored
draft constitution of 2000.

      The government actually accused the urban electorate of having had the
temerity to "mislead" the rural electorate into rejecting the draft
constitution and the white farmers of voting as a block with their employees
against the draft constitution.

      The result was that during the 2000 parliamentary elections process,
war veterans and youth brigades aligned to the ruling party barred urban
dwellers from visiting their rural folks until after the elections.

      Farmers and their employees were dispersed and scattered to dismantle
the farms block vote. We called it fast-track resettlement to benefit the
landless majority.

      The above scenario illustrates the degree of disagreement between the
ruled and the rulers. It eptomises the existence, for four years now, of a
constitutional deadlock and impasse between the ruling elite and the people.

      The government was and is still angry (or is it frightened?) about the
outcome of the 2000 referendum and has put the people under political siege.

      While the rural people have been thoroughly intimidated and whipped
into line, the urban dwellers are sulking in silence and are also getting
angry.

      Instead of submitting to the people's demands for a new constitution
in 2000, the government dodged the issue by calling for a general election
on the basis of the old and unpopular constitution.

      The veteran clique in the old opposition cried foul and demanded that
no elections be held until a new democratic constitution, anointed by the
people, had been produced. Their voice was drowned by that of the new kid on
the block - the Movement for Democratic Change (MDC) -which readily accepted
the government's election challenge despite the flawed and lopsided
electoral framework and the constitutional impasse.

      The MDC was buoyed and motivated by the results of the referendum on
the draft constitution and wanted to ride the crest, win the election,
impeach the President and usher in political change.

      Some of us who knew the depth and extent dictatorship had permeated
and entrenched itself in our body politic warned that the MDC - in agreeing
to contest elections under the given constitutional environment - was
"drinking from the poisoned chalice".

      Now, four years down the line, we still have a constitutional impasse,
and the government says arrogantly that the constitutional deadlock is not
its priority.

      The MDC president is literally fighting for his life in the High Court
and almost all the MDC legislators have cases to answer under the ublic
Order and Security Act - a piece of legislation crafted and enacted during
their parliamentary tenure.

      Meanwhile, the government is preparing for another round of
parliamentary elections in which the MDC will require 75 seats to win the
parliamentary majority when ZANU PF only needs 45 seats to win, thanks to a
constitution that gives the President 30 seats in Parliament before
elections.

      The MDC's promise to change was apparently a false prophecy, and the
leadership is in danger of being termed false prophets by the people.

      The way forward for Zimbabwe lies in going back to the year 2000. We
have a draft constitution which the people said failed to capture their
political vision and democratic aspirations. We owe it to ourselves, to the
liberation war-dead and to posterity that Zimbabwe has a people
ordained-constitution.

      Political parties must accept that the people are the seat of all
legitimate power and they must ensure that the sovereign will of the people
is always upheld.

      If ZANU PF wants respect from the people, it should show some respect
to the citizens of this country.

      The ruling party is not behaving like a servant but a master of the
people; instead of earning admiration, loyalty and adulation, the ruling
party - with an iron fist - demands these from the people.

      Some of us do not want to see the demise of ZANU PF as a political
player. The party embodies and personifies the history of our struggle
against colonial rule.

      The ANC (1950s), ZAPU and ZANU (1960s),UANC (1970s), ZANU PF (1980s)
to me represent the building blocks in our road to self-rule. Their births
were important milestones in our journey towards national independence.

      Clearly, the people of Zimbabwe desire a multi-party political system
in this country and ZANU PF - as the ruling party - is under moral
obligation to develop a multi-party system in Zimbabwe.

      We should learn from Nelson Mandela - he did not gobble up or banish
Mangosuthu Buthelezi of Inkatha Freedom Party and FW de Klerk of the
Nationalist Party. He nurtured them and encouraged a spirit of political
co-existence and talked of developing a "rainbow" nation with them as
leaders of their own political parties.

      Today, we have a political deadlock between the rulers and the ruled
on the issue of the constitution.

      ZANU PF can choose to be arrogant and politically self-important and
refuse to listen to the voice of the people demanding a new constitution.
The end result of this behaviour is guaranteed political irrelevance and
oblivion for ZANU PF and, in the same process, our glorious liberation
struggle history will be demeaned and demonised. The colonisers and
oppressors will have the last and very long laugh.

      On the other hand, the ruling party can choose to listen to the
people - to be a political humble servant - and play midwife and catalyst to
a truly free, plural political environment.

      The result of this conduct would be popular gratitude, which would
translate naturally into political gains for the ruling party.

      It is ZANUPF - not the MDC - that is on political trial. The people of
Zimbabwe desire a multi-party concept of government, and they know that
Zimbabwe will develop faster and better with two or three political parties
contesting in the political arena.

      lAlois Masepe is a management consultant and political analyst.
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FinGaz

      A crisis within a crisis

      4/1/2004 7:27:07 AM (GMT +2)

      For quite some time, the financial sector had defied the general
downward trend in the economy, notching good results year after year.

      Enter governor Gideon Gono with his monetary policy statement of
December 18 2003, and the scenario suddenly took a turn for the worst.

      Several financial institutions have been adversely affected, with
some - Intermarket Bank, Building Society and Discount House, Barbican
Bank - under curatorship.

      ENG Capital Asset Management, Century Discount House and Barbican
Asset Management have been closed.

      Others were requested to restructure in order to get Reserve Bank
liquidity support from the Troubled Bank Fund (for example, Trust Bank and
Century Bank).

      What went wrong?

      Gono's monetary policy seeks to clean up the financial sector by
restoring normalcy and compelling financial institutions to focus on core
business.

      First, the Reserve Bank had "forgotten" its regulatory and supervisory
role, resulting in a "free for all" situation developing in the financial
sector. For instance, out of the 75 asset management companies in existence
at the end of 2003, only 15 were registered.

      This implies that Zimbabweans in general were exposed to unregistered
companies that mopped up deposits from unsuspecting investors and used them,
quite often for speculative purposes.

      It must be pointed out that with the productive sectors experiencing
problems, speculative activities were in most cases the only "viable"
activity remaining.

      It is an open secret that before the introduction of the controlled
auction system for foreign currency in mid-January 2004, foreign currency
was traded on the parallel market.

      Given that the parallel market was the only recourse for those in need
of foreign currency, it is not therefore surprising that all and sundry were
involved in it. From the members of the Apostolic sect on the streets of
Bulawayo to parastatals such as the National Oil Company of Zimbabwe and the
Zimbabwe Electricity Supply Authority to companies and individuals, banks
and asset management companies, all were frantically involved in the
parallel market for foreign currency.

      Just have a look at any company report for the period 2002-2003. One
would find an item called foreign exchange gains, reflecting receipts from
trading on the parallel market.

      Even as we were assessing the basis for price increases under the
Tripartite Negotiating Forum (TNF), we faced the dilemma of how to deal with
cost increases arising from the sourcing of foreign exchange on the parallel
market. Because it was the "norm", such transactions were accepted as
legitimate.

      We may want to blame those who participated in the "illegal" parallel
market for foreign currency and, indeed, other basic commodities that were
in short supply. But the reason for their widespread use was the distorted
policy regime.

      Price controls were set at levels below what was required for
viability. In terms of foreign currency, the Zimbabwe dollar had remained
fixed at Z$55 to the US unit until, through the TNF initiative, it was moved
to Z$824 to the US dollar in February 2003.

      Even then, the parallel market fetched a better return, which had shot
to as high as Z$8 000 to the greenback by early December 2003.

      It must be pointed out that what was happening here was perfectly
rational, although "illegal". Rational in the sense that in a market
characterised by acute shortages, the controlled prices - including the
exchange rate - were unrealistic and did not provide a rate of return
commensurate with market expectations.

      As the then Minister of Finance, Herbert Murerwa, rightly observed in
the 2003 national budget statement: "Efforts to protect the consumer from
spiralling prices are being undermined by price controls that focus mostly
on the final product, ignoring developments affecting inputs into the
production process. This has affected production viability and the
sustainability of the controlled price levels. As a result, the real costs
to society have been high and include the following:

      "lShortages of critical basic commodities on the formal market. Where
these are available, they are not easily accessible to the majority of the
poor since they are not traded openly.

      "lA thriving parallel market for basic commodities where the price is
much higher than the controlled price. This is the market where a
significant part of our population is sourcing basic commodities. The
beneficiaries of the price controls are, therefore, the speculators and
dealers and not the targeted vulnerable groups.

      "lProduction of lower quality products as producers are forced to
'shave inputs' in order to maintain profit margins against a backdrop of
rising input costs.

      "lLoss of employment opportunities as companies downsize production
capacity in view of viability problems occasioned by unsustainable price
control levels." (Page 14-15).

      In a move that contradicted the budget statement, the government
published Statutory Instrument (SI) 302 of 2002 on Control of Goods (Price
Freeze) Order on November 15 2002. The SI extended the list of items covered
by the price freeze. The freeze was for a period of six months.

      In his address at the opening of the 52nd ZANU PF central committee
meeting in Chinhoyi on December 11 2002, President Robert Mugabe attacked
business and blamed it for hyperinflation.

      He declared: "While many manufacturers and traders want to blame it on
production costs, it is clear that the consumer is being ripped off, abused
and taken advantage of by avaricious, heartless business people, several of
whom would want to politicise production processes in sympathy with white
landed interest," (The Herald, December 12 2002, Page 1).

      We may wish to pause here and ask the question: is it the business
person or the policy environment which is to blame for the price hikes?
Certainly, in the TNF, business was able to convince the social partners on
the legitimacy of the price increases.

      Audits were undertaken on the basis of the price increases. Clearly,
what was the problem was the hyperinflationary environment, which
necessitated regular reviews of prices, and not the price reviews
themselves.

      A similar argument could be posed with respect to increases in school
fees. The basis for such regular reviews is perfectly legitimate; unbearable
input cost increases.

      Likewise, one could look closely at the financial sector, where
several, if not most, of the participants were involved in non-core banking
activities. Some bought cars, bricks, coal and opened up regional
institutions to hedge against hyperinflation.

      Under such conditions of rising inflation, it is imprudent to keep
resources in a liquid form. At the same time, involving oneself in non-core
business exposed financial institutions to default risk, resulting in
inability to meet depositors' demands for cash.

      In this context, most financial institutions went too far towards
hedging their operations against inflation and exposed themselves in the
process.

      Enter Gono with his prudential approach to monetary policy!

      What has been unearthed in the process of cleaning up the financial
sector appears imprudent at face value.

      But once the context is put in place, one realises that the financial
sector was caught in between rock and a hard place. They either had to
remain upright and perish or bend the rules and survive. It is not
surprising that most chose the latter option.

      As the myriad of "illegal" activities that some financial institutions
were involved in emerged, several directors skipped the country and have
generally been branded miscreants back home. While the activities they
perpetrated are "illegal", in the context of the distorted macroeconomic
conditions, their behaviour is "rational".

      As I see it, Gono had two options: either to prosecute all those
involved in "illegal" financial activities or to give them a grace period to
clean up their acts.

      He chose the prosecution route, which, at face value, is perfectly
understandable. However, it is an injustice to only prosecute a few, yet it
is abundantly clear parastatals, private individuals, etc, were actively
involved.

      The more just route would be to acknowledge that, in the first
instance, the Reserve Bank itself contributed to the mess by turning a blind
eye all along. In this regard, it is also to blame and should therefore take
responsibility for its laxity and the consequences thereof.

      A more productive approach would have been to make it clear henceforth
that all "illegal" financial activities should be stopped, in which case
financial institutions would have been given a grace period to "clean up"
their act.

      This approach would have given financial institutions a deadline,
after which the dramatic measures taken so far would have been instituted.
This could have minimised the social cost of the fallout.

      More fundamentally, the measures taken so far also threaten the
viability and sustenance of the financial sector. This is particularly so
given that so far, no serious attempt is being made to deal with the sources
of macroeconomic distortion, namely fiscal policies and issues of
governance.

      The shortage of foreign currency, for instance, will not be resolved
unless the wider issues of governance are addressed, an issue agreed to by
all social partners through the TNF. This is what the Kadoma Declaration
sought to address - the "political risk factor".

      As I see it, we have reached a point where Gono, as someone from the
financial sector himself, must now recuse himself and allow a inter-party
parliamentary committee to investigate the financial sector crisis. It would
give Zimbabweans the opportunity to provide evidence with respect to the
crisis and suggest the way forward. An interested party like Gono is not the
best person to take the issue forward in a transparent and accountable
manner.

        .. Godfrey Kanyenze is director of the Labour and Economic
Development Research Institute of Zimbabwe and a member of the Zimbabwe
Economics Society.
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FinGaz

      Hiring a bulldozer to crush a mosquito

      4/1/2004 7:33:43 AM (GMT +2)

      A FEW years ago when President Robert Mugabe made his infamous "I have
degrees in violence" boast at a ZANU PF congress in Victoria Falls, some
"analyst" tried to defend the statement afterwards when questions were
raised on how a head of state could speak in such vein.

      I remember one pro-ZANU PF analyst saying the President's statement
should not have been taken at face value because he was speaking in
parables.

      Hogwash, I fumed at the time and hold the same sentiments today. A man
holding a position as important as head of state surely knows that whenever
he opens his mouth, he is communicating with large numbers of people over
long lines of communication. There is no earthly reason, therefore, for him
to speak in parables about an important issue like violence, which has
deplorably become a routine occurrence on Zimbabwe's troubled political
landscape.

      It is important to remember that President Mugabe made that notorious
statement while breathing fire and brimstone against the Movement for
Democratic Change, which had caused shock waves by performing beyond the
ruling party's expectations in the 2000 parliamentary elections despite the
violence that marred those polls.

      As political violence has not abated since 2000 and President Mugabe's
menacing speech, no one can deny that his utterances were no idle boast,
but, in fact, a clear declaration of intent. He was, in fact, calling a
spade a spade and giving the nation an accurate idea of the sort of
intolerance he and the ruling party harboured against any organisations or
individuals holding views that do not coincide with his own.

      This has been proved beyond any shadow of doubt by the relentless
crusade the government has waged through the enactment of totalitarian laws
to silence the people through flagrant violations of human rights and the
subverting of the rule of law. The government has had no respite since the
MDC appeared on the scene, but what the regime does not seen to realise is
that by going to these ridiculous and desperate lengths, it is actually
acknowledging that the opposition party is a force to be reckoned with.

      Despite all the bravado and illusion of invincibly being displayed, it
is clear to all right thinking observers that it is the government that has
been given a run for its money rather than the other way round as it has
frantically tried to have everyone believe.

      Let us consider for a moment the analogy of someone who hires a
bulldozer to crush a mosquito. Either that person needs to have his head
examined or he is not being entirely honest about the nature of the creature
he wishes to tackle.

      The creation by the government of a monstrous and brutal machinery
that relies on scare-mongering, propaganda, unjust laws, strong-arm tactics
and rigid unresponsiveness to the voice of reason, is indisputable evidence
that it feels mortally threatened. In short, it knows it is in the intensive
care unit fighting for its political life.

      The tragedy in all this, however, is the regime's refusal, so to
speak, to follow doctor's orders to ensure its own recovery.

      Despite gasping for breath, the ruling party continues to refuse to
swallow the bitter pill for returning to sanity and normalcy. It seems
determined to hang on to life through the artificial respiration of
repression, brute force and burying its head in the sand.

      But a ruling party in such a vegetative state is a huge danger and
liability to the nation, as events in the Zengeza by-election have shown.

      Violence and intimidation enabled the ruling party to "win" the seat
but can ZANU PF really beat its chest with genuine satisfaction and pride
that the people support it? Can the ruling party really convince itself that
it genuinely defeated the MDC when it placed every conceivable obstacle at
every turn to make it impossible for the opposition party to get its message
across to the voters?

      What calibre of politicians do we have in government if they are quite
happy and comfortable with having the people supporting their party under
duress? Holding elections under these impossible and deadly conditions is
quite indisputably a charade and one wonders whether it is worthwhile in
future to expose innocent Zimbabweans to the possibility of being killed if
the process is not free, fair and safe.

      The question I have always asked is: if the ruling party has the
people's support, why does it go to the lengths it does to fight the
opposition party unfairly and using unorthodox methods?

      They say actions speak louder than words. ZANU PF's obsessive need to
thwart the opposition, not by showing it is the better and more mature party
but by resorting to sheer brute force and bullying, exposes it for what it
really is - an unpopular party that cannot win elections any other way.

      It is a thought that fills me with foreboding when I picture the
violence and repression seen in Zengeza being unleashed nationally in next
year's general elections.
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