Banks face collapse

Zim Independent

Dumisani Muleya

MAJOR commercial banks and other financial houses are facing a
critical liquidity crisis largely caused by unlawful speculative investments
which are now threatening to ruin the stricken institutions.

Information gleaned from an array of documents shows the situation has
triggered tremors within the sector that was hit by a chain of high-profile
institutional collapses in 2004. Cash shortages at the banks have compounded
the situation as businesses and individuals are unable to access their
money.

Almost all the banks — Barclays, Stanbic, Standard Chartered, CFX
Bank, Kingdom, NMB Bank, ZB Bank, MBCA, ZABG, FBC, CBZ, Agribank, ABC
Corporation, Genesis, Premier, Interfin and Renaissance, as well as building
societies such as CABS, Beverley, FBC BS and Intermarket — are in dire
straits.

The banks are facing liquidity problems because they cannot secure
cash applications from the Reserve Bank and have failed to pay their
statutory reserves to the central bank. Despite the bank printing up to $800
trillion to alleviate the cash shortages, banks are failing to collect their
cash requirements due to lack of security.

Banks are facing serious liquidity problems because they have tied up
a sizeable portion of their balance sheets in illiquid assets such as
shares, properties and foreign currency.

In terms of the Banking Act, it is illegal for banks to buy shares
unless they are being held as security for a loan or are owned through
swapping debt for equity.

Banks have invested an average of 22% of their total assets in
securities. The bank’s securities and investments in financial terms,
include $31,1 trillion for Standard Chartered, Stanbic $17,2 trillion, ZB
Bank $9,8 trillion, CBZ $17 trillion, Agribank $7,7 trillion, Barclays $21,6
trillion, FBC $17,2 trillion, Kingdom $23,2 trillion, ZABG $8,8 trillion,
NMB $6,4 trillion, ABC $17,8 trillion, Premier $8,9 trillion, and Interfin
$7,8 trillion or 75% of total assets.

Major building societies CABS and Beverley invested $17,8 trillion and
$5,6 trillion respectively.

Due to their failure to convert into cash stocks and other
investments, the banks are currently unable to restructure their balance
sheets to deal with the liquidity situation. Their troubles were worsened by
the current poor performance of the stock market due to the liquidity crisis
in the money market and the exchange rate volatility.

Yesterday the market situation remained in significant shortages as
most banks still battled to cover clients’ payments. Most financial
institutions had exhausted their collateral instruments, making it difficult
for them to borrow both in their inter-bank market and from the Reserve
Bank.

Cash orders by banks and building societies as of yesterday stood at
$37,8 trillion, but banks only collected $22,7 trillion even though the
central bank could meet the demand.

But queues for cash in baking halls and ATMs were falling
significantly this week as the liquidity situation improves.

However, four banks, POSB, NMB, CFX and Beverley, on Tuesday still
owed the Reserve Bank $3,8 trillion for cash collected. Most of the banks
early this week failed to collect all the money they had booked with the
central bank due to lack of security. On Tuesday Metropolitan, ZABG, POSB
and Kingdom failed to fund their cash requirements. On Wednesday ZABG, under
mounting financial pressure, applied for $2,5 trillion unsecured
accommodation from the Reserve Bank.

Earlier on Monday, five banks, CBZ, Renaissance, Kingdom, ZABG and
Genesis had failed to pay statutory reserves. CBZ and Renaissance settled
their dues on Tuesday, while ZABG had proposed to raise $3,6 trillion
through disposal of 8 550 541 Pearl Properties shares and 5 212 500 ZPI
shares. The bank requested $850 billion from the Reserve bank but was only
able to fund $200 billion. It also failed to pay statutory reserves of $672
billion on Monday.

Genesis on Monday battled to pay $350 billion to clients but said it
would clear the queue for the money by Wednesday. Kingdom had no concrete
plan of paying its statutory reserves. Kingdom executives met with CBZ
officials on Wednesday afternoon to deal with their problem of settling
inter-bank obligations. Kingdom owed CBZ at least $10 trillion.

To show its financial crisis, Kingdom had ordered $4,4 trillion from
the central bank but was only able to fund $1,1 trillion. On Monday the
bank, whose liquidity problems stem from structural rigidities in the
balance sheet, failed to pay statutory reserves of $3,4 trillion.

Barclays, which had been plagued by chronic cash shortages for the
past five months due to poor liquidity management, required $4 trillion but
only managed to fund $2,3 trillion. Despite the critical situation by
Tuesday some banks like Stanbic, NMB, CABS, CBZ, MBCA and Standard Chartered
were able to fund and collect their cash.

However, banks continue reeling from liquidity problems and the
Reserve Bank has urged them in confidential memos to restructure their
balance sheets to address the crisis. Failure to urgently tackle the
emergency could result in sector-wide bank collapses.

Press Statement by R Khumalo, CEO Zimind Publishers (Pvt) Ltd.

Zim Independent

Background
On the 25th June 2007, the Minister of Industry and International Trade
ordered all providers of goods and services including newspapers to reduce
prices by half and revert to prices that were in place on the 18th April.
This order did not however apply to wages and salaries. It was only after
the establishment of the National Incomes and Pricing Commission in August
that it became possible to vary prices after submitting an application and
providing suppliers' invoices. Even then the maximum mark-up businesses can
add to input costs is 20% which is way below the rate of inflation.

Whilst this order applied to some, to others like importers of  fuel, film,
inks, plates, and other service providers like garages and commuter
omnibuses, the order was simply ignored and those charged with its
enforcement too busy to do anything about it. It is fair to say that the
order remains applicable only to some goods that are "visible" to the
authorities. Thus on the 9th November 2007 the authorities had no difficulty
arresting myself and Jacob Chisese, chief executive officer of the Financial
Gazette, for violating price control regulations after increasing cover
prices of our newspapers in an attempt to recover costs so that we could
remain in business and allow our employees to earn  fair returns.

The authorities obviously did not see it that way as readers of newspapers
are treated like consumers of milk, bread and cooking oil. At the time I
wrote that running independent newspaper operations in Zimbabwe was like
running a race with both hands tied behind one's back. Inspite of all this
the company had to absorb cost increases all round including salaries with
no matching revenues as  cover price increases fell well below cost
movements.

At the same time following government's ill-advised policy directive of
June, which had resulted in the wanton looting of retail outlets, we had
lost nearly 40% of advertising revenue as major retailers had either run out
of stock, scaled down operations or simply closed shop. In the period after
Christmas our traditional advertisers could not even put up "Sale" signs
that are the norm for this period. Between January and December employees
were given monthly salary increases that resulted in our overall salary bill
for the year going up by 500%. In addition the group was able to pay all its
employees a bonus inspite of serious trading difficulties. In a
hyper-inflationery environment such as ours, where the last official
inflation figure of 7982,82% was issued in September 2007, these salary
movements have no relavance to today's situation as they have been eroded by
inflation which the International Monetary Fund now estimates to be 150
000%.

What was offered

On Wednesday the company made the following offers to its employees:

1) a 200% salary increase.

2) an increase in company medical aid contribution of 90%, up from 75%.

3) an increase in the transport allowance by the same percentage as
salaries.

This offer was rejected by employees resulting in them staging a walk-out.
For their part employees were demanding a 2 000% salary increase.

Having taken further cognisance of spiralling inflation and at the risk of
running down newspaper operations, the company made this final offer:

1) a salary increase of 600%.

2) a minimum salary of $200 million for the least paid employees.

3) a transport allowance of $66 million net of tax.

4) an increase in company medical aid contribution to 90%, up from 75%.

The company made a further undertaking to review salaries in March subject
to trading conditions prevailing at the time.

After this offer had again been rejected the group, in compliance with the
law, made an application for a show cause order at the Ministry of Labour.
By this time employees were demanding a 1 000% salary increase.

Following the application a hearing was then held on Friday at the
ministry's offices where members of the workers committee together with
their legal representative were present. After fairly long deliberations the
parties signed a certificate of settlement having resolved by agreement the
following:

- employees to return to work whilst negotiations continued.

- employees not to be subjected to disciplinary hearings as a result of
their illegal action.

- employees that took part in the job action would not be paid for their
time away from work.

Civic duty

Whereas the group is commited to the welfare of its employees it however
recognises that affordable transport, housing, medical care and education
for children are rights that every Zimbabwean is entitled to and can never
be solved in the workplace.

Conclusion

Throughout the negotiation process management has been transparent and tried
in vain to explain the company's financial predicament in the context of
Zimbabwe's economic crisis which has been compounded by the following: price
controls targeted at newspapers, loss of advertising revenue, high operating
costs, cost of machine breakdowns, foot dragging by authorities in granting
price increases even in the face of spiralling hyperinflation as well as
reduced newspaper circulation figures due to the unavailability of cash.

We remain open to negotiation but deplore walk-outs during the negotiating
process. We also need to emphasise that as a business we have a duty to keep
the company functioning to provide our readers and advertisers with news
whilst addressing the needs of our employees and their families.

Dabengwa confronts Mugabe

Zim Independent

ZANU PF political heavyweight Dumiso Dabengwa, now emerging as the
main dissenting voice, on Wednesday confronted President Robert Mugabe at
the party’s heated politburo meeting over war veterans leader Jabulani
Sibanda’s controversial activities.

The meeting also witnessed an attack by retired army commander General
Solomon Mujuru on Reserve Bank governor Gideon Gono over his remarks last
month that Zanu PF chefs were corrupt.

Gono was also attacked at the Zanu PF Youth League meeting last week,
although the league’s leader Absalom Sikhosana assured him of support this
week.

There was a wrangle between senior officials Simba Makoni and Elliot
Manyika over the party’s election manifesto, sources said.

However, the sources said, it was the Sibanda saga which caused a
stir. The issue drew the battle lines between Mugabe and Dabengwa who has of
late been defiant against his party leader. Dabengwa was supported by Mugabe’s
deputy Joseph Msika, party chair John Nkomo, and other former PF Zapu
leaders. Ex-Zapu officials also fought from the same corner on the Sibanda
conflict at a politburo meeting on October 24 last year.

Msika and Nkomo last month almost walked out of the Zanu PF congress
over the issue, causing chaos at the meeting. Msika had reportedly told
Mugabe that the Sibanda issue was his "rubbish".

Dabengwa has upped the ante in the intensifying Zanu PF power struggle
by creating ructions in meetings. This has raised speculation that he wants
to challenge Mugabe for the leadership. It was also said Dabengwa was
positioning himself to take on Mugabe on a different political platform if
his fight from inside fails.

Reliable politburo sources said Dabengewa, jailed by Mugabe’s regime
from 1982-87 despite acquittal over unsubstantiated treason charges,
frontally tackled his boss over Sibanda’s continued political manoeuvres.

"Dabengwa confronted the president in the meeting by firing a
question, saying ‘Mugabe, what’s happening? Jabulani Sibanda is wreaking
havoc and is destroying the party," a source said. "He went on to
aggressively deal with the matter in great detail."

Dabengwa spent the whole of last year challenging Mugabe internally.
At a politburo meeting on November 28, ahead of the party’s extraordinary
congress last month, Dabengwa questioned the way Mugabe was being endorsed
as the party’s presidential candidate. He told the party’s legal affairs
secretary Emmerson Mnangagwa that he was acting unconstitutionally in
pushing that agenda. But Mnangagwa defended his action, claiming it was
lawful.

However, Dabengwa’s complaints triggered protests at the congress that
Mugabe was unconstitutionally and unprocedurally endorsed. This view still
holds sway in the party.

Inside sources said that Mujuru attacked Gono over his remarks at the
Zanu PF congress that party officials were corrupt. Mujuru complained that
Gono’s remarks that senior party officials were "thieves" were unacceptable
and demanded action should be taken against him, it was said.

Contacted for comment, Gono said reports of an attack on him by Mujuru
were unfounded.

"Those are laboratory-type lies that seek to misinform the public and
generate unnecessary and non-existent conflicts between the governor and the
supreme body of the ruling party," Gono said.

"I’m tired of these epidemic theories of conspiracies, lies and
deceptions." — Staff Writer.

Makoni presidential plan falters

Zim Independent

Constantine Chimakure

FORMER Finance minister Simba Makoni’s three-phase project to assume
the Zanu PF leadership all but collapsed this week after he failed to
challenge President Robert Mugabe at a politburo meeting as reportedly
planned by his backers.

The situation was made worse by Makoni’s meeting with Mugabe early
this week where he reportedly distanced himself from reports of him
launching a party to fight the election against Mugabe. Makoni’s plan was to
push the Zanu PF politburo to reverse the endorsement and confirmation of
Mugabe as the party’s presidential candidate.

Impeccable sources told the Zimbabwe Independent that the plan
crumbled after Makoni chickened out of the project to split Zanu PF and met
Mugabe to pledge his loyalty to him and the party.

The sources said Makoni and his backers had come up with a three-phase
plan to oust Mugabe. The implementation of the plan was due to have
commenced at Wednesday’s politburo meeting.

In the first phase, the sources said, Makoni was supposed to convince
the politburo that Mugabe was "unconstitutionally and un-procedurally"
endorsed and confirmed as Zanu PF’s presidential candidate at the Zanu PF
congress last month.

"Makoni was supposed to mobilise other politburo members and attack
how Mugabe was endorsed," a source said. "A call was going to be made for a
fresh endorsement and confirmation of the party’s presidential candidate by
the central committee. It is at this stage that Makoni and his backers
wanted to block Mugabe from the race."

However, the plan collapsed when Makoni reportedly failed to even
"whisper a protest" during the politburo meeting.

The sources said if Makoni had failed in the first two phases, his
faction had agreed to break away from Zanu PF and form another party led by
the former Finance minister to challenge Mugabe in the March polls.

However, the plan collapsed after Makoni on Tuesday met Mugabe at
Zimbabwe House and told the 83-year-old nationalist that he was committed to
Zanu PF and the president’s leadership

The sources said Makoni met Mugabe in a preemptive move to stop the
octogenarian leader from raising the intended formation of a political party
in the politburo on Wednesday.

"Makoni disassociated himself from the formation of a new party. He
told Mugabe that he will remain loyal to Zanu PF and to the president,"
another source said. "Makoni said he was being linked to the new party by
his enemies."

On Wednesday, Makoni arrived at the Zanu PF headquarters for the
politburo meeting in jovial mood and reportedly hugged and shook hands with
members of the party organ present.

"My interpretation of his behaviour was that he wanted to assure
everyone present that he was still in Zanu PF and loyal to Mugabe," a
politburo member said. "It was the first time for Makoni to shake my hands
since my appointment to the politburo."

The sources said the Makoni faction went into disarray last week when
former Industry minister Nkosana Moyo – who was reportedly mobilising funds
from abroad -- ditched the project over differences in strategy.

Last week the Independent reported there were serious misgivings in
Zanu PF, the MDC and civic society as to whether Makoni had the capacity to
split the ruling party.

Makoni on Tuesday declined to confirm or deny his ambition to become
president. "I have nothing to say about this issue at the moment," he said.

'Zanu PF behind Kunonga antics'

Zim Independent

Constantine Chimakure

FIRED Anglican Bishop of Harare Nolbert Kunonga has reportedly claimed
that he is being backed by Zanu PF in his battle to control the church
against acting vicar-general Sebastian Bakare.

This revelation came amid accusations that Police Commissioner
Augustine Chihuri and two other senior officers were aiding and abetting
Kunonga to block Bakare — who is Harare’s acting bishop — from executing his
duties.

Kunonga is a known supporter of President Robert Mugabe and the ruling
party.

In an exclusive interview with the Zimbabwe Independent this week,
Bakare said Kunonga had told parishioners that Zanu PF was in support of his
move to cling to church property and to lock out the acting vicar-general’s
followers from churches in a bid to bar them from conducting services.

Bakare said the Church of the Province of Central Africa (CPCA) was
forced last week to file an urgent High Court spoliation application after
Kunonga despoiled the diocese of various churches in Harare on Sunday,
January 13. The Diocese of Harare is a member of the CPCA — a grouping made
up of various Anglican dioceses in Zimbabwe, Zambia, Malawi and Botswana.

High Court judge Justice Rita Makarau granted the spoliation order.
However, Kunonga allegedly declined to abide by Makarau’s order last Sunday
by refusing to let Bakare conduct a service at the cathedral in the capital.

This, Bakare claimed, happened in full view of police officers who
"did not bother to arrest Kunonga for contempt of court".

"We are very curious to know what the police and the High Court are
going to do with a person who obviously is saying he is above the law,"
Bakare said.

"Kunonga had made it known to some members of the church that he is
doing all this because he is being supported by Zanu PF."

Bakare claimed that Kunonga was introducing politics in the church
after he failed to execute his duties as bishop and was blind to the fact
that there were members of opposition parties in the diocese as well as
ruling-party supporters.

"Kunonga told the world that homosexuality was high in church, but no
one accepts homosexuality. This is an issue which is not acceptable in our
church," Bakare said. "Kunonga came up with the issue to draw the support of
the president (Robert Mugabe) who has spoken out against the practice."

Bakare, the former bishop of Mutare, hit out at Kunonga and described
him as someone who does not recognise the authority of the church or the
courts.

"The police should have arrested him soon after defying the court
order, but I am not sure if there were some orders from above to leave
Kunonga alone. I still believe that there is the rule of law in this
country. I hope the law will take its course against Kunonga because if it
does not it means there is anarchy."

In its High Court application, the CPCA said Chihuri, Senior Assistant
Commissioner Fortune Zengeni and Chief Superintendent Ngwerume Zharara
despoiled the CPCA of various churches in Harare.

Among the churches affected were the Cathedral of St Mary and All
Saints, St Luke’s Greendale, St Paul’s Marlborough, St Elizabeth Belvedere,
St Francis Glen Norah, St Andrew’s Glen View, and St Stephen’s Zengeza.

Zengeni is the officer commanding Harare province and Zharara is in
charge of the capital’s suburban district.

In his founding affidavit, Harare Diocese acting secretary Christopher
Tapera said each of the churches on January 12 received a letter from
Zengeni — the officer commanding Harare province — ordering that no person
of the Anglican Church can worship unless they align themselves with
Kunonga.

Zengeni said he was ordered to write the letter by Chihuri which he
later gave to Zharara to forward to the churches.

"On the 13th of January 2008 as is explained in the various affidavits
from priests and church wardens the first, second and third respondent
(Chihuri, Zengeni and Zharara) in apparent assistance to the fourth
respondent (Kunonga) interrupted peaceful church service and forcefully
evicted various parishioners who were attending those services," read Tapera’s
affidavit.

Tapera said it was surprising and "quite disappointing" that Chihuri,
Zengeni and Zharara — who have a constitutional obligation to keep peace —
should in their efforts to assist Kunonga be at the forefront of disturbing
the peace.

"This is an urgent application for a spoliation order for the recovery
of the applicant (CPCA)’s various churches in Harare in which the applicant
was despoiled by the respondents on Sunday the 13th of January 2008," Tapera’s
affidavit read. "In this application, the applicant also seeks not only to
protect its congregation’s constitutional right to freedom of worship but
also to seek an interdict against the respondents from interfering with
applicant and its congregation’s church and related activities."

Justice Rita Makarau granted the CPCA the spoliation order at the
weekend.

ZSE party about to come to an end

Zim Independent

By Gilbert Muponda

A STOCK exchange, share market or bourse is a corporation or mutual
organisation which provides facilities for stock brokers and traders, to
trade company stocks and other securities.

Supply and demand in stock markets is driven by various factors which,
as in all free markets, affect the price of stocks.

In Zimbabwe’s case, there has been firm demand unaccompanied by any
meaningful new issues of shares. The prices on the Zimbabwe Stock Exchange
(ZSE) have gone up to such an extent that some have claimed the ZSE is
inflationary.

On average, the ZSE has been adding on $4 trillion daily since January
1. But the ZSE party may be about to come to a dramatic end.

The crash will most likely occur due to a regulatory induced action
engineered to curb what is being mistakenly viewed as speculation.

The lack of quality investments and the unstable operating environment
has forced institutions, individuals and corporates into the stock market.

Companies haven’t invested in long term projects as the policy
remained both inconsistent and unpredictable. As a result, any surplus funds
have been ploughed into the stock market.

According to Zimbabwe’s Banking Act, it is illegal for banks to own
shares unless if they are being held as security for a loan.

So those banks holding shares for trading purposes will most likely be
caught with their pants down, as authorities open the "scapegoat finding
season".

Those familiar with this will know that the "scapegoat finding season"
visits us once in while just before any major election.

Big companies that have been out-doing each other buying each other’s
shares need to devise an escape route in good time. The monetary authorities
have been watching whilst companies were engaged in systematic corporate
cannibalisation, whereby companies just keep buying each others stock
irregardless of productivity or profitability.

The corporates who have failed to stock the shelves despite accessing
the Baccosi facility need to sell their shares fast and make sure people
have full stomachs ahead of many star rallies. If they don’t, the RBZ will
ensure they comply.

At the stock exchange, share prices rise and fall depending, largely,
on market forces. Share prices tend to rise or remain stable when companies
and the economy in general show signs of stability and growth.

Zimbabwe has the fastest shrinking economy in the world (outside war
zones) yet its stock market has been performing wonders both in United
States dollar and in Zimdollar terms.

The ZSE moved by about 90% between December 2006 and December 2007
(US$2,4 billion to US$4,6 billion). An economic recession or financial
crisis could eventually lead to a stock market crash.

Therefore, the movement of share prices and in general of the stock
indexes can be an indicator of the general trend in the economy. This hasn’t
been the case in Zimbabwe.

This implies Zimbabwe has a unique situation because the stock market
has firmed when the economy was collapsing.

This has happened because all excess funds have been forced into the
stock market due to lack of any meaningful and legal options.

Current market volatility makes it difficult to embark on any long
term projects as policies keep shifting.

The stock market is one of the most important sources for companies to
raise money.

This allows businesses to go public, or raise additional capital for
expansion. The liquidity that an exchange provides affords investors the
ability to quickly and easily sell securities. This is an attractive feature
of investing in stocks, compared to other less liquid investments such as
real estate.

Banks and other institutions have been accused of holding "non-core
assets" and engaging in "non-core" activities. This presents the RBZ with a
good sample to select appropriate whipping boys to open the latest round of
"scapegoat finding season".

History has shown that the price of shares and other assets is an
important part of the dynamics of economic activity, and can influence or be
an indicator of social mood. Rising share prices, for instance, tend to be
associated with increased business investment and vice versa. Share prices
also affect the wealth of households and their consumption. Therefore,
central banks tend to keep an eye on the control and behaviour of the stock
market and, in general, on the smooth operation of financial system
functions.

So it’s important that authorities exercise caution and restraint in
their endeavours to correct the banks’ portfolios.

Clearly banks and other market participants have been forced to adopt
such survival strategies in face of a very hostile operating environment. In
a market where inflation is reportedly at 150 000%, there are very few legal
alternatives.

The ZSE has remained the one of the few legal investment options
available to Zimbabweans. This has led to a sustained rapid increase in
share prices. This has also led to a mistaken belief that shares only can go
up. Beware! The problem with being an island of success surrounded by poor
performers is the unwarranted attention.

This means the ZSE is attracting attention which may be good or bad
for investors. There are risks associated with this attention.

Given that Zimbabwe’s formal sector has been systematically decimated,
the ZSE remains the only viable destination which can match if not beat
inflation.

It has been erroneously argued that the ZSE price rises are
inflationary. The fact is the ZSE became such a viable destination for
investment because investors were in desperate need of legal means to beat
inflation. Whilst authorities may want to punish or penalise the banks, this
would be ill-advised.

In financial markets, a stock market bubble is a self-perpetuating
rise or boom in the share prices of stocks of a particular industry.

Zimbabwe’s stock market can’t be described as overvalued. Due to the
rapid Zimdollar depreciation, Zimbabwean assets remain cheap in US$ terms.

The billions which have been made on the ZSE are not in themselves
inflationary but only become inflationary once the new billionaires try to
enjoy their wealth and chase the few goodies available. And due to limited
supply, the
sellers respond by increasing prices without any improvement in
quality.

Research has shown that psychological factors may result in
exaggerated stock price movements. It has demonstrated that people are
predisposed to ‘seeing’ patterns, and often will perceive a pattern in what
is, in fact, just noise.

Another phenomenon — also from psychology — that works against an
objective assessment is group thinking. An example with which one may be
familiar is the reluctance to enter a restaurant that is empty.

The stock market, as any other business, is quite unforgiving of
amateurs. As they say, the market has no memories. So, yesterday’s
spectacular rises can become tomorrow’s dramatic crashes!

Sometimes the market tends to react irrationally to economic news,
even if that news has no real effect on the technical value of securities.
Therefore, the stock market can be swayed tremendously in either direction
by press releases, rumours, euphoria and mass panic.

Over the short-term, stocks and other securities can be battered or
buoyed by any number of fast market-changing events, making the stock market
difficult to predict. So, investors need to remain calm instead of panicking
which may amplify their losses.

* Gilbert Muponda is a Zimbabwe-born entrepreneur, living in exile. He
can be contacted at gilbert@gilbertmuponda.com.

Minister blames water crisis on power cuts

Zim Independent

SOME residents in Harare have gone without water for more than three
weeks while some areas of Bulawayo have experienced water cuts lasting more
than five months. Amid all this chaos, blame shifting has been the order of
the day. Power cuts, unreliable water reticulation equipment and lack of
chemicals have been blamed. The quality of tap water is also suspect.
Zimbabwe Independent business reporter Paul Nyakazeya (PN) this week spoke
to the Minister for Water Resources and Infrastructural Development Munacho
Mutezo (MM) on the water crisis in the country.

PN: What really is the problem with the water situation in the
country? Can you explain why some residential areas can go for almost a
month without water and who is to blame?

MM: The main reason is disruption of electricity, as power is needed
to pump water from the main reservoir into other reservoirs. Generators do
not have the capacity to pump water past three or four reservoirs before it
reaches residential areas. We need 3 300 kilovolts (Kv) for water to be
passed through reservoirs. There is no generator with that capacity as it
will be equal to a power station. Household generators use between 2,3 – 2,5
Kv volts. Industries use between 3,8-4,5 Kv volts while mines need up to 5,5
volts.

PN: Can you explain how a power cut for about 10 hours can result in a
residential area going for nearly a week without water?

MM: There is no definite timeframe as to how long it takes for normal
water supplies to resume in the event of power disruption. Factors such as
gradient, size of reservoir, another power cut and availability of chemicals
whose manufacturer is Zimphos depends on the availability of power.

PN: You still have not answered the question why people are going for
a week and even longer without water.

MM: To give an example, in the event of a power cut around Morton
Jaffray it can take about an hour for the water to be pumped into Warren
Park. From Warren Park it can take about 48 hours of undisrupted power
supplies to reach the required levels to Alex Park. It will then take
another two days to be pumped into let’s say Highlands and about 48 hours
for water to be pumped into residential areas. Note there are levels which
the water should reach at all the 28 reservoirs in Harare before moving to
the next stage.

PN: From your explanation it is almost a week. During the process, if
there is a power cut along the way it means it can take more days?

MM: Definitely these are what we call "start-stops". The effects of
the national blackout this week could result in more days without water. It
is not a healthy situation, it also affects us and all stakeholders
involved. But without electricity there is no way there will be a constant
supply of water in the country. As a result of the power cuts, the Letombo
belt — which is one of the largest in Harare -- has not been supplied with
water.

PN: How then would you explain a residential area going for more than
two months without water? Areas such as
Mabvuku-Tafara and some parts of Greendale and Chisipite have been
equally affected.

MM: Those areas are a bit out of town and located on high places. In
order for water to reach those destinations it has to go through four or
five tanks without any disruptions. Water in such areas needs to be pumped
in tanks for as high as 150 metres. If there is a power cut during the
process the water level will go down flowing back to the first tank. When
the situation normalises the water level has to be pumped to levels as high
as 150 metres and that will be for four or five tanks.

PN: If about $10 trillion is made available to you today will the
situation improve and how?

MM: There will be a significant improvement in areas of chemical
supplies, replacing old and burst pipes and time taken to attend to
maintenance water issues. But as long as there is power disruptions there
will be disruptions to the supply of water.

PN: Zinwa officials are said to be using estimates on water bills,
which in most cases are miles away from the actual figures. What do you say
about this?

MM: There is not enough manpower to visit every household, as such
they visit an area and the next month they use estimates while they visit
other areas. We have a history of consumption for every one in the system
and know what is reasonable for a household or unit. This is the reason we
have been encouraging residential areas to use the minimum water possible in
areas that are applicable and they can discourage others when billing is
done.

PN: Is that not unfair and dangerous as consumption is different
depending on the number of people at a house and how much time they spend at
home? Surely you are disadvantaging someone?

MM: We do not rule out errors, which when reported can be rectified.
This practice is used the world over. Even in countries which use gas.

PN: Has Zesa explained to you what led to the national blackout this
week and are they aware of the impact on production, health, schools,
universities and social life of not having electricity and water just for a
day?

MM: At the moment we do not have full details of the cause of the
blackout. Zesa should be aware of the impact and so does my ministry. Zesa
has been saying they do not have enough foreign currency to import power and
other operations.

PN: How clean is the water we drink?

MM: Like I said, chemical supplies are affected by power disruption.
If you ask Zimphos (they supply water chemicals to Zinwa) their operations
have been affected by power cuts. We however have imported chemicals to
ensure that the quality of water meets world
standards. The chemicals are arriving this week.

PN: I was made to understand that no water goes unpaid for even if
there is a pipe leakage. Residents near the burst pipe will be made to pay
for the water. They say the cost of the lost water is divided by the number
of residents living in that particular road or street.

MM: That is not the correct position. It only happens to the property
owner if the burst pipe is in their yard.

Coup case crumbles

Zim Independent

Lucia Makamure

THE state case against six suspected coup plotters arrested last year
is beginning to crumble as the police have failed to make new arrests since
last year.

The six men being accused of plotting the coup were due to appear in
court for routine remand yesterday but officials at Chikurubi prison on
Wednesday told their lawyer, Charles Warara, that the prison’s truck had
broken down so his clients could not attend the hearing.

"I went to Chikurubi yesterday (Wednesday) and a senior officer there
told me that their truck had broken down," said Warara.

However, when Warara went to court yesterday to represent his clients
in absentia, he was told that there was a mix up and his case could not be
heard.

"This is just an excuse by the state to keep my clients in custody,
which shows that they are not ready for trial," added Warara.

The six accused, Albert Matapo, Nyasha Zivuku, Oncemore Mudzurahona,
Emmanuel Marara, Patson Mupfure and Shingirai Mutemachani, have been in
police custody since May last year.

Superintendent Simon Mundondwa, the police officer commanding Law and
Order in Harare who is investigating the case told the court in November
that more arrests were to be made within two weeks.

"There are now strong leads and some of the outstanding accused will
be arrested soon," said Mundondwa in an affidavit he submitted to the court
at the time.

However, the accused’s lawyer said there is concern over the continued
detention of his clients and the court’s failure to come up with a trial
date.

"We have been trying to get hold of the investigating officer to find
out if there are new developments but up to now we have not been told
anything," Warara said.

"The state promised to make more arrests last year but up to now no
new arrest linked to the case has been made," he added.

Up to this stage the state is yet to present tangible evidence linking
the accused to the foiled coup.

Warara last year told the Zimbabwe Independent that no guns or the
element of the execution of the supposed coup has been brought before the
courts to justify the lengthy stay of the accused in police custody.

"Our worry is that the police are taking time to finalise their
investigations yet our clients have been on further remand since last year,"
said Warara.

Banks trapped in liquidity crunch

Zim Independent

Constantine Chimakure

BANKS have this week written to the Reserve Bank requesting overnight
unsecured accommodation after experiencing serious liquidity problems as
depositors’ money is tied up in illiquid stocks, real estate and foreign
currency bought on the parallel market.

The rally on the stock exchange late last year and the sharp increase
in the price of properties over the same period was triggered by banks which
violated the Banking Act and monetary regulations to trade in securities and
illiquid assets.

The stock market had been consistently breaking records since July
last year, rising a total of 322 111% last year on the back of
hyperinflation.

Average growth per day for the industrial sector was averaging close
to 10% while the mining sector gained an all-time high of 20,83% in one day
this year.

Documents in the possession of the Zimbabwe Independent reveal that
banks such as Kingdom and ZABG are facing serious liquidity problems and
owed the central bank trillions of dollars in non-payment of statutory
reserves and interest.

In a letter to RBZ governor Gideon Gono on Wednesday, ZABG chief
executive officer Stephen Gwasira asked the central bank to come to the
financial institution’s rescue by providing $2,5 trillion for unsecured
accommodation.

"We write to request for unsecured accommodation in the amount of $2,5
trillion for a period of two weeks to cover our immediate cash
requirements," Gwasira wrote. "This situation has been caused by a temporary
shortage of security on our part against an increasingly high demand for
cash."

The bank revealed to the RBZ that it had underwritten two initial
public offers by underperforming property firms — Pearl Properties and Zimre
Properties.

ZABG has over 8,5 million shares in Pearl Properties that were on
Monday valued at above $3 trillion. In Zimre Properties, the bank has over
5,2 million shares valued at about $480 billion by the beginning of the
week.

"As of this morning (Wednesday), the bank’s position had improved from
yesterday following the release to the bank of various securities arising
out of matured investments in the market and the receipt of some inflows,"
Gwasira’s letter read. "As a result we are in the process of taking delivery
of cash amounting to $1,040 trillion from the Reserve Bank."

He said ZABG would repay the requested accommodation through the sale
of its shares in Pearl Properties and Zimre Properties.

"Our strategy (to come out of the liquidity crunch) going forward is
to proactively manage our loan book and to intensify our deposit
mobilisation initiatives," Gwasira wrote. "We remain committed to ensuring
that our customers’ cash requirements are met and that banking services are
extended to the wider public in line with the provisions of our mandate."

The ZABG boss asked to meet Gono to discuss the bank’s plea.

Another document in our possession reveals that a number of banks
failed to meet in full their statutory reserve obligations for the week
ended January 19. The reserve payments for that week amounted to $21,4
trillion.

ZABG had a shortfall of $672 billion minus $20,3 billion interest due
to the RBZ. The CBZ failed to pay $1,6 trillion and an interest of $48,2
billion. Kingdom had a shortfall of $3,4 trillion minus $101,9 billion
interest. Renaissance was short by $100 billion and $3 billion in interest.

As a result of the defaults, $15,2 trillion was collected by the RBZ
from the banks.

"These institutions were summoned by the central bank to explain why
they had failed to pay for statutory reserves and to lay out their concrete
payment plans," the document read. "While some of these banks such as CBZ
have already paid, others such as Kingdom and ZABG appear to be facing
formidable liquidity challenges."

According to some of the banks’ balance sheets as of December 31 last
year, the financial institutions channelled depositors’ money into
securities and investments, among them buying shares on the Zimbabwe Stock
Exchange and foreign currency on the parallel market.

Kingdom invested $23,2 trillion in securities, representing 43% of its
total assets. Renaissance poured in $2 trillion or 13% of its assets into
securities, while ZABG channelled $8,8 trillion or 26,3%.

The banks reportedly found themselves stuck with shares after the
stock market started tumbling last week and the central bank introduced a
money tracking system to detect all transactions.

They cannot dispose of their shares and at the same time cannot
liquidate the foreign currency through the Real Time Gross Settlement as the
RBZ would be able to detect the movement of huge sums of money in both local
and foreign currency.

The route the banks can use to liquidate the hard currency, sources
said, would be to trade it on the parallel market or suffer massive loss by
selling it to the RBZ at $30 000 to US$1.

Most banks argue that while it was illegal for them to buy shares and
foreign currency on the black market, it was rational to do so to preserve
the value of the depositors’ money in a hyperinflationary environment.

According to the International Monetary Fund, Zimbabwe’s year-on-year
inflation is now above 150 000%.

During the banking crisis between 2004 and 2005, the RBZ closed Trust,
Barbican and Royal banks for engaging in non-core business such as buying
and selling vehicles and bricks. They also failed to observe good corporate
governance requirements.

ZSE on downward spiral

Zim Independent

Bernard Mpofu

THE Zimbabwe Stock Exchange (ZSE) continued on a downward spiral
yesterday as banks scrambled to offload their shares to cover financial
positions. About 22% of the depositors’ funds with the banks are locked in
shares. According to the Banking Act it is illegal for banks to own shares
unless they are holding them as security against a loan.

Yesterday the industrial index dropped 4,26% while the mining index
slipped 7,65%. On Wednesday the bourse lost 15%. Analysts say the market is
likely to continue dropping in the short-term until banks have finished
offloading their equity. Other analysts said this bearish trend was a result
of shortages on the money market.

The money market was about $100 trillion short on Wednesday forcing
some financial institutions to offload their shares to cover their
positions.

"This past week has seen more sellers than buyers and there is more
pressure on sellers than buyers," said one analyst.

"It is interesting that the same way this bourse surges is usually the
same way it falls," he said.

Other analysts have attributed the fall to the recent power cuts,
which they said was denting foreign investor confidence. Last year saw an
increase in foreign investors coming on to the ZSE.

"Zimbabwe was hit the most by these regional power cuts, and this has
seen some foreign investors pressing the panic button," said a stock market
broker.

Despite these developments some analysts still maintain that the
increase in monetary supply will restore the buoyancy. "It’s only in the
short-term, otherwise I believe very soon things will be back to normal,"
said an analyst with a local asset management firm.

Zim domestic debt shoots to $21 trillion

Zim Independent

Paul Nyakazeya

ZIMBABWE’S domestic debt has soared to over $21 trillion, increasing
by 165% inside one month.

The unprecedented rise in government debt levels which over the years
was sparked by huge interest payments this time ballooned due to the central
bank’s advances to government, according to figures obtained this week.

Reserve Bank of Zimbabwe advances to government accounted for 88% of
total debt or a hefty $ 18,7 trillion.

Interest payments have for years remained over 70% of the total debt,
a situation bank economists said was evident that government was broke and
had no other source of income other than the domestic market.

The figures indicate that government debt had surged to $21 trillion
on November 21, from $7,9 trillion on October 21.

The debt had opened 2007 at $175,6 billion.

The interest payments for treasury bills, accounted for $5,9 trillion,
three times the amount issued which was $1,8 trillion during the period
under review.

The new debt levels mean that with an estimated population of 13
million, every citizen owes $1,6 million to the local banks and financial
institutions.

Four in every five Zimbabweans is living below the international
poverty benchmark of US$1 per day.

Genesis group economist, Brains Muchemwa, said government’s propensity
to rely on borrowed funds has pushed the domestic debt up.

"It’s evident that the solvency of government is already seriously
compromised with the current interest rates, and technically government
finances will not be better with even a 1% rise in interest rates," Muchemwa
said.

The increasing government debt stock raised fresh fears of renewed
turbulence in the crisis-sapped economy, battling with high inflation
currently topping 150 000% according to figures from the International
Monetary Fund.

"The surge in domestic debt was because of high interests on the
market which were in line with the inflation rate," said Muchemwa.

Analysts said the debt stock was likely to rise further on increased
borrowing by government to finance the import of wheat and maize.

They said government will borrow more funds to finance other recurrent
expenditure like civil service salaries.

Government has been forced to rely on domestic borrowings because
their tax revenue base has dwindled because of company closures which have
led to retrenchments.

This means that government that in real terms the government is
collecting less money through corporate and income tax.

Independent economic consultant, John Robertson, said the major effect
of rising government debt would be an escalation of the inflationary rate
due to increased recourse to the domestic market for funding.

With inflation above 150 000% government’s huge appetite for cash is
also likely to spur increased money printing, pushing money supply growth
currently.

The money supply growth was at 17 806,8% in August.

The fact that Zimbabwe has no access to international capital has only
made the situation worse.

Zimbabweans hooked to cellphones

Zim Independent

Jesilyn Dendere/Kuda Chikwanda

ZIMBABWEANS might be struggling with the economic crisis but they
still love a long yak especially on their mobile phones.

An ordinary Zimbabwean spends at least 200 minutes on the phone a
month, according Econet chief executive, Douglas Mboweni. This has come with
a heavy toll on the network accessibility.

The international average is 40 minutes per month and that includes
people in functioning economies like the United States and New Zealand.

The main reason why the network always looks congested is that the few
that manage to get through keep on yapping for hours. The result is that
they block the multitudes who also want to make a call.

So bad is the phone habit here that even the base stations can’t cope
with the demand for calls.

And the reason why they spend so much time on the phone is not that
they really have a lot to say but because the charges are so cheap that they
can afford to go on and on.

Again it’s not that companies are really in a price slashing
competition but the really issue is that government has kept the mobile
phone charges ridiculously low.

So what does a ‘good’ chitchat cost in Zimbabwe?

The government says mobile phone companies must charge about $50 000
which is equivalent to less than one US cent —US$0,0089286 to be precise.

So to satisfy their 200 minute phone talk a month habit an average
Zimbabwean needs $10m which is about US$1,7 per month at the current black
market rate of US$1:$5,6m.

It gets bizarre when one uses the RTGS rate of US$1:$10m. The result
is an irritating automated voice that says: "The number you have dialed is
not available at the moment. Please try again latter."

And then the less polite message that simply tells you that the
network is busy.

Still Zimbabweans will keep trying hoping that when eventually they
get through they will talk until they lose their voices.

It’s not like the charges have been eroded by inflation. Zimbabwe has
always had a low tariff regime, according to Mboweni.

Mboweni said the international standard is that the mobile tariff
should at least be about half the price of a loaf of bread or a bottle of
Coke. It is however difficult to use this measurement in Zimbabwe because
even the
prices of those commodities are heavily controlled.

For instance what exactly is the price of a loaf of bread? The
government says it’s $700 000 but people are getting it at $2m per loaf. As
for a bottle of Coke everybody has a different price.

"Communication in Zimbabwe is just too cheap. That is why there is
network congestion," said Mboweni last week.

The solution, Mboweni said, lies in increasing the tariff to viable
levels. That way people will not talk for a long time and congestion will
ease.

The mobile companies however have another bigger problem in that
inflation tends to immediately gnaw at every tariff increase.

"We need a system that allows that the networks to continuously review
their tariffs in line with inflation," said Mboweni.

That sounds like a reasonable appeal until one checks the organisation
that the networks have to deal with to get a price review.

Until six months ago the mobile companies had to deal with the Postal
and Telecommunications Regulatory Authority (Potraz) which is run along the
same line as Zinwa, Zesa and ZBC.

The red tap, delays and political interference seem to be part of the
mission statement.

Last October the government induced another headache for the mobile
companies by introducing the National Incomes and Pricing Commission (NIPC).

To get a feel of how NIPC behaves one needs to add to red tap, delays,
political interference, incompetence and of course the fact that it is
specifically mandated to keep prices down.

Even if they manage to get past Potraz and NIPC the networks will have
to deal with Zesa.

"Due to the persistent power cuts most of our base stations are always
down. Sometimes we use generators but the fuel is very expensive especially
if one considers the low tariffs," Mboweni said.

There are also the serious foreign currency problems currently
affecting the whole country.

Econet, Net*One and Telecel have been cut off by major international
networks because they can’t pay for the termination charges which are made
in foreign currency.

The networks cannot expand their networks because of the foreign
currency crisis.

Econet is now exporting SIM cards to neighbouring countries as it
seeks to raise foreign currency to meet local requirements.

Mboweni confirmed to businessdigest that the company had opted to
export SIM cards to alleviate biting foreign currency shortages. Mboweni
said EWH had been inundated with requests from Zimbabweans living in South
Africa and Botswana for SIM cards.

Mboweni said Econet had decided to leverage external demand for SIM
cards with demand for foreign currency.

Econet will use the foreign currency raised to fund operations and
import of equipment to expand the network and subscriber base. The target is
to increase the subscriber base to 1,5 million.

"Statistics show that official estimates of Zimbabweans living in
South Africa are around one million. If we can sell our services to at least
500 000 of them, we’d be some where," Mboweni said.

Econet approaches govt for forex

Zim Independent

ECONET is currently awaiting response from government for its request
for foreign currency to purchase equipment to be used for spying as mandated
under the Interception of Communications Act.

Mboweni said while they wanted to comply with the laws of Zimbabwe, it
was next to impossible given the foreign currency crunch.

"We are awaiting response from the authorities. What we are saying is
that we will comply with the laws of Zimbabwe, but to buy that equipment we
need foreign currency and we have long requested for it," he said.

Mboweni said Econet will comply with the new law as there was no other
way out.

"We will comply with the laws of the country because failure to do so
will mean losing our operating licence."

He said the terminal to put the spying hardware were already there.

The law will allow government to spy one people’s telephone
conversations. It will also allow government to read emails and text
messages.

Legal experts have condemned the law saying while it was common
practice worldwide it was susceptible to abuse by the government to target
political opponents.

The major problem is that in Zimbabwe the law is vague. According to
the law government minister, police and intelligence chiefs are allowed to
spy on people’s communication.

Experts say whereas other countries use the law to deal with terrorism
and other serious offenses it seems that the government wants to use the law
to deal with perceived opponent like political activists, parties and
journalists.

"The motive of the law is to deal with opponents. This is clear
especially if you look at the vague crafting of this law. There are no clear
checks and balances to ensure that the system is not abused," a lawyer with
a local firm.

Meanwhile Econet says it has started testing the third generation
cellular (3G) service as they wait for frequency allocation by Potraz.

"What we are waiting for is frequency allocation and not a licence as
is being said because we already have GSM licence," said Mboweni. Econet is
the country’s largest communications operator and controls 45% of the fixed
telecommunications and mobile market. State run Net*One follows in second
place with 21%, followed by Tel*One with 18% and Telecel with 16%.

NIPC and medical aid societies: Way forward

Zim Independent

By Nhlanhla Nyathi

JUST as we had thought that the disturbing era of price controls was
over and done with, the National Incomes and Pricing Commission (NIPC) is at
it again. This time they are refusing to grant Medical Aid Societies the
right to increase subscriptions in line with underlying medical expenses.

The massive upsurge of prices across the board over the past four
months gave the impression that the NIPC was no longer actively involved in
the determination of prices or at least that they had seen the error of
their ways.

Surely one would have been justified that in believing that they have
indeed learnt something from the disastrous effects of the July 2007 price
controls that caused market-wide shortages that still exist today.

The continued involvement of the NIPC in the commercial sector shows
the fallacy of the institution’s policy of controlling the price of a
finished product without fully factoring in the cost build ups.

If the NIPC argues that cost build-ups are factored into their pricing
models then they are guilty of denial of the effects of inflation on the
prices of drugs and medical expenses.

They are guilty because a number of members of medical aid schemes are
burdened with paying huge cash components whenever they visit the doctor or
buy drugs from pharmacies on account of their membership proving the
inadequacy of current subscriptions.

Medical drugs have gone up unabated in tandem with parallel market
indicators and it would be counter-productive to control subscriptions while
compromising service delivery.

It’s a case of giving with one hand while taking back with the other.
The stance taken by the NIPC will inevitably result in the irrelevance of
medical aid schemes as it compromises the initial founding objective of
providing medical aid cover to members.

If members end up paying more than 50% of their medical expenses in
cash, it becomes somewhat inconvenient to have a half-baked medical aid
cover.

The very fact that the subscriptions paid by employers on behalf of
their employees for the purpose of creating medical aid cover are perceived
as a form of levy that can be controlled by the NIPC puts the operationally
efficiency of medical aid schemes at risk.

The NIPC in this case justifies its intervention due to the fact that
subscriptions payable to medical aid schemes are perceived indirectly as a
levy on employees and hence feels obligated to protect them from escalating
costs.

However, this hard-line stance, well-intentioned as it may be in
lowering the subscription burden for employees, falls prey to causing
unintended consequences through employees having inadequate medical cover.

This might result in an unhealthy and unhappier employee, which is
more than what the NIPC bargaining for. Unfortunately because the NIPC owes
its existence to an all empowering statutory instrument, it can implement
whatever policy it deems fit even if it is crystal clear that such a policy
would compromise service delivery.

Employers and employees might be sympathetic to the plight of medical
aid schemes but cannot do anything if the NIPC has ruled on it.

Many people will have higher co-payments when they visit their doctor
next time. Concerned employers, who genuinely want to provide good medical
cover for their employees ask: is there an alternative product that can be
structured within the confines of statutory provisions that enables better
coverage while not being susceptible to NIPC control?

To answer this question, people need to understand the concept of
medical aid societies and how they function.

Medical aid societies are non profit making body corporates with
perpetual succession established for the purpose of providing medical,
dental and allied services for its members.

Allied requirements can stretch as far as the society operating
hospitals, clinics, and pharmacies for the benefit of its members.

To be a member of a society requires one to pay a periodic
subscription, normally on a monthly basis which is paid into a fund and
managed by the society for the purpose of providing medical, dental and
allied requirements.

Medical aid societies use the concept of the law of large numbers
which implies that those members who do not use medical services on a
frequent basis help finance those who claim frequently.

Looking at it now it makes sense why someone who contributes loyally
to their medical aid society for twenty years without claiming anything
would not be entitled to a cumulative twenty year claim in the future on the
fund. In essence the twenty years of non claims would be forfeited to other
members who claim frequently and some of the money from accrued investments
of the fund used to build hospitals, clinics, etc will accrue to other
future members that will join the society in perpetuity.

Well-intentioned as the concept of medical aid schemes may be, it
clearly has its own inherent weaknesses that can be improved significantly.

The intrusive tendencies of the NIPC in this case might actually offer
some innovative financial institutions the opportunity to structure medical
cover products that eliminate the just mentioned inherent weakness of
medical aid schemes.

The opportunity arises in the sense that the management of funds is
the work of financial institutions who can work hand in glove with companies
wishing to pay monies into a fund for the purpose of providing medical cover
for its employees.

The concept is that companies agree to pay monies into a fund that
will be grown for the objective of providing medical cover for its employees
and claims can be made on the fund on some agreed formula when covered
employees access medical facilities and drugs. The advantage of this product
is that investment policy can be structured with the active involvement of
the concerned contributors to the fund and they are the sole beneficiaries
of the inevitable future value of the fund.

This product would be out of the NIPC’s jurisdiction because the
monies paid into the fund are for investment purposes and do not entail a
subscription that can be controlled as in medical aid schemes.

* Nhlanhla Nyathi is a director of a private equity company. He can be
contacted on 0912250092 or Kexhe@yahoo.com

Banks sail in choppy waters

Zim Independent

Shakeman Mugari

MORE banks could sink after the Reserve Bank of Zimbabwe (RBZ) this
week announced a hefty increase in unsecured accommodation rates to deter
financial institutions seeking overnight cover from the central bank.

The RBZ raised unsecured accommodation from 1 100% to 1 500%, an
increase of 400 percentage points.

This means that Zimbabwe’s troubled banks will pay heavily if they
borrow from the central bank to cover their daily shortfalls. The central
bank also tightened procedures for accessing unsecured accommodation funds.

Unsecured accommodation is when a bank gets money from the central
bank to cover its daily shortfalls without tendering security for the loan.
The daily shortfalls happen when there is a mismatch between a bank’s total
deposits and withdrawals.

These measures mean that RBZ governor Gideon Gono will be the only one
who can approve accommodation for any bank.

"No bank or institution shall be accommodated, secured or otherwise,
without express authority and clearance from the governor," said an RBZ memo
to banks and other financial institutions. The memo said banks will not be
accommodated unless they fully explain how they fell short in the first
place.

"All motivations for accommodation must be accompanied by
comprehensive applications written by the bank’s chief executive officers
fully explaining the origins and justifications for the shortfall, supported
by documentary evidence," it said.

The increase in the rate on Wednesday came amidst revelations that
most banks were begging the central bank to cover their positions after
being hit by a serious liquidity crisis. Most banks have misaligned assets.

Banks fell into trouble after they invested trillions of dollars worth
of depositors’ funds in properties, foreign currency and shares.

According to the Banking Act, it is illegal for banks to own shares
unless they are being held as security for a loan. The major problem for
most banks is that they cannot dispose of the shares because their prices
have gone down.

It is equally difficult to dispose of fixed properties and foreign
currency, especially after the central bank introduced a tracking system to
monitor activities in the banking sector.

An average of 22% of the depositors’ monies held by all financial
institutions has been invested in non-core business like shares and
properties.

Some of the money was used to buy foreign currency on the parallel
market. As of December, about 18,62% of depositors’ funds held by commercial
banks was locked up in shares and other non-core investments.

The country’s five merchant banks have a total 31,47% of depositors’
funds locked in shares. The four building societies have poured 19,58% of
depositors’ funds into shares and other investments.

By Wednesday evening, eleven commercial banks had managed to get some
bail-out from the central bank but only on the secured accommodation basis.

Only Barclays had managed to get unsecured accommodation. The bank
borrowed $6,4 trillion (unsecured) and $8,7 trillion (secured).

CBZ borrowed the highest amount with a loan of $17,7 trillion.
Stanchart got $17 trillion, FBC $1,4 trillion, Kingdom $6,1 trillion, MBCA
$1,1 trillion, NMB $3,6 trillion, Stanbic $5,5 trillion, ZABG $928 billion
and ZB Bank $10,6 billion.

RBZ has duty to protect banks - Chikura

Zim Independent

Augustine Mukaro

THE Reserve Bank has the duty to protect banks from collapsing in
order to safeguard the integrity of the financial system and retain
depositors’ confidence, the Deposit Protection Board (DPB) said this week.

In an interview with the Zimbabwe Independent yesterday, the DPB’s
chief executive John Chikura said although indications from the central bank
were that banks had a sound financial base, there should be a constant check
on their liquidity.

"It’s the responsibility of the Reserve Bank to keep checking whether
banks conform with prudential regulations," Chikura said.

"In case of a crisis, the RBZ should ensure that the issue is resolved
quickly without prejudicing depositors to maintain their confidence in the
system."

Chikura said it was only in an unfortunate case when a bank collapses
that the DPB should come in to pay the depositors. He could not say how much
would be paid out to depositors since the situation keeps changing under the
prevailing economic situation.

"The last time we paid out $15 million per depositor but the situation
has changed because of inflation, so the actuaries are working on the new
figure," he said.

He said the central bank had the right to close a bank after
discovering irregularities but in most cases it will work with the DPB to
try and resolve the crisis.

Chikura said under normal circumstances banks should pay an annual
premium to the DPB as a way of protecting themselves in the event of one
collapsing but because of inflation they have now resorted to quarterly
premiums.

"The banks are currently paying quarterly premiums with the most risky
bank paying the highest rate," Chikura.

A thug and a spiritual leader

Zim Independent

I THINK recent developments at the Anglican Cathedral and Greendale
parish clearly show the difference between Bishop Nolbert Kunonga and Bishop
Sebastian Bakare: one is a thug and the other a true spiritual leader.

The public needs to know that the hype about homosexuality is real
hypocrisy and opportunism on the part of Kunonga. Before he clutched onto
this he had suggested as an agenda item to the provincial secretary that the
Province of Central Africa should be dissolved as a sign of respect to
Archbishop Bernard Malango who was retiring at the end of September 2007.

All other provincial bishops laughed at his reasoning. It was after
this that he came up with homosexuality as the basis of breaking away.

This guy has said so many things which have fallen flat on his face.
Just after the Episcopal Synod in Mungoshi last year, Kunonga was boasting
in public that he was breaking away together with the dioceses of Manicaland
and Central Zimbabwe.

The Diocese of Central Zimbabwe publicly expressed its irritation with
these comments by Kunonga. As for Manicaland, Bishop Jakazi has seen the
light and dissociated himself from Kunonga. He also apologised to the
province for his ill-considered actions and being misled by Kunonga.

At the height of this, Kunonga also boasted that he had received so
many invitations to join other dioceses in Africa, notably Nigeria, Kenya
and Uganda. He even visited Uganda at the last Commonwealth meeting and made
similar claims.The truth is that all these countries rejected him as they
cannot take on a person who has broken away from the Anglican Communion.

With egg on his face Kunonga then created his own province at a "press
conference"! This is unheard of and he should not compare this with the way
the Province of Central Africa was created from the Province of Southern
Africa. He knows very well that this was not done at a hastily called press
conference with the Herald and the Sunday Mail.

The simple issue is that Kunonga broke away and people can see through
his recent behaviour in Greendale and at the Cathedral and his tendency to
financial imprudence of bouncing cheques and spending what he does not have
that he was a welcome departure from the province.

His problem is like that of a person who has resigned from a company
and wants to go away with company assets and use the company name. He has
now been rejected by 98% of the parishes in the diocese. For some unknown
reason, the Herald is ignoring this.

What Zanu PF should be careful of is that all the parishes in the
rural areas, the heartland of the ruling party, have rejected Kunonga purely
as a church issue. Zanu PF is in danger of losing votes if it continues,
through the Herald and the Sunday Mail, to be seen as supporting a person
who was rejected by people in Bindura, Marondera, Murehwa, Banket and so on.

Kunonga is alleging that the seat in the Cathedral is his. This is not
an issue for the courts to consider who sits where in church. This is an
issue which was resolved by the church through accepting his schismatic
breakaway.

* The writer is a senior member of the Anglican Church.

MDC demands no longer feasible

Zim Independent

Orirando Manwere

THE MDC, currently engaged in talks with Zanu PF to resolve the
country’s political and economic crisis under the Sadc initiative, should
have been steadfast from the onset in pushing for a people-driven
constitution instead of calling for one two months before harmonised
elections, analysts have said.

The analysts said it was not feasible to have a new constitution
unless the polls were postponed to a later date.

They have further pointed out that the alternative call by the MDC for
the adoption of a transitional constitution crafted under the Sadc talks was
"totally unacceptable and undemocratic" as "it is a secret document which
Zimbabweans are not aware of".

National Constitutional Assembly (NCA) chairperson Lovemore Madhuku
said the future of Zimbabwe could not be resolved through secret talks
between the ruling Zanu PF and the MDC.

He argued that civic society and other political parties and the
general populace should participate in the negotiations if a permanent
solution to the country’s problems was to be found.

Following reports of a deadlock over the postponement of the elections
to facilitate the crafting of a new constitution, the MDC this week
organised a "Freedom March for a New Zimbabwe" in Harare to press for a new
constitution, free and fair elections, provision of food and jobs, among
other things. The march was later banned by police but a rally was allowed
outside the city centre.

The MDC formations have not been clear which particular constitution
they are advocating after endorsing Constitutional Amendment No 18 in
September last year to pave way for harmonised elections in March. They also
supported amendments to the information, security and electoral laws which
were enacted last week.

After the passing of Constitutional Amendment No 18 by parliament,
negotiators in the talks, Welshman Ncube and Tendai Biti, representing the
MDC factions, and Zanu PF’s Patrick Chinamasa said the parties had passed
the first hurdle in resolving the national crisis.

They said outstanding issues, including the question of a new
constitution, would be dealt with in due course.

However, the opposition is now calling for a new constitution before
the elections and threatens to boycott the polls if Zanu PF does not budge.
Biti, the secretary-general of the Morgan Tsvangirai-led formation of the
MDC, told journalists at a press briefing on Monday that the party wanted a
new constitution or the one agreed under the Sadc talks.

"We are demanding a people-driven constitution, if not a new one
agreed signed on September 30 in Kariba. We want to protect our right to
vote under free and fair conditions," he said.

Asked what the party was doing to publicise the Kariba constitution,
Biti said: "We will soon issue a press statement on that. I cannot comment
more on that issue."

Madhuku said the MDC made a mistake by endorsing the Constitutional
Amendment No 18 Bill and that it was not practical to have a new
constitution before the elections in March.

On the one signed in Kariba, Madhuku said it was unacceptable as
people were not consulted and no one knew its contents.

"We cannot have four people sitting down and coming up with a
constitution for the whole country. For that reason, as NCA, we are not
taking part in that march because we do not want to cause confusion among
people," Madhuku said.

Zimbabwe Election Support Network national director, Rindai
Chipfunde-Vava, echoed Madhuku’s sentiments and pointed out that there was
no time to come up with a new constitution before the elections.

"That would require the setting up of a constitutional commission and
holding of a referendum and that cannot be done within two months. There is
need to postpone the elections. Why rush and end up with a disputed
election?" Chipfunde-Vava asked.

She said Zimbabweans were not aware of the so-called transitional
constitution and the parties involved were obliged to inform the people
about it if there was any attempt to have it adopted.

The Zesn boss said civic society was sticking to the resolutions
adopted at an all- stakeholders conference in Bulawayo last year that the
Sadc mediation had not taken into account the input of ordinary Zimbabweans,
hence they were flawed.

The executive director of the Public Affairs and Parliamentary Support
Trust, Michael Mature, said it was unfortunate that the Sadc dialogue which
had achieved so much during the past year, was about to hit a snag.

He said as far as he understood the agreements leading to the adoption
of the Constitutional Amendment No 18 Bill, there was no express clause on a
new constitution.

Mataure, a former Zanu PF lawmaker, said the issue of a new
constitution was still on the agenda of the talks, according to
presentations by the parties involved.

"My understanding is that Amendment No 18 Bill was passed to pave way
for the holding of harmonised elections under amended laws like Posa, Aippa,
the Broadcasting Services Act and the Electoral Act which have since been
enacted," he said.

"I don’t remember coming across a clause on the need for a new
constitution or a transitional one being talked about. The problem is people
had already dismissed the process despite all the effort and time spent."

He said there was need to "do one thing at a time".

"The fact that the two parties had spent so much time on the
negotiating table and agreed to adopt the constitutional amendment shows
that there was progress and it’s unfortunate that we are likely to have a
repeat of what happened in 2000 when the constitution- making process did
not achieve anything," said Mataure.

A Harare lawyer who requested not to be named said although Zimbabwe
needed a new constitution, this could not be achieved just before the
elections.

He said the MDC should decide on whether or not to contest the
elections.

"They (MDC) made a mistake at the outset of Sadc-brokered talks. They
should have demanded a new democratic and people-driven constitution. By
endorsing the amendments, they have legitimised the process and it is too
late for them to start talking about a new constitution which civic society
has always agitated for," he said, adding that "even the transitional
constitution was not acceptable".

He said the MDC should re-engage civic society and mount a fresh
campaign for a new constitution even after the polls, as it was certain that
the government would not postpone the elections for a new constitutional
process.

The lawyer said there was need for concerted efforts by the opposition
and civic society to engage Sadc leaders to adopt a set of guidelines on
constitutionalism and the constitution-making process in the region proposed
by the Sadc Lawyers Forum in Harare last year to help solve the crisis in
Zimbabwe and member countries.

The guidelines form the basis of a proposed draft constitution for the
region which is being co-ordinated by NCA chairperson Madhuku.

Nation ready to embrace Makoni

Zim Independent

By Denford Magora

THERE hasn’t been this much buzz in our political environment since
the elections of 1980. The reason for the current buzz, of course, is Simba
Makoni. The mere prospect of this man running for president seems to have
galvanised the nation.

Even our fossilised government, which can not move to sort out
electricity, water, food and common shortages now stirs from its Jurassic
sleep to throw brickbats at him, courtesy of Nathaniel Manheru. They are
afraid. They are very afraid.

To start with, for the first time in ages, one is hearing people who
would not normally vote, declaring that they now have a reason to go and
register.

The "intellectual set", as they are often called, are aware that
Makoni is a brilliant man who knows what is wrong with the country and how
to fix it. Those who have engaged the man in the last couple of years can
also testify to the fact that he has a clear idea of the causes, effects and
remedies for our ills.

We are sure that Makoni will not, like the leadership that holds power
now, simply blame sanctions and fold his arms, asking his opponents to get
the sanctions lifted so that he is able to deliver a better Zimbabwe. He
does not appear to be that sort of navel-gazer.

Even if he acknowledges that the refusal to grant balance of payments
support and the banning of the country from Bretton Woods are forms of
sanctions, even if he agrees that the Zimbabwe Democracy and Recovery Act in
the USA is a form of economic sabotage against Zimbabwe, he is intelligent
enough, resourceful enough and committed enough to bring better strategies
anchored in the eternal laws of economics to ensure a swift and sustained
turnaround.

Some amongst the intellectual set, however, appear to be fearful that,
although he is all of these things, Makoni may not have a way to reach the
masses. In other words, there is a belief among the intellectual set that
Makoni is intelligent but he may not have broad enough support within the
population to guarantee election to the presidency. Call it the Mbeki
syndrome. This is a bit condescending really. The people know this man as a
former finance minister. They know him as a former leader of Sadc. The know
him to be straight-talking.

They have heard him express his own frustration at the current
leadership’s belief that citing sanctions is enough to release them from
their obligation to deliver a better economy and a better society for the
people who trust them to do so, the people who voted for them.

Because Makoni has a track record, because when he ran the economy
things worked, because he knows the meaning of the word responsibility,
because we can be sure that he has not only read Adam Smith’s The Wealth of
Nations but also understands it, the masses appear set to sweep him into
office if he runs.

For, if the reactions one hears from cross sections of society these
days are anything to go by, Mugabe is a baby with sweets and Makoni need not
exert himself to take the sweets away. He is, in fact, sure to garner enough
votes to brush aside not only Mugabe but Morgan Tsvangirai as well.

The problem at the moment is the man’s silence. Is he hedging his
bets? No one also knows whether he has set his mind on taking the
presidency, which appears to be his for the asking. Has he decided to run or
are there just people urging him to do so and he has neither accepted nor
rejected the offer?

There is also now the argument that time is of the essence. That is
nonsense. The widespread affirmation of his suitability since his name
filtered out means that he could even start campaigning in mid-February and
still win. Still, to win overwhelmingly as would suit a candidate as popular
as he is would require a bit of exertion. Hence Makoni should announce
sooner rather than later if he is genuinely interested and is not toying
with the people of Zimbabwe.

He should also be aware that his silence since the story leaked out
has simply confirmed his plans to the people.

To let them down now, when so much time in which he could have
disowned the story has passed, would risk alienating people form his
candidacy forever.

For, indeed, one of the traits the masses are looking for in their
future leader is decisiveness. If he appears indecisive now, they may well
turn around and declare that "haasi kuziva zvaari kuda" — he does not know
what he wants. This is perhaps the greatest danger Makoni faces now.

This was the undoing of Tsvangirai who could have captured State House
by default. That is to say, not through the attractiveness of his policies
but simply because his name was not Robert Mugabe.

Tsvangirai’s indecisive behaviour (will he or won’t he take part in
elections etc), compounded by his obvious tendency to behave like an
"African strongmen" meant that he could no longer excite any passion except
amongst his die-hard supporters and those who follow the crowd and are too
lazy to think for themselves. Fortunately there are not many of this species
in our educated country. Which is good for Makoni.

The screams and shouts currently coming from government spokesmen and
their runners do not count for anything.

It is sad for democracy but the truth is that the people in government
today no longer have any influence with the masses. No matter how many
column inches are wasted on an issue in the government press, they cannot
influence people to change their minds.

Whenever government opens its mouth, people expect to be lied to. We
all stood in the queues at the bank and I am sure every one of us
experienced the distrust directed towards government.

As our so-called governor lied through his teeth about queuing for
cash being "a thing of the past in the next few days", as he falsely
announced the demonitisation of the $200 000 bearer cheque, as he, for the
millionth time blamed shadows for his bank’s failures, people closed their
ears to all official word and simply said "we will see for ourselves".

Ask yourself this: Since 1997, which government or official projection
has ever proved correct. Harvests, GDP growth, foreign currency inflows,
shortages and indeed the economy as a whole has been subject to the
economics of throwing bones by this government. Not one of these has come to
pass. Street kids and new born babies, would also tell you now that they
know for a fact that there will be no "Mother of All Agricultural Seasons"
this year. And they can even tell you why.

They know that inflation is not going to come down despite what the
ridiculous minister of Financial Prophecy says. They know that the
government does not know how to use the massive gold, diamond and platinum
resources we have to earn foreign currency. To make matters even better for
Makoni, the majority of our people now also take the view that anything
praised by the government can not be good and anything badmouthed by them
and their agents has to be excellent.

So, put next to Simba Makoni, no one currently in power or wanting the
power compares even remotely. People look at Simba and see someone they can
trust. They look at him and see someone who is living with them and knows
their troubles, not someone who appears to visit occasionally from Uranus
and expresses fatuitous opinions far removed from their reality.

Simba Makoni, the nation has opened its arms for an embrace. Are you
going to embrace them, slap them in the face or turn away with tears in your
eyes?

Mugabe's govt gives education a bad name

Zim Independent

Jacob Rukweza

THE confusion that surrounded the date of opening schools for the
first term this month is a veritable hallmark of the manner in which the
Ministry of Education has presided over the education system since Aeneas
Chigwedere was appointed minister in 2000.

The fact that education secretary, Stephen Mahere, was not aware that
pupils from different schools had been given different opening dates by
school authorities clearly means that the men at Ambassador House are not in
control and the ministry is on auto-pilot.

Because Ministry of Education officials decided to sleep on the job
instead of doing what they are paid to do, parents, teachers and students
were in a quandary two weeks ago, unsure whether schools were opening on
January 8 or15.

Apparently the parent ministry had issued two conflicting directives
on the date of opening schools with an earlier statement advising school
heads that schools would open early on January 8 in order to accommodate the
harmonised elections in March.

But after correctly anticipating that stranded teachers, who were paid
a rediculous salary of $15 million in December, would not report for duty
anyway, the ministry made a last-minute turnabout announcing that schools
would open a week later on January 15.

The new date was chosen to coincide with the unplanned salary advances
awarded to all civil servants on January 11 ostensibly to cajole teachers
four days before schools opened.

But the net effect of that confusion was that several school children
and teachers in remote parts of Zimbabwe — far from radio broadcasts and TV
signals — travelled to their schools on January 8 hoping to find their
schools open.

One can imagine the amount of inconvenience when they were informed on
arrival that the ministry had actually postponed the date to January 15.

Tragically, it is difficult to imagine that the mayhem that has
characterised Chigwedere’s tenure as Minister of Education will go away this
year.

Emasculated teachers have already rejected the new salary increment
awarded to all civil servants recently arguing that it does not tally with
the escalating cost of living.

Progressive Teachers Union of Zimbabwe (PTUZ) secretary-general
Raymond Majongwe has dismissed the new salary hike awarded to teachers as a
pittance, setting the stage for another showdown with government.

Last year students lost more than 90 days of learning time when
teachers went on strike on three occasions in February, May and October
pressing for better salaries.

And 90 days is a lot of time given that an average school term is 65
days. What it means is that students were in school for only one-and-a-half
terms the whole of last year because of the intermittent fights between
government and teachers.

As we speak the PTUZ says teachers across the country are on a go-slow
until their demands for a $520 million gross salary are met.

Impoverished teachers who by last year were earning less than
vegetable vendors and bus conductors are now ranked in the same category
with poor farm workers and prostitutes.

Teachers will be in a worse predicament this year with a basic salary
of $150 million for the lowest paid.

It will obviously be difficult to make ends meet when the cheapest
boarding school is charging $500 million per term in school fees.

What it means is that the poor teachers will for the second year
running fail to afford basic education for their children when they are
expected to be providing the same education to children of well-heeled
citizens.

Unfortunately teachers cannot have all their children learning at
cheaper day schools — where they teach — for obvious reasons.

For example, rural teachers cannot keep their children with them at
their work place in primary school forever so as to avoid the expenses of
secondary education and on many occasions the unavoidable boarding school
life.

Teachers in Zimbabwe have been reduced to laughing stocks in
communities that they are supposed to lead as role models.

Even the impressionable students in our schools should find it
difficult to accept that education is a worthwhile endeavour when the very
purveyors of that education live like paupers.

But Zimbabwean teachers are not fools. A visit across the Limpopo will
leave anyone wondering whether our schools still have teachers.

South Africa — which needs 20 000 teachers every year — is teeming
with highly qualified Zimbabwean teachers who are now holding fort in both
private and government schools and earning real money for their labour.

The PTUZ says more than 25 000 teachers had left the education system
by December 2007.

More are likely to skip the country this term as it is becoming
clearer by the day that the Zanu PF government has no capacity to solve the
problems bedevelling the country let alone the education sector.

As the few remaining teachers got the second half of their January
salaries on Tuesday, teachers’ unions predict that most will use the money
for bus fare as they join the great trek across the Limpopo.

Confirmed reports say some three schools in Matabeleland North
province failed to open for the first term this year because all teachers,
including the headmaster, had left for Botswana.

More schools have been left with less than half of the required
teaching staff while rural schools are the hardest hit.

Others schools have only one teacher manning the whole institution.

Things are looking very ugly as the education sector titters on the
brink of collapse.

The Zimbabwe Schools Examination Council (Zimsec) last December failed
to meet its marking deadline because of an acute shortage of exam markers
who are usually school teachers.

Presently Zimsec has not finished marking some subjects including
mathematics and science subjects well after the December 19 deadline.

Because of the overwhelming work given to markers in terms of
re-allocations it is obvious that the quality of results will be severely
compromised.

From being the best in Africa, standards in our education system have
deteriorated to the laughable levels of a failed state.

Yet those who have presided over the destruction of this education
system take pride in flagging their superior educational credentials, most
of them acquired in colonial Rhodesia.

President Robert Mugabe is arguably the most educated head of state on
the continent -— at least on paper — with a string of university degrees
acquired while serving time in detention during the liberation struggle.

But the barbarism he has displayed in running down this country
contradicts what is expected of a man who has been refined or civilised by
education. Mugabe is giving education a bad name by following the path of
cynically inadequate and primitive policies that his government has
repackaged and retailed as modern and progressive.

Zimbabwe is not yet a failed state but is in fact a dysfunctional
state dominated by an illegitimate elite — a conclave of incompetent feudal
potentates calling themselves a patriotic front.

The truth of the matter is that we are at the tail-end of a failed
presidency which now has one foot firmly in the grave and is determined to
be buried together with the country.

* Jacob Rukweza is a sub-editor at the Zimbabwe Independent.

The irony of a Zuma presidency

Zim Independent

By Rejoice Ngwenya

JACOB Zuma, South Africa’s new ANC president has a political destiny
already sealed with fate. Those who believe that his electoral victory will
emit "shock waves" in and beyond South Africa simply do not understand the
political game plan in the ANC.

A Zuma victory, however thin or wide, portends a bad omen for 21st
century politics even in Africa.

Not least because 21st century politics is immune to socialist
rhetoric, but that South Africans are wise enough to know that sacrificing
hard-won regional and continental dominance on the altar of simplistic
populism come 2009 will be suicidal.

Zuma’s ascendancy to the ANC throne leaves us with a relative
historical reflection about his roots.

Zuma belongs to the Zulu tribal lineage, known for its authoritarian
military antics under Tshaka Zulu and by extension, though less dramatic,
under Chief Gatsha Buthelezi.

For South Africa, the phenomenon of a new national president emerging
out of an ANC political process is nothing strange. After all it is the
party that produced great characters like Albert Sisulu, Oliver Thambo and
of course, global icon Nelson Rolihlahla Mandela.

But to say Zuma will substitute a "great name" in the person of Thabo
Mbeki would be an illusion. Most South Africans believe Mbeki’s soft-touch
approach to the national crises of HIV/Aids, unemployment and crime are a
blight on the ANC.

If, according to the ANC constitution, Polokwane 2008 has "produced a
future president" in Zuma, South Africans, technically, must ready
themselves for a populist Zulu cadre as national leader. This predictive
model may sound totally inconsistent with a constitutional democracy that
hosts "big" political contestants like the PAC, Democratic Alliance (DA) and
the Inkatha Movement, but the politics of South Africa is mutually
exclusive — black or white.

How inconceivable it is that a nation that suffered four centuries of
white-on-black oppression can vote for a white president, even if it is a
contest between Helen Zille’s superior liberal DA ideology and Zuma’s
socialist rhetoric! Mbeki, despite his political transgressions and
acclaimed "aloofness", casts a humble impression of an intellectual
ideologue who understands the importance of business and property rights.

This explains why ANC’s potpourri of socialist, communist and labour
membership co-exists with Black Economic Empowerment of the Tokyo Sexwale
and Cyril Ramaphosa mould.

But if black South Africans vote for Zuma in 2009, they will be doing
it in the full knowledge that he is a man who pays no homage to issues of
HIV/Aids, women’s rights and business integrity, although they would rather
live with this, than either with another Mbeki term or Helen Zille. If this
sounds confusing, the National Prosecuting Authority, South Africa’s version
of the FBI, has the answer.

According to current court records, Zuma has "a criminal history" that
can wreck anybody’s political career. But perhaps like an American White
House soapie, sex scandals and money games play a minor role in political
credibility in South Africa. Yet as you read this article, the NPA has
concluded that Zuma, who survived a rape conviction by a whisker, definitely
has many cases to answer on his relationship with the jailed fraudster
Shabir Schaik. Political analysts agree that this is neither a case of
circumstantial evidence nor political harassment.

Therefore if Zuma is convicted, that will signal the end of his
flirtation with the national presidency, in which case his deputy, Kgalema
Motlanthe may run Pretoria after 2009. If Zuma survives, South Africans will
find themselves head on with fate — a president with a "criminal" history,
but then, will all the members of the African Union that are "clean" please
raise your right hands!

However, were Zuma’s brand of populist politics to destroy the South
African economy, three million Zimbabwean economic exiles, who to date
sustain Harare’s fragile economy, would be "dead and buried". But for
Africa, it is another feather in the cap of leaders who have blood, semen
and funny money on their hands. Do Sadc and the AU really care?

* Rejoice Ngwenya is a Zimbabwean political analyst based in Harare.

Banking crisis deep-rooted

Zim Independent

Comment

IS it a case of central bank governor Gideon Gono rejoicing in the
failure of banks or is it that our financial institutions have become
citadels of indiscipline? The central bank and banks have combined to make a
cast that is responsible for the public misery and with it, the erosion of
all public confidence in the country’s banking sector.

This week we reveal the parlous state of the country’s financial
services sector in which banks currently laden with illiquid assets such as
stocks, property, motor vehicles and foreign currency are in short
positions. In simple terms, their liabilities now exceed their assets and as
a result they cannot collect cash from the central bank hence the queues
which have become a common feature at banks.

The same banks cannot go the central bank for overnight accommodation.
Gono in an apparent move to inflict pain, has hiked the rate to 1 500% from
1 100% in response to the crisis.

This phenomenon, which also obtained in 2003 and 2004, has largely
been blamed on banks engaging in speculative behaviour and acting outside
the policy guidelines of the central bank. The current fiasco which is
exposed in this edition of the paper is worrying. The central bank which is
entrusted with supervising and counselling errant banks conveniently went to
sleep when it mattered.

There is all the evidence that the central bank saw this crisis coming
but did not intervene to forestall it. Gono’s monetary policy statement last
October contained a telling contradiction which was generally ignored.
Talking about the status of banks, Gono said the sector had "remained
generally safe and sound and this is attributable to enhanced supervision
methods being employed by the Reserves Bank, as well as continued
improvements in the risk management and corporate governance among banking
institutions themselves".

He then stated that he was "concerned with the reemergence and
increase in incestuous relationships between certain banking institutions,
their holding companies and other related parties that are reminiscent of
what we saw in the pre-2003 era".

He sounded another warning to banks: "Some unprincipled shareholders
and unscrupulous executives continue to use convoluted group structures as
conduits for abuse of depositors’ funds and engagement in non-permissible
activities such as purchase of stocks on the equity market," he said.

So there you have it. Gono has been aware of banks buying stocks to
hedge against inflation. By the same token, he was aware that banks were
participating in real estate deals and that they were buying cars and
foreign currency on the parallel market. As the regulator, we ask what the
governor did about this? Three months down the line, banks are in trouble.

The central bank will say tongue in cheek that it is not responsible
for the current state of affairs in the sector. It will blame truant bankers
for the mess. It is true that if banks acted outside the law, they are
culpable for this current mess notwithstanding apparent policy aberrations
the central bank has tried to enforce. But equally, the same central bank is
culpable in as far as it is responsible for creating a macro-economic
environment which allows speculative tendencies to flourish.

Bankers whose banks have been caught in this maze will argue that they
have a duty to ensure that their businesses survive. They will argue that
due to hyperinflation, they are not making money from their normal business
operations hence the investment in stocks and other illiquid assets. They
will regard Gono’s measures this week to increase accommodation rates on
those institutions in trouble as punitive. In other words, Gono already
stands accused of trying to close banks again.

This almost permanent stand-off between the central bank and banks has
only worked well to kill public confidence in the banking sector. If
depositors cannot withdraw their cash from banks on call, and if policy
interventions from the central bank fail to rectify the problem, then we
have a real problem on our hands. The stability of any banking institution
is built on the foundation of depositors’ confidence in the ability of the
sector to deliver. The state of affairs in the banking sector today is
indicative of a serious policy deficiency. How are banks expected to make
money in an environment where inflation has reached stratospheric levels of
150 000% — according to the IMF — if they cannot invest in high-yielding
vehicles?

The mess in the banking sector is indicative of serious policy flaws
which has become the hallmark of Zanu PF governance. We urge the banking
sector to seriously consider lobbying the government and central bank for
more prudent policies in the banking sector to avert the current cat and
mouse games because depositors are not interested in the politics of banks.
They simply want their money.

Bvudzijena’s glaring double standards

Zim Independent

MuckRaker

POLICE spokesman Wayne Bvudzijena on Tuesday provided a good example
of what the opposition is up against. He was quoted in the Herald as saying
a planned MDC march on Wednesday could not go ahead because MDC spokesmen
were making "exasperating statements". He gave as an example Morgan
Tsvangirai’s demand for a new constitution, voters’ roll, and an independent
electoral commission.

"These reasons seem to suggest a sinister motive behind the march,"
Bvudzijena said.

Participants had already been warned not to carry any placards or
banners.

So here we see the amendments to Posa as pointless. The police can
arbitrarily cancel a march because they object to calls for a new
constitution and voters’ roll. These elementary democratic freedoms cannot
be tolerated!

Is that what the MDC gave its approval to? And what happened to those
clauses about dialogue where the police refuse permission for meetings? Didn’t
everybody say at the time this wouldn’t work given the political culture in
the police hierarchy?

And can you imagine picking up the leader of the opposition for
"talks" at 4.30 in the morning. The Office of the President claims he wasn’t
arrested, but merely "invited" to meet the police. Does George Charamba
expect the media to go along with these disingenuous explanations?

Just two months ago the police allowed a Zanu PF march to go through
the city centre with banners and placards. The double standards here are so
glaring as to be blinding. Let’s hope they can be seen in Pretoria.

The Herald last Friday attempted to upstage Muckraker’s "Mother of all
potholes" competition by publishing a picture of a massive crater on the
Guruve-Muzarabani road.

It was indeed a daunting sight as parts of the crater, caused by
floods, looked like a cliff-face. A motorist was seen trying to decide how
to tackle it.

However, the entry had to be disqualified as the judges ruled it to be
a wash-away and not a pothole. Sorry about that.

The one along the Guruve-Muzarabani road is by no means unique. The
Masvingo-Beitbridge road contains some gigantic holes that could swallow up
your car.

Hit one of those at night and your chassis would be finished. So why
is the Ministry of Transport not fixing these life-threatening hazards? What
happened to the carbon tax extorted from motorists? How is that money being
spent?

The minister concerned, Christopher Mushohwe, should be addressing
these issues instead of negotiating the purchase of expensive Russian
aircraft which the country can’t afford and certainly can’t maintain.

There is a German word that reflects the feelings of many Zimbabweans
towards the power crisis South Africa is undergoing: Schadenfreude.

It means taking a quiet pleasure in others’ misfortunes. Zimbabweans
can only rub their hands in barely-contained glee that their powerful and
occasionally bossy neighbour is now experiencing what we have been going
through for years: load-shedding, blackouts, power cuts, call them what you
will. Down South the culprit is called Eskom.

One South African publication suggested in a "Message from Eskom" that
"Nkosi Sikelel’ iAfrika" should be replaced as the national anthem with
"Hello Darkness My Old Friend".

Simon and Garfunkel fans will be delighted. And we loved the Madam &
Eve cartoon which showed the devil trying to reveal himself to Madam.

"Have you realised who I am yet?" he demands with horns and tail very
much in evidence.

"Give me another hint," Madam suggests.

"Where I come from there’s eternal suffering and it’s unbearably hot."

"You’re from Pofadder," she guesses.

"They call me the Prince of Darkness," he helpfully hints.

"You work for Eskom," she finally declares.

Then there’s the cartoon in which President Mbeki tells President Bush
he "can’t talk now" on the phone because "the whole country is at the mercy
of Eskom". Bush orders the Pentagon to put US forces on alert thinking Eskom
is a terrorist.

All this satire, we should note, follows a mere few hours of darkness
in some areas. It is never days or weeks! And South Africans complain
bitterly when a loaf of bread goes up by a few cents!

Still with our friends to the south, President Mbeki’s wasted trip to
Harare last Thursday should have exposed to him the extent of presidential
obduracy. Muckraker’s information is that Zanu PF was prepared to be
flexible about the election date until their leader shot it down at the
December congress. Sadc had already been told to expect a June date, we
gather. They need three clear months to prepare their observers in terms of
the Mauritius protocol. But policy in the ruling party is decided on the
hoof: most notably the president’s.

And if a picture could tell a thousand words the footage of a
profoundly unhappy leader was revealed to ZTV viewers on Thursday night. He
couldn’t even manage a small smile. And Mbeki wasn’t given any encouragement
to say anything more than the few words he managed to deliver before
leaving. Indeed, one got the impression he would have been hauled off by his
host if he had tried to say
anymore!

Muckraker’s question is: what will Mbeki tell Sadc at the end of the
month? That there has been "good progress"?

Not even the supine Sadc heads will swallow that one again unless
Mugabe gives ground on the transitional arrangements.

Cuba will continue to support Zimbabwe in its fight against "illegal"
sanctions imposed by Western governments led by Britain and the United
States.

Addressing journalists at the belated 49th Anniversary of the Triumph
of the Cuban Revolution commemorations last week, Cuban Ambassador to
Zimbabwe, Cosme Torres Espinoza, said the Zimbabwean situation resembled
that of Cuba, "since the US always imposes sanctions on whoever does not toe
its line of thinking".

What a hypocrite. It is the Cuban government that imposes sanctions on
its critics by locking them up. How many journalists languish in Cuban jails
because the arthritic regime in Havana can’t stand criticism?

Cuba, Zimbabwe, Belarus, Iran and North Korea all try to prevent
criticism by banning newspapers and locking up journalists. The Cuban
ambassador should not try and pretend that Cubans have any freedoms except
the freedom to denounce the United States.

ZUJ president Matthew Takaona has a knee-jerk response to any mention
of the Zimbabwe Independent or Trevor Ncube. He denounces Ncube in the most
virulent terms, describing his company as "oppressors of the worst kind" for
allegedly paying their staff "peanuts". But he never says anything too
strident about his old company, Zimpapers.

Is there something we’re missing here? Takaona’s deep and abiding
dislike for Ncube should not become ZUJ policy lest it compromises their
ability to play a constructive role in industrial disputes in the newspaper
industry in future. And if there is a bit of history we are missing here
Takaona should disclose it next time he fulminates. We want to know what’s
"getting his goat"!

Meanwhile, Takaona’s inquiry as to whether there would be a conflict
of interest if somebody sat on both the state Media Council and the
Voluntary Media Council suggests that "somebody" has already been
approached. No guessing who!

The Chronicle experienced a measure of staff disgruntlement over pay
on Tuesday, we hear. But we didn’t hear a single yap from the union
watchdog.

No marks for bravery for the Africa Institute of South Africa. This
outfit was due to hold a conference in Pretoria on The Zimbabwe Crisis: A
Civil Dialogue. But they cancelled because of the "sensitivities"
surrounding the current mediation talks. In other words these civic society
mandarins couldn’t even discuss issues of governance in Zimbabwe. Their
vision of the future was not allowed to see the light of day.

They evidently have the spine of a jellyfish. Muckraker’s question:
Who leaned on them?

To march or not to march: the issues

Zim Independent

Candid Comment

By Joram Nyathi

THAT government would ban the MDC’s "Freedom March" on Wednesday was
predictable. What was not predictable was that the police allowed it in the
first place, and that the MDC believed it could hold a march with such a
nebulous agenda in the centre of Harare.

There are a number of possible reasons why the MDC march was banned.
One is the fear of violence, which is the official line given by the police.
It is barely plausible, but a reason nonetheless, given that once the people
are out on the streets it is difficult even for those who mobilised the
march to control them. The result could be mayhem, with the opposition
blaming the usual "rogue elements" and Zanu PF "infiltrators" while the
police will use it as "proof" that the MDC is "a violent party".

The other reason is that the police still believe they are the final
authority in sanctioning public gatherings. They still control how we should
exercise our democratic rights even when no life or property is under
threat. In other words, while the Sadc-initiated talks are concerned with
expanding the democratic space, Zanu PF and the police believe there is a
set date when the gates should be flung open to all.

The third reason was perhaps to thwart the MDC’s foolish "revenge"
march. Since Zanu PF’s "Million Man March" in support of President Robert
Mugabe’s candidacy in the March elections, there has been agitation that the
MDC should be allowed to hold its own "Million Man March" now dubbed
"Freedom March".

It is a battle of wills and Zanu PF couldn’t countenance the spectacle
of the MDC marshalling more marchers than it did in November.

The MDC has a right to hold such a march as the official opposition. I
have only two reservations about its merit: why copy what Zanu PF is doing
when there is no obvious national benefit? Secondly, since the MDC is still
dithering about participation in the elections, what is the merit of
displaying to the world 10 million men a majority of whom are not registered
to vote? Isn’t that to psyche the world for a phoney MDC victory when the
party will boycott the elections or, if it takes part, it may not mobilise
the same number of voters, and claim rigging on the basis of street marches?

This brings me to the MDC’s gamut of demands as contained in its
notice of the "Freedom March". They want a new constitution; food and jobs;
free and fair elections; real money and restoration of our dignity; water,
electricity and medical drugs; and affordable health, transport and
education.

The little information I have on the deadlock in the talks between
Zanu PF and the MDC, the "sticking points" are a new constitution and a
postponement of elections. I thought these would constitute the crux of the
march.

But the MDC thought a mixture of everything was the way to go — they
want to pick real money, jobs and quality education off the streets of
Harare.

The trouble with this medley is simple: it blunts the "sticking
points" in the ongoing talks. We are now confused about what these are: a
new constitution or a transitional constitution or a postponement of the
polls or water and electricity? Understandably, the National Constitutional
Assembly has said it will not ride on this omnibus driving around Harare. It
would rather stay its course for a people-driven constitution.

But the MDC can’t miss an opportunity to demonstrate that it is close
to the pulse of the nation, that it is with the people and understands their
immediate needs. Cash, drugs, personal dignity, health, transport and
education are all valid demands but belong to a different time and platform.

My point is that when you hold a march you are demanding something
specific and deliverable and this should not be confused with
electioneering. The MDC is spot-on on a new constitution and a postponement
of the elections because these constitute a direct impediment to its quest
for power. President Mugabe can reject these but it’s not beyond his power
to deliver them in one day. But the MDC is vague and muddled in its demands,
blowing hot and cold in the hope that it can use the talks as an affirmative
action project to power.

Issues like education, transport, drugs, health and cash at this
moment belong to organisations such as the Consumer Council of Zimbabwe, the
Zimbabwe Congress of Trade Unions and other civic groups. The MDC should use
these as campaign material by telling supporters and potential supporters
how it wants to tackle them. How do you march against the policy
deficiencies of a rival party which you should use as campaign material?

These are the issues it should be addressing at its 300 rallies, not
in a once-off march when critical elections are less than two months away.
We want to know how it intends to deal with these chronic and pervasive
problems which the Zanu PF government has clearly failed to solve.

But the message one gets from the party’s list of grievances is that
the MDC has not evolved from a protest movement into an opposition party
ready to govern. For its part, by banning the MDC march, the Zanu PF
government has exposed two things: that it is dealing in bad faith in the
inter-party talks and that it is dead terrified of the MDC. It’s good
ammunition for the opposition.

Air Zimbabwe flying high, but . . .

Zim Independent

Eric Bloch

THERE is so much that is bad in Zimbabwe today that most of the population,
including the business community, can perceive of nothing good and are
imbued with almost exclusively negative views of virtually anything and
everything.

This Zimbabwean characteristic of the 21st century (for it did not exist
previously) is especially pronounced on any issues relating to parastatals.
That it is so is, to some extent, understandable, for an overwhelming number
of Zimbabwe’s parastatals are continuously deficient in their service
delivery, are achieving naught by astronomically great losses, and are major
contributants to Zimbabwe’s distraught economic circumstances.

The Zimbabwe Electricity Supply Authority (Zesa) and the Zimbabwe National
Water Authority (Zinwa) are prime examples thereof, as is the Agricultural
and Rural Development Authority (Arda), but these are but a few of many
incapable, incompetent, and counter-productive parastatals that worsen the
circumstances of the beleaguered Zimbabwean economy, and the oppressed and
afflicted Zimbabwean people.

However, that does not mean that there are no exceptions, and that none of
the parastatals have anything to commend them, but many (if not most) are
convinced that that is so.

Certainly, until two years ago, the vast abundance of outspoken critics of
Air Zimbabwe had every justification to be critical. A timeous flight was
the exception to the rule, and that was but one of the innumerable faults of
the airline.

But as one who avails himself very extensively of that airline’s services,
this columnist states categorically and unreservedly that the airline has
markedly and remarkably improved. That is not to say that the airline is
faultless, but compared to that which it was not very long ago, its
transformation is spectacular.

Of my last 274 flights, 267 have departed and arrived either exactly on
scheduled time, or within 10 minutes of that time. Five of the flights had
delays exceeding 10 minutes, but less than 30 minutes. One was delayed for a
little over an hour, and one (due to a technical fault) sustained a delay of
approximately two hours.

If departures and arrivals are within a 10-minute parameter of schedule,
that can justly be regarded as schedule compliance, and any airline in the
world can be proud of a 97,4% positive achievement.

Admittedly, the airline has experienced some considerably greater delays,
which this columnist was fortunately not a victim of, but they have
nevertheless been the exception to the rule, but that has not deterred many
from vitriolic castigation of the airline.

The greatest such delays have occurred on international routes. Invariably
that has been because of the gross inadequacy of Air Zimbabwe’s fleet of
long-haul aircraft, comprising only two 767s. If one of them is out of
commission, whether due to a technical fault or maintenance service
requirements, or has been "expropriated" for presidential services, all
international routes punctuality becomes an impossibility.

The reality is that the airline has always been grossly undercapitalised. It
must have a lesser equity base than any other national airline. As a result,
it cannot operate aircraft fleets necessary to meet its needs on a
continuous basis. Concurrently the inadequate capitalisation burdens it with
excessively great, costly debt, further hindering operations.

But, despite these constraints, and those of foreign currency scarcity, Air
Zimbabwe has in many respects a highly commendable, but widely unrecognised,
performance. That is not only that it has a far greater punctuality record
than most are prepared to acknowledge, but also in other respects.

Foremost thereof is that it has demonstrated strongly (although many dispute
it) that its overriding concern is passenger safety. No matter how minor a
fault, the crews consistently require rectification before flying, and there
is incontrovertible evidence that those crews are complying with airline
policy.

As highly commendable is the attentiveness of both check-in personnel and
cabin crews. They are always helpful and caring. A smile is clearly part of
the uniform, for they are virtually never without it. And that is so whether
on the domestic flights on the small MA60 aircraft, regional flights on
those aircraft or on Boeing 737s, or on the long-haul, international routes.
That is also so of almost all of the check-in personnel outside of Zimbabwe,
be they in Johannesburg, London Gatwick, or elsewhere.

Although so much of the efforts of management, ground staff, flight crews
and all others at Air Zimbabwe is to be commended, nevertheless much must
still be addressed, including upgrading and enhancing the fleet, replacement
of endlessly out-of-commission computer equipment and systems, consistent
availability of certain foods and beverages, regular publication of
timetables, more frequent publication of onboard magazines, equitable
remuneration of staff and the like.

Much is required to achieve this, but probably first and foremost is
adequate capitalisation, and of probably equal importance, elimination of
political interference.

Both of these needs would be satisfied if government would finally proceed
with privatisation of the airline, provided that it was implemented with a
sound strategic partner, and with those who can contribute to and assure the
enterprise’s wellbeing, instead of vesting ownership in the avaricious and
politically well-connected.

Also necessary is that government and the National Incomes and Pricing
Commission adopt a realistic stance to charges that Air Zimbabwe is
permitted to raise. As a very, very, frequent flyer, this columnist
obviously wishes air fares to be as low as possible. But they should not be
so low as to jeopardise the airline’s viability and operations.

With real inflation being considerably in excess of 100% per month, and
inflation attributable to domestically sourced imported products being even
greater, the airline cannot operate effectively with unrealistically low air
fares. While the airline must seek to minimise fares to as great an extent
as reasonably possible, nevertheless it must also be enabled to charge that
which it necessarily needs.

The impressive recovery of Air Zimbabwe over the last two years has raised
it from a horrendous low, but much has yet to be done, for a viable,
efficient airline is one of the prerequisites for Zimbabwe’s economic
revival, and ongoing economic wellbeing.

Privatisation, recapitalisation, fleet development, necessary upward fares
movement in the present hyperinflationary environment and effective policies
for skills retention are all essentials for Air Zimbabwe.

We saw it coming

Zim Independent

Editor's Memo

Vincent Kahiya

I penned the article below for the Zimbabwe Independent Banks and
Banking Survey published in September last year. I saw it coming although I
received a tongue-lashing from bankers, one of whom is a senior executive at
one of the banks currently facing difficulties.HISTORY, we are told, has
this uncanny habit of repeating itself. Whilst a lot might, for the
uninitiated, look to have taken place since the last mini-banking crisis
which started at the end of 2003, it is a case of being the more things
change, the more they stay the same. We are saying this because a number of
conditions that preceded the 2004 banking crises are also obtaining in the
market right now.

But before we discuss these conditions, we need to answer the
question; what is a crisis? According to a paper prepared by Asli
Demirgüç-Kunt and Enrica Detragiache in 1998 on behalf of the World Bank, a
banking crisis is "an episode in which a large number of banks suddenly
become illiquid or insolvent". A bank is illiquid if it cannot meet the
calls for deposits by its customers and is insolvent if accumulated losses
erode all its capital. A major crisis is one in which a substantial fraction
of the banking system is endangered.

The first half of 2003 saw a rapid acceleration in the annual
inflation rate which started the year at roughly 200% and had reached 600%
by December. On the exchange front, the peg on the Zimbabwe dollar continued
with the rate set at $824 to the US dollar. However, a thriving parallel
market existed, with the rate starting the year at $1 400 and closing at $6
000 (figures in old dollars). Banks were alleged to be major players in this
market.

From a policy perspective, there appears to have been some form of
paralysis with the banking system basically trading rudderless. There was a
biting cash shortage, as the inflation spiral caught the central bank
unawares and the huge transaction demand had to be eased by the introduction
of several high denomination notes.

The negative real returns spurred on by a loose monetary policy
framework on the money market are nothing new. The returns on the treasury
bills that were in issue in the market was hugely negative, even on a
compounded annual basis. The result was a very buoyant stock market, which
moved from 103,5 points (revalued) and by mid-year had reached 277,30
points, thus showing a return of 168%. This was however below the monthly
compounded official inflation rate of 198,2% for the six months. The second
half showing was much more impressive, the market racing to 714,25% by end
of November, having notched a record 103% gain in July. This equated to a
massive 11 months return of 590%. Shares had convincingly surpassed the
compounded monthly inflation rate for that period of 512,7%.

Banks were rumoured to be large players in the stock and foreign
currency markets. The more adventurous sought to hedge themselves against
the rampaging inflation by acquiring physical trading assets and motor
vehicles in addition to taking positions is foreign currency and equities.
There was also a lending boom, as companies borrowed heavily in the face of
negative interest rates.

As a result of these activities and the rapid revaluation of the
assets acquired most banks, particularly the indigenous ones, recorded some
breathtaking interim results. A closer look at the financials released by
particularly indigenous showed a huge propensity to succumb to a liquidity
and interest rate crunch. The banks had hugely ‘liability’-sensitive balance
sheets and were particularly susceptible to both liquidity and interest rate
risks. Moreover, most of the assets were not trading assets and neither were
they securitised, hence the banks were incurring losses on the ‘book’ but
were making up with asset revaluations.

December 2003 was a watershed month as interest rates suddenly became
positive, the foreign currency market stagnated, and asset prices,
particularly cars and vehicles, also slowed down. There was a serious
liquidity crunch and most banking institutions found themselves battling
with mounting losses as liabilities repriced upwards at a faster rate than
assets. The result was that losses were recorded. ENG Capital fell by the
wayside and Century Discount House was closed.

Before drawing parallels between 2003 and 2007, we show the two
scenarios separately to emphasise the relationships between the benchmark
yields on money market instruments and annual inflation.

Not only are the situations that the banks find themselves in similar
but 2007 is worse in as far as the level of negative real returns is
concerned. All the other trend patterns are not too dissimilar. Inflation
has moved from the chronically high inflation phase into a proper
hyper-inflationary phase. In terms of policy, money supply remains not only
expansionary but growing at a very fast pace. Real returns on the money
market are hugely negative, with one year treasury bills currently yielding
340% per annum in an environment where the official inflation rate is
expected to be on the other side of 20 000% by December 2007. The exchange
rate remains fixed whilst on the ‘other’ market the Zimbabwe dollar has
taken a beating. The rate on the parallel market opened the year at roughly
$3 000 to the Greenback and by half year was estimated to be trading at $190
000.

The property market is not far behind the ball game. Neither has the
stock market disappointed, surpassing all the benchmarks by a respectable
margin. The industrial index went up by 7 469% whilst the Zimbabwe dollar
depreciated by 6 567% in the same period. The most pessimistic inflation
estimate is showing 4 033% for the monthly compounded rate. The buoyancy of
the stock market cannot be attributed to the activities of traditional
investors alone but the entrance of a new breed of investors, banks
included.

In comparison to 2003, the only difference is that, there isn’t a
credit boom going on. The funds that would ordinarily found their way into
loans and advances are ostensibly being channeled into real assets.

The tell tale signs are the huge movement in profit levels which
coincide with a rally in the stock market. The other ‘mark of the beast’ as
it were is the huge profits on asset revaluations and the consequent
movement in fixed asset values as well as other assets.

Banks for this interim period to June 2007 will report phenomenal
results. In similar fashion to 2003, most of the balance sheets are huge
liability sensitive, with liability durations being far much shorter than
asset maturity profiles. As a consequence, the banks are exhibiting the
systematic vulnerability as they did in 2003.

In conclusion, the ingredients for a liquidity crunch and interest
rate induced bank difficulties are in place, what is left is the trigger. In
2004, it was the change in monetary policy at the end of 2003 which saw
interest rates becoming positive, resulting in a severe credit and liquidity
crunch. Asset prices also collapsed as interest rates became positive.

Back then in 2003/04 the bad luck event was the tightening of the
monetary policy, the bad policy was the change from negative real interest
rates whilst the bad banking was the investment decision.

Like the Norwegian case, we leave you to determine what the bad luck
event will be, what the bad policies are and how bad banking practices
feature in the equation

Zim Independent Letters

Central bank chief has lost the plot

THE Reserve Bank of Zimbabwe circus is still in town, featuring Gideon
Gono as the chief clown. Grit your teeth and try to enjoy the latest show.

The chief clown has lost the plot. Therefore, a new dimension has been
co-opted into the script.

Blaming banking institutions and so-called "cash barons" for cash
shortages is just another ill-conceived publicity stunt meant to divert
attention from his blundering and bumbling in managing the cash crisis
bedevilling Zimbabwe.

Clowns generally love the spotlight because their purpose is to
provide entertainment. However, "our" clown has long ceased to entertain.

By denying people access to their hard-earned cash, he has brought
unprecedented suffering. The country is literally on its knees and yet the
"clown" continues to grandstand, evidently enjoying his own show!

Gono’s tenure at the RBZ has become untenable, but the reality is that
he will cling on, even with his finger-nails.

For reasons best known to himself, Gono has reneged on his promise to
reveal the identity of the "cash barons". Nevertheless, it is obvious that
Gono does not have the courage to make good his allegations.

I am surprised that the Anti-Corruption ministry has been silent on
this matter of national importance. The responsible minister is either
sleeping on the job or moonlighting on some stolen farm.

I will reiterate an Irish idiom: Gono couldn’t organise a piss-up in a
brewery.

Joseph Mhlanga,

Dublin, Ireland.

--------------
Suspend, probe Gono

THE implication of Reserve Bank of Zimbabwe governor Gideon Gono in
illegal foreign currency deals requires that he be suspended from his job
while investigations are conducted either to clear his name or to gather
evidence upon which to prosecute him.

If it is true that Gono slipped money, unofficially or officially,
into the hands of people he knew or ought to have known would use the money
to source foreign currency from the parallel market, he must be dismissed
from his job if this country still has a leader, even just one on paper.

It is inconceivable that a man who is being accused of handing over
public money through the back door to some briefcase businessmen, even if it
was just one cent of taxpayers’ money, for the purposes of trading on the
unauthorised foreign currency exchange market should be at the helm of the
central bank.

Unless his name is cleared, an interim replacement for Gono must be
appointed to handle the functions of the central bank in a proper way while
the actions of the incumbent governor are being thoroughly scrutinised.

The central bank is such an important part of our monetary system that
there should be no room to entertain a civil servant whose conduct or
trustworthiness falls below the bar of public expectation.

Is it true that the RBZ governor has connections with front companies
that buy hard currency on the parallel market? Is it true that this governor
had a hand in creating directly or indirectly someone that can be referred
to or that can meet the status of a cash baron?

If it’s true, then Gono must be held directly responsible for the cash
shortages that have affected the entire country and brought public life to a
standstill before and after the Christmas period.

This would mean this governor would be equally responsible for the
compromised security of people that characterised this traumatic episode.
Many were left immobilised and failed to meet important periodic medical
procedures. HIV and Aids patients missed supplementary dietary needs and
medication.

Thousands of people who had urgent and time-sensitive transactions
were denied their fundamental right to use the money they had worked for.
Millions were left to starve while their money was locked in banks and
losing value.

It is only in Zimbabwe where a governor accused of such a treasonable
offence against a people’s economy remains and stays put as if the matter in
question has no consequence over how people view the national institutions
that must and are expected to deliver economic stability.

If in principle Attorney-General Sobusa Gula-Ndebele could be asked to
step down to allow an investigation into his alleged interference in a case
of a fugitive banker, why are we not seeing the same essentials of justice
being followed through in a more serious matter that affects the entire
nation?

What is the purpose of a central bank other than to create stability
by managing the value of the local currency as an instrument of building
confidence in the economy?

If the person who has been assigned this function gets involved in
bringing the dollar into a freefall by trading at exorbitant, overvalued
rates through front-runners on the parallel market, is it not the
expectation of a balanced mind that the incumbent must be quickly relieved
of any responsibilities that come with the job pending an investigation?

President Robert Mugabe, who is accustomed to sweeping under the
carpet the vice and graft rife in his party, periodically and selectively
bringing up accusations against less powerful individuals, must now act on
Gono.

The only thing we want is a governor who knows how to work our books
and build on the positive, not a noisy comedian who puts our money right
into the hands of people police should be arresting.

Courage Shumba,

UK.

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Name and shame saboteurs

CAN someone answer me on who owns our economy? Who owns the money in
the banks?

If it is the people of Zimbabwe, who then is supposed to get feedback
on cash barons from Reserve Bank of Zimbabwe governor Gideon Gono? Surely,
must we wait till after general elections scheduled for March?

Gono was about to expose the heavyweights that have been sabotaging
our economy. Those in "position of authority" who have inflicted pain among
the resilient people of Zimbabwe all of a sudden have a change of heart and
postpone the "name and shame" event.

Isn’t this a face-cover for some leaders who are seeking re-election
and are well known to be cash barons?

If Gono is a real man, like he appears to be, can he please go ahead
and name the saboteurs in the public media?

We demand to know who is behind the cash shortages. We want to know
who is on that list.

Nhamo,

Harare.

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We don't live for ourselves

FIRSTLY, I’d like to say well-done on the well researched and
informative news that’s coming through your paper. I’ve been following the
independent press in general over the past eight years and have noticed how
the articles are progressively becoming more factual and less biased.

Secondly, I would like to send a message to Zimbabweans that the
hyperinflationary environment is bad for everyone. What we are suffering
from is a combination of a serious confidence crisis, lack of foresight and
excessive greed.

However, we are not to despair as God has provided the solutions
within our reach: if we stop being selfish and start acting responsibly then
we can return to a stable environment.

If everyone who travels by kombi would quiz the commuter omnibus owner
as to what justification they have for increasing fares, then that kombi
operator would quiz the fuel supplier, who would in turn quiz the forex
supplier and so on until everyone starts acting responsibly.

This habit of just accepting whatever is thrown at us will constantly
give us headaches and force everyone to operate in a survival mode in which
all creative energies, intellectual and other resources become wholly
consumed in today and look no further than tomorrow.

The challenge is that we need to realise that we do not just live for
ourselves; we have a heritage to bequeath to future generations and it would
be unfortunate to leave them dilapidated social facilities like hospitals,
incapacitated water treatment services, poor roads and so on.

Sorting out our problems is going to take our collective effort and
first of all humbling ourselves before God. No one man or woman has the
solution to our problems.

On a positive note, I would like to congratulate and express my
gratitude to Zimbabweans for being patient and not giving themselves over to
the demon of violence during these extremely trying times.

I think Zimbabweans have been tried and tested as a people whose
respect for human life and peace are above comparison. This should go as a
credit to everyone and should provide hope for this great nation.

Tineyi Matenga,

Harare.

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Be warned: banks under threat again
PLEASE warn your readers that Gideon Gono, now joined by Finance
minister Samuel Mumbengegwi, is threatening to "regulate" the banking sector
again.

Last time he did this, hundreds of thousands of people lost their
money. I suggest everyone gets their money out of the banks and keep it at
home where it will be safe.

The last time he crashed the banks it was a clever trick to make sure
the money supply was reduced as people lost their money to the government
and inflation.

He needs to do this again to save face and move the blame for the
current fiasco away from the real culprits — the RBZ and government.

If people lose their money they cannot queue.

Be warned, the signs are there.

A McCormick,

Harare.