The ZIMBABWE Situation | Our
thoughts and prayers are with Zimbabwe - may peace, truth and justice prevail. |
February 19 2004 at 04:39PM |
By Cris Chinaka
Harare - Zimbabwean President Robert Mugabe turns 80
on Saturday, a birthday landmark that has sparked fresh debate on when the
embattled veteran leader is likely to retire.
He received an unwelcome
early present on Thursday when the European Union renewed sanctions on his
government, underscoring its international isolation amid accusations of human
rights abuses and a deepening economic crisis.
Mugabe, Zimbabwe's only
ruler since independence from Britain in 1980, is cryptic about his exit plans
and remains an enigmatic figure after half a century on the political
stage.
The veteran leader has left his plans open over the past year
despite speculation he wants a graceful exit in the face of a severe economic
and political turmoil.
His office say regular media reports that he is
sick are "mere wishful thinking".
Political analysts say while Mugabe
used a December conference of his Zanu-PF party to squeeze an endorsement of his
leadership, reorganisation within his party suggests the former guerrilla is
working for early retirement.
But they add Mugabe is likely to leave the
question hanging until the end of 2004, when Zanu-PF holds its five-yearly
congress to elect new leaders.
"I don't think he is ready to discuss his
plans yet and I don't see him giving anything away until the Zanu-PF congress in
December," said Professor Heneri Dzinotyiwei of the University of
Zimbabwe.
Mugabe has no designated successor, although Zimbabwe media has
floated several names, including speaker of parliament Emmerson Mnangagwa,
Zanu-PF national chairperson John Nkomo and Defence Minister Sydney
Sekeramayi.
Some analysts say Mugabe wants a deal which would protect him
from possible prosecution for human rights abuses the opposition accuse him of
committing before stepping aside.
In a commentary in the private Daily
Mirror newspaper, writer Ruzvidzo Mupfudza said Mugabe remained an inscrutable
character capable of pulling out surprises.
"The terrain of the typical
Mugabe psyche is one very few are able to negotiate and understand," Mupfudza
said.
Political analysts say Mugabe - whose term ends in 2008 - has used
his battles with Western critics to divert attention from the question of who
should succeed him.
On Thursday, Zimbabwe state radio reported Mugabe had
said parliamentary polls would be held on schedule in March 2005, presenting the
next big test of Zanu-PF popularity.
Mugabe remains defiant in the face
of international criticism and pulled Zimbabwe out of the 54-member Commonwealth
group of mostly former British colonies when it extended Zimbabwe's 18-month-old
suspension, first imposed over accusations of vote-rigging in his re-election in
2002.
Mugabe maintains he won the election fairly, and that Britain and
other Western powers are bent on imposing opposition leader Morgan Tsvangirai as
leader of Zimbabwe.
As Mugabe readies for a birthday bash at his Zvimba
rural home on Saturday, the EU extended sanctions by expanding a list of
Zimbabwean officials under a travel ban.
Since 2002, the EU has frozen
the personal assets of senior officials and prevented them going to EU countries
in response to what it called a breakdown of law and order.
Many critics
blame Zimbabwe's problems on government mismanagement, particularly Mugabe's
handling of a land-reform programme that gave white-owned farms to landless
blacks. Mugabe says the economy has been sabotaged by his opponents.
Stakeholders Give Forex Auctions Thumbs Up
Financial Gazette (Harare)
February 19, 2004
Posted to the web February 19, 2004
Nelson Banya
Harare
We have not rejected any high bids, says RBZ
KEY stakeholders and industry players have come out in defence of the recently introduced foreign currency auction system, which has recently been the subject of criticism.
The bi-weekly auctions, which started on January 12, have seen the Zimbabwe dollar trading between $3 518.19 and $4 196.58 to the United States dollar against the parallel market rate of $6 500 to the greenback which obtained prior to the new system.
After a slow start, which saw just below US$500 000 being taken up at the first auction, demand has surged to surpass supply, which has been US$8 million at the past three auctions.
Dissenting voices have also increased, largely among the exporting community, which has been charging that the lower rate was negatively impacting on the viability of their businesses.
Charges of fiddling to keep the rate at low and manageable levels have also been levelled against the foreign currency exchange.
However, the Confederation of Zimbabwe Industries (CZI), which was the major proponent of the auction system, has expressed satisfaction at how the auctions have been conducted to date.
"I find it a little depressing when I hear complaints against the forex auction," CZI president Anthony Mandiwanza said.
He said industry had been calling for a realistic and predictable exchange rate in order to generate export growth.
"A predictable exchange rate helps businesses to plan," Mandiwanza said, adding that while much of the current stocks had been built on the basis of a higher exchange rate, import costs should come down as current stocks were cleared.
Many exporters have come out in criticism of the foreign currency auction system, whose weighted average rate has been up to 50 percent less than the parallel exchange rate of $6 500 to the local unit, saying they had procured inputs at that rate and were now required to acquit their forex earnings at an obvious loss that would hurt their operations.
Under the new foreign currency retention scheme, exporters retain 75 percent of their earnings at the ruling auction rate while the remainder would be exchanged at $824 to the greenback.
Some have charged that the auction rate, which they expected to be closer to the parallel market rate, was being manipulated to stay at the current levels.
Of particular interest to some exporters has been the floor rate at each auction, which has invariably been $3 000 to the US dollar.
The Reserve Bank of Zimbabwe (RBZ) denies these charges.
"To date, only bids below the lowest acceptable rate have been rejected in all cases. No bids have been rejected because the bid rates have been too high.
"Furthermore, bids have been rejected on the basis of the amount available for auctioning," the central bank maintains in its review of the auctions conducted so far.
To date, the rejected bids amount to 15.9 percent (or $9 million) of total amount of bids.
Economic commentator Erich Bloch, who also sits on the RBZ's Foreign Currency Exchange Advisory Board (FCEAB), said that while there were certain issues that had to be resolved, he was satisfied that the auctions were being conducted above board.
"I am satisfied by the transparency. The auctions are not fiddled with at all," Bloch said.
"However, like the governor himself has always told the advisory board, monetary policies are not cast in stone but are evolving, there is always room for changes."
Bloch said the advisory board was looking at "about eight measures to address the exporters' problems caused by the forex auction system."
RBZ governor Gideon Gono said the auction has had to reject some bids for holiday travel allowances and motor vehicle purchases as the bank gave priority to the importation of medicines and industrial inputs by the productive sector.
"If that is manipulating the auctions, then let it be," Gono said.
Analysts have said that in spite of the complaints by some sections of the exporting community, the auctions had been met with success, although pressure was likely to increase as producers exhausted their stocks.
"Most retailers had overstocked because it was prudent to hold stocks and exploit the low interest rates, so they are not yet coming to the auctions, while others might be holding out to take advantage of lower rates," one analyst said.
We have not rejected any high bids, says RBZ
KEY stakeholders and industry players have come out in defence of the recently introduced foreign currency auction system, which has recently been the subject of criticism.
The bi-weekly auctions, which started on January 12, have seen the Zimbabwe dollar trading between $3 518.19 and $4 196.58 to the United States dollar against the parallel market rate of $6 500 to the greenback which obtained prior to the new system.
After a slow start, which saw just below US$500 000 being taken up at the first auction, demand has surged to surpass supply, which has been US$8 million at the past three auctions.
Dissenting voices have also increased, largely among the exporting community, which has been charging that the lower rate was negatively impacting on the viability of their businesses.
Charges of fiddling to keep the rate at low and manageable levels have also been levelled against the foreign currency exchange.
However, the Confederation of Zimbabwe Industries (CZI), which was the major proponent of the auction system, has expressed satisfaction at how the auctions have been conducted to date.
"I find it a little depressing when I hear complaints against the forex auction," CZI president Anthony Mandiwanza said.
He said industry had been calling for a realistic and predictable exchange rate in order to generate export growth.
"A predictable exchange rate helps businesses to plan," Mandiwanza said, adding that while much of the current stocks had been built on the basis of a higher exchange rate, import costs should come down as current stocks were cleared.
Many exporters have come out in criticism of the foreign currency auction system, whose weighted average rate has been up to 50 percent less than the parallel exchange rate of $6 500 to the local unit, saying they had procured inputs at that rate and were now required to acquit their forex earnings at an obvious loss that would hurt their operations.
Under the new foreign currency retention scheme, exporters retain 75 percent of their earnings at the ruling auction rate while the remainder would be exchanged at $824 to the greenback.
Some have charged that the auction rate, which they expected to be closer to the parallel market rate, was being manipulated to stay at the current levels.
Of particular interest to some exporters has been the floor rate at each auction, which has invariably been $3 000 to the US dollar.
The Reserve Bank of Zimbabwe (RBZ) denies these charges.
"To date, only bids below the lowest acceptable rate have been rejected in all cases. No bids have been rejected because the bid rates have been too high.
"Furthermore, bids have been rejected on the basis of the amount available for auctioning," the central bank maintains in its review of the auctions conducted so far.
To date, the rejected bids amount to 15.9 percent (or $9 million) of total amount of bids.
Economic commentator Erich Bloch, who also sits on the RBZ's Foreign Currency Exchange Advisory Board (FCEAB), said that while there were certain issues that had to be resolved, he was satisfied that the auctions were being conducted above board.
"I am satisfied by the transparency. The auctions are not fiddled with at all," Bloch said.
"However, like the governor himself has always told the advisory board, monetary policies are not cast in stone but are evolving, there is always room for changes."
Bloch said the advisory board was looking at "about eight measures to address the exporters' problems caused by the forex auction system."
RBZ governor Gideon Gono said the auction has had to reject some bids for holiday travel allowances and motor vehicle purchases as the bank gave priority to the importation of medicines and industrial inputs by the productive sector.
"If that is manipulating the auctions, then let it be," Gono said.
Analysts have said that in spite of the complaints by some sections of the exporting community, the auctions had been met with success, although pressure was likely to increase as producers exhausted their stocks.
"Most retailers had overstocked because it was prudent to hold stocks and exploit the low interest rates, so they are not yet coming to the auctions, while others might be holding out to take advantage of lower rates," one analyst said.
Copyright © 2004 Financial Gazette. |
THE money market has been in a short position this week.
One would naturally expect interest rates to rise, but this is not happening.
There seems to be a deliberate attempt by the central bank to create a shortage in the market because it is issuing compulsory bills at 10 percent with periods ranging from seven to 91days.
Moreover, there is a discrepancy between what the Reserve Bank of Zimbabwe (RBZ) pays if a bank is in surplus (10 percent) and when a bank is short (300 percent).
This does not encourage banks to hold RBZ paper for longer periods.
What is required is a mechanism that keeps money out of circulation for some time. The only way is through the issue of Treasury and RBZ bills, provided they are attractive to the market.
The central bank needs to issue them at market-determined rates.
Now, with the local currency slipping against the greenback, low investment interest rates will promote speculative behaviour, rendering the monetary policy ineffective in curbing speculation.
A tight monetary policy should be maintained through a high interest rate environment so as to make it unattractive to borrow money to buy foreign currency for speculative purposes.
Such a situation is also inflationary because of the resultant depreciation of the exchange rate on the parallel market.
However, against a background of continued low money market rates, the monetary authorities rightly want interest rates to rise, as indicated by the repo rate, which they have left pegged at a high level of 300 percent.
This explains why lending rates have been hiked or left at levels above 200 percent. This reflects the cost of funding for the banks. If the banks are to borrow from the central bank, they get the money at 300 percent.
Given the above situation, stock market investors would always remain on the sidelines because indications are that rates will go up.
The inverse relationship between the money and stock markets means investors cannot actively participate on the equity market because indications are pointing to a possible rise in interest rates.
If it were not for this fear, the equities market could be doing well now because of the existence of significant negative real interest rates of more than 500 percent through the wide disparity between inflation (622.8 percent) and nominal interest rates (90 percent).
Negative real interest rates result in positive stock market performance.
We are now geared for the reporting season, which traditionally produces excitement on the stock market.
Generally, we expect good results from exporting companies and low-geared companies.
As for the financial companies, good results will come from the strong and stable counters that were not affected by the liquidity crisis, otherwise most of them will report disappointing earnings.
An indication that rates will go up makes fixed-income securities more attractive in the short term than the equities. This results in lower volumes of equities traded, and the same applies to stock prices.
Investors will put their cash on call account so that in the event that a good investment vehicle arises, they just shift their money.
Higher interest rates signal bearish conditions while lower interest rates signal bullish conditions to the equities.
Currently, we do not have a clear picture of what direction interest rates will take. Neither are we able to forecast.
We are, however, optimistic that the stock market is still the best vehicle in the medium to long term.
THE turmoil in the financial sector, which has eclipsed Zimbabwe's seemingly unending political crisis, has drawn in auditing firms accused of glossing over issues bordering on serious corporate governance breaches, analysts said this week.
The finance sector, which had defied the country's economic recession now in its fifth year, took a body blow at the turn of the new year when a grave liquidity crunch left most banking institutions in a lurch, with some facing outright collapse.
Startling revelations of impropriety and defiance of corporate governance rules have emerged to give a fresh face to the pain of adjustment caused by the rapid change in policy and the attendant market conditions, typified by the precipitous rise in interest rates.
Analysts and regulators alike maintain that loose adherence to the rudiments of corporate governance had landed most of the companies in trouble.
Although charges of creative accounting have never grown beyond the odd whisper, some analysts have wondered why auditing firms had not voiced concern over the heightened risk that the banks were exposing investors and shareholders.
Aggressive investment policies that saw funds being locked in illiquid assets for speculative purposes should never have escaped the attention of auditing firms, which are almost like the last line of defence within organisa-tions, analysts said.
Indeed, some investors have expressed awe at how the healthy state of affairs, which all had been led to believe obtained, had been replaced by the current catastrophe.
Dave Scott, senior partner at PriceWaterhouseCoopers and immediate past president of the Institute of Chartered Accountants of Zimbabwe (ICAZ), agrees that the current state of affairs in the financial sector was symptomatic of the need to enhance corporate governance.
However, Scott says this responsibility, along with that of preparing company financials, lay with the directors.
"We should be focusing on solutions now, not who did what, although I do not want to make any excuses for negligence. Financial statements are not the auditors' responsibility, but directors'. Auditors only express opinion on the statements - that does not exempt auditors from doing their job. They should be punished if they are found to be negligent," Scott said.
Although the operations of auditing firms have never been brought under the spotlight in this country, there have been unsubstantiated charges of collusion with some company directors, at the expense of shareholders.
"There are certain bad apples in the barrel, but that does not mean that the whole barrel is bad," Scott insists.
The Reserve Bank of Zimbabwe (RBZ), now ties recommendations of board and management changes to liquidity support for distressed banks, in a move to tighten the governance of the institutions.
RBZ governor, Gideon Gono, has said there was "a lot of corporate incest expressing itself in various means".
He said the straying from core banking business, undue influence from shareholders - some who also held management positions, the mixing of incompatible risk elements, borrowing from the RBZ to fund non-core businesses and a high concentration of insider loans had put most institutions' viability in jeopardy.
Although most of the new, locally-owned financial institutions that came on stream following the liberalisation of the sector in 1991 experienced varying degrees of the liquidity crisis, only three listed financial groups were at the centre of the storm.
The three institutions - Trust Holdings Limited, First Mutual Limited (FML) and Century Holdings Limited - had to be suspended from trading on the Zimbabwe Stock Exchange (ZSE) as the regulatory authorities instituted investigations into their state of business.
While Trust, which had become the country's biggest banking group by virtue of its $800 billion balance sheet size, was accused of straying from the core banking business and thereby exposing itself to the vagaries of interest rate volatility, Century and FML where caught at the scene of the ENG Asset Management company accident.
Century and FML had invested substantial amounts of money into the unregistered asset management company.
Many illiquid banks, with Trust being the major case, saw their profits being wiped out in record time, as a result of the sharp rise in interest rates between November and January.
Trust, reported a $15 billion after-tax profit in the six months to June 2003. That profit was just about wiped out in the second half of the year.
ICAZ president Matthews Kunaka said the institution had processes for publicly quoted companies and carried out annual practice reviews to ensure probity.
"We do have processes for quoted companies and always check to see if the opinion expressed is in accordance with international standards. If this is not so, we call in the auditors. The opinion expressed has to be in line with evidence. All this is not clear to the public, but we do not condone any impropriety," Kunaka said.
However, the increasing scepticism and the need to safeguard against corporate scandals such as the Enron and WorldCom debacles that rocked the United States, would suggest a more transparent way of doing business, with the ICAZ making public any auditing firms that would have been reprimanded.
John Chikura, another past president of ICAZ, who now heads the Deposit Protection Board, has called for what he terms a comprehensive disclosure regime, saying this should start with unsophisticated financial statements.
"When an ordinary investor looks at the financial statements, he should be able to comprehend the real nature of the business the company is involved in.
"Truthfully speaking, window dressing and sophisticated financial statements are a form of fraud. Usually this is done at quarter and year-end, where transactions are manipulated to make figures look unduly rosy," Chikura said.
We need assistance to tap Angolan market, companies tell govt
ZIMBABWE'S construction sector is looking for government assistance to venture into war-ravaged Angola, which has become the target of a scramble among foreign investors.
Players in the construction sector said they wanted the government to lead the way for local constructors, engineers and surveyors' direct entry into mineral-rich Angola, which is undergoing rehabilitation after almost three decades of devastating wars and conflicts.
Construction Industry Council chief executive Martin Chingaira told the Financial Gazette the sector would want the government to assist with start-up capital in the form of foreign currency.
Chingaira said the sector would soon meet with Reserve Bank governor Gideon Gono.
He said the construction industry had potential to bring in foreign currency, badly in short supply in Zimbabwe.
"Start-up costs should be provided by the government . . . such ventures can only be positive if they have government support," Chingaira said.
He cited the aftermath of the civil strife in Mozambique when Zimbabwean companies' attempts to enter the country without government assistance failed.
Backed by its government, South Africa's construction industry has successfully penetrated both the Mozambican and Angolan markets.
At a recent meeting to assess the implications of the central bank's new monetary policy on the construction sector, industry players noted that Zimbabwe's failure to enter the Democratic Republic of Congo (DRC) following its instrumental role in bringing peace to the country was mainly a result of lack of government backing on the political front and in terms of start-up capital.
Analysts say Zimbabwe, which has been very active in regional peace initiatives, has not benefited from its efforts while hawkish South African and European investors have quickly seized the resulting investment opportunities.
Chingaira said the council had already presented a document, now being considered by the government, on the capacity of the local industry to invest in the regional markets.
"We have identified the SADC (Southern African Development Community) region as representing immense opportunities for the construction industry.
"We can assist in the reconstruction and development of infrastructure, skills and technology transfer in the needy countries such as DRC, Angola and Mozambique.
"The government could assist in spearheading market and business development in Angola as we continuously search for new, challenging enterprises,"said Chingaira.
But some observers have pointed out that infrastructure development at home is fast deteriorating.
The road and rail networks, in particular, have been cited as examples of declining infrastructure. Players in the construction sector blame the falling standards on lack of maintenance.
"Deterioration in infrastructure is mainly because we do not budget for infrastructure maintenance, but this does not mean that we do not have the capacity,"said property analyst Itayi Mugiyo.
"Zimbabwe boasts big names in construction industry such as Costain, Gulliver, Murray & Roberts, John Sisk, among others.
"The ability to do the work is there but without government assistance it will be very difficult to succeed in countries such as Angola and the DRC," he said.
INDUSTRY players have slammed the Zimbabwe Electricity Supply Authority (ZESA)'s increase in electricity tariffs, which came after recent moves to bill its exporting customers in foreign currency.
The move is going to increase input costs and reduce profit margins, they say. Players in the manufacturing and mining sectors told The Financial Gazette that the recent increase in tariffs did not tally with the recently announced monetary policy statement which sought to arrest the country's economic decline through increased production to boost exports and generate foreign currency.
Zimbabwe Chamber of Mines president, Ian Saunders, said the current situation under which ZESA billed its customers a kilowatt per hour had resulted in power pricing difference of 40 percent with South Africa. Confederation of Zimbabwe Industries (CZI) president, Anthony Mandiwanza, said tariffs had gone up by 2 000 percent and maintained that ZESA was flouting set regulations that tariffs must be adjusted in line with regional trends.
At the moment the power utility, which is billing all its exporting customers in foreign currency, is charging its exporting customers US$0.6 per kilowatt when South Africa is charging between US$0.2 to US$0.3 per kilowatt.
"The cost of power has dramatically increased but we have no choice. At the moment we cannot import new equipment and raw materials and some consumables to feed into the mines. We do not even have the US dollars and we need capital. This electricity billing system is directly affecting our ability to expand or increase production," Saunders said.
He said the previous system where they had an option to either pay the equivalent in local units or in hard currency was very preferable.
Mandiwanza accused ZESA of using parallel market rates in its billing system, a move which he said had the disastrous effect of impinging upon the country's production capacity. "ZESA should buy its foreign currency on the auction floors at the auction rates. At the moment, whatever gains industry was going to accrue from the monetary policy are going to be eroded. ZESA rates are out of kilter with reality on the ground," Mandiwanza said.
Mandiwanza poured scorn at the way affairs at the power utility were being handled, saying ZESA was a major enterprise with a strategic role to play in economic development.
ZESA, which owes two regional power suppliers a total of US$51 million, has failed to shed off its financial encumbrance due to a host of factors, among them an acute foreign currency shortage in the country.
The authority has been under immense pressure to settle its mounting debt or risk plunging the whole country into darkness.
Last year, ZESA cut off power to Bindura-based Freda Rebecca gold mine for two weeks after the company had refused to settle its bills in foreign currency, a development which resulted in some sections of the mine flooding.
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Yet another setback for Zimbabwean media freedom as court rejects application.
HARARE: The
Zimbawean High Court has dismissed an urgent chamber application filed by
Associated Newspapers of Zimbabwe (ANZ) seeks a declaratory order to have its
journalists accredited by the Media and Information Commission (MIC).
In dismissing the application, Justice Alphas Chitakunye said the matter
should go through the normal channels that are used when making applications.
Chitakunye said the court is not in a position to sit on this application as an
urgent matter but should follow the normal channels.
The ANZ, publishers of The Daily News and its sister paper, The
Daily News on Sunday, has been locked in a legal battle with the MIC since
September last year. The newspaper group was ordered to stop publishing when
discovered that the company was operating without a license and its journalists
were not accredited as required under the Access to Information and Protection
of Privacy Act. -ALLAFRICA
Mawere shoots down deal Nelson Banya 2/19/2004 7:24:09 AM (GMT +2) A MULTI-BILLION dollar tie-up involving the Mutumwa Mawere-controlled ZimRe and two other financial institutions could run into a brick wall as it emerged that key stakeholders are haggling over the merits of the deal. The three financial institutions - First Banking Corporation (FBC), Southern Africa Reinsurance (SARE) and National Discount House (NDH) - last month signed a memorandum of understanding that is expected to precipitate in the alliance, widely seen as a gambit in a protracted game of chess. | |
Although the prime promoters of the
transaction sounded optimistic yesterday, there were growing fears that it could
run into difficulties. |
M
The New Presidential Powers Regulations Represent A covert Declaration of a State of Emergency
New
Presidential Powers Regulations, recently announcement by the Mugabe regime, sends ‘shivers down the spines’ of the
freedom loving people of
commitment to engage in political
dialogue to address the crisis of governance in
“These
regulations are nothing more than a Trojan horse which effectively usher in provisions that give the
Mugabe’s new powers mean that police can detain people for up to thirty days without trial. Not only does this disturbing development confirm the totalitarian instincts of the regime, it also betrays Zanu PF’s intention to entrench their framework of tyranny.
The Zanu PF government has attempted to dress up the
announcement as a moral stand against corruption by claiming that the
fundamental aim is to tackle ‘economic
crimes’ such as money laundering, fraud and illegal foreign currency trading.
Closer scrutiny of the new regulations however, reveal that the ‘economic
crimes’ element is a mere gimmick. The main target of the
regulations are Mugabe’s political opponents,
i.e. the M
“The
intention of the regime is clear. They understand that the region and
declaration
of a State of
Furthermore,
given the regime’s predilection for torturing its opponents whilst they are in
police custody, there is equally no doubt that these provisions will be used to
torture opponents more effectively, and more importantly, to prevent those
tortured from receiving timeous medical attention,” said
Increasingly, this level of desperation on the part of the Mugabe regime confirms its loss of moral authority. This is a regime that is on its way out and it knows it. It finds itself exactly where the Smith
regime was in the late 70s.