The Axis xxviii

474334998743984380Why Zim cannot de-dollarise successfullyThe
32847349349487836Presidential intervention: Whither exchange rate?

CAFCA posts 345% rise in HY profits

349279632786128961Hippo Valley suspends advance payments
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0 Spi1neless,2radar6less Ce7ntral B0ank 1
9327509265847130927Voodoo economics evoked to save Zimdollar

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8 97#ISSUE: XXVII



The AXiS Friday 13 May 2022 #ISSUE: XXVII

The African Africa launches trade
Trade exchange to curb
Exchange Russia-Ukraine
war effects

PAGE 16

equityaxis.net @equity axis @equity axis zimbabwe @equity axis @equity axis @equity axis 08677 197 791 @ aaronc[at]equityaxis.net

The fallacy of lending activities suspension in
Zimbabwe
Zimbabwe Banking Sector Income Split The RBZ and the Ministry of Finance have come
T he business of lending forms the core of 2021 out to further elaborate on the last measure. It is
banking while at the same time creating the Bank’s view that stopping banks from lend-
a catalyst for economic growth for the Last week the President of Zimbabwe announced ing money at this point, will help restore sanity
broader economy and its cessation in a modern a raft of measures, which he said were designed in the financial system.
state, epitomizes the height of economic lunacy, to restore confidence, preserve value and restore The Bank believes that borrowing was being
far beyond the coveted and record-breaking print- macroeconomic stability. These measures were in abused by speculators for purposes of buying
ing of Zimbabwe’s currency during the hyperin- response to sharp losses in the value of the Zim- currency and given the galloping nature of the
flationary years. dollar, which under 2 months had foregone over exchange rate, the money borrowed would
When banks lend they re-channel funds from 50% of its value. The loss in the value of the significantly lose value and thus its cost of
areas of surplus to areas of deficits, creating a local unit stimulated inflation to levels last seen servicing lowered, if not completely erased. The
more efficient way of resource allocation, which at the height of the post dollarization inflationary huge gap by itself is a huge incentive for specu-
in turn increases the rate at which production period in 2020. The inflationary experience lation activities.
grows, and bars any eventualities. Tempering this weighed on spending power, reduced aggregate Volatility in the economy, particularly of currency
economic process comes with payoffs which may demand, and affected the availability of raw and inflationary nature, naturally breeds specula-
have a higher opportunity cost against the intend- materials and product pricing, leading to an eco- tive borrowing. This speculative borrowing can
ed results. nomic downturn. In 2020, Zimbabwe’s economy spontaneously grow to the point of a bubble
This is why policy makers the world over elect tanked by a double-digit figure. Among the mea- through a vicious cycle. The vicious cycle plays
to balance the payoffs through tinkering with the sures announced was a change from auction through borrowing and placements of funds into
interest rate and not suspending or abolishing market to interbank’s willing buyer- willing highly responsive assets such as stocks. For
lending practices altogether. seller, in price discovery. Price discovery refers example, one can borrow ZWL$4 million from a
to the act of letting market forces determine an bank and place it in shares. If one was to borrow
Zimbabwe Loan to Deposit Ratio Trend equilibrium price at which suppliers match that amount in January and place it in Delta
buyers of currency. Although the government shares, there would have grown the nominal
In Zimbabwe, at least 35% of banks’ incomes never admitted it, the discredited auction market value of the funds by about 90% between Janu-
are generated from lending activities. This figure was set by the RBZ and its latest huge variance ary and April 2022, whereas interest rates were
is even at a historical low and prior to hovering to the parallel market signalled a no return largely static within the period.
around 60-70%, about 5 to 10 years ago. Debt phase. This means the borrower of a ZWL$4 million
often referred to as gearing makes up a good Further, the measures included an increase of loan in December would have generated about
portion of ZSE corporate balance sheets. IMMT on all domestic FCAs to 4% from 2%. 90% of the funds borrowed and possibly cover
While companies have in recent years reduced The cash withdrawal levy on FCAs revised from 100% of the loan due to the bank by as early
gearing in light of macro dynamics, they are still US5c to 2% for transactions. Settlement of For- as April and remain with about ZWL$2 million.
seeking debt on the short end for working capital eign currency obligations such as taxes and This ZWL$ is a real profit of US$8000 in 4
and similar activities. duties, to be revised from a lower auction rate months.
Despite high demand, the market is still starved to the willing buyer willing seller interbank rate, It would be very tempting to repeat the cycle
of long-term capital and this is largely due to the suspension of third-party country foreign pay- over and over again. In the interim, demand for
short-term nature of deposits and a lack of access ments, tighter controls on securities trading on stocks would rise and the artificial gains would
to external lines. the ZSE, increase in capital gains tax for shares be monetized and flood the forex market in
held for a period not exceeding 270 days to 40% search of the greenback. This is inadvertently a
from 20% and the suspension of banks’ lending real threat to monetary stabilization.
activities to government and the private sector.
The last item will be the focus of this report and *To Page 4
we look at the implication of the ban.
RBZ
independence
under
scrutiny PAGE 5

Markets watch PAGE 26

ZSE ASI 27,589.62 ZSE TOP 10 18,379.40 MEDIUM CAP INDEX 44,679.17 ZSE TOP 15 20,234.23 SMALL CAP INDEX 576,574.92 ZWL INTERBANK 165.9942
27,196.87 18,044.54 44,544.97 19,887.26 597,946.28 165.9942
26,693.75 17,582.30 44,666.56 19,461.40 607,360.86 165.9942
25,658.41 16,955.87 42,633.45 18,743.50 610,613.02 173.2685
24,117.59 15,700.19 41,718.34 17,440.25 579,021.09 173.2685
22,942.36 14,780.46 40,820.84 16,451.75 577,080.35 173.2685
-16.84% -19.58% -8.64% -18.69% 4.38%

In Focus 34The AXiS XXVII - Friday 13 May 2022

*From Page 3 system, particularly those in the agro-processing- Zimbabwe Treasury Bills Trend ZW$
space, have already issued statements to suppliers billions
The real challenge with the measure instituted is that they will not be able to maintain their
that it does not address the problem at stake. It models. The government has emerged as the taker of
is not the borrowers that are at fault. In fact, it This is just a microcosm of the challenges that deposits sitting with Banks. Government requires
is not every borrower channelling borrowings to are likely to emerge, post the measures. Overall short term debt, which most borrowers will not
the stock market or similar avenues of earning the measure will dampen business performances prefer and against these it would issue Treasury
interest in the short term. Some are borrowing and further drag the economy into an adverse Bills. It is our persuasion as Equity Axis, that
for productive purposes while some are borrow- outturn if prolonged. RBZ will have to remove the real source of inflationary pressure is not the
ing for the construction of properties etc. In any the cap within a month or else drive the real stock market per se, but rather, government secu-
modern society, lending is regulated through the sector into real chaos. Some companies may rities, which are used to channel money into the
interest rate, not the abolition of lending itself, even fold, while GDP earlier expected to main- hands of government suppliers. The suppliers are
no matter the horizon of abolition/suspension. tain a positive trajectory will yield a negative in turn dumping the local currency on the black
return. market. It is foolhardy to point elsewhere as we
To counter the impact of what is highlighted Zimbabwe’s loan to deposit ratio currently is seek to reposition the economy. While lending
above RBZ ought to have played around with below 50%, and this measure is way below the has been stopped to both government and the
the interest rate, particularly the benchmark rate, RBZ benchmark and the regional averages. This private sector, the continual settlement of con-
which it had, just a week earlier, expressed satis- statistic measure is the level of deposits that are tractors, especially those involved in road con-
faction over. The MPC and RBZ retained a churned out as loans. For every dollar of depos- struction, is likely to keep driving the exchange
benchmark rate of 50% and 80% for overnight its, banks are loaning out only 50c. This is a rate higher. In fact, it would be logical to con-
lending. An adjustment to these rates would have national failure to maximise deposits and fund clude that, even the infrastructure projects which
to move in line with inflation which in turn national growth. are being pursued will likely stall or slow down
would move in line with the exchange rate, in A more informed study shows that this failure is as government cuts its borrowing spree.
order to counter arbitrage and speculative bor- largely driven by the short-term nature of the
rowings. It is the first since the turn of the mil- local deposits. The transitory deposits are
lennium that Zimbabwe’s authorities have sus- informed by the nature of businesses within the
pended borrowing. Likewise, as highlighted earli- economy and the levels of country risk and the
er, it is not a common practice for a modern challenges around securing external credit lines.
state in the 21st century. The short-term nature of deposits reflects on low
incomes within the economy, low propensity to
By suspending lending altogether, the government save in the face of inflationary risks and lack of
has effectively elected to drag production in the confidence in the banking system.
economy. All companies are now looking at ways
to maximise existing cash flow resources to sus-
tain production. Yesterday, Dairibord, a lister
milk processor, suspended payment of a dividend,
which it had earlier declared. Several companies
whose business model relies on the credit

Economic News and Analysis 5The AXiS XXVII - Friday 13 May 2022

RBZ independence under scrutiny

On Saturday the 7th of May 2022, follow-
ing a financial and economic crisis that
threatens to extinguish the Zimbabwe
dollar like what happened in the 2008/9 era,
President Emmerson Mnangagwa addressed the
nation outlining a number of measures to restore
confidence, preserve value and restore macroeco-
nomic stability.

Mnangagwa’s address gave an explicit and con- and to solve it, we need to avoid legislatin- RBZ insulated from day-to-day politics. This-
spicuous reference to the de-dollarisation process, gagainst it but rather address its primary drivers. makes it impossible for the RBZ to serve its
clearly showing that the government is deter- This can be achieved through both market liberal- delegated specific responsibilities such as ensur-
mined to make the local currency the sole legal isation as well as improving policy quality and ing price and financial stability which are easily
currency as opposed to widespread calls to dump policy response to any emerging threats,” it eroded by the exploitative government.
it and adopt the US dollar, a process known as added. This is not an attempt to sanitize the RBZ of its
dollarisation. Economist Tinashe Murapata, popularly known poor policies over the years. But whilst there is
Looking at the contents of Mnangagwa’s address, on micro-blog Twitter as “Baba Nenyenyedzi”, more to criticise about Mangudya and company,
it seems he assumed the role of the central bank posted on Monday that “For once I felt sorry for the President sent a worrying signal to the market
governor. He made the address at the State House Mthuli and Mangudya.” on Saturday.
flanked by the Reserve Bank of Zimbabwe (RBZ) “As bankers, I’m sure they were gnashing their In the address, Mnangagwa made it a point that
Governor, Dr. John Mangudya, and the Minister teeth behind the masks and trying as hard as pos- the government is convinced that the recent
of Finance Professor Mthuli Ncube. sible not to lose it as the speech was read. The exchange rate movements are being driven by
Was that a reflection of politics trumping eco- incoherence and conflicting measures have me negative sentiments by economic agents as
nomics? Before delving deep into this, it can be believe they had nothing to do with the state- opposed to economic fundamentals.
helpful to take note of the RBZ’s vision and mis- ment,” he said. However, the ZNCC refuted this claim and
sion statement. It is stated as follows: Another economist, Zvikomborero Sibanda in a instead blamed the government’s financing model
“To be a credible, transformative, and responsive conversation with this publication also echoed the for ongoing programmes and developmental proj-
central bank that contributes to the economic sentiments. He said, “It showed us that central ects as the major driver of the rapid depreciation
development of Zimbabwe. To achieve and main- independence which is key for monetary policy is in the local currency.
tain price and financial system stability to foster non-existent in Zimbabwe.” “Government is using short-term financing mech-
sustainable and inclusive economic development.” Central bank independence (CBI) means that anisms to finance the Emergency Road Rehabili-
However, amidst a heightening financial and eco- monetary policy is delegated to unelected officials tation Programme, Construction of Dams and
nomic crisis, the RBZ governor stood aside and that the government’s influence on monetary funding critical programmes like Census and
whilst the President took to the podium and out- policy is restricted. One reason for the govern- bi-elections. The Zimbabwean dollar being paid
lined measures to steady the ship. Practically, it ment to meddle in the RBZ’s affairs is pressure by Government to the contractors is ending up
will be naive to think that central banks, world- to retain power as the country heads into the chasing the greenback on the parallel market as
wide, operate in a political vacuum. Central bank- 2023 general elections. they seek to preserve value,” ZNCC said.
ers and government officials frequently meet and We believe that there is pressure on the Mnan- It added that the fundamentals such as money
also have informal ways for discussing (the coor- gagwa regime to boost economic activity in the supply and foreign exchange management are
dination of) monetary and fiscal policy, but the short run for electoral reasons. Another reason is misaligned and those are actually driving negative
government’s influence on monetary policy the incentive for politicians to use the central sentiments not blaming the adverse expectations.
should be restricted. bank’s power to issue money as a means to The confidence building measures announced by
The sight of the president making that announce- finance government spending. Former President the President include restoration of lost value on
ment, appearing rather rushed and reactionary as Robert Mugabe was often criticised for using the bank deposits (see other articles in this publica-
the nation was bracing for a shutdown the RBZ as a vehicle to finance electoral campaigns tion for more detail), clearance of foreign auction
following Monday, raised eyebrows. The question as he resorted to dirty tricks to overpower politi- backlog, continuation of partial dollarisation – use
among critical observers is why would the presi- cal rivals, to the detriment of the country’s eco- of dual currency system, reviewing the will-
dent make such an announcement and not either nomic stability. ing-buyer willing-seller trading limit and also
one of the treasury chief or central bank gover- The second regime for all its reform promises allowing retailers and wholesalers to benchmark
nor? Was that evidence of the unprecedented appears a mirror reflection of the former. This their pricing to the average interbank rate with a
political power over key economic institutions, behavior is among the chief causes of alarming maximum allowable variance of 10%.
particularly the RBZ in this case? exchange rate depreciation and inflation haunting On additional measures to strengthen demand for
The Zimbabwe National Chamber of Commerce the country now, even though the government local currency President Mnangagwa said the
(ZNCC), in an address to the treasury department believes that the fundamentals are sound. quarterly reserve money growth will be further
and the RBZ in response to the measures It is argued that a central bank subject to politi- reduced to 0% from 5% per quarter. He also
announced on Saturday, commended the Presi- cal influences would likely not be credible in its announced a differential taxation system for the
dent’s efforts to tackle the economic rot, but it promises such as low inflation, as the public Intermediate Money Transfer Tax (IMTT). On
also raised questions about the independence of would recognise the risk that monetary policy- this, he said the 2% would continue to apply to
the RBZ. makers could be pressured to pursue short-run local currency transfers and that all domestic
“This is refreshing to note that the man occupy- expansionary policies that would be inconsistent foreign currency transfers to attract the IMTT of
ing the highest office in the land is hands on,” with long-run price stability. 4%.
ZNCC which is one of the country’s biggest As such, when the central bank is not credible, Meanwhile, as part of measures to foster market
industry bodies said. the public will expect high inflation and, accord- discipline, the government has suspended lending
“However, the downside is having the head of ingly, demand more-rapid increases in nominal by banks to both the government and the private
state announcing such measures sending a clear wages and in prices. Thus, the lack of indepen- sector.
signal that politicians are directly involved in dence of the central bank can lead to higher “The security agents of government and the
economic policymaking, notably monetary policy inflation and inflation expectations in the longer Financial Intelligence Unit shall, with immediate
measures (where a greater degree of central bank run, with no offsetting benefits in terms of great- effect enhance their roles to effectively monitor
independence is required), and in the process ren- er output or employment. This is the dilemma financial transactions in order to address the
dering the Reserve Bank of Zimbabwe as an arm Zimbabwe is stuck in. delinquent arbitrage behavior in the economy,”
of political decision making.” Following the Saturday event and buttressed Mnangagwa said in an attempt to enhance market
ZNCC also criticised the government’s slow reac- byhistorical trends, it is difficult to imagine the discipline.
tion to economic chaos which it says triggers
such a confrontational approach and, in the pro-
cess, resulting in unintended consequences, that
is, worsening the economic turmoil.
“The perennial existence of arbitrage opportuni-
ties will continue threatening economic stability,

Economic News & Analysis 6The AXiS XXVII - Friday 13 May 2022

Government descends on economic drivers in curbing
inflation: Do fundamentals drive sentiment or vice versa?
T he Republic of Zimbabwe has since inde-
pendence been fighting to have a stable stood at US$4 billion. Fast forward to the current -ing with a significant chunk of money. This was
and hard currency through different strate- year of 2022 in the first quarter of the year the a win-win situation for the investor and the econ-
total credit was slightly less than US$1 billion. omy as the companies invested would utilise
strategies. These have all failed to stand the test This 75% decline in total lending contradicts the improved liquidity in their operations and capital
of time as the country has had numerous curren- growth in the aggregate economy over the expenditures.
cies since independence. In 2019, the Zimbabwe respective years, signifying more dependence by
dollar (ZWL) was reintroduced as the local cur- economic players on other sources of money or With the banning of money lending, liquidity that
rency. This followed its extinction in 2009 capital which is not bank loans. However, since used to come from banks will be halted on the
following a period of hyperinflation. the introduction of the ZWL, the money supply stock market, and companies will also be starved
has grown from ZWL 10 billion to ZWL 500 of the liquidity as a ripple effect. This further
In a bid to stabilise this currency, the Reserve billion, a 4900% growth in less than 3 years. reduces demand on the ZSE and investor turnout.
Bank of Zimbabwe (RBZ) has tried various ave- Statistically, the impact of bank loans on the In the prior month, the government enforced a
nues, mainly including a command fixation of an growth of money supply can hypothetically be reduction on the daily price changes of stocks,
exchange rate, which failed dismally and was nullified. from 20% a day to 15% for market heavies, and
then succeeded by the introduction of the inter- from 100% a day to 20% for penny stocks.
bank market. To further improve the interbank The government then moved to increase capital Armed with these measures, the bullish days on
market which was introduced in February of gains on shares traded on the ZSE within a ZSE seem to be pulling down curtains.
2020, a Reuters-based Auction System was then space of nine (9) months to 40% after allegations
introduced in June 2020. Since the introduction of the stock market fueling inflation. Generally, The ripple effect of this sentiment is reduced
of the Reuters Auction system, the ZWL has inflation and exchange rates are key drivers of liquidity for companies that rely on it for their
depreciated by 381% against going concern. This also
the greenback. A recent com- means underpricing of stocks
putation and research by This then renders on the ZSE as demand will be
the stock exchange low enough to play ahead of
American Analysts in late inflation. The market will also
April saw the ZWL as 40% not viable for be rendered less viable for
weaker than the United States value value preservation and this,
Dollar. therefore, leaves few options
Despite the introduction of preservation for for economic players, and the
investors who
seek
infinity policies to stabilise the safest haven would be to store
currency over the past few to store their liquid value in a hard currency, the
years, the Central Bank has United States Dollar. Increased
not yet done. Recently, assets in stocks demand for the greenback will
through the office of the Pres- as hey would have see a further plunging of the
ident, more controversial mea- buying power of the local cur-
to wait for nine
(9 months to enjoy rency as the revival of confi-
sures were announced over the dence in the local currency has
weekend, which the govern- the value
ment believes to be the final preservation) proven to be impossible.
punch to stopping inflation.
These measures included pin- The government has to ensure
ning down Zimbabwe Stock Exchange (ZSE) the stock market. Spiritually, the government strong economic fundamentals that affect the
activities, banning the lending of money by believes that sentiments drive economic funda- strength of a currency before addressing symp-
banks to the government and private players, mentals. Economically, fundamentals drive senti- toms of an already failed currency. As highlighted
revising the willing-buyer willing-seller trading ment in the economy. When economic fundamen- above, the country’s balance of trade is one such
limits, improved clearance of foreign currency on tals are weak, economic players respond by sail- fundamental. In 2021, Zimbabwe’s total exports
the Reuters Auction system, and continuation of ing cautiously. The ZSE, since 2020, has been stood at US$6.19 billion while imports totaled
the dual currency system among others. recording tremendous annual nominal and real US$7.2 billion. However, these are official figures
returns, with the bourse emerging as the best from the Reserve Bank of Zimbabwe which, in
performing bourse in Africa, in real terms. This
Delving into the first two measures which posi- was mainly due to stock prices chasing the paral- categorising imports, the Central Bank only focus-
tively co-depend, the government tried to foster lel exchange rate. This can also be hypothetically es on “priorities”. This means the country’s
discipline in financial markets by banning inter proven by the repricing of all the counters that balance of trade is above negative -US$1 billion.
account transfers between clients’ sub-accounts shifted to the Victoria Falls Exchange as they In a country that is highly informalised (approxi-
with a broker, prohibiting third-party funding of revalued based on the parallel exchange market. mately 80% of the economy) and highly depen-
client sub-accounts, restricting third-party funding dent on imports, a local official currency can not
of client sub-accounts with a broker to only be stand the test of time and strength as production
allowed to customers’ bank accounts and not to However, on the other hand, a few investors has to buttress the strength of any currency. The
third parties, increasing the capital gains tax for were liquidating their portfolios on ZSE and government has to first focus on reviving the
shares held for a period not exceeding nine transfer the proceeds to the parallel exchange country’s industry, and this will, on its own,
months from 20% to 40% to curb speculative market, thereby bidding higher and fuel the revive the strength of the currency.
trading, in line with individual maximum margin- exchange rate. This was, however, symptomatic Before a Central Bank focuses on strengthening a
al tax for Pay as You Earn (PAYE). of an already ailing currency which led to every currency, the currency ought to bear certain char-
economic player opting for the greenback instead
of the local currency. By prohibiting third-party
In the financial sector, the government moved to funding of client sub-accounts, the government is acteristics which include acceptability and scarcity.
ensure that banks shall with immediate effect not trying hard to force economic players not to opt To achieve the former, the country has to focus
process third-party country foreign payments and for a strong or hard currency. on production and turn the country into a net
a complete suspension was put on lending by exporter. This will increase demand for the cur-
banks to both the government and the private rency as foreigners would need it to buy locally
sector as the Central Bank strives to achieve a Meanwhile, a capital gain is the increase in a manufactured goods. To achieve the latter, the
zero growth in reserve money. capital asset's value and is realised when the Central Bank has to stop the rampant printing of
asset is sold. Therefore, in stock markets, a capi- money, an incurable disease at the Reserve Bank
tal gain is the marginal increment on investment.
The strength of a currency is affected by the Since investors used to opt for stocks for value of Zimbabwe. The government will also have to
interplay of several local and international vari- preservation based on the capital gain on the ensure increased production to match the money
ables, including foreign exchange market demand stocks as they chase inflation, an increased capi- that is already in circulation and match it with
and supply, central bank interest rates, domestic tal gains tax means the government is now enti- goods in circulation.
inflation and growth, and the country's balance tled to a huge chunk of that marginal increment In addition, currency strength is influenced by a
of trade. Interest rates refer to the borrowing cost which is rather meant to be a hedge against country's political situation and economic perfor-
of money. If the cost of borrowing is low, this inflation. However, stocks were able to chase the mance. As a result, a country with less political
increases the rate of borrowing in a country, and rampant inflation through high liquidity and high risk attracts more foreign investment, diverting
in turn, increases the country’s money supply trade counts which enabled a quick response to money away from countries with more political
hence weakening the currency’s buying power. volatility. The increase in capital gains prohibits and economic stability. An increase in foreign
However, Zimbabwe is a special case when it avid traders to seek hedging on the stock market, capital leads to a rise in the value of the coun-
comes to the money supply, inflation, and money thereby reducing the historic trade counts and try's currency. A country with good financial and
lending. liquidity. On the other hand, some investors had trade policies does not allow for currency value

Using the United States hard currency for uni- been accustomed to borrowing from banks, invest instability. However, currency rates may depreciate
form comparison, less than a decade ago at in stocks, then take out gains and the principle in a country prone to political unrest, like the
theend of 2013, the country’s total bank credit amount before paying back the loan and remain case of Zimbabwe.

Economic News & Analysis 7The AXiS XXVII - Friday 13 May 2022

Presidential intervention: Whither Opinion Piece:
the exchange rate? The Zim dollar is dead,
let’s try something else
A ccording to the RBZ, a total of demand a surrender of the export proceeds
US$3.12 billion has been traded via from exporters at the respective weighted “I was one of the first people to argue
the foreign currency auction market average exchange rate. The cycle went on that Zimbabwe must adopt the
since its inception in 2019. Between Janu- and on, but the RBZ was sure that it was South African Rand.
ary and April 2022, a total of US$528.1 only a game of time. The model was
million was traded via the same market. never sustainable given that the auction And join the rand monetary area for
Over the 12 months period to December market itself lacked depth and was exclu- a 7-10-year period because
2021, the auction market traded a total of sionary.
US$1.97 billion, implying that at the A bigger chunk of economic agents in South Africa is Zimbabwe’s largest
going rate in the current year, the auction Zimbabwe playing in the informal sector trading partner, accounting for 80% of all trade.
market is likely to exchange a lower total do not have access to the auction market
sum by year-end. Allotments however tend and rely on the parallel market. What this Things have moved on now, so what I would
to be higher in the second half of the year meant was that the gap between the auc- argue now is that we have to remove the bond note
compared to the first, implying that the tion market and the parallel market was
value traded will pick up in the 2nd half. bound to widen over time and although in currency which has become a surrogate
However, the evolving dynamics following the past stop gap measures were put in Zimbabwean dollar without the macroeconomic
an introduction of a new set of measures place, the gap would always reemerge,
designed to restore economic stability this time to untenable level of over 100%. or monetary policy credibility.
through exchange rate management, reflect The interbank rate, which is now primed So that should be removed because
that the broader currency market is in for to achieve the objective of price discovery,
a major restructuring. is different from the auction market in it is bad money”
Going forward, the auction market will that it is not set by RBZ. The RBZ has
take more of a back seat behind the inter- no role on the interbank market and only Prof Mthuli Ncube- Minister of finance and economic development
bank market in terms of both driving price banks, who are authorized dealers are
discovery and pushing trade volumes. It is responsible for facilitating trades between N ext week the Finance minister is poised to
also likely that the gap between the auc- buyers and sellers on the respective announce another round of stringent measures to
tion market rate and the interbank rate market. Likewise, the interbank bank foster market demand for the local currency. The
will narrow together with the gap between market unlike the auction market is rolling president is also convinced that negative sentiment
the 2 and the parallel market. and does not have only a single day of towards the Zim dollar and future inflation is dislodg-
However, this does not imply that curren- trading per week, this helps in making the ing the central bank’s monetary response. Essentially,
cy depreciation will overall, slow down. market more responsive to economic the new measures are retaliatory, “seemingly” targeted
According to official data, the interbank dynamics which might call for currency at the economic agents fuelling currency depreciation.
market accounted for a total of US$309 rerating. Since this market does not have But in reality, the blanket of policies will have implica-
million in forex trades over the 12 months RBZ, an interested player, players use tions on the whole economy.
period to December 2022. The total repre- actual demand to supply factors to drive The move to prioritise the interbank market might just
sented 22% of the total trades via the the average rate and this rate should typi- force some stability by allowing the exchange rate to
three different channels including the auc- cally be closer to the parallel rate. We be determined by market forces. However, I believe
tion market and the FCA direct payments. anticipate that the auction-rate will possi- this is yet another short-term solution to a problem that
Between January and April 2022, the bly stabilize at 20% below the parallel has existed for decades. The people simply do not trust
interbank market facilitated trades amount- market. the government to have their best interests at heart.
ing to US$58.5 million or 41% of the Advantages of adopting the interbank rate That also includes a currency they can rely on, save
total trades via the different forms of are more and these include stimulating and make future plans with.
settlements. The movement from 22% to production and exports given that export- In the words of the minister, the Zim dollar is bad
41% between 2021 and the first 4 months ers surrender are ceded at a higher rate money, and bad money dries out good money. So, what
of the year represents a huge leap and the compared to the auction in the prior peri- am I suggesting? I am simply echoing the words of
growing dominance of the respective ods. Further pricing of goods and services Prof Ncube’s argument, just like his predecessor Tendai
market in the trading of foreign currency will tend to be more competitive and Biti. Zimbabwe should adopt the rand and join the
on the local market. reflective of true market forces allowing common monetary area (CMA).
Earlier in April 2022, the MPC recom- for commerce to stabilize. In as much as Biti also believes both the bond notes and RTGS$
mended that willing buyers and willing the interbank move is as rosy, it is the should be scrapped. And while there is no doubt that
sellers can transact via the interbank for retention of the auction market in the the use of the USD stabilised the economy and gave
amounts up to US$1000, a limit that has matrix, which will create problems going Zimbabwe several years of much-needed economic
now been revised to US$5000. Adoption forward. RBZ is electing not to disband growth, it was never meant to be a permanent fix.
of the resolution resulted in a pick-up in the auction market, despite its admittance Turning to South Africa is now Zimbabwe’s best possi-
trades and the creation of possible refer- that the market has failed in price discov- ble solution. Over 80% of our trade is with the rand.
ence rates outside the auction market. The ery, which goes to reflect on inefficiencies Why avoid the inevitable? Just so that we can maintain
consequence of the move was a growth in in allocation and possible market manipu- our monetary sovereignty? But at what cost?
the value of trades via the interbank and lation such as speculation. Adopting the rand would mean that Zimbabwe submits
the emergence of a fairer exchange rate What we will begin to see is the emer- its entire monetary and financial system under the regu-
than the dominant auction market. These gence of a 3-tiered forex system in Zim- latory jurisdiction of the SARB and Zim banks become
trends can help us define, what lies ahead babwe. The first will be the interbank subject to the SA repo system. However, the rand
for the different currency markets adopted market, highlighted above and controlled would present unsurmountable options for a comeback
by the country. by banks. The interbank market will only of the Zimbabwean economy.
Emergence of the interbank market as the be dragged by lower volumes compared to The only challenge is simply political because, in prin-
point market for price discovery is at first the other 2 markets given that government ciple, monetary reform is not that hard in Zimbabwe,
an admittance by authorities that the auc- will elect to channel its surrender receipts the government does it all the time. The real problem
tion market was never a true representa- to the former. is a political one. This type of currency reform will
tion of market forces. For years, we have This means RBZ is now going to be sub- certainly diminish the ability of the state to loot the
brought that to light highlighting that the sidizing imports, for those that will be country. Is that the biggest hurdle for the state?
auction market is used by the RBZ to sup- able to source funds via the auction Elsewhere in the region, the rand has been adopted
press the exchange rate. this was achieved market. The bank will pay a higher auc- with success. Although Lesotho, Namibia and Swazi-
through managing the supply side of tion rate for surrender funds and offload land all maintain their own currencies, these are all
forex. First the bank would go to the same at lower auction rates and this is pegged to the rand, and the rand is widely accepted for
market and satisfy all lower bids such that typical subsidy. As in the past, we view trading purposes. Economist Phillip Haslam argues that
even if private players were to wait and this as unsustainable and creates arbitrage. “the rand could bring some immediate advantages to
supply at higher prices, the bigger chunk There is no mechanism to regulate the Zimbabwe, including the virtual elimination of currency
satisfied at lower rates will suffice to keep beneficiaries in terms of final product fluctuations for cross-border trade”
the weighted average exchange rate lower. pricing and the cost will be felt by the
Now using the same achieved weighted taxpayer. Gradually retention of the model
average exchange rate, the RBZ will then will tend to disrupt the auction market
over the midterm.

Economic News & Analysis 8The AXiS XXVII - Friday 13 May 2022

The Boomerang Effect:

Why Zimbabwe cannot de-dollarise successfully
The re-introduction of the Zimbabwe dollar
(ZWL) was always risky but as touted by ment still believes its fundamentals are sound. accountable for the performance of its mandate.
the Reserve Bank of Zimbabwe (RBZ), it This asserts that there is nothing to fix and will Following the MPC’s latest resolution to retain
was necessary to remove disastrous economic only fuel the existing mistrust of the RBZ and its policies, the president announced another bar-
distortions, including the use of alternative cur- the state. rage of “monetary policies” to save the currency.
rencies for calculating taxes and eliminating the This was the clearest indicator that the central
large implicit taxes on exporters who surrendered The pre-conditions for successful bank does not operate independently. When the
foreign currency at the official rate. De-dollarisa- de-dollarisation head of state announces monetary policy and eco-
tion, we were told would help anchor inflation nomic policymaking, it essentially renders the
and stabilise the exchange rate. It is crucial for the credibility and a successful RBZ an arm of political decision-making. In
In its inception, the monetary authorities said introduction of a new currency that the currency Zimbabwe, the state is the central bank and the
they would only intervene to initially kick-start, reform is designed and implemented in such a fiscal authority. Because the mandate of a central
and then stabilise the exchange rate in what was manner that it facilitates public acceptance of the bank is so complex and covers a range of policy
supposed in ‘principle’, a freely trading interbank new currency. There exists a clear lack of areas, the central bank law should largely rely on
forex market. At present, because of Zimbabwe’s research regarding behavioural economics based collegial decision-making. That means that market
volatile exchange rate history and ongoing lack on the policies pushed out by the apex bank. In advice from analysts and industry experts should
of trust in the political system, the market has fact, the Zimbabwean government is convinced take precedence over the state’s input, regardless
rejected the currency, macro-economic stability that the recent exchange rate movements are of the state of the economy. Without input from
has not been achieved and the economy remains being driven by negative sentiments of economic economic agents and the market as a whole, the
de-facto highly dollarised. However, despite the agents as opposed to economic fundamentals. central bank risks the rejection of its policies.
incessant ZWL depreciation, unprecedented infla- Consequently, the RBZ believes these negative Which is what is currently taking place.
tion levels and a clear lack of confidence in the sentiments have been proliferating expectations
economy or the currency, complete de-dollarisa- on future inflation and exchange rate movements, Moreover, the central bank law should contain a
tion is still a likely outcome. which has resulted in artificially high demand for clear provision that strictly limits any monetary
These are certainly scary times for the average foreign currency, as a hedge. This section will financing of the government and public sector.
Zimbabwean, reminiscent of the 2008 hyperinfla- analyse the pre-conditions for successful de-dol- To date, the government continues to be the big-
tionary period which saw many lose their liveli- larisation and how the monetary authorities have gest borrower in the market and that has exacer-
hoods. However, despite the over-the-top mea- failed to meet them. bated money supply growth (M3) and conse-
sures to curtail inflation and restore confidence, Without any political (and indeed in general, any quently higher inflation levels. A sound monetary
what is particularly worrying is that the govern third party) interference, the central bank should policy should enforce limitations of monetary
be effective, autonomous, transparent, and financing and quasi-fiscal activities, that are com-
patible with exchange rate policy. The limits on
monetary financing should be tightened signifi-

*To Page 9

You miss of the shots
100 percent you never take.

Wayne Gretzky

Economic News & Analysis 9The AXiS XXVII - Friday 13 May 2022

*From Page 8 The roadmap towards de-dollarisation is incentives that can be used by the regulator
-cantly to ensure that such financing is only per- and supervisor to tilt the overall balance of eco-
mitted subject to clearly specified and appropriate De-dollarisation is generally anchored on three nomic actors towards greater use of the domes-
criteria, strict temporary limits, and in circum- types of policy actions. First, macroeconomic tic currency. It is about nudging banks, firms,
stances where the economic and fiscal circum- stabilisation policies generally bring about an and households to use the local currency. These
stances warrant it. The same applies to quasi-fis- environment conducive to the expansion of local measures can be budgetary, supervisory, and
cal activities which should not be carried out on currency-denominated banking assets. Zimbabwe monetary. They all contribute marginally to
the back of the balance sheet of the central bank. achieved some initial stability on the currency tilting the balance of funding costs in favor of
This point is of particular interest in light of the front, but progress has since reversed-the boo- the domestic currency over the foreign currency.
president’s recent measures. By temporarily sus- merang effect. Until macro-stability is achieved, If it is well targeted, it can create a tipping
pending bank lending, the authorities have com- it will be illusional to think a stable domestic point.
promised the economy at large. In a bid to stop currency can be maintained, and dollarisation However, in the case of Zimbabwe, the new
speculative borrowing, the government is instead should be expected to remain high. At this pres- policies have eclipsed the principle of nudging.
halting key productive sectors of the economy.- ent moment, the monetary authorities still tout Rather, authorities have resorted to forcing local
Firstly, in the absence of interest income, banks’ their fundamentals as sound without the stability currency confidence which will likely be
ability to pay interest on deposits will be truncat- to back that up. Inevitably any strategic move accompanied by backlash as economic agents
ed, which will have blowback on savings. More- towards complete de-dollarisation will lead to seek the greenback as a hedge against inflation
over, the government is not taking into consider- further deterioration of macroeconomic stability. in anticipation of even more reactionary policies
ation the fact that not all economic players in the Secondly, developing local capital markets in from the government. An 80% overnight lend-
economy were borrowing for the purpose of local currency is key to creating the supply of ing rate is not a nudge.
manipulating the exchange rate. Key players in financial assets in local currency. This also Suspending lending by banks is not a nudge. A
agriculture, manufacturing, mining SMEs, infra- allows for the creation of a deep forex capital 40% capital gains tax on short-term investments
structure development, retail, energy, and educa- market and for hedging instruments to internalize is not a nudge. The government of Zimbabwe’s
tion rely heavily on business operations. This the costs of dollarisation. The current state of the currency of confidence has been depreciating
measure will leave them with no other option but forex operations and market structure in Zimba- for the past 42 years and will continue to do
to go back to the market to keep the lights on. bwe is not conducive to meeting the require- so until the economy gets a reset button. That
The President is propagating the very thing he ments of a modern economy. Forex operations reset button will only be possible with a new
says he wants to avoid, a strong black market. In and the market structure are characterised by a administration.
essence, this intervention comes at a time when very high level of centralisation of forex flows
it is already too late. from the central bank; there is a lack of hedging
instruments and a lack of market infrastructure.
Fiscal consolidation According to the monetary authorities, there is
evidence that speculators were able to easily
Creating from start a hard budget constrain on move funds from the equities market to the alter-
the fiscus, avoids the risk of falling into the native forex market, in essence, fuelling
“fiscal dominance” trap. Fiscal consolidation is exchange rate precariousness. The imposition of
largely intertwined with monetary stability. After the 40% capital gains tax on all short-term
the government had compressed incomes and investments for periods not exceeding 270 days
shrunk the budget, the need to aid the budget is meant to deter short-term investors and specu-
diminished. This would mean reduced issuance of lators from the stock market. This measure will
currency and all sorts of new money into the adversely affect trading volumes given the limit-
system. The shock in currency was not related to ed access to ZWL liquidity. Essentially as the
the budget nor its excesses. However, going on authorities sway investment from the already
to assume that price stability prevailing on the inadequate avenues of value preservation in the
backdrop of a compressed national budget is sus- economy, which is widely contributing to the
tainable is always disingenuous. The economy lack of market infrastructure.
needs actual reforms to reconfigure and charter a
new path of sustainable growth anchored on a The currency of confidence: Update
sustainable fiscal framework and management.
The RBZ has been borrowing extensively on The third type of measure needed to de-dollarise
behalf of the government and this has been the
major driver of inflation at least over the last 10
months.

New measures by government intentionally

shrug off key issues
Zimbabwe's economy does not appear to
have a sustainable growth plan, and there makes the government appear economically illit- -tries. Pension funds often invest enormous sums
appears to be no plan in place to address erate, which creates a trust problem between eco- of money and are major shareholders in both
the country's long-standing foreign currency nomic agents and the government. The subject of public and private companies. They are particu-
shortages. This is just one issue amongst a pleth- bank lending being prohibited is one such con- larly essential in the stock market, which is dom-
ora of unsolved issues. Zimbabwe has now cern. Many research papers have shown how pro- inated by large institutional investors.
devolved into a rudderless ship. This article will hibiting bank lending harms the economy as a
examine the new measures implemented by the whole, but this article will focus on how some The assets of the top 300 pension funds are
government, particularly the confusing policies critical aspects have been overlooked in the "res- almost $6 trillion. Pension funds, according to
and certain policies that were predicted but were toration of trust" efforts. PricewaterhouseCoopers, have approxi-
neglected for various reasons. mately US$33.9 trillion in assets
Pension and Annuities Problem worldwide,

Political rhetoric versus Economics The government has vowed to pay depositors for making them
any funds lost as a result of inflation, but this the largest
Political rhetoric is the art of persuasion that uses feature has left out essential parts of other people type of insti-
syntax and logic to persuade people to think in who have lost their savings as a result of hyper- tutional
a particular manner. Rhetoric is the study of the inflation. The pension problem is double because investor
tactics used by writers and presenters to inform, it involves the compensation of bank balances, ahead of
persuade, or motivate certain audiences in partic- such as pension funds and annuities. As a cost mutual
ular situations. Political rhetoric is defined as "a to the government, this should compensate the funds, insur-
tactic for effectively communicating with others value lost owing to inflation—loss of value on ance firms,
in juries, forums, and the Senate. This is a prob- bonds and cash. The other factor is the value lost currency
lem associated with Zimbabwe’s government poli- as a result of insurance and pension funds seizing Ne w reserves,
cies. It's mostly hearsay as opposed to informed policyholder assets like stocks and real estate Goverment sovereign
economics. without the government intervening to pay poli- me ar u re s wealth funds,
Looking at the presidential measures to restore cyholders. hedge funds,
confidence, it is clear that some of them are just Any plan, fund, or scheme that provides retire- GmoveeaOrrlmdureenst
a matter of political rhetoric versus economic ment income is known as a pension fund, also
reality, which is a significant challenge because it known as a superannuation fund in some coun- and private
equity.

Goverment mearures

*To Page 11

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Economic News & Analysis 11The AXiS XXVII - Friday 13 May 2022

*From Page 9 choosing, during the term of the CD. Sometimes, manufacturing sector will face some decline. The
A series of payments paid at regular intervals is financial institutions introduce CDs indexed to belief at Equity Axis is that this policy will be
known as an annuity. Regular savings account the stock market, bond market, or other indices. one of the first policies to be repealed due to the
deposits, monthly home mortgage payments, The argument is that the RBZ cannot claim to way the policy is very controversial and it is
monthly insurance payments, and pension pay- have lowered reserve money when it has effec- doing more harm than good.
ments are all examples of annuities. The frequen- tively forced a financial product into the market
cy of payment dates can be used to classify to absorb surplus liquidity. Treasury bills, RBZ Reason why lending was banned
annuities. Weekly, monthly, quarterly, yearly, or at Savings bonds, OMO bills, and AMA bills,
any other regular interval, payments (deposits) tomention a few, are other instruments that the Supposedly, person A is a good friend of the
may be made. Annuities can be estimated using government has devised that benefit it more than- bank and the Bank gives person A a ZWL10
"annuity functions," which are mathematical func- the broader people. million loan. Immediately the person converts
tions. A life annuity is an annuity that delivers that loan to US$ using the USD official rate
payments for the rest of a person's life. A suc- Lack of Commitment (US$1:ZWL 173). So, effectively the person gets
cession of payments is known as an annuity. The a US$57,800 loan but in the books, it is recorded
Zimbabwean government has failed to solve these The growth of broad money supply to over 100% as a ZWL10 million debt. This can be easily
two challenges, leading us to doubt their effec- since the beginning of the year should have converted to US$23,800 using the black market
tiveness. moved the government to put in place policy rate (US$1:ZWL 420) and still pay off the loan
measures to deal with money supply in this + interest. This cycle, therefore, has been abused
Reserve Money Propaganda regard. What is shocking is reserve money at repeatedly by individuals forcing the government
ZWL28 billion is 5.5% of broad money supply to ban that provision even though the idea was
Some type of 'creative accounting' is used to but the government seems to have gone bonkers not wise. Therefore banks play a crucial role in
lower Reserve money. Converting excess bank because of this. If the government really wanted the economy. They support productivity and they
RTGS accounts into non-negotiable certificates of to control broad money within range of targetted bridge financing amongst other roles but these
deposits (NNCDs) is a simple way to reduce GDP growth rate of the year in line with foreign same banks have been exploiting the market.
reserve money. A certificate of deposit (CD) is a currency earnings. In conclusion, the measures meant to restore con-
time deposit that banks, thrift institutions, and fidence in the Zimbabwean economy might actu-
credit unions typically provide. CDs are distinct Lending on production ally do the opposite and cause a liquidity crisis
from savings accounts in that they have a set in the economy. The measures are very subpar
duration (typically one, three, or six months, CZI recently announced that the manufacturing and they ignore many factors that economic
orone to five years) and a fixed interest rate. sector in Zimbabwe grew by 20% to 56 in 2021, agents have sought answers to like the pension
Thebank anticipates that the CDs will be kept according to figures released on Wednesday. compensation issue. At the same time, some of
until they reach maturity, at which point they will This growth was anchored by banks' credit. By the measures are vague and lack a proper time
be withdrawn and interest paid.CDs, like savings banning bank credit it means essentially that the frame or strategic and logical manner of how
accounts, are guaranteed "money in the bank" they will be undertaken.
and thus virtually risk-free up to the local insured
deposit limit. Institutions often provide greater
interest rates on accounts that customers can
withdraw money from on demand than they do
on accounts that customers can withdraw money
from on demand—though this may not be the
case under an inverted yield curve situation.

Fixed rates are common, but some institutions
offer CDs with various forms of variable rates.
For example, in mid-2004, interest rates were
expected to rise—and many banks and credit
unions began to offer CDs with a "bump-up"
feature. These allow for a single readjustment of
the interest rate, at a time of the consumer's

Brace for more measures - Mthuli

A s the nation is trying to make head or tail foreign currency challenges, a power crisis, and “The fundamentals for a strong currency are in
of a series of stringent fiscal and mone- high unemployment among others. place and yet we see this situation, which has to
tary measures announced by President do, as I said, histories, indiscipline (and)
Emmerson Mnangagwa, the treasury has indicated Despite the harsh economic challenges currently rent-seeking behaviour, which is inherent in any
that a fresh round of measures could soon be buffeting the economy, the Minister maintained situation where a population has come out of
unleashed. that the economy was on a solid footing. hyperinflation.” The latest economic pronounce-
Flanked by central bank Chief Dr. John Man- ments by President Mnangagwa communicate
gudya and head of Treasury Professor Mthuli “Zimbabwe’s economy is not in a crisis, we are everything but “Zimbabwe is open for business,”
Ncube, President Mnangagwa introduced a series still on track to meet our 5.5% growth rate, and as the government extended a heavy hand to
of government dictates including, the introduction our fundamen- tals are in place,” interfere with the markets, dampening investor
of a 40% Capital Gains Tax on institutional trad- he said. confidence- which was already in a deficit.
ers on stock markets, banks suspension from The move only adds to the bad streak of the gov-
lending activities, reserve money growth target
of 0% and other measures meant to encour- ernment’s record of tampering with the markets
age the use of the domestic currency. through inconsistent policies, scaring away
local and foreign investment in the country.

In a conversation with ZTN’s Andy Fraser Institute’s ‘Policy Perceptions
Hodges on “The Mint Special” on Index,’ which assesses overall policy
Thursday, Minister Ncube told the attractiveness for investment globally,
nation to brace for more abrupt rated Zimbabwe last in Africa and
measures from the government. eighth-worst globally. Justifying,
“We have more measures to Zimbabwe’s poor rating, the report
encourage the use of the local indicated:
currency, in case these do not “Uncertainty regarding the admin-
work as intended,” said Ncube. istration, interpretation, or
The raft of measures was an enforcement of existing regula-
attempt to rescue an economy tions, the country’s legal system,
that is falling off a cliff, whose its taxation regime, its infrastruc-
inflation came in at 94% in ture, trade barriers, its political
April, against a local currency stability, and security were major
that has shed 43% of its value in areas of concern that discouraged
2022 alone compounded by investment in the country (Zimba-
bwe).”

Economic News & Analysis 12The AXiS XXVII - Friday 13 May 2022

President admits to allotment of

non-existent funds on auction market

P resident Emmerson Mnangagwa has admit- As a result of the backlog, companies have However, due to the heavy influence of politi-
ted that the Reserve Bank of Zimbabwe been reportedly turning to the parallel market to cians within the business of RBZ and the
(RBZ) has been allotting unavailable funds source foreign currency fuelling the black Finance Ministry, the promise might be seen as
on the foreign auction market system, leading to market rate which the auction was introduced to political, propaganda propagated to gain public
the backlogs that they have been battling to clear curtail. attention.
to date. The backlogs have also led to declined confi- Last month, auction beneficiaries bemoaned the
This backlog challenge has been prevailing on dence in the auction market by the business delays by the central bank in disbursing funds
the auction system which was introduced in June community and further fuelled the parallel barely weeks after the RBZ governor, Dr. John
2020 to ensure accessibility of the greenback to market rate which government continues to Mangudya had announced that the forex back-
companies and industries triggering industry play- blame on people whom it says are the enemies log of about US$200 million had been cleared.
ers like the Confederation of Zimbabwe Indus- of the Second Republic. This also reduces the confidence in what the
tries to call for its suspension. The President went on to assure the business president said.
“With immediate effect, the Reserve Bank will community that pending allotments will be Meanwhile, in the latest auction held on 10
ensure that all foreign currency allotments are cleared by end of this month. May 2022, the total allotted funds decreased by
settled within a period of 14 days post auction “Whilst considerable progress has been made in 6% to US$26.84 million from a comparative
allotment and that the auction system only allots clearing the auction allotments backlog, the US$28.64 million allotted on 3 May 2022.
foreign currency that is available,” Mnangagwa government is proceeding to make available A total amount of US$23.02 million was allot-
said in a speech on 7 May 2022 addressing mea- sufficient resources to clear the backlog balance ted to the main auction while U$3.82 million
sures to restore confidence, preserve value and by the end of May 2022.” was allotted to the SME auction.
restore macroeconomic stability.

Economic News & Analysis 13The AXiS XXVII - Friday 13 May 2022

‘Staying the course’: An economic review

P resident Emmerson Mnangagwa has admit- people whom it says are the enemies of the year’s projected 5.5% GDP growth.
ted that the Reserve Bank of Zimbabwe Second Republic. Upon reflection, Standard Chartered’s recent
(RBZ) has been allotting unavailable funds The President went on to assure the business Zimbabwe (and other minor global markets) exit
In view of Zimbabwe’s turbulent economic envi- community that pending allotments will be should not come as a surprise bearing the high-
ronment, particularly since the introduction of the cleared by end of this month. levels of macroeconomic uncertainty in mind
RBZ’s weekly forex auction in June 2020, what “Whilst considerable progress has been made in where literal overnight shifts in policy steer a
would “staying the course” entail from an eco- clearing the auction allotments backlog, the business in a new direction.
nomic perspective across various sectors? government is proceeding to make available
*Analysis assumes economic environment sufficient resources to clear the backlog balance Financial services
post-implementation of statutes that support Presi- by the end of May 2022.”
dent Mnangagwa’s policy review speech. But a new oil embargo enforced by the Euro- Still looking at the financial services sector,
zone on Russian oil will drain global supplies May 2022’s heavy-handed market intervention
Inflation dynamics and for a net fuel importer like Zimbabwe, and the prevailing “stay the course” policy
ZERA will be pressured to regularly revise fuel directive, we anticipate:
In 2021, headline inflation closed the year at price caps beyond the current US$1.64 and • Further erosion of published financial state-
60.70% having eased 287.86% that year. In 2022 US$1.71 per litre of petrol and diesel respec- ment reliability as a measure of company per-
however, inflation has risen consistently, a trend tively. formance in a hyperinflationary environment.
that traces back to August 2021. Notably, this • A stock market slowdown in response to a
was before the Russia-Ukraine war which the Costly public transport May 2022 ZSE circuit-breaker measure which
government of Zimbabwe often attributes as the should also safeguard potential losses, preserv-
key inflation driver in 2022. Stemming from high fuel, vehicle and mainte- ing the financial market’s overall integrity and
At 96.43% as of April 2022 and 15.55% on a nance costs as reflected in ZERA’s price ability to channel surplus ZWL into listed com-
month-on-month basis, there are no indications of reviews and ZIMSTAT inflation data, mainte- panies.
a directional shift of good and service pricing, nance of the status quo also promotes arbitrage • A gradual uptick in more drawn-out stock
particularly in the face of unchecked parallel cur- pricing of public and private transport to exploit market activity in line with long-term invest-
rency market activity in which ZWL-US$ a gap the state has failed to address. But with ments, necessitating more prudent stock selec-
exchange rates have slid by as much as 75% transport supply shortages and higher transport tion if inflation-hedging strategies are to suc-
between January and April this year. Parallel fares charged at household level comes lower ceed.
market activity bears a greater impact on local levels of disposable income which in turn: This has a significant bearing on SECZIM and
inflation when one considers that the bulk of • Dampens local tourism revenue generation other financial literacy proponents considering
local commercial activity lies in the hands of an • Eats into national savings and the increased necessity of informed investment
informal market that benchmarks prices on paral- • Reduces labour productivity on account of decisions as value-preservation strategies. Suc-
lel currency market exchange rates and goes on time wasted commuting between residential and cess by Zimbabwe’s financial services sector as
to trade goods and services with a formal market commercial sites. an inflation-hedging investment avenue and
that is unfairly mandated to adopt RBZ-deter- wealth preservation medium indirectly addresses
mined exchange rates. Blocked lines of credit downstream civil order, a sensitive variable in
the run-up to the 2023 presidential elections.
Expensive energy, higher costs of pro- Bearing the latest monetary and fiscal policy Consequently, the “best performing stock
duction measures in mind, the suspension of both market” narrative the ZSE touted in 2021 will
private but more significantly state lines of be put to the test.
A notable energy sector development that high- credit (as Treasury Bills) will be an important
lights Equity Axis’ upward inflation expectations measure that targets broad money which unlike External trade
is in the local fuel sector in which a recent judi- Reserve Money has spiralled out of control over
cial resolution in favour of consumers should the last 12 months: 124% growth between Feb- The central bank’s seemingly scripted responses
have trimmed fuel prices which were based on ruary 2021-February 2022, rising to ZWL506 to forex allotment backlogs do little in terms of
NOCZIM’s debt redemption and Strategic reserve billion. confidence-building and operational tension
levy model. Complementing this was Green But considering the unsustainability of suspend- relief for businesses in need of import funds.
Fuels’ reintroduction of mandatory fuel blending ed commercial bank lending: 2021Q4 had RBZ announcements concerning
in April this year, a move that should also have • A funded income line that contributes as timely forex allotment and backlog manage-
contributed to lower fuel prices and associated much as 40% to commercial bank annual ment. Come May 2022 and the same announce-
costs of production. inflows and ments are being made, indicating that little if
As a result of the backlog, companies have been • A pivotal contributor to national trade and any change has occurred.
reportedly turning to the parallel market to source services, agriculture, mining, energy and mineral “Staying the course” in this regard mounts pres-
foreign currency fuelling the black market rate commodity exploration sector development, sure on importers that have already been unsat-
which the auction was introduced to curtail. “Staying the course” in this regard undermines isfied in terms of forex volumes they receive.
The backlogs have also led to declined confi- broader economic development goals and this
dence in the auction market by the business com-
munity and further fuelled the parallel marketrate
which government continues to blame on

A track down of Zim dollar’s
assassination attempts
by authorities
Reading through the economic measures
announced by President Emmerson Mnan- In this article, I will analyse four retrogres- Zim Dollar
gagwa on May 7, the term that comes to sive measures announced by President Mnan- *To Page 14
mind is ‘managed failure’. The abrupt policy gagwa as the state wrestles to resurrect the
measures which came at the back of a collapsing local currency.
economy, are herein described as self-sabotaging The grave miscalculated policies about how
measures, as the government desperately battles to resuscitate the Zimbabwe dollar did not
to rescue the staggering local currency. begin now. The aggressive policies are traced
It is, however, not surprising that in a bid to save back to 2021 when the government revised
the Zimbabwe dollar (ZWL), the government laid the proceeds held by exporters downwards
another death penalty on the anguishing currency. from 70% to 60%, a measure
Acting this way is simply its tradition. that was carried out without

Economic News & Analysis 14The AXiS XXVII - Friday 13 May 2022

*From Page 13 The graph below shows that since the begin- Barely five months after the retention thresholds
consulting either the public business players or the ning of the year, the Zimbabwe dollar has were reduced down to 60% against industry
private players. This hawkish policy resulted in widened losses by 54% on the weekly Auc- expectations, another retrogressive policy aimed at
companies incurring huge losses with RioZim’s tion Market. removing the Zimbabwe dollar from the deathbed
going concern currently at stake after capping the was passed – the Statutory Instrument 127 of
year with current liabilities overriding current 2021 and again without engaging the business
assets, while Padenga lost a total of US$9 million community. The controversial law was passed
resulting in a loss after tax. using emergency presidential powers. Key provi-
sions contained in SI 127 include measures that
One of the key fundamentals that act as a buffer prohibit businesses from selling goods and
to the good performance of a currency is a func- services or quoting them at an exchange rate
tional industry. Continued loss-making by compa-
nies widens unemployment gaps, results in above the ruling auction market rate, issuing
reduced production, and finally weighs on the buyers with a Zimbabwean dollar receipt for pay-
country’s macro-economy. ment received in foreign currency, giving buyers
a discount for paying in foreign currency and
However, the government and RBZ did not learn setting out penalties for businesses that refuse to
from that mistake. They cast a deaf ear and blind accept payment in the Zimbabwean dollar at the
eye to the industrial pleas to revise the retention ruling auction market rate.
thresholds to 20% or completely remove them.
*To Page15

Term of The Week

Benchmark Types:
•Internal benchmarking: It is an application of process
sDe'ecfiunriittyio, nm: autsutaanl dfaurndda, goarinsintvwehsticmhetnhte performance of a benchmarking, within an organization by comparing the
manager can be performance of similar business units or business pro-
measured. Generally, broad market and market-segment cesses.
stock and bond indexes are used for this purpose. •Product benchmarking (Reverse Engineering): It is an
age-old practice of product-oriented reverse engineering.
Understanding benchmarks: these are indexes created to Every organization buys its rival’s products and tears them
include multiple securities representing some aspect of down to find out how the features and performances etc.,
the total market. Benchmark indexes have been created compare with its products. This could be the starting point
across all types of asset classes. When evaluating the per- for improvement.
formance of any investment, it's important to compare it •Competitive benchmarking: Corporate benchmarking
against an appropriate benchmark. has moved beyond product-oriented comparisons to
include comparisons of the process with those of compet-
Identifying and setting a benchmark can be an important itors. In this type, the process studies may include market-
aspect of investing for individual investors. In addition to ing, finance, and human resource.
traditional benchmarks representing broad market char- •Process benchmarking: This is the activity of measuring
acteristics such as large-cap, mid-cap, small-cap, growth, discrete performance and functionality against an organi-
and value. Investors will also find indexes based on funda- sation through performance in excellent analogous busi-
mental characteristics, sectors, dividends, market trends, ness processes.
and much more. •Strategic benchmarking: It differs from operational
benchmarking in its scope. It helps to develop a vision of
When seeking investment benchmarks, an investor the changed organizations. It will develop core competen-
should also consider risk. An investor's benchmark should cies that will help sustained competitive advantage.
reflect the amount of risk they are willing to take. Other
investment factors around benchmark considerations
may include the amount to be invested and the cost the
investor is willing to pay.

Economic News & Analysis 15The AXiS XXVII - Friday 13 May 2022

*From Page14 usurious interest rates, and no investor would be market until it is fully liberalised and equipped,
attracted to such an economy where lending can a move the government rubbished before. The
The government arrested individuals and compa- be suspended overnight,” the Zimbabwe National measure eradicates businesses’ confidence in the
nies it blamed for fuelling the parallel market Chamber of Commerce (ZNCC) commented. already questioned auction market and by ques-
rate but inflationary pressures on the local cur- “This is a step back in the “Zimbabwe is open tioning the auction market, the public will con-
rency remained consistent, thy even spiked. for business” mantra.” tinue to doubt government policies due to
After the passing of S1 127, prices of goods and This was the first time that banks have ever incompetency and inconsistency. This ultimately
services skyrocketed resulting in month-on-month been told to stop lending and “For the avoidance weighs on the call that the Zimbabwe dollar will
inflation increasing from 2.5% recorded in May of doubt, this suspension relates to all lending, rejuvenate. Instead, people will continue to put
to 3.9% in June 2021. whether local currency or foreign currency, to more pressure on the US dollar chasing value.
The cost of living for a household of six shot government and the private sector, including cor-
up by 13.4% to ZWL 40,680 in June from ZWL porates, other legal entities, and individuals,” said What is wrong?
35,877 recorded in April, thus, further putting RBZ in a circular.
more pressure on the scarce greenback, some- Zimbabwe’s local currency is suffering from a The major economic deficiency facing the nation
thing the government was trying to avoid. lack of investments in the country to support the is the acceptance by the government that it has
After the SI 127, the government announced the RBZ foreign currency coffers and increase the failed the economy. Accepting reality will give
payment of civil servants partly in US dollars, export output. In 2021, Zimbabwe's competitive- room for corrections and growth. However, the
testifying to the worthless of the local currency ness ranking was 127 out of 140. The newborn government is convinced that the recent
on withstanding inflationary pressures. measure is like adding salt to a fresh wound. In exchange rate movements are being driven by
This was not just a testimony that the printers 2019, Zimbabwe was ranked number 67 globally negative sentiments by economic agents as
of the ZWL 2,5,10 20, 50, and 100 notes had in the ease of doing business report under the opposed to economic fundamentals.
lost faith in their own currency, but also further getting credit pillar. This is a half-baked truth as the government’s
waned the business community’s confidence in An extended ban on lending risks exacerbating expenditure to finance housing and road projects
the Zimbabwe dollar. the nation’s economic woes and could lead to and latest, elections and census drove up the rate
Meanwhile, on Saturday 7 May 2022, the gov- joblessness as no economy would survive with- fuelling economic instability. Government is cur-
ernment passed another raft of measures aimed out lending from banks. rently the major holder of Zimbabwe dollar
at stabilising the macro-economy. Of these, some Another measure was the upward reviewing of deposits.
were meant to bring stability to the collapsing the foreign currency withdrawal levy. The Therefore, if there is anyone who is fuelling
currency. In the measures, the government shift- upward review of the foreign currency withdraw- economic instability, this can be answered with-
ed the blame of an ill economy coupled with a al levy which seeks to make USD transactions out stammering by the government itself.
dying currency to the global economic shocks exorbitant and give room to the Zimbabwe Also, the massive involvement of politicians in
necessitated by the Russian invasion of Ukraine dollar is another grave miscalculation. The mea- the making up of the economic policies is kill-
and alleged deliberate sabotage by people who sure reveals the government’s thirst for revenue ing the economy.
are insensitive to the Second Republic’s reign. collection as opposed to creating a busi- From the ZNCC’s perspective, the RBZ and
President, Emmerson Mnangagwa announced ness-friendly environment, according to ZNCC. Finance Ministry are heavily politicised thus
some gross-miscalculated measures targeting to Basically, banking will be discouraged while making them subjective towards economic funda-
rescue the ZWL from the death bed. However, increasing the cost of doing business. The mentals to stay on course with the political
like others passed before, the measures are likely money outside the banking system will earn master. No wonder why inflation targets were
to worsen the performance of the Zimbabwe more premium, promoting black-market trading revised more than three times in 2021: a reflec-
dollar both in the short term and the long run. which the government is trying to avoid. tion of dictated economics. This makes the RBZ
One of the most talked-about measures was the Furthermore, the government ratified the contin- a tool for political decision-making. RBZ should
suspension of the lending power of the banks, ued collection of revenue in foreign currency, be an independent body without the influence of
considered one of the most retrogressive mea- another sign of its loss of faith in local currency. politicians. Government should snub its extended
sures of all. Suspension of lending is a barrier To prop up the currency, the government could command economics to the institution.
to the economy’s development as it retards have introduced the collection of revenue only Frankly speaking, the government is largely
investor confidence. in Zimbabwe dollars. responsible for the collapse of the local currency,
Once again as expected government resorted to However, the government seems to have no con- and the lack of will to admit this is only making
political economics. It blamed banks for flooding fidence in its own currency and this will also the situation worse.
the financial system with excess funds, fuelling force the business community to get rid of the Any economy in the world requires policies that
a currency slide and inflation. ZWL the very moment they earn it. The insis- ensure a democratic market determined by
The weekend directive to freeze loans is the tence to have duties and taxes be paid in foreign market forces, not a command economy. Com-
latest in a series of orders since 2020 aimed at currency testifies to the fact that the government mand economics has proven to be a failed
supporting the local unit and thwarting a flour- does not have faith in local currency as well. policy due to the misuse of funds by govern-
ishing black market. The Zimbabwe dollar, rein- Meanwhile, the passing of settlements of foreign ment officials. Due to command economics in
troduced in February 2019, has crashed 54% this currency tax obligations in local currency at Zimbabwe, billions were lost to the Command
year, making it the worst performing currency in ZIMRA’s willing buyer willing seller's rate is Agriculture programme which became another
the world. retrogressive to sustain the longevity of the Zim avenue for corruption.
However, economic players have expressed con- dollar. The measure calls for the dumping of the Government should stop blame tactics and
cern, again showing a lack of coherence between auction market rate when pricing products. This accept the osmosis of ideas where the ones with
the government and industry players. cements the call by the CZI to dump the auction greater economic ideas should lead regardless of
“This legitimises a parallel banking system with political affiliation.

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Regional News & Analysis 16The AXiS XXVII - Friday 13 May 2022

Africa launches trade exchange to curb Russia-Ukraine

war effects soared to above US$2 which is beyond the gen- According to the United Nations Economic
eral public’s reach. Commission for Africa, ATEX is a digital
F aced with supply chain challenges that are trade platform that will complement the exist-
threatening the continent’s food security, According to researchers, world annual sorghum ing digital ecosystem constructed to support the
Africa has come up with ways to deal production is over 60 million tonnes, of which implementation of the AfCFTA agreement.
with the Russia-Ukraine war shocks which Africa produces about 20 million tonnes, hence “ATEX will help realise the development
include turning to cheaper wheat alternatives and opting for the crop instead of wheat is the most potential of e-commerce and digitalisation, par-
launching the Africa Trade Exchange (ATEX). viable. ticularly by facilitating access for small and
The Russia-Ukraine war which started in late medium-sized enterprises (SMEs) to the wider
February this year has created historic global Rice production in Africa is also not bad, African market.
trade and commodity disruptions, which have according to Statista. The continent’s rice pro- This will enhance intra-African trade and the
been felt worldwide with Africa suffering the duction in the trading year 2021/2022 was 23 African trade position in the global market,
worst in terms of food commodity supplies. million metric tonnes. thus assisting in adjusting to disruptions in
The Russia-Ukraine crisis has increased the supply chains and continued growth of African
strain on critical supply chains in commodity Meanwhile, Africa has also come up with an businesses and economies,” the UN Commis-
markets, with current and expected price increas- Africa Trade sion said.
es in agricultural products and inputs
such as cereals and fertilisers.

This in turn put pressure The UN Commission further highlighted that
on the fragile African to support supply chain resilience, ATEX
countries which heavily will digitally enable the trade of the main
relied on these supply agricultural commodities and inputs
imported by the continent
Africanchains for basic goods from Russia and Ukraine:
cereals (including wheat,
such as wheat. Howev- maize, and grains),
er, the critical implica- fertiliser, and associated
inputs, oils, oilseed, as
Tradetions are the down- well as other products and
inputs critical to support agri-
stream effects of poten- cultural value chains.
tial supply chain con-

Exchangestraints that are raising

prices, increasing vulnerability
and food insecurity, and building unsustainable
pressure on already stretched African fiscal envi-
ronments.
“The platform will
facilitate pooled pro-
As such, African countries have turned out to Ex- curement by African
use cheaper wheat alternatives amid inflated change, buyers of these com-
prices of the commodity for months now courte- a plat- modities from African
sy of Russia’s invasion which squeezed exports form to suppliers where possible,
from Ukraine while its exports are subdued by pool-pro- as in the case of
the sanctions from the US and allies. Russia and cure bulk fertilisers; and from outside
Ukraine account for about 40% of global wheat basic com- the continent where neces-
supplies. modities and sary, as in the case of cereals
Recent reports from the media revealed that ensure coun- and grains, thereby contributing to
food producers in Kenya, Egypt, the Democratic tries access the creation of new, continental supply chains
Republic of Congo, Nigeria, and Cameroon are scarce supplies which insulate Africans from the volatility
mixing cheaper alternatives into their bread, pas- transparently and eq- which has characterised recent years,” the UN
tries, and pasta with local rice, manioc flour, uitably.
Commission said.

and sorghum substituting for wheat. Afreximbank in collaboration with other key The ATEX is a commendable move made by
This can also be adopted by the majority of continental institutions including, the African Africa which if implemented well will reduce
African countries including Zimbabwe where Continental Free Trade Area (AfCFTA) Secretar- the supply chain challenges in the continent in
bread prices have been on the rise with bakers iat, and UNECA launched the ATEX building light of the war and also even when things are
citing soaring wheat prices as the reason for the on the African Development Bank’s US$1.5 normal, it will aid in bettering African econo-
price hikes. billion emergency food production plan to miti- mies through strengthening their trade.

gate the effect of the war on food prices
Currently using the auction market rate, US$1 is through rapid production of wheat, maize, rice,
not enough to buy a loaf of bread. Prices have and soybean.

Did you know?

According to data from 2009 to 2020, Zimbabwe's manu-
facturing sector has only surpassed the 50% mark once,
that is in 2011 when the industry capacity utilisation rose
to 57.2%. Data show that the country's capacity utilisation
came off to the lowest of 34.3% in 2015 and has aver-

aged 42.6% over the past 12 years.



Business News and Insights 18The AXiS XXVII - Friday 13 May 2022

Approved side marketing penalties to plug

tobacco revenue leakages -ed licenses to start medical cannabis production
with the support from pharmaceuticals and this is
E arlier this week, the Tobacco Industry the crop altogether, as input costs outweigh the likely to cash in more money than the traditional
Marketing Board (TIMB), put in place total revenue. and “harmful” tobacco, hence the foreseeable
measures to help put an end to the side The limited local financing and low net tobacco migration by willing and able farmers.
marketing of tobacco as numbers that are being export benefits have also been a challenge to Meanwhile, total contract and auction masses
recorded so far are sub-standard when com- most farmers and this has seen most opt for sold on day 26 of the 2022 tobacco marketing
pared to the prior year's figures. crops like wheat which have more expert bene- season were 21.14% down to 69 million kilo-
Under the strict measures gazetted on 15 April fits and have the potential to make an insur- grams(kgs) from 87 million kgs that were record-
2022 and published on the 9th of May 2022, mountable profit when compared to tobacco. ed in the prior year.
any person who participates in “side marketing” On the international markets, the production of The total value was slightly down by 11.88 %
shall be liable to a fine not exceeding level five tobacco is likely to decrease because of the to US$204 million from the US$231 million that
or imprisonment for a maximum of six months anti-tobacco production and marketing campaign was sold last year.
or so and may also be required to compensate threat which means that tobacco products have Total auction mass also declined by 14.5% to 5
three times the suffered loss by any particular been the focus of tightening regulations for million kgs and raked in a total at a value of
contractor. decades, higher taxation, and increasing health US$ 17 million, which is a decline of 2.5% from
Zimbabwe’s traditional dependence on tobacco awareness among having reduced smoking rates last year.
as one of its top foreign currency earners is and volume consumption significantly in the Contract tobacco sold so far is 67 million kgs, a
being threatened by the issue of side marketers past. 19.78% decline representing a total value of US$
as they try to fetch more than what is offered These factors are likely going to push most 199 million a 10.55% decline from the numbers
on the floors. farmers to drop tobacco and make strides to recorded last year.
The average price of tobacco this season as of move to more potentially lucrative markets, for Rejected bales this season have however become
day 26 for contract sales is US$6.50, a 2.99% example, The Hemp industry. relatively lower compared to the last season as
decline from the highest price of US$6.70 that The global market share of cannabis is antici- farmers have started implementing farming meth-
was being offered during the previous market- pated to be slightly above US$253 billion by ods that allow them to produce the highest grade
ing season. 2028, and Zimbabwe plans to cash on at least of the golden leaf.
Viability challenges as well as financing issue- one billion of the total amounts. Rejected bales went down 30.67% to 27 405
shave also continued to cripple the tobacco To ensure this, just over 50 farmers were grant- from 39 528 in the prior comparable period.
sector, and have seen most farmers abandoning

Hippo Valley suspends advance payments to

farmers as government’s measures bite
Afew days after President Emmerson
Mnangagwa announced a raft of mea- -tuating over the years, but the advance pay- at 164 250 metric tonnes.
sures to help restore macroeconomic ments that were being offered by Hippo Valley The planting target for the year is 85 000 hect-
stability and confidence in the local currency, created positive sentiments in the producers and ares and if farmers realise the national average
the biggest sugar producer Hippo Valley, suc- encouraged them to produce more. tonnes per hectare, we would reap around 425
cumbed to the stringent measures which saw However, Tongaat is just a tip of the iceberg 000 tonnes this winter alone. The harvest will be
the company suspend advance payments to sug- as the ruckus of measures that were announced enough for national consumption for a year, but
arcane farmers with immediate effect. are going to cripple the agricultural sector. these numbers might experience a marginal
In a statement, Hippo’s Chief Operating Officer Banks had put in place several lending facilities decrease given the current standing.
James Bowmaker said that they were no longer that were specifically targeting farmers in order During the previous season, commercial/contract
able to fund the advances from loan proceeds to help them access the necessary capital to farmers harvested 156 144 tonnes of wheat and
that they used to access from banks. buy inputs ahead of every farming season, like around 95 000 tonnes were grown by the rest of
"Following the suspension of the lending facili- the CBZ Agro-Yield facility and the AFC Land the wheat farmers to give a total harvest of over
ty by banks we find ourselves unable to contin- Bank. 250 000 tonnes.
ue offering advances,” he said. Meanwhile, the measures also come into play The whole dynamics of the targeted hectarage
This announcement comes as cane farmers are at a time when winter wheat cropping just may now be affected if the government does not
preparing for the 2022/2023 season. started and farmers were still dipping their address parties that are exempted from this ban,
Hippo Valley had said it was targeting 11 000 hands into the much-needed facility. seeing that May 15 is the practical deadline for
hectares in new out-grower schemes over five This season, AFC Land Bank is targeting to planting optimal yields this season.
years, a development that has been derailed due contract 10 000 hectares, at an estimated yield While most farmers who borrow money have
to the new bank measures. of 4.5 tonnes per hectare, the estimated produc- already had their loans, some are still waiting for
Sugar production in the country has been fluc- tion is 45 000 metric tonnes; while the CBZ a bank officer to visit their farms and sign them
Agro-Yield facility was targeting to contract 36 off. At the moment, farmers are waiting for mo-
500 hectares, with the estimated production set dalities that will waiver the ban, particularly in

*To Page 19

Business News & Insights 19The AXiS XXVII - Friday 13 May 2022

*From Page 18 their production as they are likely to be most prices.
affected. The country will have to brace for wheat short-
Consistent farmers have always depended on ages and possible food inflation in the coming
these lending facilitates to help them achieve year as doom has already been spelt by the mea-
optimum yields, but with the facility now having sures put in place, unless if they are reviewed in
been shut down, it is going to take a toll on the shortest time possible.
some commercial farmers. Going forward, it is our view at Equity Axis that
The impact of the suspension of bank lending is this measure will dampen economic growth, low-
confidential between the bank and the individual ering it even further than our 2.5% projection. In
farmer, but because of its seasonal peculiarity, addition, this policy will likely be very
agriculture cannot move forward without loans. short-lived as it is unsustainable unless the
The suspension of the lending facility in the authorities refine it to ensure that it only applies
middle of the winter wheat cropping season is to certain parties instead of a blanket suspension,
unprecedented and will hurt the economy given especially seeing that agriculture is key in Zim-
the war in Ukraine will result in higher wheat babwe’s economic development.

Government’s hawkish policies rip RioZim profits,
accelerate liabilities

• The group suffered a loss after tax of Despite a slower rate of change of the RBZ gov- mining activities in the K2 pit, which has slight-
ZWL 2.1 billion erned auction rate, the comparative rates in the ly better grades,” said the Group in a statement
alternative market traded at huge premiums accompanying the full-year financial results.
• Operation loss widened to ZWL 1.2 above the auction rate during the period putting Renco mine’s operations succumbed to the erratic
billion more pressure on the Group’s profitability as power supply to achieve 561kg of gold, 3%
inputs tracked rates in the alternative market. lower than 580kg produced in the prior year.
• Current liabilities capped the year Besides hawkish policies on foreign currency, the Electricity blackouts reduced the plant’s through-
above current assets, widened by 96% Group also moaned the government’s inefficiency put leading to less production.
in providing a long-term solution to power outag- During the year under review, Zimbabwe experi-
Comparison of RioZim's current assets and es. Because of this, mining operations were enced one of the record electricity blackouts with
liabilities over 5 years in ZWL billions stalled during the period under review resulting ZESA turning to electricity rationing. This affect-
in less productivity. ed industrial activities especially mining opera-
Z SE-listed mining outfit, RioZim suc- In 2021, Zimbabwe experienced massive power tions that consume more energy.
cumbed to a loss of ZWL 2.1 billion blackouts, a situation which led to the rationing Empress Nickel Refinery continued to be under
during the full year ended 31 December of electricity by the provider, ZESA. This affect- care and maintenance throughout the year.
2021 from a profit of ZWL 453 million realised ed business operations, especially in the mining 210tons of matte, 78tons of PGMs, and 21tons
in 2020 due to the hardships incurred to secure sector which consumes more energy for produc- of copper were produced generating revenue of
foreign currency and massive power blackouts. tion. ZWL 381 million during the year.
The Group further reported an operating loss of “The foreign currency retention was revised “The Company continues to engage various
ZWL 1.2 billion from a profit of ZWL 462 mil- downwards to 60% in January 2021 from 70% stakeholders to identify sources of raw material
lion in 2020 due to high-income tax expenses in the prior year,” said the Group in a statement to feed the Refinery to normal production capaci-
which soared to ZWL 940 million from ZWL accompanying the financial statements. ty and our stakeholders will be kept appraised,”
455 million in 2020. “This not only reduced the value realised for the said the Group.
Of more concern was the disparity between the Group’s gold produce but also negatively impact- Meanwhile, the Group is looking for new poten-
current assets and current liabilities. The group ed on the timeous execution of the Group’s proj- tial investors for its 2 800 megawatt Sengwa
capped the full year with current liabilities ects, which predominantly required foreign cur- coal power project after the withdrawal of Chi-
exceeding current assets by 96%. Current assets rency.” na's Industrial and Commercial Bank of China
closed at ZWL 2.9 billion while current liabilities The Group stalled the commissioning of its flag- (ICBC) earlier this year.
at ZWL 5.6 billion, casting a lot of uncertainties ship project for the year, the Biological Oxida- The power station project is based on a coal
and a significant doubt on the Group’s ability to tion Plant which was scheduled for Q4 2021. resource of 1,3 billion tonnes, capable of generat-
continue as a going concern. Failure to commission the plant presented huge ing up to 2 000MW of power, almost as much
The dismal performance was attributed to the setbacks as gold production regressed by 7% as Zimbabwe's total installed capacity.
government’s hawkish policies, chiefly the 40% from 1 205kg produced in 2020 to 1 122kg The Group is expecting to return to profitability
retention of export proceeds from companies. in2021. Gold production at the One-Step mine in 2022 after the commissioning of the BIOX
According to the Group, the reduction of export fell by 18% from the prior year’s production of Plant on 14 April this year.
proceeds retained by companies from 70% in 427kg to 351kg. The low gold output was attrib- “Production is forecast to improve as Cam &
2020 to 60% in 2021 was bad news as that utable to lower grades which dropped from the Motor returns to producing from its high-grade
strained its foreign currency coffers to finance prior year. pits,” added the Group.
the capital projects key for profitability. This At Cam and Motor Mine, no gold production
hugely affected the gold production across units took place as the commissioning of the BIOX
and the diamond production as well. plant failed to meet the 2021 end target. Com-
In January 2021, the government revised the missioning of the BIOX Plant Project would
retention thresholds ceased by exporters upwards have enabled the resumption of mining opera-
from 30% to 40%. This implies that exporters tions at the Cam & Motor high-grade ore pits.
are forced to give up 40% of their foreign cur- Inadequacy of foreign currency also stalled the
rency to the government and then given it back completion of Project Crown Jewel which seeks
in Zimbabwe dollars at the current auction to increase the current processing plant capacity
market rate. to move to a ‘low-grade high volume’ strategy
to sustain production.
As a result, diamond production for the Group’s
associate, RZM Murowa (Private) Limited,
declined by 28% to 414 000 carats from 579 000
carats produced in the comparative year.
“The Associate processed material from the
low-grade stockpiles with limited mining activi-
ties from the K2 pit which was in contrast to

Business News & Insights 20The AXiS XXVII - Friday 13 May 2022

First Capital CAFCA posts 345% rise in half-year
cautious on profits
liquidity outages
Cables manufacturer and supplier, Company and exchange control delays in
Z SE-listed First Capital Bank says it CAFCA Limited reported an infla- getting paid our Malawi customers which
will remain cautious in its approach to tion-adjusted profit of ZWL 512.6 mil- affected further export sales,” the company
ensure that liquidity outages are mini lion for the six months ended 31 March said in a statement accompanying the
mised whilst taking advantage ofwhilst taking 2022 (HY’FY22), 345% up from ZWL financials.
advantage of the expected resurgence in growth 115.2 million in the same period in FY21. “We are confident that we will pick up the
sectors which include mining, industrial, farm- Revenues were higher by 48% and reached volume shortfall against budget in the
ing, and tourism. ZWL 3.4 billion in the first half of full-year second six months of the year,” the compa-
Liquidity refers to the ease with which an asset 2022, from ZWL 2.3 billion in H1’FY21. ny added.
or security can be converted into ready cash Commenting on the statement of financial
without affecting its market price. The company whose products are used for position, the company said borrowings have
In a statement accompanying the trading update the transmission and distribution of electrical increased from ZWL 130 million to ZWL
for the first quarter ended 31 March 2021 energy and telecommunication, clocked a 445 million to finance inventories which
(Q1’FY22), Acting Company Secretary, 61% increase in operating profit to ZWL have moved from ZWL 930 million to
Sarudzai Binha said that the Reserve Bank of 972.2 million in the period under review ZWL 1,789 billion.
Zimbabwe maintained a tight liquidity manage- from ZWL 602.1 million recorded in the
ment framework, mopping up daily excesses previous comparable period, the company’s The company’s total asset position grew to
into zero-coupon non-negotiable certificates of financial statements released on Thursday ZWL 4.1 billion at the end of H1’FY22,
deposits, whilst keeping the overnight accom- shows. an 28% increase from ZWL 3.2 billion in
modation rate high at 60%, as measures to the previous corresponding period.
stem inflation. Headline earnings per share (cents) at ZWL On the outlook, the company noted that the
“These measures have had the effect of slowing 1,526.08 were ahead of ZWL 345.08 in exchange rate volatility is a cause for con-
down balance sheet expansion in the financial H1’FY21. cern, but the upside of which is increased
sector,” Binha said. economic activity as consumers invest to
“The Bank expects the aggressive liquidity Volumes for the period under review were hedge their savings.
mop-up and high-interest regime to subsist up 1,199 tonnes, an increase of 2% over the “We are therefore forecasting an increase in
to the end of the year as a way of neutralising prior year's comparative period of 1,175 volume in the second half of the year over
inflation pressure from an otherwise expansion- tonnes. the first half,” the company said.
ary fiscal posture arising from the need to
restore basic infrastructure and to support social “Volumes were adversely affected by the
funding against projected food shortages follow- delay in getting regulatory approval to
ing a below-par agriculture season,” she added. extend our barter deal with the Zimbabwe
Meanwhile, the Bank’s total income for the Electricity Transmission and Distribution
quarter was up 37% to ZW$2.4 billion from
ZW$1.7bn recorded in 2021 on the back of Food and beverages anchor
strong performance in both net interest income Dairiboard’s Q1 volume performance
and non-funded income which increased by
37% and 36% respectively. Z SE-listed beverage maker, Dairiboard Volumes sold in foreign currency rose
The increase in net interest income and Holdings recorded a 17% growth in by186% against the prior comparable period
non-funded income was driven by an increase sales volumes to 23 million litres for and dominated 40% of the quarter’s aggre-
in underlying business and customer transac- the first quarter ended 31 March 2022 gate sales volumes up from 17% in 2021
tions in the wake of reduced COVID-19 restric- mainly driven by the food and beverages with exports accounting for 8% from 4% in
tive measures. division. 2021.
“About 20% of the Bank’s income for the quar-
ter was earned in foreign currency with the In a trading update, the Group said food and Meanwhile, a historical financial performance
business outlook suggesting an increased contri- beverages sales volumes were up 29% and reported by the Group saw a 129% increase
bution going forward,” Binha said. 31% respectively. However, liquid milk vol- in revenue to ZWL 3.9 billion due to posi-
First Capital’s total assets increased in real umes dipped by 4% owing to plant unavail- tive price and volume performance.
terms by 29% year-to-year, however, on a ability on the UHT line amid commission- Export revenue grew by 149% while domes-
year-to-date basis, the balance sheet remained ing. tic US dollar revenue was also up 190%,
largely flat between December 2021 and March “The commissioning and optimisation of sev- with overall foreign currency revenues grow-
2022 with total assets and deposits increasing eral capital projects, aimed at increasing ing by 182%.Operating margins during the
by 2% whilst equity reduced by 5%, following product supply, was in progress during the period remained under pressure due to high
adjustment for the 2021 final dividend of period, particularly in the Liquid Milks and input costs of both domestic and foreign
ZW$834 million. Beverages category,” said the Group. supplies.“ Global crude oil price increases
Gross advances improved by 15%, closing the Raw milk remained firm over the period and had a material impact on raw and petro-
quarter at ZW$10bn from ZW$8.7bn on 31 accounted for 33% of raw milk utilised by leum-based packaging material and transport
December 2021, reflecting increased appetite processors. costs,” the Group said.
from both the productive and consumptive sec- “Dairibord persisted in supporting farmers Going forward, Dairibord expects improved
tors. with regular raw milk price adjustments in performance in the second quarter compared
The Bank’s asset quality remained strong with line with their cost build-up to ensure they to the first, on the back of firm demand
a non-performing loan ratio of 0.2% being remain viable and poised for volume recov- coupled with improved supply stemming
recorded at the end of the quarter, down from ery,” the Group said. from capital investments that are starting to
1% recorded at the end of 2021. generate returns.
Binha also highlighted that First Capital’s capi-
tal position remained strong with a satisfactory
margin of safety above the US$30 million
threshold.



Politics Around The World 22The AXiS XXVII - Friday 13 May 2022

ISIS in Africa behind a surge in terrorist attacks, policy. But it was learnt that the moves by the former
officials say Albanese hit back, accusing Morrison of shirking President and his supporters had generated a
The Islamic State’s regional affiliates in Africa are responsibility for the slow rollout of vaccines and groundswell of anger from other contestants, who
carrying out lethal attacks at a tempo far surpass- rapid antigen tests in the Covid-19 pandemic, as felt the plan would amount to injustice if it sailed
ing that of the parent organization that once ruled well as for his management of the 2019-2020 through. – Punch
large swaths of Iraq and Syria, Morocco’s chief "Black Summer" bushfires and this year's deadly Germany shifts focus of military missions in Mali,
diplomat said Wednesday at a meeting of the east coast floods. Niger
global alliance battling the militant group. When Morrison faces challenges, he "blames Germany on Wednesday said it had agreed to raise
Sub-Saharan Africa, home to several branches of someone else consistently", he said. – AFP its contingent in the UN's MINUSMA peacekeep-
the Islamic State, now accounts for nearly half of INEC laments low voter registration in Lagos ing mission in Mali to a maximum of 1,400
all deaths worldwide attributed to the terrorist The Independent National Electoral Commission, troops from 1,000.
group, Moroccan Minister of Foreign Affairs Lagos State, has decried the low number of online The German government has also decided to
Nasser Bourita said. voter registration since the Continuous Voter Reg- reduce its training mission as part of the EU's
“We remain lucid on the state of the ISIS threat, istration exercise commenced in the state. deployment EUTM, halving its upper limit from
which has not diminished,” said Bourita, whose The state Resident Electoral Commissioner, Mr 600 to 300. Most of the redeployed forces will be
country is hosting a conference of the Global Segun Agbaje, disclosed this, according to a state- moved to neighboring Niger.
Coalition to Defeat ISIS. He said that sub-Saharan ment on Wednesday, during a meeting held at the The changes, like all foreign military deployments,
Africa accounts for 48 percent, or 3,461, of the commission’s office in Yaba. still need to be approved by parliament. – DW
deaths worldwide attributed to ISIS in 2021. Agbaje noted that the CVR was organised in all Terrorists kill seven soldiers, others in Taraba,
“Today, 27 terrorist entities based in Africa are the Local Government Areas for those who had Reps raise concern
registered on the U.N. Security Council sanction misplaced their Permanent Voter Cards, relocated Gunmen suspected to be terrorists, on Tuesday,
list,” Bourita said. “This is a clear indicator of from one state to the other, and others who wish killed seven soldiers and a mobile policeman at
their connections to major global terrorist groups.” to change their polling units before the 2023 gen- Tati village in Takum Local Government Area of
Secretary of State Antony Blinken had planned to eral election. Taraba State, according to military sources.
attend the meeting here, but canceled after testing He said, “INEC is currently observing CVR in all This was as the terrorists bombed the 6 Brigade
positive for covid-19. Victoria Nuland, undersecre- LGAs in Lagos. The exercise started last year and of the Nigerian Army Base in Jalingo, the state
tary for political affairs, and Yael Lempert, acting the conclusion of the exercise will be on June 30, capital.
assistant secretary for Near Eastern affairs, led the 2022. This CVR will be for those that have not Several sources at the 93 Battalion of the Nigerian
U.S. delegation. – The Washington Post registered before. For those who registered Army in Takum told one of our correspondents
Kiwis shouldn't expect much to change': Opposi- between June and July last year, their PVCs are that the incident happened when soldiers were
tion says Govt should 'sort out priorities' follow- currently with the commission. responding to an attack on Tati village near
ing crime package announcement “We have up to one million PVCs in Lagos as a Mararaba.
Opposition political parties are blasting the Gov- result of the previous election in 2019. With the One of the sources at the 93 Army Battalion said,
ernment's crime announcement, saying they need ongoing online registration, as of Tuesday, May “It’s unfortunate, we are all down with the devel-
to "sort out their priorities" because more police 10, 2022, Lagos State has over 183 successful opment. As we speak, the whereabouts of the
numbers won't mean tougher consequences for online registration while the total of those who Commanding Officer who led the operation is not
offenders. have registered are over 400. – Punch known.
The Government announced on Sunday a $600 Raila to Kingi: You are thankless “It was not an ambush so to speak. It was an
million package to address the spate of crimes The Independent National Electoral Commission, operation that turned bad. The terrorists had
currently ripping through New Zealand. It will see Lagos State, has decried the low number of attacked the village (Tati) and the soldiers were
an increase in police numbers, nearly $100m to online voter registration since the Continuous deployed to the village. – Punch
tackle gang violence, and an extension to rehabili- Voter Registration exercise commenced in the Nato to welcome Nordic members as Ukraine
tation programmes to break the cycle of offending state. pushes back Russian forces
and entering a life of crime, the Government said The state Resident Electoral Commissioner, Mr Finland said on Thursday it intended to apply to
in its announcement. Segun Agbaje, disclosed this, according to a join Nato without delay, with Sweden likely to
More than $562m over four years will be invested statement on Wednesday, during a meeting held follow suit, as Russia’s invasion of Ukraine
in police. at the commission’s office in Yaba. reshapes European security and the Atlantic mili-
"This Budget builds on our investment in record Agbaje noted that the CVR was organised in all tary alliance.
police numbers, tackling gun crime and violent the Local Government Areas for those who had Nato allies expect Finland and Sweden to be
offenders and reducing reoffending, all of which misplaced their Permanent Voter Cards, relocated granted membership quickly, five diplomats and
help to keep New Zealand communities safe," from one state to the other, and others who officials told Reuters, paving the way for
Police Minister Poto Williams said. wish to change their polling units before the increased troop presence in the Nordic region
Williams said the first priority of the new package 2023 general election. during the one-year ratification period.
was to increase police numbers on the front line. He said, “INEC is currently observing CVR in “Finland must apply for Nato membership without
"When we took office, turning around declining all LGAs in Lagos. The exercise started last delay,” President Sauli Niinisto and Prime Minister
police numbers was our number one priority. Once year and the conclusion of the exercise will be Sanna Marin said in a joint statement in Helsinki.
we achieve our goal of an extra 1800 Police offi- on June 30, 2022. This CVR will be for those “We hope that the national steps still needed to
cers later this year we will ensure numbers don't that have not registered before. For those who make this decision will be taken rapidly within the
fall away again by maintaining an ongoing ratio registered between June and July last year, their next few days.”
of one police officer to every 480 New Zealand- PVCs are currently with the commission. Finland, which shares a 1,300-km border and a
ers," she said. – Daily News – Daily Nation pre-1945 history of conflict with Russia, has grad-
Australia's election foes get personal Jonathan’s backers seek adoption, southern APC ually stepped up cooperation with the North Atlan-
Australian Prime Minister Scott Morrison derided aspirants disagree tic Treaty Organization as a partner since Russia
his Labor Party opponent Wednesday as an unreli- Some All Progressives Congress leaders have annexed Ukraine’s Crimea in 2014. – Moneyweb
able "loose unit" on the economy as he fought to stepped up moves to adopt former President Floribert Chebeya: DR Congo policeman
catch up in the opinion polls 10 days from May Goodluck Jonathan as the party’s consensus presi- sentenced to death for murder
21 federal elections. dential candidate in 2023. A Congolese military court has sentenced a
In their third televised election debate, character- The PUNCH on Tuesday learnt the moves formed high-ranking policeman to death for his role in the
ised as the "final showdown" before 17 million part of the discussions between the former Presi- 2010 murder of human rights activist Floribert
Australians cast their compulsory votes, Morrison dent and the APC National Chairman, Abdullahi Chebeya, which caused national outrage.
and Labor's Anthony Albanese got personal. Adamu, in Abuja on Monday night. Commissioner of police Christian Ngoy Kenga
"He's a loose unit when it comes to the economy. It was gathered that already, the party leaders, Kenga was found guilty of murder, desertion and
He makes things up as he goes along," said Mor- including two northern governors, had reached out misappropriation of weapons and ammunition.
rison, using a slang term for someone who is to other members of the National Working Com- – BBC
unreliable because of the Labor leader's campaign mittee to ensure the adoption of Jonathan as the
stumbles. consensus candidate.
At the outset of the campaign last month, Alba-
nese forgot both the unemployment rate and the
main lending rate. More recently, he apparently
had difficulty explaining his party's disability

Business Around The World 23The AXiS XXVII - Friday 13 May 2022

Africa faces unrest as thumping food prices hit it The rate for April came in at 1.06 percent, the central bank tightening could slow global econom-
hardest highest for the month since 1996, IBGE said. ic growth. – Reuters
Surging international food prices will hit Africa’s That was worse than the forecast of one percent Angola’s first IPO to spur wave of listings –
economies the hardest and may trigger social by analysts polled by business daily Valor. stock exchange CEO
unrest if governments fail to cushion the blow, – eNCA
according to a report by Oxford Economics
Africa. Gold giant Barrick is hunting for more African Next month’s debut initial public offering (IPO)
Food has a heavier weighting in the inflation bas- copper projects on Angola’s BODIVA stock exchange is expected
kets of African nations, compared with those in Barrick Gold Corp. is searching for copper proj- to unlock a wave of new listings, its chief execu-
advanced economies, due to purchasing patterns. ects in both Zambia and the Democratic Republic tive said, as the Southern African oil producer
In advanced economies it accounts for as much as of Congo as the gold-mining giant looks to forges ahead with a far-reaching privatisation
15% of the basket, while in Africa it exceeds expand in one of the world’s most-important drive. BODIVA will begin accepting bids next
25%, with some countries including Ethiopia, industrial metals. week for 1.945 million shares a 10% stake being
Zambia, Sudan, and Nigeria having food weight- Barrick already owns a copper mine in Zambia offered by BAI, Angola’s largest private bank.
ings above 50%, economists Jacques Nel and and in April laid out plans for a $7 billion cop- BAI’s listing is expected on June 9.
Petro van Eck, at Oxford Economics Africa said per-gold project in Pakistan. Copper is an essential Under President Joao Lourenco, the OPEC
in a research note. – Moneyweb part of the world’s efforts to decarbonize and new member has embarked on an ambitious reform
Dubai Airports passenger traffic may reach supply is constrained globally. Prices surged to a programme to modernise the economy and attract
pre-Covid levels earlier than expected, CEO says record in March and remain elevated, although private investment. – Moneyweb
Air passenger traffic in Dubai may reach pre-pan- they have retreated since then. – Moneyweb Google announces new smartphones, a watch and
demic levels in 2024, a year earlier than previous- Philippine economy in solid shape as Marcos set tablet at its I/O developer conference
ly expected, Dubai Airports CEO Paul Griffiths to take the helm Google on Wednesday unveiled an expanded
said. Newly-elected Philippine President Ferdinand lineup of hardware products in the latest sign it
“We recorded 13.6 million passengers in that first Marcos Jr. will inherit an economy that has remains committed to moving beyond its core
quarter [at Dubai International Airport]. This is strongly bounced back from the COVID-19 pan- advertising business and competing with the likes
causing us to revise our forecast for the year,” he demic when he takes office in June, but soaring of Apple.
told CNBC’s Dan Murphy on Wednesday, calling food and fuel costs will need to be addressed At its first in-person developer conference in three
it an “extremely encouraging” result. quickly. years, Google announced three new smartphones
“Originally, we thought 2025, but it’s quite likely Southeast Asia's fifth-largest economy grew a and its first in-house smartwatch as well as plans
we’re going to be back to pre-COVID levels better-than-expected 8.3% in the first quarter, the to release a new tablet next year. Google also
maybe as early as Q1 or Q2 of 2024,” he said. government said on Thursday. It was the fastest announced updates to several of its most popular
– CNBC annual growth since the June quarter of 2021 tools including Maps, Google Translate and its
Volkswagen's EV business as profitable as com- when it expanded 12.1% and exceeded a 6.6% core search product. – CNN
bustion engines sooner than planned - CEO forecast in a Reuter’s poll. Asian stocks down as inflation fears churn mar-
Volkswagen (VOWG_p.DE) expects its electric That growth rate made the Philippines the fastest kets
vehicle business to be as profitable as its fossil growing economy in the East Asia Region for the Asian equities slumped on Thursday following
fuel-burning cars sooner than planned, its chief period, officials said. – Reuters Wall Street's lead, as markets churned after a key
executive Herbert Diess said on Thursday at the Bitcoin crash is crushing Coin base. Stock plunges US report renewed fears of inflation and a tighten-
carmaker's annual shareholder meeting. again ing of monetary policies.
Volkswagen previously expected to match its The bitcoin crash is hitting Coin base really, really Stocks have been volatile for much of 2022,
profit margins from combustion engine vehicles hard. fuelled by China's Covid-19 lockdowns, Russia's
with electric vehicle sales in two to three years, The cryptocurrency brokerage reported a first-quar- invasion of Ukraine, and surging inflation that has
but the carmaker was in a robust financial posi- ter loss late Tuesday and revenue that fell 27% dampened consumer sentiment.
tion, Diess said, despite a challenging economic from a year ago, missing Wall Street's forecasts. Investors had been looking to the US consumer
environment. Coin base shares plummeted more than 25% price report in hopes that easing inflation would
"We expect that the e-mobility business will be as Wednesday and hit their lowest level ever. lower pressure on the Federal Reserve to hike
profitable as the combustion engine business earli- Coin base stock is now down more than 75% this interest rates, but the rise of 8.3 percent was
er than planned," Diess said. "Through good crisis year and is trading nearly 85% below its all-time higher than expected. – eNCA
management, we are financially robust and have high price from November. Shares have lost more
strengthened our resilience." – Reuters than half their value in just the past week alone. Nissan warns of flat profit as chip shortage
U.S. fuel prices surge faster than crude as exports – CNN becomes 'new normal'
tighten market Disney profit slips but streaming TV subscribers Nissan Motor Co (7201.T) expects flat operating
U.S. fuel prices have surged faster than crude oil jump profits this fiscal year, far below analysts' expecta-
prices in the last month, as the United States has Disney on Wednesday said its profit slipped in the tions, as Japan's third-biggest carmaker grapples
shipped more refined products abroad to supply recently ended quarter but its television streaming with a global chip shortage, rising material costs
European markets following Russia's invasion of service and parks were booming. and China's COVID restrictions.
Ukraine. The entertainment giant reported net income of Nissan joins a growing list of global companies
Traders say the world's stockpiles of fuel are not $470 million, just over half of the $912 million warning about worsening profitability as they
likely to increase quickly as big producers like profit it made in the same period a year earlier. cannot fully pass on soaring input costs to con-
OPEC, are increasing production slowly. The tight- But park attendance that had fallen due to the sumers and are bracing for more supply chain
ness in fuel markets is more alarming, they say, pandemic rebounded and the Disney+ television hold-ups following the Ukraine conflict and pro-
because it shows refiners are having trouble meet- streaming service gained 7.9 million subscribers to longed COVID lockdowns in China.
ing demand even as more crude becomes available 137.7 million. – eNCA Its bigger rival, Toyota Motor (7203.T), said on
through big reserve releases. Dollar hits two-decade high, rattled investors Wednesday "unprecedented" hikes in raw material
"Things are really tight with diesel and world plump for safe haven costs could slice a fifth off full-year profit.
demand," said Aaron Milford, chief executive of The dollar rose to fresh two-decade highs on – Reuters
Magellan Midstream Partners, in an earnings call Thursday as concerns that tighter monetary poli- US inflation took a breather last month for the
on Thursday. – Reuters cies to tame surging inflation will hurt the global first time since August. Prices still increased, but
Brazil April inflation hits 26-year high economy dampened risk sentiment and drove at a slower pace than in previous months.
Brazil's inflation rate hit a 26-year high for the investors into the safe-haven currency. The Consumer Price Index was up 8.3% in the 12
month of April as spiralling prices continued to Data on Wednesday showed U.S. consumer price months ended in April, the Bureau of Labour Sta-
defy the central bank's push to rein them in. growth slowed sharply in April, suggesting that tistics reported Wednesday, slightly higher than
The national statistics institute (IBGE) said infla- inflation had probably peaked, though it was economists had predicted. It was a decrease from
tion in the 12 months through April rose to 12.13 likely to stay hot. the 8.5% recorded in March, which had been the
percent, the highest since 2003 and well above the The dollar benefited as the data confirmed expec- highest level in more than 40 years.
central bank's target of 3.5 percent. tations for further aggressive hikes in interest rates Stripping out more volatile product categories like
by the Federal Reserve and investors fretted that food and energy, the CPI stood at 6.2% over the
same period, less than the 6.5% reported in
March. – CNN

Guest Column 24The AXiS XXVII - Friday 13 May 2022

With new WBWS system, the RBZ auction becomes irrelevant

By Zvikomborero Sibanda The foregoing inefficiencies of the auction, cou- motes informality, and underhand dealings, and
pled with unsustainable government spending decimates financial inclusion gains achieved in
A s the nation is trying to make head or tail emanating from substantial payments to its con- the last decade. Apart from reducing auction
of a series of stringent fiscal and mone- tractors in the construction sector and RBZ’s liquidity, these taxes buttressed by suspension of
tary measures announced by President lacklustre liquidity management triggered currency bank lending are self-defeating as they increase
Zimbabwe is a country with a strong history of instability hence fuelling price inflation. The business transaction cost with negative spillover
policy inconsistencies as authorities display a public whom I assume to hold rational expecta- effects on production and pricing.
strong bond with populist policies which are inef- tions had faced the same situation in 2008 when Of concern is also the announcement that plans
ficient, and prone to abuse and corruption. the government through the RBZ undertook RBZ will clear the forex allotment backlog which
Numerous policies particularly monetary policy excessive quasi-fiscal operations (QFOs) leading is reportedly northwards of US$100 million by
measures were pronounced in only 4 years ZWL to a free fall, massive wage erosion, and the end of May 2022. The statement was not
(2019-2022), a clear indication of the pursuance hyperinflation. As for corporates, staggering explicit on the sources of forex to settle the back-
of half-baked policies by the government. investment values worth billions of dollars were log, raising fears of debt accumulation. In the
For instance, in the last 4 years, Zimbabwe had lost, plunging them into distress. Given that the past, the government through the RBZ has bor-
gone through almost all of the globally popular current episodes are vivid reminiscences of the rowed loans of over US$1.4 billion from the
exchange rate regimes. When the Zimbabwe 2008 era, the government has initiated a general Afrexim bank to support currency reforms and the
dollar (ZWL) was officially introduced in early panic in the economy. As such, economic agents’ importation of strategic commodities. The nation
2019, the Reserve Bank of Zimbabwe (RBZ) trust in RBZ has plunged and confidence in ZWL cannot afford to continue piling debt which is
adopted the interbank forex market as its mecha- had touched new lows. This alone shows that the already unsustainable and in distress as shown by
nism to manage the currency. In the early days government can never exonerate itself as it has accumulating external arrears. As of September
of the interbank market, RBZ was managing the played a larger role in instigating the panic and 2021, external debt amounted to US$13.2 billion
exchange rate (a managed float) before it later subsequent depreciation and price madness. But, (96.4% of total public and publicly guaranteed
settled for free float (no interference in the despite all this evidence, the government is ada- debt), with arrears alone constituting 49.8%
market). However, when ZWL depreciation had mant that macroeconomic fundamentals are strong (US$6.57 billion) of the total external debt.
peaked in line with excessive money supply and the crisis is all for the Russia-Ukraine war Unsustainable debt is subduing business activity
growth and acute shortage of foreign currency in and behavioural economics to blame. as it constrains the countercyclical effects of
the economy, RBZ immediately returned to a With the situation going out of hand, the govern- fiscal policies and is affecting capital accumula-
managed float where it could set exchange rate ment crafted new policy measures it believed tion through heightened long-term interest rates,
depreciation bands (circuit breakers). These can be would arrest the currency and inflation crisis. The higher distortionary tax rates, and inflation. High
daily or weekly limits on the maximum allowable President of Zimbabwe announced that the will- indebtedness has also weakened the country’s
depreciation of a local currency. ing-buyer willing-seller (WBWS) interbank market ability to respond to unforeseen contingencies like
In the fourth quarter of 2019, RBZ then silently rate which was introduced by RBZ’s Monetary natural disasters, the COVID-19 pandemic, and
adopted a fixed exchange rate. My view is Policy Committee (MPC) in April 2022 would worsening global geopolitical risks. Even if the
hinged on the fact that the performance of the become the reference rate for all domestic trans- backlog is cleared and RBZ allots all bids within
ZWL in the official market was out of sync with actions. In my view, this WBWS (ZIMRA) rate 14 days going forward, the fact that there are no
the performance of both monetary and fiscal has effectively rendered the already inefficient complementary measures to revamp the current
aggregates, what economists term macroeconomic RBZ auction useless and henceforth should be auction system, forex demand will continue to
fundamentals -industrial production, fiscal posi- dumped. outweigh forex supply thus causing pressure on
tion, interest rates, reserves, and public confi- However, the government announced that the RBZ. This is because the auction market is not
dence, among others. On the 21st of March 2020, forex auction which, in my opinion, had failed to allocative efficient as it is selling forex earned on
the nation recorded its first case of the smoothen the ZWL price discovery process since exports below the marginal cost of producing a
COVID-19 virus and later instituted its first June 2020 as promised by RBZ would be main- unit of exports.
COVID-19-induced hard lockdown on the 30th of tained in its current form. The argument by Furthermore, if businesses are obliged to use the
March 2020. Under the guise of fighting the authorities is that, in the long run, the WBWS ZIMRA rate, what use will be the auction deter-
spread of the virus, RBZ also allowed businesses and auction rates will unify. But if one is to take mined rate in the economy besides enabling
to accept foreign currency but at a fixed into account some of the gross inefficiencies of exchange rate multiplicity (auction rate, WBWS
exchange rate (US$1: ZWL25). This was a this RBZ auction market I had highlighted earlier, rate, and varying parallel rates for RTGS balanc-
break-away from existing regulations that barred they are likely to be convinced that without insti- es, mobile money, and banknotes) leading to a
forex as legal tender by allowing exclusive use tuting serious auction reforms, there would be multi-tier pricing system that increases transaction
of ZWL. less incentive for the privileged few who are costs. Exchange rate multiplicity also breeds
Despite having less than 3-month import cover accessing cheap forex at the auction to increase rent-seeking behaviours, poor compliance with
(forex reserves), the monetary authority main- their bid offers to match WBWS rate which is RBZ exchange regulations, and round-tripping to
tained a fixed exchange rate regime from March relatively closer to the parallel rate. This is tanta- convert black money into legally earned money.
2020 through 23 June 2020, the day it elected to mount to a waste of hard-earned and direly By maintaining the auction system in its current
use a Dutch Foreign Currency Auction System needed foreign currency. form, RBZ is enabling ZWL depreciation by pro-
now popularly known as the RBZ auction market. The forex that is sold by RBZ at the auction viding cheap forex liquidity which incentivizes
Again, the auction was initially allowed to freely largely comes from taxpayers. Businesses are one to trade it in the black markets where the
float while the RBZ and government reverted to obliged to surrender (cede) 20% of forex earned ZWL price is high to make riskless profits -arbi-
a tight monetary targeting framework and a sus- domestically to RBZ at the WBWS rate. This is trage opportunities. In other words, the auction
tainable fiscal spending path respectively. Conse- the same for exporters who surrender 40% of market has helped to commodify the US dollar
quently, ZWL depreciation moderated, parallel their export earnings. While using the WBWS and the opportunity cost is lost productive capaci-
market exchange premia declined, and the rate of rate is an improvement from the previous arrange- ty and output.
growth of prices subsided. Instead of maintaining ment where they used overvalued auction rate, the It is my submission that the auction system
this status quo, the RBZ tampered with the auc- WBWS is still way below the parallel market rate should not be used together with the WBWS
tion market as it could no longer exhibit the true thus inflicting huge losses on the exporting com- system and therefore should be suspended indefi-
market dynamics -operation of market forces of panies as they fail to cover all operational costs. nitely. This is because while it might be true that
demand and supply- from the beginning of the A good case is RioZim, a gold miner that recent- the 2 official exchange rates may unify in the
fourth quarter of 2021. ly bemoaned these high involuntary export surren- long run, it is not clear how long is the long run
Many economic commentators also lamented the der requirements. As such, this has created an as people are already suffering. According to the
lack of transparency in the RBZ auction market unfair operating environment between exporters World Bank, nearly half of the population is
concerning the forex bidding process thus affect- and importers where the former is subsidizing the swimming in extreme poverty due to this protract-
ing the participation of other holders of forex like latter. These RBZ forex retention ratios which are ed economic crisis. If properly subjected to the
banks and companies. Also, some pinpointed that the same as capital controls have become an efficient operation of market forces and buttressed
the use of a priority list affects the operational impediment to investment, both foreign and by strict monetary targeting, fiscal discipline, and
efficiency of the auction thereby distorting the domestic. prudent and inclusive policy-making, the WBWS
official exchange rate. One can not also rule out I am also worried about the feasibility of main- mechanism can help bring back sanity in the
massive corruption and insider trading given that taining the auction market given the negative foreign exchange markets.
no audit or investigation was undertaken and impact of other measures on sources of forex for Zvikomborero Sibanda is an Economic Analyst for
shared with the public for the sake of entrenching the auction. For instance, the government has Zimbabwe Coalition on Debt and Development
a culture of transparency and accountability in the introduced a 2% cash withdrawal levy on all US (ZIM- CODD). He writes in his capacity, his views
management and utilization of public funds as dollar cash withdrawals above US$1 000 and also do not represent those of the organization he works
well as to boost animal spirits. Animal spirits a 4% tax on all domestic US dollar transfers. for. Email: [email protected]. Twitter
refer to the confidence and the ‘gut instincts’ of These taxes promote pillowcase banking which handle @bravon96
consumers and business executives on the current leads to a cash economy. A cash economy pro-
and future performance of the economy.

Commodities 25The AXiS XXVII - Friday 13 May 2022

How China's ease at $9,008 per ounce from $9.470 recorded
restrictions are affecting in the prior week. Copper for delivery in April
fell 2.6% from Friday’s settlement price, touch-
international ing $4.15 per pound ($9,139 per tonne), the
businesses lowest since September 1.

Aluminium

Global entities are facing damage to their bottom Gold In the week under review, aluminium prices
lines from the zero-covid policy in China, where further plummeted 8% in the futures market as
tens of millions of people remain in lockdown In the week under review, gold prices extended participants trimmed their positions on a low
and almost every major business has been disrupt- their retreat to fall 1.5% as the dollar hovered trend in the spot market. On the Multi Commod-
ed. In recent weeks, major cities of China, includ- near two-decade highs, dimming the metal’s ity Exchange, aluminium for delivery in May
ing the financial hub of Shanghai, have been appeal. The dollar has exploded higher given declined by 2.89%. Analysts said cutting down
locked down as authorities work to stamp out the expectations of a more aggressive U.S. Federal of positions by participants, on easing demand
coronavirus. For industries ranging from Reserve, in turn weighing on gold, which bears from consuming industries, mainly kept alumini-
big-to-smaller entities their business activities are no interest. Making bullion more expensive for um prices lower.
completely hindered, being disrupted by both overseas buyers, the dollar, also considered a
demand and supply. rival safe haven hovered near a two-decade high. Nickel
Apart from China, many companies had also just Meanwhile, benchmark 10-year U.S. Treasury
run up millions, or billions, of dollars in losses yields eased after hitting fresh 3-1/2 year highs Nickel futures have finally tumbled to $27,700
due to the war in Ukraine. The combination of earlier in the session. Two of the Fed’s policy per ton, representing a 1-week loss of 0.8% as
both events has created a double blow for multi- hawks in the week pushed back on the view the the squeeze on the metals market gets worse.
national corporations forcing some to cease their U.S. central bank missed the boat in the fight The prices dipped under $28,919 a ton for a
operations in most affected countries such as against stubborn inflation, citing tightening finan- couple of days in late March. But the level is a
Russia and Ukraine. The significant headwinds cial conditions that began well before it began key one because Tsingshan Holding Group Co.,
had also forced companies to slash their outlook raising interest rates in March. Meanwhile, U.S. the company at the centre of the crisis, had paid
for the year. stocks slid on higher U.S. Treasury yields, with its margin calls up until March 4. Further
The current crisis is a big reminder of China's sentiment taking a hit from fears of an economic margin payments above those levels have been
outsized importance to global companies. Possibly slowdown in China. waived under a standstill agreement with its
China is the first or second-largest consumer banks, with Tsingshan pledging to reduce its
market around the world, and also a major base Platinum short positions once “abnormal” market condi-
of production. The country is now on its sixth tions subside. Moreso, the Chinese zero-covid
week under lockdown. The measures have left Platinum prices marginally went up 0.8% to moto generally puts the commodity market under
tens of millions of people confined at home for settle at $970 per ounce in the week amid inves- pressure since it is the single large consumer.
more than a month, leading to high levels of tor sentiment on the metals’ short supply in the
mental stress. In many cases, residents are unable market. This came after Britain announced it Brent
to leave their apartments without special permis- will increase tariffs on platinum and palladium
sion from community leaders, and a large number imports from Russia and Belarus in a new pack- Brent crude oil futures declined more than 2.7%
of businesses remain closed. age of sanctions targeting 1.7 billion pounds as demand from China weakened and the dollar
In recent years, China has become the biggest ($2.10 billion) of trade, which it said aimed to strengthened in the global market. In the week
market for a range of industries, from luxury further weaken Russian President Vladimir under review, oil prices were at $100.1 per
goods to automobiles. But last month, the world's Putin's war machine. barrel from $111. A stronger dollar made crude
second-largest economy slowed sharply, hitting not oil more expensive to holders of other curren-
only consumer spending but also employment. Copper cies. Market reports noted that concerns over the
Some businesses have declined to make a forecast higher interest rates and their impact on econom-
at all. The situation in China is unprecedented on ic growth kept investors away from riskier assets
the companies’ earnings call. such as crude oil. The decline in crude oil
According to Fitch Ratings, it has cut its forecast demand from China, a major consumer, also hit
for China’s 2022 GDP growth to 4.3%, from prices. Reports said China’s crude oil imports
4.8%. Meanwhile, the agency revised its 2023 declined by 4.8% in the first four months of
growth forecast slightly higher to 5.2%, from 2022 compared with the corresponding period a
5.1%, on the assumption that the government will year ago. The Covid outbreak in many regions
phase out its ‘dynamic zero-Covid’ policy only of China has led to lockdowns, impacting its
gradually over the course of next year. economy.
Apple (AAPL) warned of huge losses related to Moreover, some members of the European Union
the Covid-19 outbreak in China, saying that were against a complete ban on the import of
supply chain issues could hit its sales by as much crude oil from Russia in the backdrop of its
as $4 billion to $8 billion this quarter. Apple ongoing war with Ukraine. They were worried
blamed the expected revenue drop on both restric- about the impact on their economies.
tions in China and component shortages world-
wide. Some of the shutdowns briefly affected
about 20% to 30% of all iPhone production,
according to analysts.
The slowdown in mainland Chinese growth tied
to widening COVID lockdowns has weighed on
sentiment in multiple commodity markets in
recent weeks. The whole scenario may be fulfilled
with the weekly commodity market review below:

Copper prices fell to their lowest in almost eight
months, as tightening lockdowns in China stoked
worries about demand, with a stronger dollar
further weighing on the market. In the week
under review, the metal plummeted by 4.9% to

26The AXiS XXVII - Friday 13 May 2022

Markets watch

Zimbabwe dollar sheds 4.4% to 173.3
despite latest currency reforms

ZWL performance in 2022 to date -omy perpetuated by the resurgence of of fuel and food items.
COVID-19 and the Russian aggression in Transport Index recorded the highest inflation
Ukraine. rate of 12.3% on account of increased prices
of petrol and diesel courtesy of the Rus-
Locally, the currency continued to suffer from the sia-Ukraine War.
effects of persistent power cuts that are crippling However, Kenya’s economy rebounded in
the South African industry. 2021 to grow at the fastest pace in 11 years
on easing of COVID-19 restrictions which
Meanwhile, the impact of recent floods that boosted recovery in key sectors excluding
caused severe damage to the country's infrastruc- agriculture whose activities were hit by poor
ture still poses a great and also the resurgence rainfall.
of the COVID-19. Data from the Kenya National Bureau of Sta-
tistics (KNBS) showed economic activities
Naira drops to 419 while at the parallel expanded 7.5% compared with a contraction
market, touches 600 tally of 0.3% a year earlier when activities almost
grounded to a halt because of measures to
The Zimbabwe dollar shed by 4.4% against the Nigeria’s currency dropped to 419 against the contain the spread of the pandemic.
United States dollar during the latest Auction United States dollar from 418 traded last week. This was the highest expansion since 2010 at
Market held on 10 May 2022. This was another According to data from the FMDQ Securities 8.1% when economic activities were recovered
0.4% depreciation from the prior week when the Exchange, the local currency was exchanged for from the aftermath of the twin shocks of the
under-fire currency depreciated by 4%. The the US Dollar at N419 per US$1 compared with global financial crisis and post-election skir-
further decline comes despite the measures that the preceding session’s exchange rate amid a low mishes in 2008 followed by a biting drought
were announced by President Mnangagwa on supply of forex to traders at the market window. in 2009.
Saturday last week that saw a suspension of Forex availability dropped to US$53.26 million
banks to lend in a bid to curtail the parallel compared with the US$88.43 million achieved Pula remains constant
market rates through tightening the money in last Friday, representing a decline by US$35.28
circulation. million which translates to approximately 40%. Pula remained at 12 against the greenback
President Mnangagwa blamed the banks for This propped up the unregulated parallel market yesterday for the third consecutive week. The
flooding the market with money supply fuelling rate which saw a single greenback traded against recent stability was buoyed by the country’s
the parallel market rates. N600. prospects of accelerating clean energy projects.
However, the measures met intense criticism Botswana invited bids from power producers
from the economic players who believed they Shilling slips to 116 as inflation hit to build a large solar power plant, joining
were just a suicidal attempt on the Zimbabwe highest since 2017 Portugal which is currently working on a
dollar as they are going to starve banking per- mega floating solar park with 12,000 solar
formance and even increase demand for the East African economic harbour, Kenya saw its panels.
United States dollar. currency trading on the back foot on Thursday
as demand for the greenback continued to shoot. Kwacha appreciates to 17 against the
Regional Markets Shilling traded at 116 against the dollar widening US dollar
losses from the prior week's performance.
Rand weakens to 16.1 as the US dollar Meanwhile, in 2021 Kenya’s inflation rate rose Zambian Kwacha reversed the stalemate of
gains ground to a four-year high of 6.1% a rise from the 5.4% 17.4 against the United States dollar on Thurs-
that was reported in 2020, according to the Eco- day after gaining by 0.4 points to trade at 17.
Southern Africa’s strongest economy, South nomic Survey 2022 released by the Kenya The rebound comes at a time the greenback
Africa saw the Rand trading at record lows since National Bureau of Statistics (KNBS). is on the gaining streak against major curren-
November 2021. The currency traded at 16.1 on This was the highest inflation rate recorded in cies as investors resort to less risky assets
Thursday against the US dollar which is on a the country since 2017 when it hit 8%. The rise amid a global economic slowdown propelled
gaining streak as investors seek less risky assets is mainly attributed to an increase in the prices by the Ukraine-Russia war.
against the continued global shocks on the econ-

ZSE WEEKLY COMMENTARY

The ZSE's negative trend continued into the second week of May, as profit-taking
and panic sell-offs exacerbated supply over demand. The ZSE All Share Index
dropped -16.84 percent to settle at 22,942.36 points, a one-month low. Market
heavies and medium caps suffered the worst losses, falling -19.58 percent and

-8.64 percent, respectively, while penny stocks gained a modest 0.09 percent.
Year-to-date nominal gains fell to 111.99 percent, while month-to-date losses fell
to -19.19 percent, the lowest monthly outturn in almost two years. Capital gains
from market investments by institutions were raised from 20% to 40% in a state-
ment released by the President over the weekend. This was in a bid to stop specu-

lative trading from driving inflation, according to the government.
The real estate counter, Mashhold, came out as the worst performer in the week
on plunging by -41% while on the upside, ICT stock, Zimpapers, emerged the
best performer in the week on surging by 20%. However, on a sectoral basis, the
ICT sector performed the worst in the week on slumping by -27.8% while the
Agricultural sector posted the smallest losses of -4.8%.

ZSE ASI 27,589.62 ZSE TOP 10 18,379.40 MEDIUM CAP INDEX 44,679.17
ZSE TOP 15 27,196.87 SMALL CAP INDEX 18,044.54 44,544.97
26,693.75
25,658.41 17,582.30 44,666.56
24,117.59
22,942.36 16,955.87 42,633.45
-16.84%
15,700.19 41,718.34
20,234.23 14,780.46 40,820.84
19,887.26 -19.58% -8.64%
19,461.40
18,743.50 576,574.92 ZWL INTERBANK 165.9942
17,440.25
16,451.75 597,946.28 165.9942
-18.69% 607,360.86 165.9942
610,613.02 173.2685
579,021.09 173.2685
173.2685

577,080.35 4.38%

Meanwhile, Padenga was the strongest performer on the US$ denominated bourse,
VFEX, rising 2.9 percent, while on the downside BNC fell by -1.2 percent. The
bourse saw a total of US$27,685 traded in the week under review, down from
US$241,256 the prior week. BNC exchanged an aggregate of US$27,032 which
is a contribution of 98% while the remainder was contributed by Padenga. The
miner, Caledonia, has failed to attract any significant activity since its inception
on VFEX while SeedCo International has been subject to low liquidity.
The Central Bank implemented a Willing-Buyer Willing-Seller mechanism for
exchanging currencies on the formal currency market. The interbank exchange rate
and the official exchange rate are now separate exchange rates in the formal
market. The official currency rate ended the week at ZWL$ 275.7864 per US$,
while the interbank market extended its losses from the previous week by a wid-
ened -4.38 percent to ZWL$ 173.2685 per US$. The necessity to narrow the
increasing gap between the formal and informal currency markets in the highly
informalized economy prompted the establishment of the official exchange rate.

FINANCIAL MARKETS AT A GLANCE 2022

ZSE All Share Index ZSE Top 10 Index ZSE Small Cap Index Interbank Market Rate

22942.36 14780.46 577080.35 173.2685
-16.84% -19.58% 0.09% -4.38%

ZSE Top 10 Index ZSE Small Cap Index ZSE Medium Cap Index

All Share index ZSE Top10 index All Share index Small Cap index All Share index

Medium Cap index

22942.36 22942.36 40820.84
14780.46 577080.35 22942.36

WOW -19.6% MOM 42% YTD 117% WOW 0.09% MOM 44% YTD 43.3% WOW -8.6% MOM 58% YTD 100%

ZSE Top 10 Index ZSE Consumer Discretionary Index ZSE Consumer Staples Index

All Share index ZSE Top10 index All Share index

All Share index ZSE Consumer Discretionary index ZSE Consumers Staples index

22942.36 22942.36 22942.36
14780.46 27387.25 27503.01

WOW -19.6% MOM 42% YTD 117% WOW -18.6% MOM 26% YTD 123.6% WOW -12.2% MOM 42% YTD 101.1%

ZSE Industrials Index (New) ZSE ICT Index ZSE Materials Index

All Share index ZSE Industrials Index (new) All Share index ZSE ICT Index All Share index ZSE Materials Index

22942.36 19732.35
26299.27 22942.36

WOW -8.1% MOM 44% YTD 38.9% WOW -27.8% MOM 58% 42909.81 WOW -9.5% MOM 56% YTD 125.9%
22942.36
ZSE Real Estate Index
YTD 161.3%

ZSE Real Estate Index Interbank Market JSE All Share Index

All Share index Interbank All Share index JSE All Share index

22942.36 46% 22942.36
25.4%

WOW -25.7% MOM -4% 8903.06 WOW -1.82% MOM -8.5% 68416.41

YTD 1.5% YTD -7.18%

BSE All Share Index LUSE All Share Index NGSE All Share Index

BSE All Share index LUSE All Share index NGSE All Share index

WOW -0.25% MOM -0.2% 22942.36 WOW 0.75% MOM -1% 22942.36 WOW 3.94% MOM 12.8% 22942.36
7226.52 52838.45
6778.13
YTD 3.09% YTD 23.7%
YTD 11.86%

Company Latest Price Previous Week Consumer Latest Price Previous Week Materials Latest Price Previous Week TOP 5 WEEKLY RISERS
Staples ZWL Cents ZWL Cents ZWL Cents ZWL Cents Sector ZWL Cents ZWL Cents
African Sun COUNTER PRICE CENTS CHANGE % CHANGE
AFDIS 36803.89 36803.89 AXIA 1213.04 1351.22 ARTZDR 2300 2500
ARISTON 395 453.09 EDGARS 12551.49 15928.67 LAFARGE 15169.97 17100 ZIMPAPERS 625 103.27 20%
BAT 366000 366000 NTS 500.28 580 PROPLASTICS 8059.09 9000 NTS 1612.5 223.09 16%
CFI 23000 23000 RTG 1612.5 1500 TURNALL 650 732 FBCH 7500 454.35 6%
DELTA 32566.1 39763.54 SIMBISA 745 800 Willdale 325.3 378.95 UNIFREIGHT 3500 106.25 3%
DAIRIBORD 4904.38 5500 TRUWORTHS 24163.93 30193.59 RioZim 15000 15000 TANGANDA 24351.15 351.15 1%
HIPPO 47000 55709.68 171.5 201.33
INNSCOR 50997.76 60460.73 ICT Financial Latest Price Previous Week TOP 5 WEEKLY FALLERS
MEDTECH 1980 2200 Sector Latest Price Previous Week Sector ZWL Cents ZWL Cents
MEIKLES 20500 24005 Ecocash ZWL Cents ZWL Cents COUNTER PRICE CENTS CHANGE % CHANGE
NATFOODS 220000 220000 ECONET 15486.96 First Capital Bank 1023.33 1099.34
OK 4896.19 5214.27 ZIMPAPERS 11938.51 27596.19 CBZ 12996.77 15705 MASHHOLD 320.25 -218.52 -41%
SEEDCO 23552.38 24000.2 20122.36 595 FBCH 7500 7022.22 ECONET 20122.36 -8801.67 -30%
STAR AFRICA 200.16 215.53 Real Estate 625 FIDELITY 2000 2100 ECOCASH 11938.51 -4001.15 -25%
TSL 11500 13200 Sector Previous Week FML 1900 2166.67 AXIA 12551.49 -3802.08 -23%
Tanganda 24351 24000 MASHHOLD Latest Price ZWL Cents GBFS 1061.25 1050 CBZ 12996.77 -3303.23 -20%
FMP ZWL Cents 493.28 NMBZ 3440 3500
967.96 ZBFH 8102.17 9500
320.25 ZHL 501.01 558.15
807

JSE All Share Index BSE All Share Index LuSE All Share Index NGSE All Share Index

68416.41 7226.52 6778.13 52838.45
-1.82% -0.25% 0.75% 3.94%

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