The AXiS LVII

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A career capped

in losses

#Issue: LVII

EQUITY AXIS www.equityaxis.net

Financial insights at your fightertips.

By a fortunate stroke of serendipity, it is an honour to receive the prestigious Capital Markets-
Media Coverage Award, just as The AXiS turns one year old. The award was nominated by a
public poll and adjudicated by a judging panel, aiming to recognize journalism which is revelato-
ry, and which has an impact. The award recognises the outstanding work of a media house
whose articles have raised awareness and understanding of developments in the capital mar-
kets. For us, first and foremost, the prerogative is to be an industry leader in economic, business
and financial analysis and reporting. It is a pleasure to be recognized for the frequency and

depth of our reporting on developments within capital markets

Capital markets reporting in the corporate and financial sector requires a critical voice that
questions corporate practices and behaviour. However, following stakeholder theory, media
have no financial stake in a company but play a crucial role in disseminating information and
influence stakeholders, such as investors, and their decision-making processes. We pride
ourselves in playing this crucial societal role, acting as watchdogs for industry because the
distribution of information shapes financial markets. And as Dr Mthimkulu eloquently articulat-
ed, “We are the stewards of society’s futures and a such, we have an unmistakable reporting line

to society”.

We would like to thank Business Weekly and Financial Markets Indaba for recognising our hard
work and our corporate partners and clients for believing in our vision.

The EQUITY AXIS

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

CONTENTS The AXiS LIV 18 Nov 2022

The Cover In Focus
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Axia set on VFEX lis�ng 5 Chipo Mtasa : A legacy of losses
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RBZ maintains hawkish policy Business News and Analysis
Dw(tMmTa/sfeMoZughehwaWodiecPnwerndekCgw$nieeemtbr)9etnnettea5bheesrtir0heekonaswyesrslcteueetlra2daoc�ee,g0oPanowob2ontsno.ahh2elosinleicmlcfcoyrhooooygtmfmnihrisseiCeentenZbohganWoemZet2bwpgW$nmaaian7dRca$r�in5ka�Bv9m,i0leZ0enloer’0eeaags-fl
mZimakbinabgwe and the art of deal 6 Tongaat Hule�, Hippo Valley: And the anatomy of a scandal
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9 Diminished Communica�ons Network (DECONET) :

Econet fails to cast out load-shedding demon
10 Simbisa: Seeks foreign investment on USD-denominated bourse
11 The art of the deal: Why Zim firms fail to secure deals

Guest Column

13 2023 Na�onal Budget: Is an elec�on-focused budget worth it?

Economic News and Insights

15 The “so-called” enhanced financing approach :Were government
guarantees the way to go?

16 MPC latest si�ng resolu�on review : RBZ maintains the bank policy
rate despite business cri�cism, cites review in Q1 2023
Kariba Dam’s: Receding water levels suffocate the Fish Industry

17 Mining deficit: Perpetuates bleak 2023 outlook
Ver�cal farming : A solu�on for Zim’s intermi�ent rainfall

19 Unpacking CZI 2022 : 3rd Quarter Business and Economic
Intelligence Survey Results
AfDB 2022 : Industrialisa�on report cements need for
automa�on in Africa

20 ZIM'S Energy crisis update: It never rains but pours
for the energy sector in Zimbabwe

22 Zim’s Banking Sector: Taking the economy to where it should be

Markets

25 Markets Watch
26 Weekly Commodi�es Pulse
27 ZSE Weekly
29 Financial Markets At a Glance

World News

23 Business around the world
24 Poli�cs around the world

ZSE ASI 14,810.81 ZSE TOP 10 8,603.82 MEDIUM CAP INDEX 33,608.70 ZSE TOP 15 9,593.32 SMALL CAP INDEX 472,431.36 ZWL INTERBANK 654.9630
14,834.46 8,672.55 33,287.86 9,651.03 472,431.36 655.5619
14,845.17 8,701.17 33,187.54 9,677.05 465,222.42 656.7892
14,778.48 8,656.66 33,079.31 9,638.08 465,222.73 658.7373
14,826.95 8,653.44 33,366.21 9,644.70 465,222.73 661.7149
14,725.40 8,565.42 33,214.84 9,564.26 455,726.42 661.9627
-0.58% -0.45% -1.17% -0.30% -3.54%
To Page1.07% 8



5 The AXiS LIV Friday 18 Nov 2022

Chipo Mtasa
A legacy of losses
Chipo Mtasa steps down as CEO of para- was looking for given its challenges and future
statal telecommunications company, ness. It’s however also a give-and-take exercise, goals required a leader who succeeded where
Telone, at the end of the year after serv- where you convince the board that you will Mtasa failed at RTG. The very challenges
ing her full two terms stretching between 2013 sacrifice so much, creating goodwill and in Mtasa created at RTG and failed to turn around
and 2022. Her legacy will be mixed depending return, they should also give so much. As part were the ones that they tasked her to tackle at
on the variables being assessed. However, as a of his restructuring plan, the RTG CEO who Telone. In retrospect, this was insane but
CEO, the primary measure of success is wheth- replaced Mtasa committed to massive cost cuts expected in a country where standards in busi-
er one achieved incremental value for share- which saw a total of US$2 million being saved ness are very low.
holders over their tenure, and this is best in expenses alone in 2013, a 10% drop from
reflected in profitability and sustainability. On prior year, thus driving operational efficiency Over her tenure at Telone, Mtasa presided over
this front, it is very clear that Chipo Mtasa, a and overall profitability. In total, RTG saved legacy debts inherited from PTC, which by the
girl child champion and inspiration to many US$3.8 million in 2013 which included US$1.8 time she left were sitting at US$419 million.
women aspiring for c-suite corporate careers, million in interest savings from balance sheet These legacy loans attracted huge interests and
failed dismally. To paint the picture more blunt- restructuring. in 2021 alone ZW$10 billion was paid for in
ly, Chipo Mtasa will leave Telone in the exact The restructuring of RTG, just like many other interest costs.
manner she left listed tourism group RTG, local companies, which had diversified into the Against this background, the company’s equity
which is in losses and an unsustainable debt region during hyperinflation, had begun by the position continued to dissipate given perennial
position. It is important to, however, highlight time Mtasa left RTG. To her credit, she over- losses in constant income. Was this in Mtasa’s
that in the instance of Telone, the debts and saw the disposal of some non-performing assets control, a question may be posed. Legacy debts
loss positions were inherited while in the case including a hotel in Zambia. The level and kind or own debt, a CEO signs up for management
of RTG, she oversaw the deterioration of both of restructuring pursued under her tenure were of the entire company and not parts of it.
profitability and balance sheet positions. too general and less effective in repositioning a On signing up for the Telone job, Mtasa knew
The article looks at Mtasa’s legacy and reviews bleeding business, which is the same thing that what was at stake or perhaps there was no
her term as CEO of Telone. Typically, it is played out at Telone. Just a fortnight ago objective to turn around the company in the
much easier to heap praises at the end of any- Robert Alan Chapek was relieved from his role first place and maybe the focus was on tender-
one’s tenure but critical introspective and proac- as CEO of Disney, just only two years into his ing the fragile entity until some miracle hap-
tive lenses are needed if local institutions are to appointment and was replaced by his predeces- pens along the way. The company has been in
become more competitive and profitable in the sor Bob Iger. Part of the reasons why he was technical insolvency and therefore incapable of
future both public and private. By evaluating sacked was that he mishandled his restructuring contracting new debt. Given the high demand
the performances of key individuals, institutions campaign, ending up tanking Disney’s perfor- for capex in telecoms, competing has been
and boards are able to critically recalibrate their mance, although the company remained profit- more difficult. The game at hand, in the now
processes from recruitment, contract extension, able. predominant broadband space, requires massive
performance-based bonuses and more crucially The fluidity of decision-making at strategic investment and Telone is inhibited due to fund-
adjust the strategic thrust of their businesses level and the swift implementation is a stark ing capacity.
which may include changing management per- contrast to the rigid and bureaucratic and ineffi- In terms of equipped international internet band-
sonnel timeously to save shareholder value. cient system of local entities particularly those width capacity (Mbps) Telone holds on 19% of
Chipo Mtasa’s career at Telone began in 2013 in the public sector. Part of the reason why the total capacity against Liquid’s 80%. Since
following a very bad spell at RTG where she CEOs like Mtasa got away with poor perfor- the first quarter of 2021, the total sector capaci-
was CEO for eight years, and its finance direc- mance records is because of the quality of ty has soared by 40%. In the LTE base stations
tor before that. At the time Chipo left RTG the shareholders. For RTG, the majority shareholder space, which is where the internet game has
company was undercapitalised and carrying soon emerged to be NSSA, the social security shifted to, Telone admits its failure to compete
huge debt which weighed on its ability to com- authority. The authority, by its very positioning, and attributes it to the lack of funding. In the
pete during dollarisation. Still, on the high-level is deep-pocketed, yet prone to abuse by gullible second quarter of 2022, Econet deployed 22
analysis, between the two companies she presid- political leaders who leverage its proximity. new LTE base stations and some 5G base
ed over, Chipo managed to at least achieve As a consequence, the quality of board mem- stations asserting its market leadership.
operational profitability, which in both cases bers largely handpicked by government and In terms of financial performance, Telone
was growing year on year in the two years subsequently responsible for appointing directors reported growth in the top line and operating
leading to her exit. at investee companies, will themselves be profit position but a sustained net loss position,
This evaluation brings out a key point to note incompetent for the task. This results in poor which has been the case for the last 10 years.
in the assessment, which is that Chipo was not board appointment and oversight in investee The company acknowledges that government is
wired to be a transformational leader, but a companies and if prolonged, the depth of crisis in communications with the creditors with a
continuity leader. Given a stable business, deepens. In the past, NSSA would appoint its view to shift the legacy debt into its own
Mtasa could thrive on sustaining a trajectory to own directors to sit on some boards for invest- books, but this has not yet materialised. The
some point, but not change it. A business with ee companies, raking thousands in Director fees deep hole in Telone’s books has spooked poten-
a good operational performance but adverse without any notable contributions to the invest- tial investors
overall profitability requires robust cost manage- ee companies and the citizenry, which is the
ment and debt restructuring coupled with quick- ultimate shareholder. To Page 7
er growth in the top line. Mtasa’s record The challenges of board incompetency are even
showed only limited capability to drive the top higher at parastatals where appointments are
line but not to manage costs and the balance much more likely to be influenced by politics
sheet. than by real business. It is, therefore, predict-
Within a year of Mtasa’s departure from RTG, able that Chipo’s tenure was going to be much
the new CEO managed to convince the board easier from a perspective of oversight and
and the subsequent top shareholder to recapital- demand for results.
ise and restructure the punitive short-term debt. The government’s entire parastatals catalogue
A rights issue was undertaken together with a has only a single profit maker and it is not
loan restructuring which saw an injection of Telone. If the board of Telone at the respective
US$10 million by the top shareholder. This is time of Mtasa’s appointment was as competent,
the kind of transformational leadership that is there was no way she would have gotten the
required as part of efforts to reconfigure a busi job in the first place. The qualities that Telone

6 The AXiS LVII Friday 09 Dec 2022

& Analysis

Tongaat Hulett, Hippo Valley
And the anatomy of a scandal
T he ramifications of Tongaat Hulett’s
balance sheet fraud, allegedly carried out near the town of Chiredzi in south-eastern Zim- management change-over that does not disrupt
by former chief executive Peter Straude babwe and 100 percent in Triangle Ltd. the Zimbabwean operations,” they said.
and other managers, have been on full display Hippo Valley controls over 53% of the local “No reasons have been given for the resignations
this year. While the issue has been widely sugar industry market, operating in a highly of all the THL directors. Simplistically, their
reported with sensationalism, there’s no sug- complementary environment with the likes of resignation is a show of no confidence in the
ar-coating the consequences of THL, currently Star Africa, at different levels of production. In business rescue plan and its likelihood to suc-
under business rescue, collapsing. Late in Octo- its latest financial results for the six months ceed. Due to the conflation of the THL and
ber, it defaulted on payments to creditors and ended 30 September 2022, Hippo Valley’s reve- Zimbabwe operations, the business rescue at
was placed under business rescue after banking nue grew 61%, registering an impressive Tongaat will inevitably have a contagion effect
institutions rejected the business recovery plan ZW$63.1 billion up from ZW$39.3 billion in on the Zimbabwean operations, on both econom-
presented by its new leadership, which took over comparative period prior year. The sugar giant ic and operating efficiencies. “The ministry
in 2019. recorded a 63% increase in adjusted EBITDA should (also) consider obtaining an explanation
Tongaat Hulett is a leading agri-business in despite recording a 54% loss for the period. from the BRPs on the reasons for the en masse
sugar, ethanol, animal feeds and cattle, with a director resignations and what impact this may
significant asset base and footprint in Southern How the business rescue could affect have on the Zimbabwe operations given its
Africa. This Friday, the besieged sugar producer local operations dependents on THL for various shared services.”
plans to hold a virtual shareholder meeting, to Now, dissecting this document reveals that
vote on the remuneration of the company’s busi- A letter written to the Ministry of Industry and before the business rescue, THL conflated its
ness rescue practitioners (BRPs), with its shares Commerce by local farmers in a bid to engage operations and management control with those
remaining suspended on the JSE. A fee agree- the government shows that the farmers fear that of THL Zimbabwean operations. That is why
ment can only conclude if the requisite majority the developments in SA will no doubt impact the local producers are calling for a smooth
support is obtained from the creditors and share- the Zim operations. The farmers deliver nearly transition, aligning expectations and redefining
holders of such company. half of cane to Tongaat’s local mills. The docu- reporting lines from the pre-existing management
Although progress was made by the new board ment reveals that Tongaat Hulett South Africa’s to the BRPs.
on a variety of fronts, including realising cost liquidity progressively worsened over the years, The fear is that the disposal of Zimbabwean
savings and improving available funding there compounded by the unforgiving operating envi- operations by a distressed parent (THL) will
was still the debt challenge. Debt, specifically, ronment. This resulted in its South African oper- likely result in a distressed sale. “The true value
was reduced by more than R6.6 billion from a ations largely being sustained by bank borrow- of what the Zimbabwean business is worth is
high of R11.7 billion, however, there remained ings and by dividends and management fees unlikely to be realized. The government should
a shortfall in the company’s working capital remittances from the Zimbabwe operations. consider a possible buy-out by local players who
facilities of about R1.5 billion, largely owing to Despite the exponential growth in expenditure could the land’s intrinsic value as their equity
the impact of Covid-19 and the unrest experi- and consequently debt (creditors and bank loans) contribution. NSSA is already a shareholder in
enced in July 2021, in KwaZulu-Natal. This against diminishing income/cashflows (revenue, Hippo Valley Estates. This would arrest capital
shortfall is necessary to fund the peak working debtors and cash), THL continued to leverage flight occasioned by dividend and support fees
capital requirements to complete the 2023 finan- Zimbabwean operations’ profitability and strong remittances from a natural resource-based invest-
cial year. balance sheets to mask its deteriorating solvency ment (land). The implications of disposal on the
THL’s South African lender group informed the position. The farmers say that this delayed the 99-year lease (if any) may need to consider.”
company that they will not be able to continue onset of its insolvency and eventual business Strategically, the disposal of Zimbabwean opera-
supporting the company with additional funding rescue, which finally happened in October. With tions to an investor aligned with the interests of
in South Africa. Without this funding, the board the Zimbabwean operations effectively managed the country and the local producers could prove
concluded that Tongaat is, or would be, facing and controlled by THL, in respect of inter alia, to be more effective. “The headwinds are strong
“financial distress”, as defined by the Companies decision making, sugar exports, budgetary sup- and the market turbulences impacting THL are
Act and that the South African operations are no port, ICT (same ERP is used group-wide and the unlikely to relent in the foreseeable future,”
longer financially sustainable without further servers are located and monitored in South according to the local farmers.
liquidity. Africa), technical support for mill maintenance, The rescue practitioner, Metis Strategic Advisors,
In this context, the board resolved to enter vol- employee recruitment, Hulett’s sugar brand, and says the business rescue plan will be unveiled
untary business rescue proceedings. The compa- other shared services, the development at THL at the end of January when the market will be
ny appointed Peter Van den Steen, Trevor Murg- would impact on local operations. updated in detail on the business rescue process.
atroyd and Gerhard Albertyn of Metis Strategic Despite Business Rescue Practitioner (BRP) Going forward, the stability of THL Zimbabwe-
Advisors as the BRPs. They are said to be taking full management control of THL, direc- an operations calls for a review of its alignment
highly experienced and well-qualified, having tors and pre-existing management could still with its parent company.
recently completed various high-profile business have continued to function as before under the This inside look at the local operations undoubt-
rescues in South Africa.Tongaat has made it supervision of the BRPs through delegated edly calls for a more comprehensive approach
abundantly clear that it is not being liquidated, power, the farmers elated. “The Ministry should by the government, looking into the company’s
but that the business rescue is rather a means to consider requesting the BRPs to clearly out- local operations and finances.
proactively protect the business, jobs, creditors linethe powers and authority delegated to the
and other stakeholders. The pre-existing management to ensure a smooth
board sees the rescue as a more formidable
approach with better return to creditors than
liquidation. The company has operations in
South Africa, Botswana, Mozambique, and Zim-
babwe. However, only two South African opera-
tions are entering the business rescue. Yet, that
doesn’t mean that these markets will not be
affected, according to sugarcane farmers in Zim-
babwe’s Lowveld region, who have expressed
concern over the corporate. THL SA owns 51
percent ofHippo Valley, a sugar estate found

7 The AXiS LVII Friday 09 Dec 2022

Axia Corporation

I nnscor spinoff, Axia Corporation Limited, is Set to duck ZSE, eyes VFEX
seeking to delist from the ZSE and migrate to
the Victoria Falls Stock Exchange (VFEX). in Unifreight and other private players. DGA is It's widely believed that higher sales volumes lead
well positioned for sustained profitability in the to higher revenues or turnover but it is evident
long term, having won multiple All Africa Awards that for AXIA, it isn't the same as indicated by
The pattern will remind many of how Simbisa for being one of the leading distributors in Africa. the analysis. This annual growth rate is expected
paved the way for Axia to unbundle from Innscor to decline in the coming years largely on the
in May 2016 after the latter had unbundled a few When TV Sales & Home first opened its doors in backdrop of an increased influx in informal motor
months earlier. 1968, the company was known as TV Sales & spares traders who have relatively low operating
Hire. Early on, the business model comprised leas- expenses since some of them smuggle these spares
Simbisa Brands Limited recently became the 6th ing equipment to consumers who had no intention without paying any customs duty and other rele-
counter to formally list on the foreign currency-de- of buying them and selling electronic appliances vant taxes.
nominated Victoria Falls Stock Exchange (VFEX) on credit through its "hire to buy" scheme.
on Friday 02 December. Axia joins the list of Rentals are also a large contributor to total oper-
companies on the queue to make the switch from Today, TV Sales & Home is a furniture and elec- ating expenses given that Zimbabwe has one of
ZSE to VFEX. The Zimbabwe Stock Exchange tronic store in Zimbabwe with 49 retail locations, most expensive property sectors in terms of rentals
(ZSE) viability and sustainability are in peril as and its business performance is stable, but it con- per square area compared to informal traders who
more corporations choose to delist from the fronts severe competition from Nash Furniture and either, in the extreme, don't pay rent or pay very
exchange in favour of the Victoria Falls Stock the Glen View Home industry. In the most recent low rentals given that they share little spaces.
Exchange, which deals in US dollars (VFEX). end-of-financial results, the business's 35% volume Thus, operating expenses coupled with a lack of
rise resulted in a 33% gain in revenue. pricing power in terms of the Transerv business
Since businesses need foreign finance for expan- have had a material effect as indicated by the low
sion, more companies leaving the ZSE will make Restapedic beds volumes increased by 52% but net profit margins which have averaged 4% over
sense from a capital-raising perspective. The turnover was 5%, proving how the informal sector the past 5 years.
majority of ZSE-listed companies are considering is outdoing TV Sales & Home. It has to be noted
delisting because they no longer see any value in that the firm remains tenacious in its struggle Axis’s average cash conversion averaged 2.1%
the local currency market and would rather go to against an informal market that has fewer operat- between FY2016 and FY2022 showing real growth
the VFEX, which trades in US dollars. ing expenses which makes it hard for TV Sales & and value for shareholders from Free Cash Flows.
Home to adjust prices without losing customers. This explains the announcement made by Axia on
Two of the companies' biggest concerns are a lack Wednesday 8 December to buy back 3% of its
of liquidity on the ZSE and valuation issues. In 2002, Transerv was founded as a cross-border outstanding shares for ZWL$1,06 billion between
Transferring to the VFEX will help them realize transportation business that also imported auto now and its next annual general meeting (AGM)
their true worth. parts for light-vehicle workshops. Transerv exploit- to maintain shareholder value, amid economic
ed a niche market opportunity in the wholesale turbulence. Axia operates in a volatile business
The money made from the sale of goods and market for spare parts and supplied larger opera- environment where, in 2021, borrowing costs in
services has been increasing steadily between tors with a quick-moving inventory. But the Zimbabwe were 41% annually, while borrowing
FY2016 and FY2021, with revenue growing at a Kaguvi Street Spare Market has inundated that costs for regional operations averaged 18% annual-
Compound Annual Growth Rate (CARG) of market with less expensive replacement compo- ly in the respective local currency loans.
4.79%. However, it should be noted that Axia has nents, which is a major issue for Transerv. The
three business units, including TV Sales & Home company's volumes increased by 67%, which The average cost of borrowing is predicted to
(TVSH), a leading furniture and electronic appli- resulted in a 30% increase in revenue. surge above 100% in 2022, which will increase
ance retailer; Transerv, which sells automotive current debts and the company's ability to repay
spare parts; and Distribution Group Africa (DGA), In addition, Transerv Fitment Center was devel- its short-term debt with cash or near-cash resourc-
a reputed and reliable distribution and logistics oped as a companion brand to offer clients a facil- es. For 2021, the current ratio was 1.7, displaying
firm. ity to fit their tyres, batteries, and suspension. that Axia was more than capable of paying its
However, cheaper alternatives have been availed obligations.
Distribution Group Africa (DGA) was established by the informal sector and offer fewer charges for
in 1999 by Innscor and has evolved to become the same service. Investors and shareholders can trust in the resil-
one of the largest and most successful distribution ience offered by Axia Corporation, even though it
enterprises in Zimbabwe, Zambia, and Malawi. In Axia’s Profit After Tax margins have drastically is competing with an unfair industry since it still
the 2021 financial year, the Distributed Group dropped, in FY2016 the PAT margin was 7% in produces quality products that are needed by the
Africa (DGA) volumes grew by just 3% and went comparison to the 3% or 2021 hence the compa- majority and is further hindered by strict monetary
on to account for a remarkable turnover in revenue ny’s efficiency in converting sales to profit has policies from the government. It has to be noted
of 22% against the over the years dropped as the firm has lost the that with all things being equal and the economy
prior year in the Zimbabwean sector, proving how power to adjust prices at will due to the competi- steady more value can be realized from Axia Cor-
the business continues to thrive since it has fewer tion from relatively lower informal sector prices. poration.
competitors in the market

*From Page 5

and given that fact it becomes even harder to space, fixed telephone now contributes only
evaluate management since they can easily shift 24%to total income down from 90% in 2012.
the blame for underperformance to legacy debts. On the other hand, broadband revenue contribu-
The failure to come up with an own credible tion has increased from 10% in 2012 to 80% in
restructuring agenda and failure to push for debt 2021. This digital transformation has helped spur
resolution with shareholders positions Mtasa in a the top line, which is a credit to Mtasa. Telone
lower league than celebrated corporate gurus. Revenue MixHad the company not refocussed,
Sympathy from colleagues who shared board income would have continued to dwindle in line
sittings and particularly the women constituency with market trends and shifts towards broadband.
out looking for those they look up to will, how- This too has helped lower the bleeding inflicted
ever, carry the day for Mtasa in her post-Telone by the huge legacy cost. Telone is better posi-
life. Outside of the gloom, Mtasa modernised tioned today to face the future and claim a fair
the state entity by refocusing it in the tech space market share, given its digital focus. It will be
leveraging existing and new infrastructure. paramount for the State to move faster to effect
Telone is no longer a fixed telephone compa- debt resolution and overall restructuring for able
ny.Although it maintains market leadership in the parastatals as espoused in the TSP, if the fiscus
is to achieve a breathing space in the near term.

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9 The AXiS LVII Friday 09 Dec 2022

Diminished Communications
Network (DECONET)
Econet fails to cast out load-shedding demon

Known for its drive to identify and solve was reportedly involved in a chase to become a reliability, thereby necessitating us to increase
traditional and modern-day problems private player in electric power generation in our efforts to augment our power supply with
through modern-day solutions which are Zimbabwe, a move which was denounced by solar power. However, as inflation increases and
typically tech-driven, Econet Wireless has grown authorities. disposable incomes are coming under more pres-
to be a household name in Zimbabwe with an This idea was in retrospect meant to address the sure, there is a discernible increase in the theft
unforeseeable going concern. power challenges the company had succumbed of diesel, batteries and solar panels. In response,
While its former and current peers have either to in the near past. In a post titled “Why I hate “we have enhanced security at our sites to
completely shut down operations or failed to corruption”, Masiyiwa said, “In about 2007, as counter the effects of increased vandalism and
sustain, Econet has managed to widen its expo- Zimbabwe lurched into hyper-inflation, and theft.” These measures heavily weighed on the
sure into the region and the globe. However, foreign currency disappeared, our local manage- company’s financials in the first quarter as it
despite all these achievements, the giant compa- ment was faced with a big, big problem: Electri- predicted a recovery in the second quarter. How-
ny has remained susceptible to a perennial pre- cal power! ever, in its HY-2023 report, the Group was nega-
dicament- power outages. The cell phone network consumes over 10MW tively affected by regulatory tariffs from
With operations and investments in Africa, distributed nationally. Base stations were collaps- POTRAZ, which were trailing behind inflation.
Europe, South America, and the East Asia Pacif- ing, and service was degrading on a daily basis.” This negated the Group’s efforts to recover from
ic Rim, Econet, formally known as Econet He goes on to proclaim that with the right cali- the effects of power outages in the previous
Global Ltd, is a diversified telecommunications bre, every problem has a solution. In his words, reporting period.
group that provides goods and services in the his efforts to come up with a solution to the While negotiating with regulators for better tariff
key areas of mobile and fixed telephony aforementioned problem were hindered by cor- rates in a bid to recover, Econet is yet again
services, broadband, satellite, optical fibre ruption from high offices. back in the trenches of darkness as electricity
networks, and mobile payment. Econet Wireless Zimbabwe is currently experiencing a hyper-in- continues to throw fists at operations. According
and Cassava Technologies are just a couple of flationary phase and massive power cuts, similar to a report by POTRAZ, overall operating costs
the group's subsidiaries. Renowned entrepreneur to the problems Econet was facing when Masiy- for mobile operators in Zimbabwe escalated by
Strive Masiyiwa founded Econet in Zimbabwe in iwa initially tried to resolve the debacle. Recent- 97% in the third quarter of 2022, comparative
1993. ly, Zimbabwean authorities publicly announced to prior quarter. According to the report, band-
It was originally going to be named "Enhanced that Kariba's hydro project, which typically width constituted 30% of the aggregate cost
Communications Network," but was later abbre- meets 65% of the country's power needs through while administrative costs accounted for 19%.
viated to Econet. When Econet received a tele- its established capacity to produce 1200 MW of The increase in costs was reportedly due to
phone license in 1998, 70% of the people in the energy, will immediately temporarily shut down. inflationary pressures in the economy. Despite
nation had never heard of a ringtone. After the The shutdown is being attributed to the reser- inflationary pressures in the economy, Econet
Burundi crisis, Econet created a mobile payment voir's low water levels. succumbed to tariff reviews in its HY2023 and
mechanism to assist NGOs in sending funds to The suspension will last the remainder of the recorded a -1% dip in inflation-adjusted revenue.
refugees. Along with a credit solution, the con- year, according to a statement from the authori- The Group’s EBITDA plunged by -17% owing
cept was expanded and integrated into Econet's ties, and a reevaluation will be done early in to cost pressures.
technology. 2023. The anticipated time for reevaluation is The regulators are yet to review tariffs ahead of
2011 saw the official introduction of EcoCash, after the recent rainy season. Since Econet inflation. This means that the telecommunica-
which was run by Econet Enterprises and now depends heavily on electricity supplied by the tions company is still highly susceptible to
listed separately on the Zimbabwe Stock public entity, ZESA, insufficient supplies from further declines in revenue owing to tariff
Exchange as an associate company to Econet. the entity will have to be set off by other alter- laggards. At the same time, the power outages
Following its introduction into the market, over natives which are inherently costly to the tele- in December will pose a greater threat and
6.7 million people had signed up for the mobile communications company. weight on Econet’s cost base. Prospects of
financial service by November 2017, which For the company to provide its products to its recovery from the weak macroeconomic funda-
accounted for 80% of adult Zimbabweans or vast customer base (mainly the network), it mentals seem murky for Econet, as the three last
52% of the entire population. One of the local requires electricity to power its network bases quarters of 2022 have posed a significant heft
commercial banks in Zimbabwe, formerly known and other base stations. If the national grid is on revenues.
as TN Bank Zimbabwe, was acquired by Econet failing to power these bases, then alternatives Lost revenue, repair of damaged equipment,
in February 2013 and renamed Steward Bank. that include solar grids or generators powered by replacement of equipment damaged beyond
The bank's shares were delisted from the Zimba- fuel will have to be resorted to. In its Q1 Trad- repair and manpower costs of restoring service
bwe Stock Exchange (ZSE), where they had pre- ing Update, Econet said, “Persistent national grid will remain the four main categories of the neg-
viously been listed and incorporated as a subsid- power outages have affected network quality and ative financial effects of power outages on
iary to date. Econet going forward.

Before the spin-off, Ecocash Holdings, formerly
Cassava Smartech, the Group controlled numer-
ous subsidiaries which include Econet Wireless
Zimbabwe, Econet Wireless South Africa,
Econet Telecom Lesotho, Mascom Botswana,
Econet Leo (Burundi), Liquid Intelligent Tech-
nologies, ZOL, Transaction Payment Solutions,
Africa Data Centres, Sasai Fintech, Cassava
Remit, Vaya Technologies, Distributed Power
Technologies, Ecocash, Steward Bank, Ownai,
Ecofarmer, Ecosure, Moovah and Ruzivo Digital
Learning.

The above-mentioned subsidiaries all came into
existence as a means to solve a problem, hence
the founder’s obsession with capitalizing on
problem-solving as “perfect entrepreneurship”.

However, the telecommunications giant is one of
the biggest single consumers of electrical power
in Zimbabwe, and as a result, the availability of
power is very crucial to the going concern of
the business and its operations. In his quest for
solutions to “modern problems”, Strive Masiyiwa

10 The AXiS LVII Friday 09 Dec 2022

Simbisa
Seeks foreign investment on USD-denominated bourse

S imbisa Brands Limited and its 567 stores
have shipped to Victoria Falls Stock
Exchange (VFEX) to become the 6th com-
company on the security exchange. The
group views the VFEX as a way of targeting
foreign investors as well as global capital mar-
kets. Chief to the move is the benefits associat-
ed with the use of the US dollar currency as
the currency of denomination. This is supported
by a statement by the non-executive chairman
in which it was said that in the pursuit of
foreign investment, stakeholders require financial
statements indexed in a familiar currency. The
ZWL dollar is plagued with many distortions
that increase business risk and thereby deter
investments. With multiple exchange rates for
currency transactions, exacerbated by the
requirement of hyperinflationary accounting
adjustments, it is difficult for anyone to under-
stand and make meaningful valuations from
financial data. The move can therefore be
understood as a strategy to increase investment
using increased transparency.

Additional benefits to the move include favour-
able tax incentives which enable investors to
retain more of their returns when compared to
the ZSE. Moreover, the move enables investors
to take advantage of offshore settlement options
which allow them to efficiently repatriate their
dividends and eliminates the foreign currency
risk of holding Simbisa shares as a foreign
investor. Furthermore, a USD-indexed exchange
will support the group's most appropriate func-
tional currency (given that much of its receipts
are made in USD) and its sizeable ownership
in foreign assets.

The decision to migrate to the VFEX comes
during a period of strong growth. The group
received ‘The Best Tangible Returns’ award at
the 2022 Zimbabwe Top Companies Survey
Awards which highlighted its strong perfor-
mance.

Despite the impact of global inflation and that the exchange rate derived from the Reserve will result in various distortions in the econo-
supply chain challenges which put upward pres- Bank of Zimbabwe weekly Foreign Currency my.One such distortion is the overvaluation of
sure on the cost of doing business and con- Auction System (“Auction Rate”) is not appro- stocks depending on the rate used to convert
strains demand, the group was able to achieve priate and is not a spot rate”. More representa- ZWL to US$. As stated before, in a country
growth in profit of 71% (from ZW$5.6 billion tive of economic conditions is the parallel with two exchange rates, the parallel market
to ZW$9.58 billion). Moreover, cash generated market rate, which the wider economy uses to tends to be more reflective of economic reality.
from operating activities increased 342% to price goods and services. It follows that the rate Certainly, this is the case in Zimbabwe.
ZW$21, 7 billion. at which Simbisa’s stock is exchanged matters On the 5th of December, the official interbank
In the 2022 chairperson’s report, the board’s to understanding the share's value. rate was US$/ZWL 656.7892. This implies that
decision to, amongst other measures, import The VFEX published the news of Simbisa’s the closing price of SIMBISA’s stock on the
their raw materials was integral to mitigating migration in a press release which was titled” day of delisting was US$ 38.2c. This is identi-
global inflation. The group’s growth strategy Listing of Simbisa Brands Limited on the cal to the stock price of SIMBISA on the
was driven by the Zimbabwean and Kenyan VFEX.” It intended to notify stakeholders of the VFEX, dated 5 December 2022. The price of
markets, which added 27 and 39 stores respec- listing of The Exchange’s new listing, with the stock was therefore transferred to the VFEX
tively. Further investments included significant effect from 02 December 2022. using the interbank rate, which as mentioned is
expenditure into the expansion of the capacity The press release informed the public that trad- not reflective of the economic realities in the
of its restructured Franchising Division, which is ing in Simbisa Brands securities will commence economy.
an independently operating division responsible on 05 December 2022. The closing price of If the stock were to have been transferred to the
for improving brand quality and customer SIMBISA’s stock on the ZSE on the 5th of VFEX using the parallel Rate (which is said to
service in the group's stores. The group's December following this announcement was be a truer rate of exchange), which on the date
growth trajectory is further indicated by an ZWL 25091.87c. This was the last recorded was US$/ZWL 800, the stock would have
upward trend that spans over three years. price following the delisting of the group from traded at US$ 31.36.
This strong performance is reflected by a con- the ZSE pending its transfer to the VFEX. Its This implies that SIMBISA is overvalued and
tinuous increase in the price of the stock since price on the VFEX on the same day was US$ its stock is expected to suffer a bear run for
the stock price reflects all the information about 38.3c. reasons similar to BNC. The performance of the
the stock. Under the above, it follows that the Under the above-mentioned, Zimbabwe has stock in the months following its delisting was
price of the stock when delisted from the ZSE more than one exchange rate, an official rate stagnant. The stock was delisted at a trading
and immediately relisted onto the VFEX should (named the interbank rate), and a subsequent price just above its one-month average price of
not change. Only the currency by which it is parallel market rate. Such a situation occurs ZWL 23205.37c in November and its
expressed should change. This however is when a central bank finds that it is no longer three-month average of ZWL 19013.29.
distorted by the workings of multiple exchange able to maintain a managed exchange rate The jump in real value from ZWL 25091.87c to
rates (interbank rate and parallel market rate). policy for current transactions, that is, to ensure ZWL 30,563(calculated by multiplying the
It is important to note that the official rate (the that the supply of foreign exchange (FX) is VFEX stock price by the parallel market rate)
interbank rate which closely mirrors the RBZ sufficient to meet legitimate demand at that is misleading and will result in a downward
auction rate) does not reflect the realities of the price. Such a situation results in the rise of a adjustment of stock price towards a US$ price
demand and supply of foreign currency. This is parallel market rate. The spread between the of 31.36.
affirmed by the group in their 2022 annual parallel market rate and the official market rate
report which stated that “the Board’s view is

11 The AXiS LVII Friday 09 Dec 2022

The art of the deal
Why Zim firms fail to secure deals

M any businesses have found it difficult A factor is also the absence of clear fiscal poli- tions while making agreements, and Zellco is a
to close deals in Zimbabwe, which has cies and directives, changes in government prime illustration of what companies shouldn't
led many business owners to choose to policy involving interest rates, exchange rates, do.
relocate their operations abroad. This article will and taxation that result in higher tax burdens, The key difference between companies that can
examine both internal (which management may and changes in government policy addressing close deals and those that can't is said to be
influence) and external influences (those that taxation. The atmosphere in Zim is very infla- the existence of a clearly defined acquisition
can't be controlled by management). Under- tionary. According to the most recent data pro- strategy. A compelling strategic justification is
standing both the reasons for deal success and vided by the Zimbabwe National Statistics essential to closing an acquisition because due
the obstacles that lead to deal failure enables Agency, Zimbabwe's annual inflation decreased diligence will be imprecise and valuations diffi-
Zimbabwean organizations to land transactions from 268.8% in October to 255% in November, cult. The importance of in-country expertise
more successfully, making the process simpler. while monthly inflation decreased from 3.2% to further emphasizes the necessity for consultants
In addition to the possible loss of a value-add- 1.8%. with a significant African presence. Many busi-
ing opportunity, not completing a transaction Steve Hanke, a US economist, estimated it to nesses in the Zimbabwean context lack good
results in significant opportunity costs in the be 397% as of November and even poked fun strategy, which is a must for obtaining deals. As
form of management attention, time, and money. at Taguma Mahonde, the head of Zimstat, in a a result, no business will want to get into a
In this article, several reasons why deals fall tweet that read: "In this week's inflation round- contract with any business that lacks a
through will also be examined. up, Zimbabwe, takes the 1st spot. On November plan.Lack of financial data and market data may
The inability to agree on value is one of the 17, I precisely calculated Zim's inflation rate to be a major contributing reason to a deal's fail-
major issues Zim firms encounter when it comes be 397%/yr or roughly 1.5 times ZimStat's ure to close or a cause in deals that experience
to the different factors that prevent negotiations 268.8%/yr "official" inflation rate. More false problems after closing. Lack of financial infor-
from concluding. In Zimbabwe, a value discrep- data from ZimStat and Taguma Mahonde. Such mation, as well as the transparency and calibre
ancy contributed to the failure of the majority elements make it nearly impossible for business- of financial information, are major risk factors
of commercial and public transactions. A mis- es to close transactions and expand. that lead to deals falling through as well as
match is when assets and liabilities are not cor- Across all geographies, negotiation is a crucial major post-deal problems. Poor record-keeping
rectly matched. It is frequently examined in stage of any business, and the difficulty of and accounting practices are at the top of the
circumstances involving the management of negotiations in developing markets cannot be list of crucial considerations when it comes to
assets and liabilities. A mismatch can result overstated. While we asked respondents to name closing deals. The adoption of IFRS (Interna-
from a variety of circumstances, some of which the primary challenges they faced when negoti- tional Financial Reporting Standards) by several
are related to pricing. ating deals, we discovered that none of the Zimbabwean nations may come as no surprise,
An illustration of a misaligned pricing approach issues cited seemed to stand out more than the but until today, the prevalence of local account-
is the 2008 case of BP in Zimbabwe. The others. Failure to recognize the negotiating posi- ing standards was thought to have little bearing
National Oil Company of Zimbabwe (NOCZIM) tions or interests of the various stakeholders, as on a deal's success.
and two foreign petroleum companies' negotia- well as dealing with counterparties who lack Deal failures can also result from post-comple-
tions to supply the nation with fuel broke down support and experience in closing deals, are tion integration problems. The main reason for
over pricing. When NOCZIM stipulated that the frequent causes of failed negotiations. post-completion integration problems was a lack
landing fee be US$0,60 per litre, a fuel agree- It's critical to recognize the major players in the of local operational experience. Foreign-owned
ment with the Independent Petroleum Group of situation and to persuade the counterparty to companies need managers that have a strong
Kuwait and BP Shell of South Africa hire a seasoned advisor. Deals might also fall bond with their customers in terms of loyalty
The government insisted that the cost of landing through as a result of various bargaining strate- and understanding of company culture, as well
should be US$0,60 despite the two foreign gies. Deal-makers in Zimbabwe must modify as local operating experience and a working
firms' insistence that it must be between their negotiating style to fit regional traditions knowledge of the language and customs of the
US$0,70 and US$0,90 a litre to turn a profit. and cultural norms. region. It can be difficult to locate management
The two firms decided against the contract as a For instance, in 2010, NetOne terminated the in Zimbabwe who has both experience operatin-
result, the source continued, prompting contract with Zellco Cellular after the latter glocally and a connection to the customer. Both
NOCZIM to hunt for other alternative fuel failed to make the contractually required pay- a lack of in-depth financial knowledge and oner-
sources. When discussing the failure of Zimba- ment of around US$14 million owing to it. ous regulations for foreign-owned enterprises
bwean enterprises to close deals, other facts also NetOne claims that Zellco received a 14-day received comparable scores. Living conditions
come into play. Uncertainty regarding the notice to pay the amount. Following the terms were shown to be less important in some mar-
target's capacity for expansion, as well as of the Service Provider Agreement, the deadline kets.
uncertainty and a lack of knowledge on project- was April 14, 2011. Due to Zellco's late pay- In conclusion, some of the factors outlined
ed market growth, are relevant. ment, NetOne was compelled to terminate the above explain why Zimbabwean businesses are
Deals can collapse because of macroeconomic agreement. For the previous three years, Zellco having trouble closing agreements. The atmo-
factors, structural problems, and policy changes. had broken the terms of the agreement. This is sphere for companies to secure deals will
an example of failing to negotiate fair condi significantly improve if management can attempt
to combat some of these factors.



13 The AXiS LVII Friday 09 Dec 2022

Inflation Eased in November:
Is the 1-3% monthly target realistic for 2023?

By Zvikomborero Sibanda If realized, a stable price environment will lawmakers and cabinet ministers together with
bring great relief to citizens, particularly the their deputies which have debt ramifications.
According to the statistics authority, Zimba- poor majority who are earning way below the An unsustainable debt level depletes national
bwe National Statistics Agency (ZimStat), poverty datum line (PDL). This is because the reserves, crowds-out both private investment &
price inflation eased in the month under massive ZWL depreciation and elevated prices public service delivery, constrains the countercy-
review. The statistics show that general prices as experienced for most of 2022 have largely clical effects of fiscal policies and heights
measured by the all-items Consumer Price Index eroded real incomes, lowered aggregate con- long-term market interest, tax, and inflation
(CPI) spiked by 255% in the last 12 months sumer consumption, widened income dispari- rates, among other effects.
ending November 2022, down by 13.8 percentage ties, and plunged the majority into poverty. More so, electricity shortages will likely persist
points from the previous month’s outturn. From a For instance, the 2022 World Bank statistics in the first half of 2023 due to limited imports,
month-on-month (MoM) perspective, the inflation show that at least 40% of the population is uneconomical tariffs, constrained production at
rate decelerated from 3.2% recorded in October living in extreme poverty in Zimbabwe. Also, Kariba hydropower, and frequent breakdowns at
2022 to 1.8% in November 2022 the local currency & price volatilities have nation’s aging thermal power stations. Electrici-
hugely affected business predictability. ty is a key business enabler; its scarcity
The ZimStat disaggregated inflation data by prov- As I explained in last week column, business increases business costs, balloons the inflation
ince shows that Mat South had the highest predictability is key because it enables great burden, and strains household budgets. The
monthly outturn followed by Harare (2.8%), Mat market fit and quality customer service while COVID-19 pandemic and Russia-Ukraine war
North (2.7%), and Bulawayo (2.1%). Granular eliminating waste and inefficiencies to build a with an indeterminate end also pose a greater
analysis of the figures shows that at 301.4% YoY strong foundation of sustainable enterprise. In risk to the price inflation outlook. For instance,
& 0.9% MoM, the Food category (which is addition, an astronomical spike in the Reserve the sanctions and countersanctions caused by
30.34% of the total consumer basket) was the Bank of Zimbabwe's (RBZ) benchmark policy the war are negatively affecting global supply
main driver of inflation. Meat (4.4%), fruits rate from 80% to 200% has fuelled the cost chains, trade, production, and cooperation. As
(1.9%), food (0.9%), fish &sea food (0.8%), and of money. More so, high fuel prices as well such, I expect the resultant elevated global
food products N.E.C (0.4%) were the groups with as prolonged electricity load-shedding sched- inflation to continue for most of 2023 thus pre-
high inflation in the month. Accordingly, an indi- ules compounded the cost of doing business in senting a great risk for perennial net importers
vidual required about ZWL21 652.27 in Novem- 2022. Generally, a high-cost environment feeds like Zimbabwe.
ber 2022 to meet the minimum needs basket cost chronic inflation and scares away private-sec- Therefore, to help suppress excessive price
(Food Poverty Line, FPL). The FPL is the mini- tor investment which is key in powering GDP, growth in 2023, the authorities should consider
mum income required by a person to afford a incomes, and employment growth. some of the alternatives proffered herein:
daily energy intake of 2 100 calories. As for the However, it remains to be seen if the Reserve • The authorities should implement complemen-
Total Poverty Consumption Line (TCPL) -the Bank of Zimbabwe (RBZ) will be able to tary monetary and fiscal policies, with the latter
total minimum income an individual needs to meet this inflation target given the likely risks spending sustainably to ensure and maintain the
purchase both non-food & food items for them to the outlook. The forthcoming general elec- sustainability of ZWL liquidity growth in the
not to be deemed poor- official statistics show it tion will likely derail the sustainability of the market.
closing November 2022 at ZWL28 516.73, up Treasury spending path. For instance, a pro- • Government should intensify engagement &
1.3% when compared to October 2022 amount of jected 136.8% jump in budget expenditure offer lucrative incentives to independent power
ZWL28 144.07. It, therefore, means an average ceiling to ZWL4.5 trillion in 2023 from producers (IPP) to increase domestic production
household of four (4) needed a minimum income 2022’s ZWL1.9 trillion can attest to this asser- of renewable energy. These incentives can be
of ZWL114 066.92 in November 2022 to be con- tion. If the national output growth is expected extended to businesses and households to
sidered out of poverty. to decelerate further in 2023 from 2022 levels, increase their uptake of solar energy thus bring-
The public applauds both monetary and fiscal the public can then ask: What is informing the ing relief to the constrained national grid.
authorities on some of the policy actions they Treasury’s projected jaw-dropping spike in • The existing high tax environment is adding
have implemented in recent months to slow infla- revenue collections by Zimbabwe Revenue to business costs and subduing disposable
tion growth. November 2022 completed five (5) Authority (ZIMRA) next year? From an out- incomes. Hence, domestic resource mobilization
consecutive months of disinflation trajectory, a sider’s perspective, it is evident that fiscal (DRM) should be expedited in 2023:
trajectory that began in July 2022 when monthly authorities are anticipating elevated ZWL o curbing leakages from corruption & illicit
prices slid by 5.1 percentage points to 25.6% depreciation and sustained price increases in transactions
from 30.7% recorded in June 2022. Now, buoyed 2023 -high prices mean increased revenue o lowering tax compliance costs
by this rapid disinflation path, the government collection for ZIMRA. Also, based on recur- o reducing capital controls
has projected an average monthly inflation of ring deadly political clashes like cases in o strengthening taxpayer motivation & educa-
between 1-3% in 2023. The authorities expect Matobo and Gutu, there is a high chance for tion
this inflation target to be anchored by a tight the upcoming election season to degenerate o formalizing informal businesses.
monetary policy stance, stable Zimbabwe dollar into full-blown political violence, civil unrest, • Robust reforms (economic, structural, elector-
(ZWL), and sustainable fiscal spending as shown and abuse of human & political rights. al, etc) should also be part of the policy mix
by projections of a “sustainable” fiscal deficit of Furthermore, the 2023 proposed budget shows to reduce prevailing growth-retarding pricing
1.5% of national output (GDP) as stated in the that the government is facing an increased distortions, avoid crowding-out of public service
2023 budget statement. public borrowing requirement in 2023. Public delivery, protect rule of law & property rights,
debt will jump significantly in 2023 as Trea- and help Treasury secure the direly needed sup-
sury faces a mammoth task of financing a port from its creditors to meaningfully resolve
ZWL575.5 billion budget gap comprising an the decades-long debt conundrum.
overall deficit of ZWL336.9 billion and net Zvikomborero Sibanda is an Economic Analyst
loan repayments of ZWL248.6 billion. The for Zimbabwe Coalition on Debt and Develop-
Treasury proposed to finance this deficit by ment (ZIM- CODD). He writes in his own capaci-
issuing a US$100 million domestic bond, ty; his views do not represent those of the organi-
US$400 million external loan facility is zation he works for. Email: bravosibanda@g-
expected from Afreximbank, and ZWL82.8 mail.com. Twitter: @bravon96
billion treasury bills (TBs). Ahead of the 2023
harmonized elections, the Treasury will also
gobble tens of millions of US$ as loans to



The AXiS LVII Friday 09 Dec 2022 15

& Analysis

The “so-called” enhanced
financing approach
Were government guarantees the way to go?

About three years ago, the Government of received guarantees amounting to ZW$5 billion been some notable recov-
Zimbabwe partnered with several com- for the financing of the 2022 winter wheat farm- ery rates, particularly
mercial banks as it sought to increase ing season with ZW$96 billion being allocated from facilities extended
the administrative efficiency of agricultural for the 2022/23 summer cropping season. by various investors such
financing under the Command Agriculture as Pension and Provi-
framework – an agricultural program which Pguerafroarnmteaensce of selected government dent Funds, Insurance
was introduced circa 2016/17. The new companies and chief
enhanced financing approach meant the govern- Firstly, the ZW$4.5 billion 100%-government among them Banc
ment had to provide loan guarantees to these guaranteed loan facility for maize farmers ABC Bank which has
respective banks and private players to allow through the CBZ Bank Agroyield which was had fully paid facili-
them to advance agricultural loans to farmers. meant to finance the 2019/20 maize cropping ties. Moreover, equal-
CBZ Bank and Agricultural Finance Corpora- season had a loan recovery rate of about 39% as ly important to note
tion (AFC) Holdings (formerly Agribank) were of September 2022, as only ZW$1.5 billion of and of significance
among the first lenders to partner with govern- the total disbursed loan had been recovered by is the amount of
ment on this massive shift in agricultural focus. the financiers. The loan had to be serviced by debt the Reserve
However, several banks have since joined the December 2020 with a 17% interest rate tag over Bank Zimbabwe
pool of lenders since the introduction of the one year. The government, therefore, had to owes to the
facility, including Banc ABC bank, Steward assume the debt burden emanating from the Afrexim Bank.
Bank and Pension Funds. Credit guarantees are farmers who had defaulted and the facility The RBZ bor-
among, and widely used especially in Africa in amounting to ZW$2.77 billion including interest rowed about
the agricultural sector, a pool of instruments for had to be called up. US$1.3 billion
risk mitigation and credit enhancement mea- A similar 50% loan guaranteed CBZ Bank Agro- from the
sures. yield facility totalling ZW$76.8 million was Afrexim
This credit enhancement measure came at a availed for maize farmers for the financing of Bank in a
time when government had faced low to no the 2020 winter maize cropping season. The loan bid pro-
recovery of the loans – high default rates – it facility which was to mature in April 2021 had cure
had extended to farmers over the period since a recovery rate of 0.6% as only ZW$0.44 mil-
the inception of the program. Although some lion had been recovered as of September 2022. *T*oTPoaPgaeg1e016
argue that the Command agriculture program This loan facility represented a high default rate
was a subsidy meant for increasing the output as government had to assume about ZW$0.08
of various special grains, it was merely a billion with the remainder being assumed by the
poorly and inefficiently managed loan program bank. On the other hand, the highest recovery
by the government. rate from these loan guarantees was at 74% from
In the new financing facility, the government another CBZ facility. Wheat farmers also benefit-
no longer directly involved itself in the financ- ted from a US$67 million 73% government-guar-
ing structure as before since it now only anteed loan facility which was to finance the
assumed the burden of the debt in the event 2021 winter wheat farming season. The loan
that the farmers default on their loans. Strictly which matured in April 2022 had a loan
speaking, this gives rise to a moral hazard situ- recovery rate of 40% as of September 2022
ation as farmers have the incentive to increase as only US$26 million had been paid up.
exposure to the risk of getting these loans since Meanwhile, Sub-Saharan Tobacco (Pvt)
they won’t bear the full costs of the risk given Limited borrowed, on behalf of tobacco
the full or partial government guarantee facility. farmers through a company farming
It, therefore, follows that high default levels scheme, about US$3.5 million from CBZ
will imply unnecessary additional debt to the Bank at 12% for the financing of export
already bloated government debt overhang posi- and contract orders with a partial guar-
tion and the reverse being true. antee of just 40% from the government.
Together with the 2023 national budget state- The loan which matured in December
ment, the minister of finance also released a 2021 was never paid back and had a
report –among other reports on 2023 infrastruc- total outstanding debt of US$4.2 mil-
ture development and IMF kitty expenditure lion including arrears as of September
position to date – on the state of public debt 2022.
for the country. Data from this latest report,
published by the Zimbabwe Public Debt Man- The loan default was largely a result
agement Office (ZPDMO), reveal that the gov- of side marketing of the product by
ernment had a total of US$1.68 billion and the farmers through selling to private
ZW$32.22 billion (which amounted to circa sellers, which economically was
US$52 million using the prevailing September because private players paid better
exchange rate) in outstanding guarantees as of than what government marketers were
September 2022 since the inception of the paying.
facility. In addition, for the first nine months of However, although the recovery rates for
2022 to September, the government had issued most of the loan facilities have ranged
over US$175 million and close to ZW$11 between 30% and circa 75%, there have
billion in loan guarantees. AFC Holdings alone

16 The AXiS LVII Friday 09 Dec 2022 being extended to farmers at interest rates, 17 will always assume the debt and accommodate
percent, low market rates – a form of financial the farmers. Therefore, reluctance on the part of
*From Page 15 repression by the government – the government the farmers has been the root cause of the high
had to pay ZW$8.5 billion for the difference in default rates.
strategic commodities such as fuel, fertilizers interest between that extended on loans to farm- In conclusion, the Command agriculture program
and raw materials among others for a tenure of ers against the market rate by CBZ Agroyield (regardless of the different names it might be
about 7 years at 7.62% plus 6m LIBOR. As of 55 percent. associated with) has been inefficient in all cases
shocking as it may sound, the Bank is actually One would have expected an increase in the implying the government has to extend loans to
on track with its interest payments with roughly recovery rates of the various loans issued to farmers with a track recording of at least deliv-
US$1.09 billion of the debt outstanding. farmers by banks but instead, the opposite is ering their produce to the GMB coupled with
CBZ is argued to be one of the biggest banks happening as the default rates remain high even farmers with adequate farming equipment such
in Zimbabwe and the only one with relatively as before. This has however been largely a as irrigation mechanisms. The low recovery rate
high close business ties with the government. result of side marketing by the farmers coupled is independent of whether the country experienc-
Given this background, the government has over with the belief by farmers that the government es good rains or not.
the past ten months paid over ZW$2.9 billion
of the called-up ZW$3.9 billion while ZW$970
million remains due and outstanding. Given that-
the government guaranteed loan facilities were

MPC latest sitting resolution review

RBZ maintains the bank policy rate despite business criticism, cites review in Q1 2023

T he resolutions of the RBZ’s room for review in the first quarter estimated to be about 6 months. nomic agents to resort to USD
Monetary Policy Committee of 2023 subject to inflation trends The witnessed sustained decline in credit as a means to circumvent the
(MPC) held on the 2nd of at the time. This is in spite of monthly inflation over the past few policy position on ZWL.
December 2022 come at a time economy-wide outcry regarding the months is a result of several policy The Bank has further committed to
when the economy is beginning to prevailing high borrowing costs actions, including the introduction enhancing its support of productive
witness a ballooning parallel which, according to businesses, of gold coins which are said to sectors of the economy, in line
market rate, which is now averag- have severely affected profitability, have mopped up close to ZW$15 with the government’s vision to
ing between ZW$900/ZW$950 to consumer spending and working billion since their inception, cou- achieve an upper middle-income
the greenback, a sudden increase capital positions. Of interest, data pled with the value for money economy status by 2030, by
from ZW$750 a few weeks ago. from the latest Confederation of approach by the ministry of finance increasing the Medium-Term Lend-
This is occurring despite recording Zimbabwe Industries (CZI) busi- in regards to payments to contrac- ing Facility to ZW$20 billion in
slow growth in the general price ness and economic intelligence tors, which makes it difficult to 2023 from the current limit of
level which stood at 1.8% in survey for third quarter 2022, account for individual effects of ZW$10 billion.
November from a peak of 30.7% reveal that loans and advances by the said policies on various eco- In addition, in the coming year, the
in June this year. Given the sus- the banking sector continued to rise nomic variables, particularly infla- Bank aims to improve foreign
tained fall in month-on-month over the period despite the rise in tion. exchange efficiency by reviewing
inflation over the past three interest rates by the central bank. Therefore, it may be too early for forex retention thresholds on
months, one would expect the RBZ However, the sustained position on the central bank to relax its mone- exports and domestic FCAs.
to marginally loosen its monetary the bank policy rate by the RBZ is tary policy stance. On the contrary, In the outlook, the tense global
policy stance which has remained justifiable despite falling inflation. it can be argued that monetary geopolitical position coupled with
firm since July this year. Central bank actions have a rela- policy tends to be ineffective in a planned OPEC production cuts will
Having reviewed the macroeconom- tively larger outside lag (the multi-currency regime given that impart considerable levels of uncer-
ic environment, the MPC will amount of time it takes for either the RBZ has only instituted a tight tainties to inflation on the local
maintain the current bank policy fiscal or monetary policy to have monetary policy on the Zimbabwe front through imported inflation.
and medium-term lending rates at anoticeable effect on the economy) dollar leaving room for rational eco
200% and 100%, respectively, with compared to fiscal policy, which is

Kariba Dam’s
Receding water levels suffocate the Fish Industry
F ishing cooperatives and private fishers have vention is critical, but the problem is that three
reported an extraordinary drop in fish the Kariba dam. Zimbabwe is already suffering ministries compete for control of the Kariba
catches on the renowned Lake Kariba the effects of the more than 19 hours a day of Dam.Fishing is regulated by the Ministry of Agri-
amid declining water levels. Although many have daily power outages that have struck residential culture in a water body designated as a recre-
focused on how the country's power woes have areas. Zambia has suggested a 6-hour load-shed- ational park and is regulated by the Ministry of
been impacted by Lake Kariba's low water ding plan beginning on December 15th, in addi- Environment, Climate, Tourism, and Hospitality
levels, it has to be noted that Kariba fisheries tion to increasing power production. Power inter- Water Climate. The Zambezi River Authority
produce between 60 - 70 percent of Zimbabwe's ruptions will have a significant impact on the (ZRA), which is under the Ministry of Power
total fish output and hence play a critical part in production levels from various sectors of the Development and Energy, is responsible for man-
the nation's food security. nation intended to curb out-of-control food infla- aging, operating, and maintaining the Kariba
The aquaculture industry is nascent, and Lake tion. Complex. Sometimes the confusion caused by
Harvest Aquaculture is the only significant player. Because fishing cooperatives and private fisher- these overlapping roles hinders decision-making.
It offers the lake's greatest opportunity for future men are not permitted to fish in all places less For the Kariba Dam's concerns to be managed
fish production. than 20 meters deep, the fishing surface area has and dealt with in unity, the current situation there
According to the World Bank, In October, Zimba- shrunk, potentially causing fish depletion because should serve as a proper springboard and allow
bwe topped the list for food inflation with a boats are concentrated in a few areas. Fishermen authorities to put in place a vivid structure to
351% spike, and the situation at the Kariba dam are expected to fish two kilometres inland from govern the affairs at Lake Kariba.
would only exacerbate the country's critical food the shoreline in regions that used to yield a lot The Zimbabwe Parks and Wildlife Management
security concerns. Low-income workers are the of fish for the industry but now lack water or are Authority ceased issuing fishing licenses in 2020
most affected by food inflation since they spend deemed shallow ground. Due to the low water to stop the overfishing of fish species, notably
a big portion of their income on food, and kapen- levels, the fishing area is now too confined, and kapenta, which is a key component of the indige-
ta is a cheap source of protein for most people many businesses are closing. Due to the costs, nous cuisine. The US$1,200 per year fishing
in the nation. many boats that are currently strandedin the mud permits are now burdensome for many, as catches
Food inflation has been aggravated by food are not being removed. The government's inter have decreased, yet landlord fishermen charge up
imports, and in the past, the government has tried to three times what ZPWMA charges. In this
to protect consumers from irrational price goods. regard, the outright revocation and re-allocation of
On November 14th, the Suspension of Duty on some fishing licenses should be considered. Revo-
Basic Commodities came to an end, and the gov- cation of licenses for persistent violators will be
ernment made it clear that it would not be a deterrent, especially in light of the requirement
extended. As a result, more needs to be done to limit the number of fishing rigs to sustainable
locally to try to stem the spiralling price increas- levels.
es, and the situation at Lake Kariba poses more According to sources, the maximum number of
problems than it does suitable solutions.Both the fishing rigs permitted in Lake Kariba is 500. Out
Kariba North Electricity Station (on the Zambian of this, 275 should operate on the Zimbabwean
side) and the Kariba South Power Station (on the side and 225 on the Zambian side, however, the
Zimbabwean side) have seen decreased power lake now has more than 1,500 fishing boats
production as a result of the low water levels at anchored there. To salvage the dying fish industry
at Lake Kariba, proper legislation and reorganiza-
tion are currently of the utmost importance.

17 The AXiS LVII Friday 09 Dec 2022

Vertical farming Mining deficit

A solution for Zim’s intermittent Perpetuates bleak 2023
rainfall outlook

The mining sector is the second largest national
income generator after wholesalers and retailers pro-
ducing 11% of national income, 83% of exports,
19% of government revenue, 2% of direct formal
employment, and 73% of foreign direct investment.
Authorities had initially envisioned the 2023 budget
at US$12 billion, but the recent hard-hitting national
power crisis has placed the sector in the blast
furnace.

The operational constraints have left the sector with
the need to review the 2023 budget downward to
US$7.5 bn. This nosedive has initially been pointed
to increased electricity charges. The emerging power
shortages and the 2023 proposed value-added tax
increase are expected to widen the gap.

The expanding sector has applied 2200MW worth of
power to ZESA for 2023 operations. This, however,
unfortunately, is beyond the power company’s capa-
bility as it is operating on 19-hour residential
load-shedding.

T he current rainy season in Zimba- The Zimbabwean economy is rooted in ZESA normally operates at a capacity of 1600MW
bwe has not been the best. Lack agricultural productivity, according to the plus an additional 250MW recorded as imports from
of rain affects various parts of National Economic strategy, NDS1 (Na- South Africa and Mozambique to make a total of
the economy in addition to being the tional Development Strategy1). Agriculture 1850. The Zambezi River Authority ordered the
main cause of blackouts in the nation. has an important role in Zimbabwe's closure of Kariba South Bank power station as the
Many meteorological experts predict that long-term economic prosperity. whole nation is living on an average of 500MW with
drought will soon arrive. The rains have the latest of 494MW recorded yesterday, Dec 6th.
been erratic, which has proved terrible for
farmers who only use rainwater. Agricul- In this article, we'll look at how farmers This high-magnitude electricity shortage is expected
ture is one source of income for many and agribusinesses can use vertical farming to run into 2023 as the proposed suspension is
individuals in Zimbabwe because the to protect themselves from irregular rains. expected to be reviewed in January 2023 when a
country has a significant informal sector further review of the substantive Hydrological Out-
presence. For farmers who depend on Vertical farming is the process of cultivat- look at Kariba will be undertaken which will include
seasonal rainfall, the rainy season is cru- ing crops in layers that are piled vertically. consideration of the total reservoir live storage
cial. It frequently integrates soilless farming build-up which would have resulted from a shutdown
The World Bank reports that Zimbabwe techniques such as hydroponics, aquapon- of the Kariba South Bank Power Station power.
has seen a sharp decline in agricultural ics, and aeroponics, as well as con- In addition to energy constraints, the mining sector
output and rising food prices, leading to trolled-environment agriculture, which tries also deals with high-cost structures brought on by
an increase in food insecurity. Therefore, to optimize plant development. Buildings, taxes, fiscal fees, and a lack of foreign currency. The
a long-term solution to the problems shipping containers, tunnels, and aban- government has recently reviewed upwards the
brought on by erratic rainfall is needed. doned mine shafts are value-added tax from 14.5% to 15% previously oper-
Now is the time for farmers and agribusi- some of the most frequent ated prior to COVID-19.
nesses to plan and create farming tech- structures used to house
niques that use less rainfall. Relying on vertical farming systems.
natural rainfall has in the past led to Greenhouses are the most
disappointment for farmers. Due to the common vertical farming
unpredictable nature of weather patterns structures in Zimbabwe.
brought on by climate change, farming According to a survey I
has grown to be a massive enterprise. conducted, a
Most locations have had occasional rain- solid(40m*40m) green-
fall, with the total amount received so far house structure for vertical
being much less than it was at this time farming can cost between
last year. US$4,000 and US$20,000,
Climate change has had a substantial including basic buildings
impact on agricultural production. The and storage tank facilities.
agriculture sector's contribution to GDP These prices can be
decreased from 10.14 percent in 2019 to reduced by over 50% if
7.61 percent in 2020, according to the the material used for the
latest available data. The fundamental greenhouse is wood as
cause of this is that most people involved opposed to the convention-
in agriculture solely rely on precipitation. al galvanized steel green-
When rainfall is uncertain, crop yields houses.

Vertical farming in Africa
was estimated to be worth

The outlook is that the pre-11 % growth forecast for
the sector is most likely unachievable if all the bot-
tlenecks are not addressed. The national income
US$0.57 figure outlook of 3.8% is also greatly strained down-
billionin wards by 40 basis points (bps) to 3.6% owing to the
2021, power shortage situation. This could nosedive by a
according higher margin if the electricity alternatives are not
to Farmers explored.
Market SA
data, and is
expected to
expand at a
rapid rate of 26.4 percent pbeerinygeaur,rgreedachtion!ginUvSes$t1.8in6 billion by 2026. Many
Zimbabwean farmers are vertical farming. This
market is relatively untapped, and there are advantages to farming vertically.
The main advantage of vertical farming is improved crop output over a small-
er cultivated are
*To Page 18

The AXiS LVII Friday 09 Dec 2022 18

*From Page 17 Vth2eerticfualtufraer.msSoamree being heralded as the farms of the population grows and food prices rise. As a
farms, particularly in large result, vertical agricultural solutions will be nec-
Beyond providing fresh local produce, vertical urban areas, are successful already. There are essary. Hydroponics is an excellent alternative for
agriculture could help increase food production several benefits to vertical farming, including no Zimbabwean farmers who don't have access to
and expand agricultural operations as the world’s reliance on weather, less water usage, and the land or water.
population is projected to exceed 9 billion by ability to convert city spaces into working farms. Vertical farmers are already under pressure to
2050. And by that same year, two out of every It’s not all positive, though. There’s a limit to deliver an ever-increasing variety of products
three people are expected to live in urban areas. what can be grown on vertical farms, their while maintaining the volume, quality, and nutri-
Producing fresh greens and vegetables close to energy usage is high and the prices will appeal tional criteria that buyers demand.
these growing urban populations could help meet to just a small fraction of people. It's not easy to navigate the drawbacks of agri-
growing global food demands in an environmen- cultural development to meet demand. Vertical
tally responsible and sustainable way by reducing Regardless of the benefits and drawbacks of ver- farming is the future!
distribution chains to offer lower emissions, pro- tical farming, progress must be made. Traditional
viding higher-nutrient produce, and drastically farming methods will be unable to keep up as
reducing water usage and runoff.opment to meet
demand. Vertical farming is the future!

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The AXiS LVII Friday 09 Dec 2022 19

Unpacking CZI 2022
3rd Quarter Business and Economic Intelligence Survey Results

T he results of the 2022 3rd Quarter Busi- an increase-of which the transport sector had restrictions to travel. An easing of lockdowns in
ness and Economic Intelligence Survey thelargest proportion registering increased trade 2022 naturally implies growth in the transporta-
have been published. volumes, 33.72% of the firms registered a tion sector.
This exercise was conducted and circulated by decrease, and 24.42% remained the same. Fur- Other highlights of the report include imports of
the Confederation of Zimbabwe Industries with thermore, it was younger firms that represented a consumption goods falling relative to capital and
the aim of fetching insights from both manufac- higher proportion of companies that registered intermediate goods. USD Domestic sales
turers and non-manufacturers on the economic increases in trade volumes. remained the primary source of foreign currency,
environment and their overall performance. The This cannot be interpreted as implying strong about 59% of the firms perceive that their profit-
sample swept 522 companies across the country performances given that the impact of the ability had either stagnated or declined. About
and across varied sectors, from communication, COVID-19 pandemic and the subsequent lock- 17% of the firms retrenched in the first nine
agriculture, and transport, to wholesaling and down restrictions posed such a strong constraint months of the year, the biggest proportion
retail trading, amongst a few others. on the economic environment and therefore the coming from the wholesale sector.
The report highlighted that despite the challeng- 2022 performance is measured from a low base.
ing environment- which was characterized by
high inflation which peaked at 285%, huge paral- Considering that about half of the surveyed firms There remains great uncertainty regarding the
lel market premiums which reached 110% in indicated that they managed to create jobs. The economic and sector outlook. Only 45% of the
July, and a myriad of tight monetary and fiscal transportation sector lead job creation growth sample except the 2022 4th quarter to be better
policies like the suspension of borrowing- trading with the sector having the largest proportion reg- than the current period. 15% of the sample
volumes in 2022 still increased compared to istering increased trade volumes. This follows the expect the future to be worse while 38% expect
2021. 41.86% of firms in the sample registered narrative of a low base caused by lockdowns and the economic conditions to remain the same.

AfDB 2022
Industrialisation report cements need for automation in Africa

A frica has always been the international prices coupled with Moreover, the performance of the In the case of Zimbabwe, the fall
prime supplier of primary low productivity in the said sec- countries over the period was nega- in the manufacturing sector was
commodities to the rest of tors.The African Development tively affected by the C-19 pan- due to negative or premature dein-
the world since the turn of the cen- Bank (AfDB)’s industrialization demic which brought a halt in dustrialization which began in the
tury, particularly agricultural prod- report tracks the industrial policy many sectors of the respective 1990s, a result of weak government
ucts and mineral resources. Howev- of over 50 African countries, countries.” policies skewed towards socialist
er, the COVID-19 pandemic excluding Somalia and South Of interest, although Zimbabwe and leftist policies instead of
exposed the continent to its various Sudan. Industrialization is defined was among the top performers in encouraging and embracing private
structural bottlenecks which have as the structural change from the terms of industrial policy in the sector growth. Regionally, North
since rekindled the need for the primary sector, that is agriculture 1980s it has however deteriorated Africa which includes the fastest
continent to industrialize. or resource-based economy, towards over the past three decades. Zimba- growing emerging economy, Egypt,
These structural inefficiencies have the manufacturing sector. In bwe was among the main losers in remains the most advanced region
since been exacerbated by the Rus- essence, the index measures the terms of rankings together with in terms of industrialization
sia-Ukraine war, which has disrupt- capacity of countries to produce Malawi, Angola, Congo, et cetera. followed by Southern, Central,
ed global value and supply chains. and export manufactured goods. West and East Africa.
Africa has relatively been hardest “Overall, many countries have
hit both in terms of rising prices made significant gains in their
coupled with shortages of basic industrial development over the
commodities. This comes at a time coverage period 2010–2021, with
when most African nations are 37 of 52 Regional Country Mem-
undergoing premature deindustrial- bers improving their AII score.
ization as compared to the devel- However, some countries recorded
oped countries of Asia and Europe only a marginal improvement,
which experienced deindustrializa- thereby falling in the ranking as
tion as a natural phenomenon. the score was not enough to boost
Africa has over the past decades it, while others performed satisfac-
focused only on resource extraction torily. Only 25 countries improved
and agricultural activities plagued their rank and 4 remained in the
with unpredictability in terms of same position as in 2010”, read the
report.

20 The AXiS LVII Friday 09 Dec 2022

Zim’s Energy crisis update

It never rains but pours for the energy sector in Zimbabwe

OPEC+ has Made a decision to main- Sokol. The imposed sanction-based price include imports of petroleum for substitution. Already the
tain production levels at current ceiling will automatically shift the oil country is importing electricity worth about US$20 million,
levels despite widening supply gaps supply curve to the left and cause a hefty a month and this could go up once imports are increased.
in the market. The decision comes at a reduction in petroleum supplies. The uncertainty disrupts the country’s objectivity in achieving
time China is expected to see spikes in The COVID-19 restrictions that have the 3.8% 2023 GDP growth estimate by a much larger
demand as the latest COVID-19 lockdown reduced China's petroleum use are being margin. The negative outlook remains a threat to the govern-
measures ease and Russia’s supplies tank hesitantly eased and this will increase ment and necessitates the need for the authorities to explore
further. petroleum demand. Since the month of more options for power provisions.
The 23-member nation group last agreed to October, the largest crude importer in the
implement the reduced 2 million bar- world purchased up to 10.2 million barrels !
rel-a-day production at its most recent per day. according to figures from the cus-
summit on the 4th of October 2022. The toms service issued on the 31st of October,
meeting, which lasted around 20 minutes, China made a total fuel import of 43.14
was conducted entirely online. The cut will million tons of petroleum. The eased covid
typically have an impact of further worsen- 19 restrictions will create a much larger
ing prices. demand spike which will trigger even more
The EU recently put in place legislation shortages in the fuel market.
prohibiting a significant portion of imports Zimbabwe’s energy market is presently
of Russian crude as well as the utilisation reeling from extreme supply deficits, espe-
of regional shipping or insurance services cially in electricity. This follows the steep
to buy Russian oil. This is unless the price cutback on production at Kariba Hydro
is kept below a cap of $60 per barrel. The which is the main source of electricity
current trade price for Russian oil is cur- supply. The huge deficit which arose
rently at $73.43 in ESPO and $77.25 in requires significant gap filling which will

The AXiS LVII Friday 09 Dec 2022 21

Regional Economic

Watch

GHANA RWANDA

The Bank of Ghana (BoG) has increased its benchmark interest rate from 24.5 percent to 27 The Rwanda Central Bank has raised its lending
percent. rate from 6.0% to 6.5% as it battles a drastic rise in
the cost of living.High food prices as well as exter-
Speaking with journalists in Accra on Monday, Ernest Addison, governor of BoG, said the decision nal shocks, including the impact of the war
is expected to anchor inflation expectations in the country.In October, inflation in the West between Russia and Ukraine, have fuelled an
African country hit 40.4 percent — its highest rate in 20 years. increase in the prices of imported commodities
including oil, gas, fertilizers and sunflower seed
“The committee is of the view that significant upside risks to the inflation outlook remain. To oils.
continue to anchor inflation expectations, the committee, therefore, decided to increase the
policy rate by 250 basis points to 27.0 percent,” he said. This is the third hike by the country’s central bank
rate-setting Monetary Policy Committee (MPC) this
Addison, also the chairman of the bank’s monetary policy committee, said the country’s inflation year.According to Rwanda’s Central Bank Governor
is forecast to peak in the first quarter of next year.He added that inflation could settle at around John Rwangombwa, inflation in the country has
25 percent by the end of 2023 if a tight policy stance was maintained.“The inflation forecast shows risen sharply due to high prices of imported goods
that in the outlook, inflation will likely peak in the first quarter of 2023 and settle at around 25 as well as local food prices as the agricultural
percent by the end of 2023,” Addison said. output remains constrained.Despite the interven-
tion by the central bank, inflation remains above
target, sharply rising to double digits, well above
the initial annual average target of 12.1%.Rwanda
Consumer Price Index (CPI) headline inflation
increased by 31% on an annual basis and by 5.6%
on monthly basis in October according to figures
released by the National Institute of Statistics of
Rwanda.

MOZAMBIQUE N

The Monetary Policy Committee of the Bank of Mozambique NW NE
(CPMO), meeting in Maputo on, decided to keep its benchmark
interest rate unaltered.A statement from the CPMO said that the WE
monetary policy interest rate (MIMO) used by the central bank
for its interventions on the interbank money market to regulate SW SE
liquidity, will remain 17.25 per cent.The inflation rate is slowing
down. Annual inflation, as measured by the consumer price S
indices in the three main cities (Maputo, Nampula and Beira), fell
from 12.01 per cent in September to 11.08 per cent in October.
This, the CPMO said, reflected a fall in food prices, particularly of
fruit and vegetables.

The Bank was optimistic that, in the medium term, the annual
inflation rate will fall to below ten per cent, due in part to the
stability of the national currency, the metical.Nonetheless, the
CPMO warned of a high level of risk, thanks to growing pressures
for an increase in public expenditure, and uncertainties about
climatic shocks and the effect these will have on marketing and
prices. Furthermore, nobody knows how long the Russian inva-
sion of Ukraine will last, and the risk remains of a worldwide
economic recession.

The central bank has revised downwards its forecast for econom-
ic growth in 2023. In the third quarter of 2022, the annual growth
rate slowed to 3.6 per cent, which the CPMO statement blamed
on “the poor performance of the secondary sector”.In the
medium term, a slowdown in the expansion of economic activity
is expected “faced with the potential reduction in foreign
demand, and restrictive financial conditions, including added
difficulties in access to international financial markets”.

The AXiS LVII Friday 09 Dec 2022 22

Zim’s Banking Sector
Taking the economy to where it should be
Z imbabwe’s undying but slowly suffocating
problem has been inflationary pressures with reduced premium levels to below 2% which central bank uses the weighted average as the offi-
and the MPC implored multiple tools to has given insights into the convergency theory. cial bank rate
reduce the pressures. The financial sector has
Temporary Suspension of Lending by Mosi-oa-Tunya Gold Coin Trading

remained the focal point for controlling the inces- Banks. The monetary policy committee also introduced
sant macroeconomic problem. The recently pub- gold coins into the Zimbabwean market as an
lished banking sector review for the Q3 period On May 7th 2022, the central bank temporarily alternative stable investment product for value
has shown sound financial performance improve- suspended lending by banks to allow comprehen- preservation. This helped the banking sector in
ments, showing an insignificant reaction from sive investigations by the Financial Intelligence retrieving the excess funds circulating in the black
tight monetary policies that includes more than Unit (FIU) into abuses of commercial bank loan market and the foreign currency pool that was
double bank lending cost hikes. The recorded stel- facilities by business entities. pilling on the black market was channelled to buy
lar financial records are owing largely to non-in- This model realised success in the detection of the gold coins The gold coins moped excess
terest income, which comprised of fees and com- significant abuse of loan facilities by borrowers liquidity and the accelerated forex deals were a
mission, revaluation gains from investment transla- through arbitrage, multi-dipping, borrowing on result of the accelerated demand for local currency.
tion gains on foreign currency-denominated assets. behalf of third parties and diversion of foreign The banks have made investments in other finan-
exchange obtained through the foreign exchange cial assets to as great significance to its profitabili-
Summary of key financial records ty.

Total banking sector assets amounted to ZW$3.11 auction system to parallel market activities. This Mosi-oa-Tunya Gold Coin Trading has given
trillion as of 30 September 2022, up from would have negatively affected the interest banks access to their flesh and restored the legacy
ZW$1.94 trillion as of 30 June 2022. The major income for the bank as the loans (the bank’s of the sector. The centralisation of funds is essen-
assets on the banking institution’s balance sheets assets) were narrowed.The improved stellar tially giving the banking sector chance to bring
were loans & advances (29.58%), balances with records in the third quarter are owing to the sec- back the lost confidence from the public and
foreign institutions (13.95%) and balances with tor’s strategized operational model. The non-inter- slowly take the nation into the zero-arbitrage
the central bank (12.65%). The return on assets est income comprised up to 70% of the sector’s formal economy.
and return on equity ratios were 16.48% and earnings. Deposits in the period under review The outlook remains positive for the banking
53.25% as of 30 September 2022, compared to increased by 70% from ZWL1,124.73 bn to sector owing to slaking inflationary pressures
8.23% and 31.87% as of 30 September 2021, ZWL1,911.57 bn in September with a slight easing since August. The operating environment
respectively. The projected performance for the decrease in liquidity ratio by 1.27 percentage however has an operational risk as the parallel
sector turned out otherwise as the monetary instru- points from 60.78% to 59.51%. The temporary exchange rate and the black-market gap is widen-
ments were pointed in reducing the liquidity from suspension of the bank lending couldn’t impact ing with the latest premium at 37% (official of
circulation hence tightening the money supply. The largely the earnings of the sector owing to above 666 vs black market of 900). As the central bank
article intends to assess the impact of monetary mentioned major drivers of Q3 income. is on the urge of paying contractors and higher
instruments on the third quarter financial perfor- Statutory reserves, the most important portion of importation Bill payments, the banking sector will
mance. funds by depositors to be kept as reserves were continue to play an important role in supporting
maintained at 10% whilst time deposits remained the funding requirements of the economy as recov-
Bank Policy Rates at 2.5% for the half-year period. An increase in ery gains traction. The banking sector is expected
broad money saw statutory reserve balances to bring back a stable banking environment in
The central bank raised the interest rate from 80% increases from ZW$20.11 billion on 31 January future.
to 200% on 24 June 2022 as a measure of reduc- 2022 to ZW$64.8 billion as of Sep 2022. This
ing speculative borrowing and stabilising the shows a significant jump in deposits and the
exchange rate. The policy came as a slam to the made operational profits of 25.77%.
banks making finances from lending. The firms
with outstanding loans engaged in premature debt
settling and this negatively affected the perfor- Foreign Exchange Market

mance of the manufacturing and operational sector As a support system in clearing arbitrage oppor-
direly. tunities, the Central Bank moved to eliminate

However, the banking sector recorded an insignifi- thegap between the official rate and the
cant change in the loan deposits ratio (from black-market rate. This has boosted forex deals
53.69% to 52.83) which in the end recognised for the banking sector owing to a reduced premi-
significant interest income.The intended discourag- um between the weighted auction rate and the
ing of borrowing and lending was in vain whilst official rate. Forex deals increased and the banks
the instrument was a success in reducing specula- utilised the opportunity and made up to 27% of
tive borrowing and stabilising the exchange rate. the total earnings out of forex deals.The auction
As it is evidence of much-reduced inflation by a market, carried every week has been a driver of
higher margin, speculative borrowing did not add a productive sector contributing 41% of funds to
value to the sector but inflation to the nation. raw material importation and 22% to machinery
Also, the exchange rate recorded some stability and equipment imports. As such the companies
have been bidding on the trade rates and then the

Term of The Week

So'' vereign wealth fund mulates the funds in the course of its management of a nation's banking
system; this type of fund is usually of major economic and fiscal impor-
Doresfionciia�l owne:alAthsfouvnedreisigan wealth fund (SWF), sovereign investment fund, tance. Other sovereign wealth funds are simply the state savings that are
state-owned investment fund that invests in real invested by various entities for the purposes of investment return, and
and financial assets such as stocks, bonds, real estate, precious metals, or that may not have a significant role in fiscal management.
in alternative investments such as private equity fund or hedge funds. The accumulated funds may have their origin in, or may represent, foreign
Sovereign wealth funds invest globally. Most SWFs are funded by revenues currency deposits, gold, special drawing rights (SDRs) and International
from commodity exports or from foreign-exchange reserves held by the Monetary Fund (IMF) reserve positions held by central banks and mone-
central bank. tary authorities, along with other national assets such as pension invest-
ments, oil funds, or other industrial and financial holdings. These are
Understanding SWF: assets of the sovereign nations that are typically held in domestic and
different reserve currencies (such as the dollar, euro, pound, and yen).
Some sovereign wealth funds may be held by a central bank, which accu Such investment management entities may be set up as official investment
companies, state pension funds, or sovereign funds, among others.
There have been attempts to distinguish funds held by sovereign entities
from foreign-exchange reserves held by central banks. Sovereign wealth
funds can be characterized as maximizing long-term return, with foreign
exchange reserves serving short-term "currency stabilization", and liquidi-
ty management. Many central banks in recent years possess reserves mas-
sively in excess of needs for liquidity or foreign exchange management.
Moreover, it is widely believed most have diversified hugely into assets
other than short-term, highly liquid monetary ones, though almost no data
is publicly available to back up this assertion.

Business Around The World The AXiS LVII Friday 09 Dec 2022 23

Growth of 5.7% in West African Economic U.S. lawmakers press federal banking regula- hoped would help it bounce back to pre-covid
and Monetary Union in 2022 tors on the industry’s exposure to crypto after profitability levels failed to materialize.
The growth rate within the countries of the West Alameda stake in bank comes to light “Many of the additional vehicles arrived in
African Economic and Monetary Union Top Senate Democrats pressed key banking regu- Nairobi just about the same time when the
(WAEMU), amounted to 5.7% in 2022, down lators on possible ties between the industry and strict covid-19 curfew rules were put in place
0.4% compared to 2021, announced Monday the digital currency exchanges following the bankrupt- in March 2020,” the company’s statement said.
leaders of this organization meeting in Abidjan. cy of major cryptocurrency firm, FTX. “Those rules led to daily kilometers driven by
The eight member countries of UEMOA (Senegal, Sens. Elizabeth Warren, D-Mass., and Tina Smith, Nopea vehicles dropping approximately 60%
Guinea Bissau, Ivory Coast, Togo, Benin, Mali, D-Minn., members of the Senate Banking, House overnight.”
Niger and Burkina Faso) have not been spared by and Urban Affairs Committee, sent letters Why NopeaRide failed in Kenya
"the deep crises that affect the whole world", in Wednesday to the Federal Reserve, the Federal Starting off in August 2018 with three EVs and
particular "the consequences of the war in Deposit Insurance Corporation and the Office of two charging stations in Nairobi, NopeaRide
Ukraine", at the same time as "our economies the Comptroller of the Currency asking about the created a network of charging stations, import-
were recovering from the shock" of the crisis close ties between crypto markets and traditional ed dozens of electric cars, and by June this
related to Covid, said Ivorian President Alassane banking following the collapse of crypto exchange year, it had driven more than 4 million kilome-
Ouattara. FTX. ters, helping Nairobi cut over 650 tons of
In addition to the growth rate, which has slowed The letters are the latest in a series of inquiries carbon emissions, according to company data.
from 6.1% in 2021 to 5.7% in 2022, inflation to various financial institutions and regulators -QUARTZ
within the union has risen from 3.6% to 7.5% in about cryptocurrency oversight. FTC sues to block the $69 billion Micro-
2022, Mr Ouattara said, adding that its member “It appears crypto firms may have closer ties to soft-Activision Blizzard merger
countries had nevertheless shown "resilience". the banking system than previously understood,” The Federal Trade Commission said Thursday
Noting that the security situation was "worrying" the senators wrote to Federal Reserve Chair it is suing to block Microsoft's planned $69
because of "the increasing number of terrorist Jerome Powell, Martin Gruenberg, acting chair of billion takeover of video game company Activ-
attacks" in several UEMOA countries, in particular the FDIC and Michael Hsu, acting comptroller of ision Blizzard, saying it could suppress compet-
Burkina Faso and Mali, he pointed out that some the OCC. “Banks’ relationships with crypto firms itors to its Xbox game consoles and its grow-
of the expenditure that should have been allocated raise questions about the safety and soundness of ing games subscription business.
"to education and health" had been allocated "to our banking system and highlight potential loop- The FTC voted 3-1 to issue the complaint after
defence and security". fhuorltehserthaactccersys.p”t-oCNfirBmCs may try to exploit to gain a closed-door meeting, with the three Demo-
The Abidjan summit was held the day after the Huge Wirecard fraud trial opens in Germany cratic commissioners voting in favor and the
Abuja summit of the fifteen member countries of Germany's mammoth Wirecard fraud trial opened sole Republican voting against. A fifth seat on
ECOWAS, to which the UEMOA belong, which on Thursday, with ex-CEO Markus Braun and two the panel is vacant after another Republican
decided to create a regional force to intervene not former executives in the dock over their roles in left earlier this year.
only against jihadism but also in the event of a the country's biggest-ever accounting scandal. The FTC's complaint points to Microsoft's pre-
coup d'état, as the region has experienced several The trial in Munich comes two and a half years vious game acquisitions, especially of
over the past two years.-AfricaNews after digital payments firm Wirecard collapsed in well-known developer Bethesda Softworks and
African airlines set to lose R11bn this year spectacular fashion after admitting that 1.9 billion its parent company ZeniMax, as an example of
African airlines are expected to post a loss of euros ($2-billion) missing from its accounts didn't where Microsoft made some popular game
$638 million (R11 billion) in 2022, narrowing to actually exist. titles exclusive despite assuring European regu-
a loss of $213 million in 2023, according to the Chancellor Olaf Scholz, who was finance minister lators it had no intention to do so.-NPR
latest outlook by the International Air Transport at the time of Wirecard's implosion, described the The UK is opening its first coal mine in 30
Association (IATA). scandal as "unparalleled" in Germany's post-war years
This year there was passenger demand growth of history. The UK has approved a new coal mine 30
27.4% among African airlines, which outpaced The first day of the high-profile trial, held in a years after the last one opened in the country,
capacity growth of 21.9%. IATA expects that in high-security courtroom inside Munich's sprawling and seven years after it closed its last deep
2023 the African region will serve 86.3% of Stadelheim prison complex, will mainly consist of coal mine.
pre-financial crisis demand levels and reach 83.9% prosecutors reading out the 90-page indictment. The £165 million project will produce around
of pre-financial crisis capacity. Notably absent from the trial will be Wirecard's 2.8 million tons of coal a year—primarily
"Africa is particularly exposed to macro-economic former chief operating officer Jan Marsalek, a coking coal, which is used in the manufacture
headwinds which have increased the vulnerability shadowy figure with ties to foreign intelligence of steel. The mine wouldn’t interfere with Brit-
of several economies and rendered connectivity agencies.Marsalek evaded arrest in 2020 by stag- ish plans to hit net zero emissions by 2050, the
more complex," states IATA. ing a daring escape from Austria by private jet. government has argued—because it will close
In looking at the air cargo market in Africa, IATA He was reported earlier this year to be hiding out down in 2049, in the very nick of time.
points out this is usually a handy barometer of in Russia. The announcement drew immediate harsh criti-
trade in high-value goods. In October this year, Wirecard's veteran CEO Braun, in custody since cism from environmentalists, academics, politi-
African airlines, which account for 1.9 percent of July 2020, faces charges of commercial gang cians and economists, who argued that the new
the global air cargo market, saw cargo volumes fraud, breach of trust, accounting fraud and coal mine will damage the environment as well
decrease by 8.3% compared with October 2021. market manipulation.The 53-year-old denies the as the UK’s reputation and moral standing as
For IATA this was a signifiant drop from the allegations and claims to be a victim of the fraud, a global climate leader, while making little eco-
-0N.1e%ws24growth recorded in September 2022 painting Marsalek as the mastermind. -eNCA nomic sense.
French economy should stave off recession in ICPC gets petition to probe NEXIM bank The mine is set to open near the town of
2022, predicts Bank of France MD for falsification Whitehaven in Cumbria, an idyllic but econom-
The French economy should avoid a recession at ically sluggish patch of the UK. Local officials
the end of 2022, the Bank of France forecast on The Independent Corrupt Practices and Other reckon that the mine will bring 500 jobs with
Thursday. France's national bank predicted that the Related Offences Commission (ICPC) have been it. They further justified the project with argu-
economy will grow an anaemic 0.1% in the final asked to launch a proper investigation into the ments that the emissions would be negligible,
four months of this year, avoiding a recession, qualifications of the Executive Director of the or that the steel made using its coal could go
which is two consecutive quarters of negative eco- Nigerian Export-Import Bank (NEXIM), Stella “ingtroeenb.”u-iQldUinAgRTreZnewables, making the mine
nomic growth. Erhuvwuoghene Okotete. China’s Premier Vows to Work With G-20 on
Hit hard by soaring energy prices and the cost of The petitioner, Lawyers for Reform Group (LRG), Debt Restructuring
living crisis, France's GDP fell 0.2% in the third in a letter acknowledged on behalf of the ICPC Chinese Premier Li Keqiang promised the
quarter of 2022. There is a similarly bleak picture Chairman, told the commission that Okotete did International Monetary Fund that Beijing will
across Europe, with several leading economies not meet the Central Bank (CBN) Statutory work with Group of 20 nations to formulate
taking a hit. GDP, or Gross Domestic Product, is requirements of having served in the banking “fair and equitable” debt-restructuring plans for
the total value of goods and services produced service for 18 years and must have risen to the developing countries struggling with repay-
within an economy. level of a General Manager for at least two years. ments.
The Bank of France said the figures were "good Signed by LRG, Executive Project Director Aare The nation will implement the G-20’s Debt
news", showing that French companies were resil- Oladotun Hassan, the law firm alleged massive Service Suspension Initiative in all respects, Li
ient. Services and construction did better than corruption allegations, spiral approval of huge said in a meeting Thursday with IMF Manag-
expected in November and there had been an loans to unqualified and unverified companies, ing Director Kristalina Georgieva, according to
"increase in activity" said Olivier Garnier, Director fraudulent round-tripping and recycling of differ- a release from the Ministry of Foreign Affairs.
General of Statistics at the French bank. ent unpaid loans as well as the use of various China will strengthen policy coordination with
“Overall, there is no fall in activity at the end of front-companies as proxies to defraud the bank of all parties, including the crisis lender, to tackle
the year”, he added. briiallions of naira and dollars. -The Guardian Nige- global challenges such as debt, he said.
GDP should grow by 0.1% in the fourth quarter, KThene yacoims cplaonsiyngthshatoppioneered electric taxis in As the world’s biggest sovereign lender to
confirming the previous forecast of a “ very slight In 2021, NopeaRide announced that it would developing countries, China has come under
increase." increase the number of cars in its fleet from 30 criticism for its perceived lack of participation
“Of course, it is still marred by uncertainty”, Gar- to 100 as part of a growth strategy. But by the in a global effort to lessen developing nations’
nier continued, but “we have an activity which is debt burdens, with US Treasury Secretary Janet
reexspisetcitnegd”w.-Eellu,raonndewevsen rather a little better than Yellen saying on multiple occasions that Bei-
jing has become the biggest obstacle to prog-
ress.

Politics Around The World The AXiS LVII Friday 09 Dec 2022 24

pPreerdu’escensseowr’sparrerseidstent under pressure after The boy remains in a critical condition in hospital. Switzerland. Almost 1.7 million people live in one
Schengen country and work in another. Around
The 34-year-old police officer who fired the shot 3.5 million people cross an internal border each
Peru’s new President Dina Boluarte was under has been suspended and is due to appear in court day.
pressure Thursday to quell the political turmoil Friday for questioning on charges of manslaughter
rocking the country, a day after the dramatic arrest with possible intent and illegally firing his Austria, in particular, had objected to Bulgaria and
of her predecessor, who stands accused of attempt- weapon. Romania joining, citing migration concerns..
ing a coup. -France24
Greek police say the teenager had tried to ram an
The South American country’s first-ever woman opifcfikcuepr'strumcko-tEorubrikoenewdusring the chase with his Indian PM Modi’s BJP scores landslide win in
leader asked the opposition for a truce as she pre- Gujarat state
pared to form a government, as doubt hung over
her ability to survive the firestorm ignited by US House passes $858bn defence bill with India’s ruling Bharatiya Janata Party (BJP), led by
Pedro Castillo. weapons funding for Taiwan Prime Minister Narendra Modi, has scored a land-
The US House of Representatives has passed a slide victory in the western state of Gujarat, elec-
The prosecutor’s office said it had carried out a sweeping $858bn defence spending bill that pro- tion results showed on Thursday, in a strong per-
dawn raid on the presidency and some ministerial vides $10bn to fund the provision of weapons to formance ahead of the general elections due in
offices in Lima, in search of evidence against Taiwan as the country comes under increasing 2024.
Castillo, who is being investigated for “rebellion pressure from China. The Hindu nationalist BJP retained its 27-year
and conspiracy” a day after he tried to dissolve The National Defense Authorization Act, which is control of Gujarat – the home state of Modi – but
parliament and rule by decree. expected to pass the Senate later this month, pro- lost power in northern Himachal Pradesh state to
vides five years of funding for weapons. It marks the main opposition, the Congress Party.
Castillo’s efforts were quickly stamped out by the first time that the American government will The BJP has not lost state assembly elections in
lawmakers who voted him out of office in a finance weapons for Taiwan, which in the past Gujarat, a western industrial state, since 1995.
dizzying day of high drama, by the end of which has bought arms from US companies after Wash- Modi was Gujarat’s top elected official for 13
he was in jail and his former vice president B-Tolhue- ington has provided approval for the sales. years before becoming prime minister in 2014.
arte had emerged as the new head of state.
Guardian

Russia’s Ukraine onslaught shows zero signs Beijing has previously signalled strong opposition Modi has fashioned himself as a champion of
of a winter lull as conflict rages to the weapons measure, which comes as tensions Hindu causes after the deadly 2002 Gujarat riots
are high over Taiwan. US-China relations remain – one of the worst outbreaks of religious violence
As the Russia-Ukraine war heads into winter, tense despite the first in-person meeting between since India’s independence in 1947. Rights groups
there has been some expectation that freezing tem- president Joe Biden and Xi Jinping, his Chinese say nearly 2,000 people – most of them Muslims
peratures on the battlefield could bring a lull in counterpart, on the sidelines of the G20 summit – were killed and dozens of women were raped
the conflict. in Bali, Indonesia, last month. that year following the burning of a passenger
train carrying a large number of Hindu pilgrims.
Last weekend, a top U.S. intelligence official even US secretary of state Antony Blinken will visit -Aljazeera
said they expected to see a “reduced tempo” in China in early 2023 to hold follow-on talks with South Africa's former health minister wants
the fighting and that this was likely to continue the country’s officials, but relations are at their to lead the ANC
over the “coming months” with both the lowest level since the normalisation of diplomatic South Africa's former health minister, Zweli
Ukrainian and Russian militaries expected to ties in 1979. Mkhize, is the main contender to run against scan-
regroup and resupply, and to prepare for count- dal-plagued President Cyril Ramaphosa to lead the
er-offensives in the spring. Taiwan has emerged as the biggest flashpoint ANC.
between the powers during the Biden administra- The party in power since the end of apartheid 30
There appears to be no signs in a let-up, however tion as Beijing has taken an increasingly assertive years ago meets next week to decide who will
— with extremely intense fighting in eastern stance towards the country, over which it claims lead the country in the 2024 general election.
Ukraine, with the devastation in parts of the sovereignty. The Chinese military has flown "I have received a nomination which means that
region reminiscent of World War I — and both increasingly large and frequent sorties of war- there are members who felt that I should be con-
Russia and Ukraine sending out smoke signals planes into Taiwan’s air defence identification sidered, but from where I sit, I think that we need
that there is no time, and no desire, for a cessa- zone. -Financial times to bring a different style of leadership. We need
tion of hostilities. to bring a leadership that will focus on implemen-
Germany expects more arrests after coup plot tation and that's been my strength,....ensuring
Russia President Vladimir Putin on Wednesday swoop collective leadership that unites people and there-
signaled that he was in it for the long-haul, saying fore I want to have an impact of uniting the Afri-
the conflict could be a “lengthy process,” continu- German authorities on Thursday ordered 23 people can National Congress (ANC)", said Zweli
ing attempts by the Kremlin to suggest to the to be held for questioning as they investigate a Mkhize, ANC and National Executive Committee
Russian public that the war will not be over soon far-right group that prosecutors say wanted to (NEC) Member.
and that there will be no pause over winter. overthrow the state and install a former member The 66year-old doctor by training and former
of a German royal family as national leader. minister feels that his experience make him ideal-
Ukraine has also showed no signs of letting-up, -lyAfprliaccaeNd etwo srespond to challenges on the ground.
particularly as it tries to build on momentum that Investigators have said the group, many of whom At least 131 civilians killed in DR Congo by
has allowed it to liberate chunks of Kharkiv in were members of the movement Reichsbuerger M23 rebels: UN
the northeast, and Kherson in the south, and now (Citizens of the Reich), planned to install aristo- M23 rebels killed at least 131 civilians in eastern
concentrates eitassteefrfnorUtskoranindee.fe-nCdNinBg Cits position in crat Heinrich XIII Prinz Reuss as leader of a new Democratic Republic of Congo on November
Donetsk, in state and found evidence that some members 29-30 according to preliminary findings, the UN
planned to storm the German parliament and seize mission in the country said.
Greece calls for calm amid protests against lawmakers. Authorities in Kinshasa had said that some 300
police shooting of Roma teenager people, almost all civilians, had died in M23
Heinrich, 71, a descendant of the royal House of attacks in the village of Kishishe in the eastern
Greece’s government has called for calm after the Reuss in the eastern state of Thuringia, was work- North Kivu province. The group had denied being
second night of unrest following the police shoot- ing as a real estate developer. He was arrested in behind the massacre, blaming "stray bullets" for
ing of a Roma teenager. the financial capital Frankfurt on Wednesday in a the deaths of just eight civilians.
swoop on the group that has shocked many in one The victims were killed "as part of reprisals
Protesters in the industrial Athens region of of Europe's most stable democracies and its larg- against the civilian population," the UN's MON-
Aspropyrgos allegedly torched a local tyre busi- est economy. USCO mission said in an overnight statement,
ness and a bus on Wednesday, setting up barri- adding that 102 men, 17 women and 12 children
cades in the streets. The House of Reuss, now headed by Heinrich were "arbitrarily executed" by bullets or other
XIV -wRheoutelirvses in Austria, disowned the alleged weapons.
Roadblocks were also in the area of Chalkidona, plot
about 40 kilometres west of the country’s sec-
ond-largest city, Thessaloniki. Croatia to join Europe's passport-free Schen-
gen area from January
Authorities have issued a warning to residents of
Aspropyrgos to remain indoors with windows and European Union countries agreed Thursday to
doors closed. allow Croatia to fully open its borders and partici-
pate in Europe’s ID-check-free travel zone, but
"I would like to ask for calm and prudence from Bulgaria and Romania were told that they must
all, but also to state clearly that there will not be wait longer to be allowed in.
the slightest tolerance of aggressive, illegal, vio-
lent behaviour toward law enforcement officers,” “The Schengen area is growing for the first time "Eight people were wounded by bullets and 60
government spokesman Giannis Oikonomou said in more than a decade,” the Czech Republic, others kidnapped. At least 22 women and five
during a regular press briefing on Thursday. which holds the EU’s rotating presidency tweeted girls were raped," it said.
after a meeting of interior ministers in Brussels.
Protests broke out after a 16-year-old boy was “Ministers approved Croatia’s membership as of 1 "This violence was carried out as part of a cam-
shot in the head following a police chase near January 2023!” paign of murders, rapes, kidnappings and looting
Thessaloniki. The so-called Schengen area is the world's largest against two villages in the Rutshuru territory as
free travel zone. It comprises 26 countries — 22 reprisals for the clashes between the -MA2f3r"icaaNnd-
Authorities had been pursuing the teenager after EU states plus Iceland, Liechtenstein, Norway and eowthser armed groups, the statement said.
he failed to pay a bill of €20 at a petrol station.

25 The AXiS LVII Friday 09 Dec 2022

Markets
watch

Zimbabwe dollar eases 1%
against US$
T he Zimbabwe dollar (ZWL) dropped by 1% to
ZWL 661.5605 from ZWL655 against the Meanwhile, the latest ranking on currency perfor- Meanwhile, companies raised their staffing levels for
United States dollar, one of the worst decline mance showed that Naira closed the month of the seventh month running amid efforts to keep on
in over 8 weeks, the latest Auction Market held on November as the 15th worst-performing currency in top of projects. On the price front, overall input
Tuesday. the world. costs increased slightly, but firms lowered their own
Parallel market rates against the Zimbabwe dollar The ranking, which is done by Steve H. Hanke, charges in a bid to remain competitive and attract
shoot to a region of ZWL900-950 against the green- revealed that the Naira since the start of 2022 has new business.
back from a region of between ZWL720-800 last dropped in value by 28.75%.The worst-performing However, business confidence strengthened to the
month, upsetting the prospects of Zimbabwe dollar currency in the world is the Zimbabwe dollar, while highest in 2022 so far, supported by currency stabili-
stability and convergence of black market and formal Ghana’s cedis sat in the fourth position. ty and expected improvements in economic condi-
market exchange rates. tions.The Central Bank of Zambia left its key interest
The highest rate received for the Zimbabwe dollar Shilling continues in recession, settles at rate at 9% at its November 2022 meeting, for the
remained at ZWL678 which was recorded last week 122.7 from 122.2 fourth time in a row this year, citing the continued
while the lowest rate stood at ZWL655, up from downward trend in inflation.
ZWL645 last week. East Africa’s economic giant, Kenya, saw its curren- Zambia's annual inflation rate eased to a four-month
US$11.6 million was allotted down from US$15.3 cy continuing trade in red after depreciating to low of 9.7% in October of 2022 from 9.9% in the
million last week. The demand for the greenback is 122.7 from 122.2 last week against the US dollar prior month, helped by the relative stabilization of
expected to grow as the nation nears the festive as foreign currency scarcity continues to bite. the kwacha.However, policymakers said the current
season. The central bank of Kenya raised its benchmark projection shows that inflation will follow a slightly
interest rate by 50 bps to 8.75% at its November higher path than was anticipated at the August meet-
Regional Markets 2022 meeting, in line with market forecasts. It ing, amid the adverse global economic environment.
marks the third straight rate hike this year, bringing Accordingly, inflation is now expected to average
Rand appreciates to 17.2 borrowing costs to the highest since late 2019. 11.3% in 2022 (vs 11.4% in August) and 8.5% in
Absa Bank Kenya, PLC has reported a Profit after 2023 (vs 8.4%), before falling back within the bank's
The South African rand traded at 17.2 against the Tax of KES 10.7 billion for the period ended Sep- 6%-8% target range during the first quarter of 2024.
USD, the highest in almost a week, on the back of tember 30, 2022, a 30% growth compared to a sim- The real GDP growth is now seen at 3% in 2022,
stronger-than-expected domestic data. ilar period last year. The impressive results have down from a 3.1% projection in August, before the
South Africa's economy swung back to growth in the been realized on the back of double-digit revenue expected acceleration to 4% in 2023 and 4.1% in
third quarter, dodging a technical recession, although growth, powered by accelerated lending especially 2024.
the expansion was mostly driven by the agricultural to the Small and Medium Enterprises (SMEs).
sector and partly due to low base effects from the Meanwhile, the United Kingdom (UK) has commit- Pula steadies at 12.8
second quarter. ted KES 11.9 billion to build a green city of office
At the same time, the threat of South African Presi- blocks, malls and a light industrial hub on Kenya The Pula steadied at 12.8 on Thursday against the
dent Cyril Ramaphosa's immediate exit from office Railways land in fresh efforts to decongest the Cen- United States dollar from 13.3 as inflation eased for
over a cash-in-sofas scandal has temporarily faded tral Business District as well as create jobs. the second consecutive month.
after his party vowed to support him at next week's The new city will relieve the Central Business Annual inflation rate in Botswana fell for a second
impeachment vote. District of part of the load in hosting enterprises month to 13.1% in October of 2022 from 13.8% in
On the monetary policy front, the South African through setting up economic zones that will com- September, and after reaching a 2008-high of 14.6%
Reserve Bank lifted the repo rate by another 75 basis prise hi-tech industries and SMEs in a development in August. Prices continued to slow for transportation
points in November, marking the sixth consecutive set to create over 200,000 new jobs.The multi-mod- (32.3% vs 36.2% in September), miscellaneous goods
hike in a year and it is poised to prolong its most al facility, which will be developed by British archi- & services (9.1% vs 9.4%); restaurants & hotels
aggressive interest-rate hiking cycle until it is confi- tects, will be situated within a 425-acre land piece, (5.3% vs 5.5%); and alcoholic beverages & tobacco
dent inflation will return to the 4.5% target midpoint of which Kenya Railways owns 292 acres. (3.2% vs 3.5%).
in its forecast horizon. On the other hand, faster increases were seen in the
Kwacha unshaken at 16.8 as repo rate cost for food & non-alcoholic beverages (15.8%, the
Naira continue nosediving steady at 9% highest since May of 2009 vs 14.8%) and recreation
& culture (4.5% vs 4.4%). Compared to the previous
The Nigerian naira on Tuesday continued its bad run The Zambian Kwacha traded at 16.8 against the US month, the CPI edged 0.2% higher, the smallest
as it depreciated to N445.83 a dollar at the official dollar as it continues on its positive streak. increase since December of 2021.
market. The Zambian Kwacha is expected to trade at 17.47 Meanwhile, the Central Bank of Botswana kept its
This was a 0.11 per cent slight drop in value when by the end of this quarter, according to Trading benchmark interest rate steady at 2.65% during its
compared to the N445.80:US$1 it sold at the Investors Economics global macro models and analysts’ October 2022 meeting, following a 50bps rate hike
and Exporters window on the previous day. expectations. Looking forward, it is estimated to in August. The decision was aimed at continuing to
Naira suffered another bad performance as participants trade at 18.5, as its biggest fall in 12 months. support a nascent economic recovery against a back-
during trading exchanged US$127.78 million, slightly Meanwhile, Stanbic Bank Zambia PMI fell to 49 in drop of strong inflationary pressures and global
more than the $120.23 recorded on the prior day. October of 2022 from 50.5 in the previous month. uncertainties.
At the black market, the Naira was sold at N760.82 The latest reading pointed to the first contraction in The bank said that elevated inflation in the short
to the dollar depreciating from N730 it sold on the country's private sector in four months, and term was primarily due to supply-side factors and
Monday. although only slight, the most pronounced since related second-round effects but that demand
February 2021. Output and new orders declined remained modest. The headline inflation rate eased to
sharply, often linked to money shortages. 13.8% in September, down from a near 14-year high
of 14.6% in the prior month; and it is forecast to
fall back within the 3%-6% objective range from the
third quarter of 2024.

The AXiS LVII Friday 09 Dec 2022 26

ZSE WEEKLY COMMENTARY

The Zimbabwe Stock Exchange oscillated back into losses in the first week of
December as sell-offs outweighed the already constrained demand. The ZSE All
Share Index eased by -0.58% to close at 14725.4 points, reversing prior week's gains.
Losses were evenly spun across all the market's main indices, while on a sectoral
basis the Real Estate index suffered the highest losses of -16% in the week. Despite
the success of government's efforts in mitigating inflation as seen in the slow-down
in annual inflation from 285% in August to 255% in November, uncertainty remains
high while investor-confidence remains low as we approach the festive and the 2023
presidential elections. Overall year-to-date nominal gains closed the week under
review at 36.06%, which, however, translates to a loss of -78% in US$ terms as the
local currency continues to depreciate against the greenback on a daily basis while
the ZSE remains oscillatory with less prospects of value recovery in real terms in
the short to medium-term. Since the beginning of the month, the ZSE has garnered
a mild 1.01%, ahead of the -3% loss recorded in November.

ZSE ASI 14,810.81 ZSE TOP 10 8,603.82 MEDIUM CAP INDEX 33,608.70
ZSE TOP 15 14,834.46 SMALL CAP INDEX 8,672.55 33,287.86
14,845.17 8,701.17
14,778.48 8,656.66 33,187.54
14,826.95 8,653.44
14,725.40 8,565.42 33,079.31
-0.58% -0.45%
33,366.21
9,593.32 472,431.36
9,651.03 472,431.36 33,214.84
9,677.05 465,222.42
9,638.08 465,222.73 -1.17%
9,644.70 465,222.73
9,564.26 455,726.42 ZWL INTERBANK 654.9630
-0.30% -3.54%
655.5619

656.7892

658.7373

661.7149

661.9627

1.07%

On the US$ denominated bourse, VFEX, aggregate turnover surged by a staggering
273% from prior week's record to US$176,237 in the week under review owing to
increased activity on the bourse following the listing of 2 more counters, Nedbank
Group and Simbisa Brands Limited. On the downside, BNC plunged to an all-time
low in the week under review after shedding off -20%, while Nedbank dipped by
-13%. The duo of SeedCo International and Padenga notched by 6% and 5% respec-
tively. During the week, Caledonia Mining Corp. recorded its first trade in over

9-months.
Meanwhile, 7 African stock exchanges launched an integration project in Ivory Coast
on Wednesday to facilitate cross-border trading of securities on the continent. The
initiative, called the African Exchanges Linkage project, includes the stock exchanges
of Nigeria, Mauritius, Morocco, South Africa, Kenya, Egypt, and West Africa. Ghana's

and Botswana's will join in a later phase.
On the currency market, the ZWL has been widening its depreciation margin against
the US$ on both the formal and informal markets in recent trades. The sole legal cur-
rency market exchange rate (interbank rate) closed at ZWL661.9627 this week after

the US$ appreciated by 1.07%. On the Reuters Auction market, the exchange rate
closed at ZWL661.561 after the greenback appreciated by 1% at the close of the most
recent currency auction trading week. As the Central Bank continues to tighten liquidi-
ty in the economy, the premium between the parallel market and the formal exchange

market has fallen from over 100% to below 30%.

The AXiS LIV Friday 18 Nov 2022 27

Weekly
Commodity Pulse

Gold (US$/oz) committed and, in most cases largely complete Residents of China's capital were allowed into
from a construction perspective. parks, supermarkets, offices and airports without
1,800 a negative COVID-19 test on Tuesday, the latest
1,760 Copper (US$/t) in a mix of steps nationwide after unprecedented
1,720 8,500 protests against a tough zero-COVID policy.
1,680 8,000 LME copper had been weaker, but moved into
1,640 7,500 positive territory, edging up 0.1% to $8,398 a
1,600 7,000 tonne after the dollar index weakened.A softer
dollar makes greenback-priced commodities
11-Nov-22 cheaper to buyers using other currencies.
18-Nov-22
25-Nov-22 Nickel (US$/t)

2-Dec-22 30,000
9-Dec-22 25,000
9-Nov-22 20,000
15-Nov-22
21-Nov-22 While nickel prices modestly retraced from their
27-Nov-22 early month rally, upside price action continued
3-Dec-22 to support the short-term range breakout. Sus-
9-Dec-22 tained increases should foster further bullish
anticipation, which could support a continuation
15-Nov-22of the short-term uptrend.
21-Nov-22Meanwhile, volumes remained steady coming into
27-Nov-22December. However, it’s important to note how
potentially volatile contracts for nickel can
3-Dec-22become amid low liquidity. This will continue to
9-Dec-22pose a risk for buyers as price action remains
Gold prices edged higher on Friday due to a Goldman Sachs is even more bullish about copper susceptible to a quick reversal.
weaker dollar, while investors held back making and this week delivered a 12-month forecast for
large bets ahead of U.S. inflation data and a slew $11,000/tonne, up from $9000; in 2024 they see Brent/Oil (US$/b)
of central bank meetings with a key focus on the prices averaging $12,000 from $8355 currently. 105.0
Federal Reserve. Spot gold was up 0.2% at Operations in Chile are undershooting production 100.0
$1,793.20 per ounce, as of 1007 GMT. U.S. gold targets and that means that a projected 2023-24
futures rose 0.3% to $1,805.90. surplus is at risk with inventories already near 95.0
Investors are in a wait-and-see mode. They are record lows. 90.0
just waiting for the Fed and the European Central Another deficit in the market next year will take 85.0
Bank meeting next week, which are going to be fundamental conditions to an unprecedented 80.0
the final key market driver for this year. The extreme in terms of tightness. The sequential 75.0
two-day U.S. central bank policy meeting ends on increase in policy targets and commitments to 70.0
Dec. 14 and the policymakers are expected to green transition, alongside a minimal supply
announce a 50-basis-point hike in the lending rate. response so far... have resulted in earlier and The energy sector is set for a slightly higher
In addition, the European Central Bank and the larger open-ended deficit conditions that essential- start, supported by strength in the crude complex.
Bank of England are also set to announce interest ly are already here, not beginning at some point U.S. equities are expected to extend recent losses
rate decisions next week. Lower interest rates tend in the future. at the open amid echoes of recession concerns
to be beneficial for bullion as they decrease the Earlier this week, Glencore also predicted a 'huge from Wall St.
opportunity cost of holding the non-yielding asset. deficit' and said his company wouldn't invest in Oil futures were trading lower, and Brent fell
Also on the radar, the U.S. Consumer Price Index adding production until the market was 'scream- close to its 2022 low as recession concerns were
(CPI) report for November is due on Dec. 13. ing for it. outweighing recent policies that placed a cap on
Russian oil and banned Russian seaborne crude.
Platinum (US$/oz) Aluminium (US$/t) However, WTI and Brent crude oil are now
higher amid reports of easing COVID-19 restric-
1,050 2,600 tions in China and concerns about Russian supply
1,000 2,500 following tanker delays.
2,400 China announced that it would drop most restric-
950 2,300 tions against COVID-19. Additionally, reports
900 emerged that Russia was concerned about a
build-up of oil tankers in the Bosphorus Strait.
11-Nov-22 2,200 Traders are bracing themselves for the EIA
18-Nov-22 weekly report, which will give more insight into
25-Nov-22 current inventories and demand.

2-Dec-22
9-Dec-22
15-Nov-22
21-Nov-22
27-Nov-22
3-Dec-22
9-Dec-22

15-Nov-22
21-Nov-22
27-Nov-22

3-Dec-22
9-Dec-22
Platinum is moving into a meaningful deficit amid 2,100
an emergent source of new end-demand in the
form of green hydrogen. The 2022 surplus of 804 Aluminium has gained 12% since the beginning
000 oz is projected to move into a deficit of 303 of November, largely on hopes for improved
000 oz in 2023, according to the Platinum Quar- metals demand as China relaxes tough coronavi-
terly of the World Platinum Investment Council rus curbs, which have depressed economic
(WPIC) for the third quarter of 2022. The surplus growth.
in 2022 is largely the result of net disinvestment Aluminium prices slipped this week, crimped by
that reduces substantially going into next year and uncertainty about the easing of COVID-19 restric-
becomes a net positive investment. tions in top metal consumer China. Three-month
Demand for platinum is growing by 19% into aluminium on the London Metal Exchange eased
2023, compared with supply growth of only 2%. 1.3% to $2,490 a tonne in official open-outcry
While such strong demand growth in a recession- trading.
ary environment may seem slightly counterintui- Aluminium has gained 12% since the beginning
tive, it is important to remember that the main of November, largely on hopes for improved
drivers are automotive demand and industrial metals demand as China relaxes tough coronavi-
demand. rus curbs, which have depressed economic
The automotive market remains somewhat sup- growth.
pressed because of supply chain challenges, and it
is below recessionary levels of consumer demand,
whereas industrial demand is largely the result of
capacity additions that have been substantially

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