NetOne to embark on 3rd phase of capital expansion project

HARARE


Netone will soon embark on the third phase of its capital expansion project at a cost of nearly half a billion dollars, as it emerged it is finalising the second phase where it is investing $218 million. Information Communication Technology, Postal and Courier Services Minister Supa Mandiwanzira said in a recent interview that NetOne would invest about $500 million in the third phase of the projects targeting latest broadband technology and increased rural coverage. In terms of Telecel Zimbabwe, the Government is rolling out an ambitious investment programme for the company after acquiring a controlling 60 percent stake previously held by Vimpelcom of Netherlands. Phase two, which had an initial completion deadline of September 2016 targeted 2 300 stations while an additional 3 000 would be constructed in 2017 under phase three of a $485 million investment. Phase two of the project saw NetOne having the widest fourth generation (4G) technology, Long Term Evolution, while the company is targeting doubling its subscriber base to 8 million by end of 2017. – Herald

 

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Externalisation probe begins

HARARE


Finance and Economic Development Minister Patrick Chinamasa has said government has started investigations to identify individuals and companies involved in externalising foreign currency from Zimbabwe and in turn fuelling the current cash crisis. Zimbabwe is battling an acute cash shortage attributed to several factors chiefly externalisation and low exports. The country’s monetary authorities have introduced several measures to curb the cash shortage including closely monitoring the way some companies handle their cash following concerns that big firms, particularly retail businesses were not banking their daily takings. Chinamasa said externalisation continued to play a huge part in the cash challenges the country was facing. He encouraged wider use of plastic money and other forms of electronic payment as a substitute for cash. On the budget deficit, Minister Chinamasa denied any fiscal indiscipline on the part of Government. –   Herald

 

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RBZ releases $15 mln in $5 bond notes

RBZ releases $15 mln in $5 bond notes

HARARE – The $5 bond note has entered into circulation with the Reserve Bank of Zimbabwe saying $15 million has been released as export incentives.

Governor Dr John Mangudya told Finx the release brings the total amount of bond notes in circulation to $94 million (from $79 million at the last release).

He said the security features on the bond notes are the same as on the $2 bond note except that the new notes are in purple.

The use of bond notes within the multi-currency exchange system are anchored to a $200 million Afreximbank export promotion facility. They are pegged 1:1 to the US dollar. Industry is currently pushing for the export incentive to be moved to 10% from the current 5%.

Long term confidence in the notes is expected to be determined by how accountable the monetary authorities are going to be seen by members of the public and the extent of likely inflationary pressures.

The public is also expecting to see the composition of the bond notes committee that will oversee the administration of the notes in the economy.  There is already a process going on to draft a legislation that is going to govern the operations of this committee. What is however worrying is that close to half of the bond notes are already in circulation while this important committee is not yet in place. Be that as it may, the central bank is already empowered by the constitution to “protect the currency of Zimbabwe in the interest of balanced and sustainable economic growth”.

While the issuance of bond notes in limited amounts in the short-term could relieve some liquidity pressure, it will not address the underlying causes of the foreign exchange shortages.

The International Monetary Fund recently said more reforms are needed to deal with the foreign currency shortages. “As we have said before, policy action is needed to reduce the budget deficit; accelerate structural reforms; and re-engage with the international community to access much needed financial support”.

“All the elements in this three-pronged approach are essential to place the economy on a sustainable footing and lay the groundwork for growth and poverty reduction. Without reforms, risks are increasingly on the downside” said the IMF.

Dr Mangudya is expected to soon present his Monetary Policy Statement, which is likely to be rich on export promotion policies.

Zimra surpasses gross and net revenue targets for January

Zimra surpasses gross and net revenue targets for January

HARARE – The Zimbabwe Revenue Authority (ZIMRA) has surpassed gross and net revenue targets for January by over four percent and three percent  respectively. The Authority collected gross and net revenue amounting to $264.79 million and $262.21 million respectively, against a target of $254.10 million. This translates to a growth  in net revenue of over 13 per cent when compared to the $232.01 million which was collected during the same period last year.

The sterling performance was mainly driven by contributions from Value Added Tax (VAT) on Local Sales, which were 41 per cent above target with total net collections of $76.90 million. The increased consumption of goods which attract VAT during the festive season, coupled with use of plastic money and the ongoing fiscalisation project whose aim is to plug revenue leakages, saw gross VAT revenue rising by $13 million from the $66 million collected in January 2016.
The VAT refunds bill also plummeted to $2.57 million in January this year as compared to the $14.59 million paid out during the same period last year due to intensified audits and verifications.

The improved performance by ZIMRA comes at a time when the Authority has embarked on a massive exercise to curb illegal and underground activities such as tax evasion, smuggling, transfer pricing and corruption in order to enhance revenue collections.

The numerous strategies to grow revenue – which include extension of fiscalisation to all VAT registered operators, cargo tracking, automation, enhanced audit and investigation activities, information dissemination, and negotiation with taxpayers for payment terms, among others – are beginning to bear fruit as evidenced by January revenue collection figures.
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Zim closes December stuck in negative inflation at -0.93%

Zim  closes December stuck in negative inflation at -0.93%


Zimstat / FinX

HARARE – Zimbabwe’s annual inflation rate for the month of December 2016, as measured by the all items consumer price index gained by 0.16 percent to -0.93 percent, from November’s rate of -1.09 percent.

“This means that prices as measured by the all items CPI decreased by an average of -0.93 percentage points between December 2015 and December 2016” said Zimstats today.

The marginal gain was on the back of price increases in selected food items such as bread and cereals, oils and fats, fish and sea food. Injection of additional liquidity through the introduction of bond notes also contributed to the increase which coincided with a traditional spending month. However declines in the prices of gas, liquid fuels, housing rentals, fruit, vegetables, milk, cheese and eggs ensured the country’s inflation remained in the negative.

Zimbabwe remains in deflation mode since 2014. According to the 2017 National Budget, the decline in domestic prices during 2016 was driven by a combination of continued weakening in domestic demand, depreciation of the South African rand against the US dollar, and subdued international oil prices.

In its October 2016 Global Economic Outlook, the IMF projected that Zimbabwe’s average inflation is expected to close the year 2017 at 4.6 percent, while the Zimbabwean government projects an average inflation rate of 1.1 percent.

The month-on-month inflation rate in December 2016 also gained by 0.04 percent to 0.06 percent, compared to November’s rate of 0.02 percent, meaning that prices as measured by the all items CPI increased at an average rate of 0.06 percent from November 2016 to December 2016.

The year on year food and non-alcoholic beverages inflation prone to transitory shocks stood at -0.95 percent, with gains noted on bread and cereals, fish and sea food, oils and fats, sugar and other products. Year on year non-food inflation stood at -0.92 percent.

Zimstats said that month-on-month food and non-alcoholic beverages inflation rate declined to 0.38 percent in December 2016, shedding 0.16 percentage points on the November 2016 rate of 0.54 percent. The month-on-month non-food inflation rate however gained by 0.13 percent to -0.09, compared to November 2016’s rate of -0.22 percent.

IMF bullish on global outlook

IMF bullish on global outlook

World output will relatively increase by 3.4 percent this year, compared to last year’slower growth of 3.1 percent, says the IMF World Economic Outlook update report released today.

“The baseline forecast for the global economy points to a pickup in growth over the
rest of the forecast horizon from its subdued pace this year, in the context of positive financial market sentiment, especially in advanced economies”, says the report. It however noted that the potential for disappointments is high, as underscored by repeated growth markdowns in recent years.

“After a lacklustre outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies. However, there is a wide dispersion of possible outcomes around the projections, given uncertainty surrounding the policy stance of the incoming U.S. administration and its global ramifications”, the report said. The April update of the report is expected to be more certain as more clarity emerges on U.S. policies and their implications for the global economy.

The report however said that the U.S. dollar appreciated in real effective terms by over 6 percent since August last year. A report published by Sagaci Research last year established that the US dollar is overvalued by 12 percent in Zimbabwe. This continues to affect the competitiveness of the country’s exports.

China is projected to post lower growth of 6.5 percent this year, compared to last year’s growth of 6.7 percent, as the Asian giant continues on slowing growth. This is likely to affect the demand for commodities and the prices as well. South Africa’s economy is also expected to post a modest growth of 0.8 percent while Sub-Saharan Africa will grow by 2.8 percent.


IMF, FinX

The IMF however sees a number of risks with the potential to constrain growth this year’s anticipated growth. “Increased restrictions on global trade and migration would hurt productivity and incomes, and take an immediate toll on market sentiment”, the report said.

The Fund said that, in many low-income economies, low commodity prices and expansionary policies have eroded fiscal buffers and led in some cases to a precarious economic situation, heightening their vulnerability to further external shocks.

“Emerging market and developing economies face starkly diverse cyclical positions and structural challenges. In general, enhancing financial resilience can reduce the vulnerability to a tightening of global financial conditions, sharp currency movements, and the risk of capital flow reversals”

“Economies with large and rising nonfinancial debt, unhedged foreign liabilities, or heavy reliance on short-term borrowing to fund longer-term investments must adopt stronger risk management practices and contain balance sheet mismatches”, said the report.

In low-income countries that have seen their fiscal buffers decrease over the last few years, the report highlighted that the priority is to restore those buffers while continuing to spend efficiently on critical capital needs and social outlays, strengthen debt management, improve domestic revenue mobilization, and implement structural reforms that pave the way for economic diversification and higher productivity.

“For the countries hardest hit by the decline in commodity prices, the recent market firming provides some relief, but the adjustment to re-establish macroeconomic stability is urgent. This implies allowing the exchange rate to adjust in countries not relying on an exchange rate peg, tightening monetary policy where needed to tackle increases in inflation, and ensuring that needed fiscal consolidation is as growth-friendly as possible”, said the report.

The report prescribed that over the longer term, countries highly dependent on one or a few commodity products should work to diversify their export bases.

World Bank projects 3.8% GDP growth rate for Zimbabwe in 2017

World Bank projects 3.8% GDP growth rate for Zimbabwe in 2017

HARARE – The World Bank has projected a 3.8% economic growth rate for Zimbabwe in 2017, a figure 1.8 percentage points lower than June projections but more optimistic than the 1.7% the country’s own Government is targeting.

According to the World Bank’s Global Economic Prospects report titled “Weak Investment in Uncertain Times,” Zimbabwe’s GDP is estimated to have grown 0.4% in 2016 but will grow 3.8% this year and taper off slightly to 3.4% in 2018. The same 3.4% growth rate is expected in 2019.

In Sub-Saharan Africa GDP is forecast to grow by 2.9 percent in 2017, barely above population growth, and by 3.6 percent in 2018. The recovery is moderate because the region continues to adjust to lower commodity prices. Although rising through the medium term, commodity prices will remain well below their post-global-crisis averages.

“Growth rates will continue to vary widely across the region, with growth in South Africa and oil exporters weaker than in metals exporters, and growth in non-intensive resource countries remaining robust.”

In Zimbabwe’s case 2016 was characterised by tight liquidity, high trade and current account deficits, low FDI, depressed production, low commodity prices, high cost of capital and the effects of an El-Nino induced drought. However commodity prices are expected to recover globally while at a country level, results of efforts to boost production of certain key minerals such as coal, gold and diamonds are expected to be felt this year. Government is currently implementing a turnaround strategy for Hwange while reports indicate that the Mines Minister will move ahead with the consolidation of the diamond sector. At the same time, the efforts being made by the Reserve Bank of Zimbabwe to increase production of small scale gold miners is expected to boost mineral revenue. The agricultural sector is expected to rebound following the good rainy season while the manufacturing sector will continue to register improvement on the back of various protection measures.

The report says that in the SSA region, stable currencies, lower inflation, and improved agricultural production should support robust consumer spending in agricultural exporters and commodity importers. Investment growth is expected to remain subdued. “The move toward looser monetary policy in some advanced economies and improvements in commodity prices have helped bolster the trade-weighted exchange value of the South African rand. This has tempered import price pressures in South Africa, and led the Reserve Bank to hold interest rates steady.”

Investments in electricity generation capacity have reduced power outages in the regions. However,

policy uncertainty and low business confidence continue to weigh on activity. In Nigeria, the gradual stabilization of oil prices and an increase in oil production will help support a modest recovery. Policy reforms are helping to improve the environment for private investment.

According to the World Bank report, private consumption growth in South Africa and oil exporters is expected to improve only gradually. In South Africa, inflationary pressures and high unemployment will weigh on consumer spending. In Nigeria, ongoing exchange rate adjustment, coupled with the gradual improvement in oil prices, will provide a modest boost to domestic revenues. This, in turn, should help the federal and state governments meet some of their financial obligations, including the clearance of salary arrears. Meanwhile,

In Angola, high inflation and tight policy will continue to weigh on domestic demand. In other mineral exporters, the outlook is broadly favorable. In Ghana, improving fiscal and external positions should help boost investor confidence. Post-Ebola recovery is expected to continue in Guinea, Liberia, and Sierra Leone, as rising commodity prices boost investment and exports. In Mozambique, recent progress in developing the nascent energy sector will help boost investment in gas production.

In agricultural exporters (Côte d’Ivoire, Ethiopia, Kenya, Rwanda, Senegal, and Tanzania), large

infrastructure development programs will continue to support robust growth. To finance these programs, their governments continue to draw on public-private partnerships (Côte d’Ivoire, Rwanda), donor aid (Rwanda), and Chinese entities (Ethiopia, Tanzania). However, political fragility will exert a drag on growth in countries such as Burundi and The Gambia.

Among commodity importers, Cabo Verde, Mauritius, and the Seychelles are expected to expand at a moderate pace, as heightened uncertainty in Europe, their main export market, weighs on tourism, investment, and trade flows. Regional trade and infrastructure investment will help support a gradual increase in growth in Lesotho and Swaziland. Electricity shortages and weak investment will continue to affect growth in the Comoros.

The outlook assumes that fiscal positions will gradually improve, as commodity exporters

continue to adjust. At the broader level, global growth for 2017 has been projected at 2, 7 percent on the back of anticipated gains in emerging and developing economies. “Growth in emerging market and developing economies (EMDEs) is expected to pick up in 2017, reflecting receding obstacles to activity in commodity exporters and continued solid domestic demand in commodity importers.

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NGO accuses Britain of being bribes hub in Africa mining deals including Zimbabwe

NGO accuses Britain of being bribes hub in Africa mining deals including Zimbabwe

An international organisation that fights corporate misconduct has raised concern over the failure by United Kingdom authorities to stop corrupt practices in deals between a leading Wall Street hedge fund and top officials in Zimbabwe and the Democratic Republic of Congo (DRC).

In a report by NGO Rights and Accountability in Development (RAID), the US authorities found that the hedge fund used third parties and a chain of subsidiaries to pay bribes to high-level officials in Africa, and the alleged corrupt transactions were carried out via the firm’s London office.

The report titled ‘Bribery in its purest form’: Och-Ziff, asset laundering and the London connection sets out the repeated failure of the UK regulatory authorities over a 10-year period – despite warnings from UN Experts, due diligence studies and compliance watch lists – to take action to prevent assets acquired through corrupt means being traded on the London markets. The key question addressed in the report is that: having failed to heed repeated calls for action, can the UK continue to shelter those who have been involved in corrupt deals, or ostensibly breached sanctions or flouted market rules, without causing lasting damage to its reputation?

In September 2016, the US Department of Justice (DoJ) charged one of the world’s largest hedge funds, Och-Ziff Capital Management Group (Och-Ziff), which has $40bn in assets under management “with conspiracy to violate the anti-bribery provisions of the (US) Foreign Corrupt Practices Act (FCPA)”, regarding transactions in the DRC and Zimbabwe

The hedge fund has been under investigation by the DoJ and the US Securities and Exchange Commission (SEC) since 2011. One of Och-Ziff’s subsidiaries, OZ Africa Management, on 29 September 2016 pleaded guilty and agreed to pay out $412m; the largest ever criminal and civil settlement for a Wall Street-listed firm.

According to the report by NGO Rights and Accountability in Development (RAID), the US authorities found that the hedge fund used third parties and a chain of subsidiaries to pay bribes to high-level officials in Africa, and the alleged corrupt transactions were carried out via the firm’s London office.

Multi-million alleged DRC corruption scheme

The hedge fund, the report alleges, had joint-control of African Global Capital (AGC), which it used to find lucrative business opportunities on the continent.

According to DoJ documents, one of AGC’s partners in Congo, is referred to as “an Israeli businessman” with “significant interests in the diamond and mineral mining industries in the DRC”. While some of the individuals involved are named in the official documents, others are not.

The DoJ and SEC documents cite a Bloomberg article in which a spokesman for Israeli billionaire Dan Gertler, who heads the Fleurette Group, is reported as saying”The Fleurette Group and Dan Gertler strongly deny the allegations announced today, which are motivated by a hedge fund trying to put behind it problems sparked by people that have nothing to do with Fleurette.”

According to the deferred prosecution agreement (DPA) entered by Occ-Ziff with the US prosecution to settle the allegations, the report alleges that the fund’s employees “entered into agreements with Gertler” as its “DRC partner to purchase shares in [DRC] mining companies under his control, aware that payments would be made to bribe high-ranking Congolese officials, who would bring pressure to bear on rival companies, forcing them to relinquish their assets”.

The DPA documents further note that when misuse of company funds emerged, Och-Ziff “conducted no review […] to confirm or rebut the allegations and thereafter advanced more than $200m to DRC partner for additional transactions”.

The DoJ documents state this practice took place over a “10-year period”, during which “Och-Ziff’s DRC partner, together with others, paid more than $100m in bribes to DRC officials”. The DoJ described the corrupt practices of Och-Ziff as “bribery in its purest form.

 ‘Suspicious Payments’, sanctions and Zimbabwe

According to the report, both the DOJ and SEC are concerned with violations of the FCPA and not the enforcement of sanctions. This notwithstanding, both authorities refer, under the headings of ‘Suspicious Payments’ or ‘Allegations of Serious Misconduct’, to a transaction in Zimbabwe to buy platinum assets from a state entity and the Central African Mining and Exploration Company  (CAMEC) Zimbabwean shareholder (Billy Rautenbach), to the diversion of an Och-Ziff loan to a Zimbabwean political party and to the use of Och-Ziff’s investment to pay for an arms shipment from China. The platinum mine has since changed shareholders and is now being developed by the Russians

In the 2008 election in Zimbabwe, ZANU-PF’s Robert Mugabe retained the presidency after a campaign   against Movement for Democratic Change (MDC) supporters.  The campaign was financed by money originating with Och-Ziff and channelled to the Zimbabwe government via a loan as part of CAMEC’s lucrative platinum deal.

According to the report the $100 million loan changed Zimbabwe’s future by thwarting progress towards democracy. Mugabe and key allies in ZANU-PF and the military were all on the EU and US sanctions list at the time of the loan. The SEC Order accords with RAID’s 2013 account of the platinum deal. Furthermore, the head of Och-Ziff’s London office  had been warned by his colleague (Baros) that the Och-Ziff loan may have been used to pay for a shipment of arms from China. Yet neither Och-Ziff employee notified Och-Ziff’s legal and compliance department. Despite the existence of US sanctions against Zimbabwe, Och-Ziff held onto its CAMEC shares until November 2009.

RAID has already raised the matter of the Zimbabwean platinum deal and sanctions with both HM Treasury in the UK and the Office of Foreign Assets Control (OFAC) in the US. Statements made by the SEC and DOJ in the Och-Ziff case corroborate that RAID was right to have flagged these concerns. RAID’s current report highlights inconsistencies over when and what Och-Ziff knew about the Zimbabwean platinum deal and calls upon OFAC to investigate. A key question is whether the UK authorities, far from preventing the platinum mine purchase or the later sale of shares controlled by sanctions targets, actually approved or licenced the transactions.

RAID has been unsuccessful in its attempts to find out, through a Freedom of Information Act (FOIA) request, what the UK government knew or did about the Zimbabwean platinum deal. The report says the UK Treasury is refusing to confirm or deny whether or not it gave tacit approval for the transaction – it is apparent that CAMEC has never been charged with violating sanctions – or whether it licensed the sale of Rautenbach’s shares and allowed him access to the proceeds (again, there is a widespread perception that such licences were forthcoming). – http://www.raid-uk.org

Export targeting not an end in itself – BMI

Export targeting not an end in itself – BMI

HARARE – Increasing exports alone will not be an end in itself in Zimbabwe as structural weaknesses within the country’s balance of payments position, a high degree of political risk and weak productivity will weigh down such prospects, an economic analysis paper published yesterday by BMI Research says.

Zimbabwe has been targeting to increase exports as a means to resolve the liquidity challenges that have resulted in cash shortages and firms failing to settle their international payments for key imports in time. Last year, the central bank introduced an export incentive of up to 5 percent on export receipts with a view to encourage exports. However, the country only managed to register exports worth $2.83 billion against the $3.36 billion target.

The research firm forecasted that Zimbabwe’s goods exports will grow by 3 percent this year, anchored by a rebound in tobacco, diamonds and other exporting industries resulting in more hard currency being accrued.

“That being said, such is the degree of Zimbabwe’s import-dependence that any increase in hard currency circulating the economy will soon be lost to goods and service brought in from abroad. This will slow the rapid pace at which the current account deficit has narrowed since 2013”, said the research firm. Zimbabwe has been implementing import control measures in a bid to reduce the volume of imports by substituting them with locally manufactured products. Total imports amounted to $5.21 billion last year.

BMI Research however noted that export revenues in 2017, while it will offer some relief to the crisis-hit Zimbabwean economy, will offer no escape from the necessary and painful reforms the country will undergo in the short term. It further opined that the country’s external position will continue to act as a drag on headline economic growth while it remains so dependent on imports but continues to rely on the US dollar as its currency. There has been recent debate on currency sustainability, with some sections of business calling for the country to adopt the weaker Rand as its main trading currency, to promote exports.

The research firm believes that the forecasted growth of exports over the next couple of years will not be strong enough, on the back of structural weaknesses in the economy, resulting in the continued lack of liquidity with which to meet the country’s demand for imports. “The detrimental impact this has on supply chains as importers continue to struggle with accessing the hard currency needed to carry out business activity will weigh on economic growth”, said the research firm. The country economy is projected to grow by 1.7 percent this year. The local industry has since last year been struggling to import raw materials due to erratic hard currency and banks’ delays in settling international financial payments.

BMI is also of the view that the bond notes introduced by the central bank are a means of slowly de-dollarising the economy and will likely continue over the coming months. “Should the government successfully follow through with the de-dollarisation process and establish a weaker exchange rate to the US dollar”, the research firm says, “then we would likely see some improvement in the country’s exporting sectors and balance of payments dynamics”. That will however mean de-pegging the Bond currency from the one-to-one tie to the greenback, and allow its strength to be determined by the market forces or fixed by the monetary authorities in line with its macroeconomic objectives.

BMI however noted that de-pegging bond notes will be “politically expensive as the impact of a weaker exchange rate feeds through into higher prices and decline in living standards that would echo the years building up to hyperinflation in the mid-2000s”. Zimbabwe experienced a massive hyperinflation era which saw inflation rising to 231 million percent in July 2008, with the country printing monetary denominations as high as $100 trillion.

 

 

POSB fined $500 000, employees dismissed for social media pics -RBZ


POSB fined $500 000, employees dismissed for social media pics -RBZ

HARARE – People’s Own Savings Bank has been fined $500 000 for violating sections of the Banking Act after its employees leaked pictures showing bond notes in the bank’s vaults on social media.

Under Section 76 (2) of the Banking Act Preservation of secrecy sub title, except with the permission of the Reserve Bank, no banking institution or employee or agent of a bank- ing institution shall disclose any information provided to it by the Reserve Bank in the performance of its functions under this Act.

In a statement RBZ said POSB had violated the Banking Act after its employees unlawfully and without permission, took images of bond notes in its vaults and distributed and publicised the images via social media.

As a consequence of the transgressions, the RBZ has imposed an administration fine of $500 000 on POSB while the employees who took the pics have been dismissed with immediate effect.. Full report to follow