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Government bigwigs get pay cuts as Zimbabwe looks for financial stability



Zimbabwe Budget 2019

It was meant to be finance minister Professor Mthuli Ncube’s chance to win the trust of the Zimbabwean public and business sector, as he tried to stir the country’s economy in a positive direction when he presented the 2019 budget in parliament on Thursday.

His presentation overshadowed the Kgalema Motlanthe-led commission of inquiry into the post-election August 1 killings, which were largely blamed on the army and its involvement in civilian politics.

During his statement, the finance minister noted that political stability was key for the country to realise economic progression.

“Growth will be anchored on good governance and promotion of democratic principles,” he said against the backdrop of the Movement for Democratic Change (MDC) Alliance constantly arguing that the country’s problems were largely based on the fact that President Emmerson Mnangagwa’s government lacked political legitimacy.

It didn’t take long for conflict to rear its ugly head in parliament when opposition legislators were violently chased out after they refused to honour Mnangagwa’s arrival.

MDC Alliance spokesperson and parliamentary chief whip Thabitha Khumalo collapsed during a scuffle that involved the police.

Ncube walked a tightrope in his presentation. He preached “austerity for prosperity”, similar to what Tendai Biti argued for during his time as finance minister.

However, as an opposition finance minister under Robert Mugabe, Biti’s words fell on deaf ears.

Ncube announced an intention to cut the salaries of cabinet ministers and senior civil servants by 5%. His budget-beating antics will also affect heads of government-owned companies.

“Effective January 1 2019, a 5% cut on basic salary be effected for all senior positions, from principal directors, permanent secretaries and their equivalents, up to deputy ministers, ministers and the praesidium.

“This is also extended to basic salaries of those in designated posts in state-owned enterprises (CEOs, executive directors and equivalent grades),” he said.

Last year, the International Monetary Fund (IMF) advised Zimbabwe to cut its civil service, which took up 90% of the country’s budget. Doing so would give government leverage to improve social services such as health and education, infrastructure development and power-generation projects.

But at the time, heading towards watershed elections where the provision of jobs was a key promise, the Zimbabwe government ignored the call.

However, Ncube took heed of the IMF’s advice. Ghost workers, mostly Zanu PF youths, known as “youth officers”, who run into thousands will be laid off.

The minister also revealed that all government property, especially vehicles, will be under strict surveillance. For the first time since independence, government vehicles are to be left at the workplace at the end of the day or taken to the nearest police station for safe-keeping.

By the time the budget was presented, the 92-page document had found its way onto social media.

Tendai Moyo said: “We have a problem as Zimbabweans of being negative about everything. We have taken no time to learn of the power we have to hold the government to account on promises they make.

We must collectively, regardless of political affiliation, hold the government to account on this budget speech.”

But the most underwhelming part for most ordinary citizens was the failure to address bond notes, the local surrogate currency that has lost more than 400% value against the American dollar.

“I thought he would tell us that the bond notes are a thing of the past and maybe announce new measures. Instead, he showed us that government is still hard pressed for foreign currency because now we have to pay in forex for goods that we import into the country especially cars,” said Brian Shoko.

Shoko fears another fuel price hike after Mthuli Ncube announced an increase in excise duty of seven cents per litre on diesel and paraffin and 6.5 cents on petrol.

“It’s common sense that a fuel hike has a direct effect on goods and services. We are going to have a gloomy Christmas,” he said.
Among the key announcements were:

5% pay cut for cabinet and deputy ministers, senior civil servants and Zimbabwe government-owned company bosses;

Close eight foreign embassies;

Fire youth officers hired by Zanu PF and integrated into the Zimbabwe government wage bill; and

Budget pegged at $8.16bn for 2019.



Zimbabwe agrees to pay $3.5 billion compensation to white farmers



Zimbabwe White Farmers

Zimbabwe agreed on Wednesday to pay $3.5 billion in compensation to Zimbabwe white farmers whose land was expropriated by the government to resettle black families, moving a step closer to resolving one the most divisive policies of the Robert Mugabe era.

But the southern African nation does not have the money and will issue long term bonds and jointly approach international donors with the farmers to raise funding, according to the compensation agreement.

Two decades ago Mugabe’s government carried out at times violent evictions of 4,500 Zimbabwe white farmers and redistributed the land to around 300,000 Black families, arguing it was redressing colonial land imbalances.

The agreement signed at President Emmerson Mnangagwa’s State House offices in Harare showed white farmers would be compensated for infrastructure on the farms and not the land itself, as per the national constitution.

Details of how much money each farmer, or their descendants, given the time elapsed since the farms were seized, was likely to get were not yet clear, but the government has said it would prioritise the elderly when making the settlements.

Farmers would receive 50% of the compensation after a year and the balance within five years. Finance Minister Mthuli Ncube and acting Agriculture Minister Oppah Muchinguri-Kashiri signed on behalf of the government, while farmers unions and a foreign consortium that undertook valuations also penned the agreement.

“As Zimbabweans, we have chosen to resolve this long-outstanding issue,” said Andrew Pascoe, head of the Commercial Farmers Union representing  Zimbabwe white farmers.

The land seizures were one of Mugabe’s signature policies that soured ties with the West. Mugabe, who was ousted in a coup in 2017 and died last year, accused the West of imposing sanctions on his government as punishment.

The programme still divides public opinion in Zimbabwe as opponents see it as a partisan process that left the country struggling to feed itself. But its supporters say it has empowered landless Black people. Mnangagwa said the land reform could not be reversed but paying of compensation was key to mending ties with the West. Reuters

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Old Mutual’s Share Price Is Focus in Zimbabwe’s Currency War



Old Mutual Shares Zimbabwe

The share price of one of Africa’s oldest insurers is taking centre stage in Zimbabwe’s battle to bring order to its chaotic foreign-exchange system.
In the latest in a series of attempts to stabilize its currency, the government wants to eradicate the Old Mutual Implied Rate.

The gauge, used by domestic companies to determine the future cost of goods and services, calculates a potential forward rate for the Zimbabwe dollar by measuring the difference between Old Mutual Ltd.’s share prices in Johannesburg, London and Harare.

The indicator is among many “contrived phantom exchange rates” in use that “conspire to defeat fiscal policy,” the government said in a June 26 edict that halted trading on the Zimbabwe Stock Exchange and stopped most mobile-banking transactions.

The OMIR is one of the multiple exchange rates Zimbabweans use daily to navigate the nation’s myriad economic challenges, including annual inflation of almost 800%.

A perennial shortage of cash means anyone who has physical banknotes is able to negotiate exchange rates with brokers who pay the funds onto mobile-money platforms. The brokers can then sell the hard cash at an even higher rate.

That’s resulted in a widening gap between the official rate of 63.7 per U.S. dollar, and the amount at which it trades on the streets of Harare, which is now at 100.

“People have relied on making money from buying and selling Zimbabwe dollars, and not from any real production,” said John Robertson, an independent economist based in Harare. “It’s what has created these distortions.”

The OMIR also feeds into the black-market Zimbabwe dollar rate, which the nation’s bourse uses, along with the official rate, to determine the value of stock prices.

Old Mutual, founded in Cape Town in 1845, is not involved in determining the rate. Market participants take the company’s share prices in South Africa, the U.K. and Zimbabwe, convert each of them into the U.S. dollar, which should typically trade near par.

The finance minister, however, in March restricted trading in the shares of Old Mutual and two other companies by making the stocks no longer fungible or regarded as being equal in value to those traded on other exchanges, in a bid to prevent outflows caused by the dual listings.

Despite the move, investors poured into Old Mutual, using it as a proxy to the U.S. dollar because of its offshore listings, pushing the Zimbabwe-listed stock up 90% since the beginning of May. The shares in Johannesburg and London were little changed, resulting in the implied rate doubling to 122 as the gap between the securities widened.

Zimbabwe’s benchmark industrial index has risen more than sevenfold this year, reaching a record on June 24, and giving the overall bourse a market value of about 229 billion Zimbabwean dollars ($3.6 billion). None of the stocks in the 57-member index has declined this year as Zimbabweans seek a haven from runaway price increases and the weaker currency, which has slumped to 63.7442 per U.S. dollar after a 25:1 peg put in place since March was abandoned.

Suspend Listing
Authorities now want to eliminate the OMIR before allowing any trading to resume on the Zimbabwe Stock Exchange, people familiar with the matter said, asking not to be identified because the talks are private. The OMIR was the focus of various meetings on Monday between members of Zimbabwe’s stockbrokers’ association, the stock exchange, the Securities and Exchange Commission and the Treasury, the people said.

Measures being considered to include suspending Old Mutual’s shares from the Harare-based bourse, having the securities traded only in dollars, or moving the listing to the Victoria Falls Stock Exchange, a market that will only trade in foreign currency once it opens later this year, the people said.
Nick Mangwana, the government’s spokesman, referred queries to the finance ministry. Several calls and text messages sent to Finance Minister Mthuli Ncube and central bank Governor John Mangudya seeking comment weren’t answered.

“There has not been any official communication from authorities in Zimbabwe to Old Mutual,” the Johannesburg-based company said in an email “We have asked our local subsidiary to reach out to our stakeholders in Zimbabwe to try and understand the circumstances around ZSE closure and other related matters.”

Discussions over the halting of trade on the stock exchange are ongoing and the outcome is still uncertain, SEC Chief Executive Officer Tafadzawa Chinamo said by phone. Zimbabwe Stock Exchange CEO Justin Bgoni said on Sunday that the bourse would wait for guidance from regulators.

In comments at a briefing after a cabinet meeting on Tuesday, the finance minister said that stockbrokers should assure their clients that their investments in the stock market are safe and that the bourse will reopen once investigations are complete. Bloomberg

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Zimbabwe government suspends mobile money transactions



Nick Mangwana

Zimbabwe government has, with immediate effect, suspended all monetary transactions on phone-based mobile money platforms to facilitate investigations that will lead to the arrest and prosecution of people responsible for sabotaging the economy.

In a statement this evening, Secretary for Information, Publicity and Broadcasting Services, Mr Nick Mangwana, said the measures will include the suspension of all trading on the Zimbabwe Stock Exchange.

The suspension will be in place until mobile money platforms have been reformed to their original purpose and when all the present phantom rates have converged into one “genuine rate that is determined by market forces under the foreign currency auction system which was launched by the Reserve Bank of Zimbabwe” on June 23. Operational modalities and details of the envisaged measures will be announced by the relevant monetary, regulatory and law enforcement authorise in the next few days.

The government will ensure that prudent measures are put in place to mitigate and prevent any collateral damage that the interventions may cause to the innocent public that was using the mobile money platforms. The Herald.

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