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Minister Mangaliso Ndlovu to meet Delta over US dollar prices

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Delta Corporation

Delta Corporation yesterday said it would start selling all its products in foreign currency with effect from tomorrow, a decision described by the Government as unacceptable and illegal.

Analysts also warned that the decision by Delta Corporation could backfire as most Zimbabweans were paid in Bond notes or RTGS.

In an interview yesterday following a statement released by Delta Corporation earlier on, the beverage manufacturer’s company secretary Mr Alex Makamure said selling its products in “multiple foreign currencies” such as the rand, pula, Euro, British pound and US dollars would also enable it to access key raw materials.

Responding to the announcement by Delta yesterday, Industry and Commerce Minister Nqobizitha Mangaliso Ndlovu said business must “stop forthwith” dollarizing the economy.

“We have noted with concern a proliferation in the number of companies and businesses engaging in preferential currency practices.

This is not only against the spirit of fairness, but it is also an illegal practice. Government is very clear that this practice is unacceptable and has to stop forthwith and if not, the law will take its course.”

Minister Ndlovu said Government had tried to ensure businesses operate in a free atmosphere, but companies were now acting in bad faith.

“The Government has supported business to operate liberally within the economy without interference but giving an intervening hand whenever it has been called upon to assist. In return, Government has expectations that business will operate in good faith and responsibly,” the minister said.

“At the centre of the relationship between Government and business is the spirit of engagement and two-way communication between all parties. That spirit is defeated when one of the parties decides to unilaterally pronounce decisions against both the text and spirit of agreed principles,” he said.

Delta Corporation said in a statement yesterday its business had been “adversely affected” by shortages of foreign currency, which had resulted in the company failing to meet orders, and “in the case of soft drinks, being out of stock for prolonged periods”.

It said the fiscal and monetary policy frameworks announced by the Government in October last year did not provide for “easy access to foreign currency by non-exporters”.

“The company has only received limited foreign currency allocations from the banking channels, which have not been adequate to fund the import requirements,” said the statement.

“Resultantly, all our foreign suppliers are unable to continue providing credit or meet new orders as some of them have not been paid for extended periods.

“In order to sustain its operations, the company advises the retail and wholesale customers that its products will be charged in hard currency with effect from Friday 4th January 2019,” reads the statement.

Mr Makamure said Delta Corporation stopped making some of its products, particularly soft drinks, in November.

He said no deliveries were made throughout November last year while it released some soft drinks on December 24.

Some supermarkets were still selling soft drinks, principally Coke, on Christmas Day with some having the product even yesterday.
The company requires US$2 million per month to buy raw materials such as concentrates and granules used to manufacture plastic bottles.

Delta Corporation said its products were fairly priced in US dollars and had remained generally unchanged since 2013, and the new prices for soft drinks announced yesterday show that a 300ml bottle will sell for 50c; a 330ml can (60c) while 500ml PET will be US$1.

Lager beer prices are 80c for 375ml returnable bottles; 750ml returnable (US$1,50); and 340ml returnable (US$1).

“We trust that our customers will continue to charge recommended retail prices in USD or equivalent currencies based on the multi-currency framework,” said Delta Beverages.

Delta said it had invested over US$600 million in plant and equipment, vehicles and ancillary services since 2009, and there was need to “protect this investment and ensure sustenance of all value chain partners”.

The company called for wider consultations on policy interventions to build consensus and market confidence among stakeholders to stabilise the macroeconomic environment.

Chairperson of the department of economics at the University of Zimbabwe Professor Albert Makochekanwa said it was incomprehensible that Delta wanted to sell in forex when almost all employees’ salaries were in Bond notes and/ or RTGS.

“More than 99 per cent of people living in Zimbabwe earn their income in Bond and/or RTGS.

“Charging in USD will likely mean reduced customers, which may affect their sales (and) there may be upward demand for USD, which will cause an upward increase in (the) buying (of) USD on the black market,” said Prof Makochekanwa.

Economist and Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer Takunda Mugaga, said the move by Delta indicated the economy was “redollarising faster than we can catch up”, which would have an impact on pensions.

“Delta, being a market leader as well as industry on its own due to the monopolistic nature of its being, the result is expedited redollarisation which will have an enterprise-wide impact from the farm to the salary of an employee directly and indirectly employed by Delta,” said Mr Mugaga.

“This stance by Delta Corporation means all players, including very small ones in the beverage sector, will follow suit (and) it will also send a message to bankers given Delta’s significant presence locally when it comes to facilities and deposits with banks,” he said.

But Prof Makochekanwa does not see the move by Delta speeding up redollarisation considering that Simbisa Brands, the owners of Chicken Inn, Pizza Inn, Fish Inn and Bakers Inn, is already charging in US dollars, together with some fuel retailers, but this has not had an “impact on redollarisation as of now”.

Simbisa accepts RTGS and Bond notes based on the parallel market rate for US dollars.

Industry and Commerce Minister Mangaliso Ndlovu said he was aware of Delta’s decision, but said he would engage the company to see if that can be reversed.

“I have seen it (the letter to customers advising of new pricing structure) but I think we should be meeting them on Friday (tomorrow). That cannot be allowed,” said Minister Ndlovu.

But Mr Mugaga said if Government blocked Delta from charging in forex, this could lead to “job losses”, arguing the company could no longer afford to “continue looking for forex outside the formal means”.

He also Government would be a beneficiary since the Zimbabwe Revenue Authority (Zimra) has started collecting taxes in forex from companies trading in hard currencies.

Delta Corporation would have to start paying corporate tax, excise tax, PAYE and VAT in foreign currency, he said.

The Herald

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BUSINESS

Zimbabwe agrees to pay $3.5 billion compensation to white farmers

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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

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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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BUSINESS

Zimbabwe government suspends mobile money transactions

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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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