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Panic buying and a mass stay-away as Zimbabwe fuel price bites



Zimbabwean president Emmerson Mnangagwa

A national stay-away kicked off on Monday in opposition to Zimbabwean president Emmerson Mnangagwa hiking fuel prices by 120 per cent on Saturday, January 12 2019, a move which sparked panic buying, with the public speculating on a sharp increase in goods and services across the board.

Social media went into overdrive with “Bring back Mugabe” memes after the president’s announcement. During his 37-year stint in power, Mugabe did not, at any point, go on national television to announce a fuel price hike. The pro-Mugabe calls subsequently waned as people recalled his policies.

The new pricing is seen by many as the beginning of a tough year under president Mnangagwa, who after the military transition in November 2017 was buoyed by goodwill locally and internationally, but has so far struggled to improve the country’s finances.

By the close of business on Sunday, some basic commodities had started disappearing from shelves in supermarkets. In some cases, grocery store owners removed products from shelves or directly increased prices, while in others the buying public bought in bulk.

“If we sell at this price, in a few days’ time we won’t be able to restock. Transport costs have shot up and it simply means to have sugar coming here (at the shop) it will be at a higher cost. It’s not workable,” said Tapiwa Ngorima, a shop owner.

Petrol went up to $3.31 a litre, from around $1.46, and diesel now costs $3.11 a litre, from $1.26 in bond currency.

However, for some fuel station operators, it’s a loss.

“The same capital that procured fuel at the old price will be used to buy in the new price regime.

For most of us, we are operating at a loss. Only rogue dealers will survive this because government notified us early that we should sell all our fuel and wait for the new pricing.

Imagine if I had held on to my old stock and decided to sell with the new price, I would at least be cushioned,” said a fuel station operator.

To try to calm tempers, the government moved its workers’ pay dates back by two weeks, with the army, police and health sectors getting paid on Monday, January 14 and the rest of the civil service getting paid on Wednesday.

Their salaries are expected to reflect a 10 per cent increment, which has been rejected by unions.

“How do you explain a 120 per cent fuel hike and a 10 per cent salary increment? Public transport operators are now demanding $2.50 for a one-way trip, from $1. There is no balance there,” said a nurse.

Deputy Minister of Information, Publicity and Broadcasting Services Energy Mutodi gave a few tips, via his official Twitter account @energymutodi, on how to survive the fuel crisis.

“Faced with high fuel costs, clever people know what to do & here are some tips: Avoid fuel guzzler, reduce fleet, cancel unnecessary trips & use bicycles where possible to save BIG. Do not protest in the street you can lose a limp (sic) in skirmishes,” he tweeted.

With the festive season gone and most companies expected to resume operations, some have extended their annual festive season shutdown until the economy improves.

Leading cooking oil, soap and margarine manufacturer Olivine Industries has closed shop because of its failure to service a US$11m debt. The company said its failure was due to the crippling economy.

“The board of directors and management of Olivine Industries (Pvt) Ltd regrets to advise its customers that all manufacturing operations have stopped.

The company has struggled to restart its manufacturing operations in January 2019 for lack of imported raw materials. As such it remains closed after the shutdown in December 2018 and employees have been sent on indefinite leave.”

“Production during the remainder of 2018 struggled at low capacity due to shortages of raw materials procured through letters of credit established before September 30, 2018, and on foreign supplier credit which was last serviced in 2018.

The company currently owes US$11m to its foreign suppliers who have since cut off supplies until the arrears are paid,” reads the company’s statement.

The Zimbabwe Congress of Trade Unions (ZCTU), a militant workers union body that gave birth to the Movement for Democratic Change (MDC) in 1999, announced that, after wide consultations, a national stay away had been called for Monday to Wednesday, January 16 in protest against “the insensitive and provocative” fuel increase.

“Workers have been facing serious hardships as a result of the general astronomical price increases since last year against stagnant salaries.

The fuel increase added more misery to the suffering working class of Zimbabwe both in formal and informal sectors,” the union said in a statement shared on social media.

“The (stay away) action will be embarked on an incremental basis and include other forms of actions that will be advised in due (course). There is nothing else pushing the workers besides the starvation and hardships afflicting every working-class household,” said ZCTU.

Meanwhile, president Mnangagwa left the country at the weekend for a five-nation visit that will take him to Russia, Belarus, Azerbaijan, Kazakhstan and Switzerland, where he will make a second appearance at the Davos World Economic Forum.

Besides Russia and Switzerland, the other destinations have little or no trade relations with Zimbabwe other than Memorandums of Understanding.


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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