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Zimbabwe seeks $500m from Afreximbank

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John Mangudya

The Reserve Bank of Zimbabwe (RBZ) is negotiating a $500 million funding package with the African Export and Import Bank (Afreximbank), as part of efforts to resolve the foreign currency shortages blighting the economy.

Afreximbank has been Zimbabwe’s biggest benefactor since the turn of the century, at a time when most global lenders had stopped extending fresh lines of credit to the southern African nation, either at the behest of Western countries that were livid over the country’s land redistribution programme or over defaulting on earlier loans.

RBZ governor Dr John Mangudya told The Herald in an interview last week that the central bank was currently in the market, scouting for fresh lines of credit, and this included discussions already underway with Afreximbank for a $500 million kitty.

The funding is required to meet critical obligations such as external payments for raw materials or key industrial equipment and machinery, as well as fuel and medicines among others.

At one point, September 2017 specifically, the country’s external payments backlog stood at nearly $600 million, as the central bank struggled to cover all external payment demands.

Demand for foreign currency continues to exceed inflows, even as exports grew by 36 per cent last year to 3,8 billion, given that the country’s import bill, at $5,5 billion, remains too high.

Apart from interventions towards alleviating Zimbabwe’s private sector funding challenges, which is being done by institutions such as AfDB, the RBZ is also in the market either scouting for lines of credit or already negotiating fresh support from institutions that have previously bailed out the country, especially, the Afreximbank.

This comes after a high-powered delegation from the AfDB, which has extensive expertise in the areas of industrial manufacturing, agriculture, energy and financial services, visited the country last week to explore private sector’s funding needs.

The bank last year said it would mobilise $8 billion to fund the needs of Africa’s private firms.AfDB is one of the multilateral institutions, including International Monetary Fund (IMF) and World Bank Group, which have not been lending to Zimbabwe over “arrears”.

“We are also in the market, as you are aware; to continuously look for lines of credit to supplement our export (receipts) from gold, tobacco or from wherever so that at the end of the day the economy can continue to function,” Dr Mangudya said.

“And three, we are also promoting diaspora remittances so that they continue bringing in money.“Of course, we are also making sure that we continue to export and that is why we continue to give incentives (to exporters),” Dr Mangudya said.

“We are finalising our loans commitments; Afreximbank has said they will give us $500 million, which we are still working on. We are also still working on other facilities, the PTA Bank is also assisting us,” Dr Mangudya said. Afreximbank, which has stood by Zimbabwe in the greatest period of need, last year gave the country $1,5 billion.

Of that amount, $500 million was meant to stabilise the country’s depleted nostro balances, to enable Zimbabwean companies to meet their external payments obligations while the balance was to ring-fence foreign investments. Most facilities extended by Afreximbank, where Dr Mangudya once worked, are given at concessionary rates.

The $1 billion from Afreximbank was a guarantee meant to ring-fence foreign portfolio investments, as President Mnangagwa’s administration, since taking over in November last year, has prioritised luring back foreign direct investment to rebuild the economy and make up for nearly four decades of economic instability and meltdown.

Dr Mangudya said that there was a growing mismatch between the demand for foreign currency by the private sector and the number of resources available on the domestic market. The RBZ chief said this was a sign of a growing economy.

“What is the reason for foreign currency shortages? The rate at which this economy is expanding is faster than the rate at which we are creating foreign currency to meet that demand. I give an example of packaging industry; go to Nampak, right now they are producing at 100 per cent of capacity.

“Check financials coming from all those who have published; you saw Delta, OK Zimbabwe, Proplastics, what were they saying; they are saying their bottom lines have improved.

“Why? This is because aggregate demand has improved.”Increased activity in the economy on the back of increasing aggregate demand, Dr Mangudya said, was stemming from increased Government expenditure and loans banks that were issuing. Hitherto, the RBZ governor has said earnings from tobacco have improved disposable incomes in the country.

Dr Mangudya said improved activity in the economy had given rise to a higher demand for other commodities such as fuel, where consumption of the commodity went up by 25 per cent, which has spawned serious congestion on the country’s roads.

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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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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