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Zimbabwe’s crumbling economy spoils coup ‘celebrations’

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Zimbabwe presidential inauguration

It’s only a few weeks before the coup plotters celebrate the Second Republic, which came after the military helped oust Robert Mugabe, then-leader of the country for the first 37 years since independence.

With the coup having started on November 14, Mugabe succumbed to pressure and signed his resignation letter on November 21 when his long-time allies, among them Emmerson Mnangagwa and then-Zimbabwe Defence Forces Commander General Constantino Chiwenga turned their backs on him and opted to topple him.

Mnangagwa, having been fired from the government on November 7 following attacks by the G40 factional grouping and fleeing the country the next day after talks of a planned hit on him, returned home on November 22 from South Africa, where he had sought refuge.

On November 24, he was inaugurated as President, promising that Zimbabwe was open for business, her economy would boom, and jobs would open up.

Instantly, he was an avowed reformist. He travelled to all corners of the world trying to woo the support of the international community. All he came back with was promise after promise.

The investors were waiting on the July 30, 2018, elections to see if Mnangagwa would follow the law to the letter and to the spirit.

During the election campaign period, Mnangagwa promised guaranteed jobs, improved health facilities, money in the banks and in automated teller machines ‑ all in all, a new Zimbabwe. He claimed Zimbabwe had wasted several years in isolation under Mugabe.

The elections came and went. The electorate voted for their candidates, with the protagonists being Mnangagwa himself and opposition MDC Alliance’s youthful leader Nelson Chamisa.

Chamisa lost to his nemesis by a small margin and contested the win in the Constitutional Court. A ruling was made and Mnangagwa was declared the winner.

But now, the nation is licking its wounds.

First to spoil his supposed plans was the August 1 deadly shootings in the capital by the military, where seven civilians died as a result of gunshot wounds.

The military fired live ammunition on fleeing citizens following protests over an alleged electoral theft.

Since then, everything has gone ballistic. The legitimacy Mnangagwa was seeking following the November coup is seemingly up in smoke.

Next was the cholera epidemic which claimed the lives of 54 people and left thousands seeking medical attention after a breakout of the waterborne disease in Glen View and Budiriro high-density suburbs.

Now, the economy is burning. And there seems to be no solution in sight as yet.

On October 1, the government scrapped the US$0.05 flat fee charge for every electronic or mobile money transfer or payment transaction and replaced it with a new tax regime, where both individuals and companies would be charged US$0.02 for every dollar transacted.

 

With a lot of public outcry and resistance, new finance and economic development minister Mthuli Ncube rejigged the policy, exempting all transactions under US$10 and putting a cap of US$10 000 charges for any transaction above US$500 000.

But still, the situation has turned grave.

The transfer rate has gone haywire, at one point shaking the market after shooting through the roof to 600%, meaning a $600 transfer for every US$100.

The authorities blame illegal foreign currency dealers for the crisis on the market.

Law enforcement agents have already been set on the street forex dealers. But the opposition says fiscal indiscipline by the government is the major source of the country’s problems.

Fuel queues, a few weeks ago, snaked out at service stations, where either petrol or diesel would have been delivered.

At some stations, it’s either the fuel tanks underground were empty, or the little available was reserved for those with cards.

At others, the fuel attendants limited what motorists could get.

For now, the situation has improved a bit, with the government said to have stocked up.

In shops, prices are going up on a daily basis, if not by the hour.

There are now multi-tier pricing systems in several shops.

Basic commodities like cooking oil and sugar, if available, are being rationed in shops.

Even beer in most shops has not been spared the rationing.

At pharmacies, the attendants are demanding foreign currency for one to get medication. They have even inflated the prices in US dollars.

For blood pressure pills that usually go for $9, the price has jumped to around US$20, or about $160 in the surrogate bond note or transfer rate.

Meanwhile, Chamisa claims the crisis will only halt if Mnangagwa concedes that he stole the July 30 election.

He says only legitimacy will solve the situation Zimbabwe finds herself in.

Chamisa’s MDC Alliance party maintains no investor would want to pour their money into a “bottomless” Zimbabwe.

Economist Chris Mugaga says the government is “clearly running out of ideas and time”.

“The government sold the nation a dummy for too long. They were milking a buffalo thinking it’s a cow, now it’s kicking them from its udder and they are wondering why,” he was quoted recently in private media.

The Zimbabwe Council of Churches has tried to bring Chamisa and Mnangagwa to the negotiation table for a way out, but that option seems to have hit a brick wall.

Zanu-PF, the party in government, insists elections determined the legitimacy issue.

“Elections were held and are gone.Let’s look ahead in terms of our economic development, that is the challenge we are facing, the stabilisation of our economy…” Zanu-PF spokesperson Simon Khaya Moyo was quoted as saying recently.

The ruling party insists its leader Mnangagwa’s doors are open to anyone with a solution to the crisis.

It’s only a matter of time before anyone knows which direction the country is taking.

African News Agency

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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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