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Reacting to the new measures, which saw the Zimbabwean government outlaw the use of foreign currency for conducting local transactions, some said what government had done was not consistent with promises it had been making in recent months.

Lack of trust

“The feeling is that there is lack of trust between the authorities and business,” Zimbabwe National Chamber of Commerce (ZNCC) chief executive Christopher Mugaga said. “As ZNCC we had a meeting, a fortnight ago, with the Reserve Bank governor, and at no point did he ever try to hint the pending introduction of a new currency.

“So that’s a dishonest engagement with business because what it means is that our proposals were ignored, so there is mistrust. The result is that business will not have confidence in the new measures,” said Mugaga.

Competitiveness

Another business body, the Confederation of Zimbabwe Retailers, was, however, urging its members to embrace the new measures as “these will further improve competitiveness.”

“The country has got to move on and embrace its own currency and have independence in monetary policy formulation and implementation,” Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu said.

He added, however, that there was a need to “quickly work on confidence building measures around the new currency and also deal with the political side of the economy by putting national interests ahead of own personal aggrandisement, egos and gains/benefits.

“Zimbabwe first,” he said.

Restraint and prudence 

“The CZR further urges the RBZ to exercise restraint and prudence with the printing machine to safeguard the value of the Zim dollar, while the ministry of finance should desist from inconsistent policy pronouncements that has dented trust and confidence in the past.

“Further measures should be a product of continued consultations and engagement while the inclusive approach is encouraged forthwith,” said Mutashu.

Economist John Robertson said there was still “confusion” and called on business to “exercise caution”.

“We have to wait a few days for all of the inconsistencies in the new policy to be worked out and there could be amendments to the statements made on Monday because some of them cannot work.

Many businesses will be forced to close if they were not able to earn the money which they need to replace their stocks,” Robertson said.

He added: “I am suggesting that everybody wait for a couple of days before taking a decision on what to do, because it could be expensive to try to readjust and then see further changes in the next few days.”

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File photo shows a visitor views an artwork at the second Belt and Road Afro-Sino Art Exchange Exhibition in National Gallery of Zimbabwe in Harare, Zimbabwe, April 29, 2019. (Xinhua/Chen Yaqin)

Established under the framework of the Forum on China-Africa Cooperation as a new mechanism for economic and trade cooperation between China and African countries, the expo is scheduled for June 27-29 in central China’s Hunan Province.

James Manzou, permanent secretary in the Ministry of Foreign Affairs and International Trade, told Xinhua in an interview that the southern African country is looking at forging strong economic and trade ties with China, particularly anchored on its vast potential in the agriculture, mining and tourism sector, the mainstay of the country’s economy.

He said there were opportunities for cooperation with China on growing some of the crops in the country for export.

“We have agricultural products that China can grow here because we have a beautiful climate which is very good for agriculture,” he said.

China has been the biggest buyer of Zimbabwe’s tobacco for several years, and has also been a major funder of the production of the crop through contract farming.

Manzou said there were also other potential areas of trade and economic cooperation between the two countries, including in mining and tourism.

“There are a number of Chinese companies already operating in our mining sector but tourism is also a low hanging fruit as you saw with the recent visit of Chinese tourists that came to Zimbabwe,” he said.

Zimbabwe National Chamber of Commerce chief executive Takunda Mugaga said the trade expo was important for Zimbabwe to showcase its trade and economic potential.

“A platform like the expo is important for Zimbabwe in particular, knowing the infrastructure deficit the country is currently facing,” he said.

He noted the dearth of foreign direct investment into the country due to frosty ties with multilateral financial institutions requires Zimbabwe to fully exploit trade opportunities with China.

“I think it’s a very good platform to try to attract very good investors, especially from the infrastructure side of the Chinese,” Mugaga said.

The African Union Commission also hailed the expo and said it will present huge trade and economic opportunities especially for Africa which was moving towards a single, integrated free trade zone through the African Continental Free Trade Area (AfCFTA) which entered into force in May this year.

“The Chinese investors can come and scout for opportunities in the AfCFTA. They can come and produce goods in Africa for the African market and the rest of the world,” senior expert in the African Union Commission’s Department of Trade and Industry Khauhelo Mawana told Xinhua.

Said Adejumobi, the United Nations Economic Commission for Africa (UNECA) Southern Africa Office director, hailed the launch of the expo as a platform that will further boost trade and economic ties between the two sides.

He told Xinhua that the expo will provide Zimbabwe and other African countries with an opportunity to explore trade and economic opportunities in the vast Chinese market.

“It’s an opportunity to expose the goods and services. It’s an opportunity to broker networks, form partnerships and to really be able to learn lessons from the Chinese experiment,” Adejumobi said.

He said Zimbabwe should also clamor for more Chinese investment in the manufacturing sector, especially the textile industry.

Trade between China and Zimbabwe stood at 1.3 billion U.S. dollars in 2018, with Zimbabwe enjoying a trade surplus of 445 million dollars with the Asian country.

Chinese ambassador to Zimbabwe Guo Shaochun said the country wishes to expand trade scale with Zimbabwe and help Zimbabwe reconstruct its economy.

“We hope Zimbabwe can actively participate in the first China-Africa trade expo. It’s a great opportunity for Zimbabwe to show the advantages of its products to Chinese buyers,” Guo said.

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The central bank said that effective immediately, currencies including the U.S. dollar and the South African rand, in use since 2009, will no longer be accepted as legal tender. A local quasi currency known as bond notes, which was introduced in 2016 but can’t trade outside the country, and their electronic equivalent, the RTGS dollar, will now be known as the Zimbabwe dollar.

The authorities had abandoned the Zimbabwe dollar after inflation reached an estimated 500 billion percent in 2008, according to the International Monetary Fund. While the country has since used a basket of currencies from the continent and abroad as well as bond notes and the RTGS$, some government departments and agencies have until recently demanded payment in the greenback.

The central bank made it clear in its announcement that money held in foreign-currency accounts will not be affected, but the step will be greeted with alarm and memories of the lives wrecked and pensions and savings lost in 2008. Recollections of what effectively became a barter economy in a country where a suitcase full of bank notes was needed to purchase a pair of jeans will be hard to erase.

The central bank also announced a series of other measures, including raising the rate on its overnight window to 50% from 15%, to buttress the currency.

“Any attempt by the officials to bring a new currency would require confidence,” said Jee-A van der Linde, an economist at NKC African Economics in Paarl, South Africa. “People aren’t sure that there’s something backing the currency. There’s no way that something like this will be maintained. People will not trust the currency. It will promote more off-market activity even more if that’s possible.”

In February, the central bank introduced the RTGS$ and said it and bond notes would no longer be pegged to the U.S. currency. This precipitated a rapid depreciation in both the newly introduced interbank rate and the black-market value. Inflation, at 97.9%, is now at its highest since at least 2008.

This “will worsen the situation,” said Christopher Mugaga, the chief executive officer of the Zimbabwe National Chamber of Commerce. Companies “with real dollars will simply go underground,” he said.

Finance Minister Mthuli Ncube said Monday’s announcement gives the central bank “flexibility” to conduct monetary policy. The authorities in Zimbabwe have previously said the central bank plans to establish a Monetary Policy Committee.

“We can also expect the creation of a monetary policy committee as part of the micro institutions that are going towards stabilizing the value of the currency,” he said on state television.

Despite government’s promise that it would introduce a new Zimbabwe currency in the next nine months while it addresses the fundamentals, the regime today just ambushed the nation and reintroduced the Zimbabwean dollar as the only legal tender in local transactions. This means that the multi-currency regime, which provided some modicum of decency and predictability, has been thrown out of the window in favor of the volatile local currency that is not backed by adequate gold and foreign currency reserves.

In spite of SI 142, it is important to state that trust and confidence, which any transacting public must have before they use a currency, cannot in themselves be gazetted.

Today’s decision shows the lack of coherent, prudent and predictable policy, which is important to retain trust and confidence in a country’s economy. Policy consistency and predictability are key tenets for any economy to succeed.

It remains to be seen how the market will respond to the madness, but the knee-jerk monetary policy introduced in the dead of the night is reminiscent of the rushed decisions of this regime. The fuel price increases announced by Mr Mnangagwa himself in the dead of night and that caused a furore in the country’s economy are a case in point.

With the current madness in government, it is important to state that the people reserve their right to express their displeasure at the free-falling economy and the knee-jerk policies that those in authority introduce when they so wish.

MDC: Defining a new course for Zimbabwe.

Luke Tamborinyoka
MDC Deputy National Spokesperson

Post published in: Business

While we are conversant that the motivations to reintroduce the Zimbabwe Dollar stem from hyperinflation and the exchange rate collapse, we restate our long-held position that a return of the Zimbabwe Dollar without being backed by a return to economic fundamentals is disastrous and will only further drain the little confidence there may exist in the financial services sector.

We further caution that the move will continue to scare potential investors and create an uncapped inflation within a few months simply because Zimbabwe isn’t producing. Ambushing citizens and corporates with ill-timed changes to the tender regulations has and will always be recipe for disaster. As a global norm, the introduction of a fiatcurrency should be underlined by the following:

a) Perception Management:A strong commitment by the central bank together with the government to take the steps needed to ensure that the new currency is perceived as stable by companies, the general public, and the international community. We posit that if a country is suffering from hyperinflation, its macroeconomic policies to date by definition are unsound. Currency reform alone is unlikely to resolve such problems and will yield its benefits only if underpinned by fiscal and monetary action.

b) Macroeconomic Stability:Sound macroeconomic policies and strong financial services sector legislation should ideally be in place or at minimum under way. At the nerve centre of Zimbabwe’s economic malaise has been low productive capacity from the supply side of the economy, massive de-industrialization, informalisation, low economic growth rates, unemployment, poverty, poor social services, poor revenue inflows and a domestic debt that balloned to close to US$10 billion.

c) Logistical Preparations and Feasibility Tests:Careful preparation is required, setting up the policies and processes behind the currency reform and drafting a detailed budget for the entire currency reform process which also includes conversion of existing national and local budgets valued against the new currency

d) Public Education:Important as all these preconditions are, the success of a currency reform depends just as much on a successful public education campaign. The central bank needs to coordinate this campaign with other agencies, financial sector representatives, merchants, and the general public.

Macro-economic stability that is pro-poor, inclusive and human–centered with increased fiscal space, a high degree of competitiveness, a healthy environment for domestic and foreign investment, a strong export economy and high degrees of innovative capability will take Zimbabwe forward. We continue to implore the government to seriously consider the following:

1) Progressive and consistent consultation with citizens and stakeholders in the development and adoption of key policy changes and reforms.

2) Policy changes in the economic realm must always seek to entrench and deepen social protection to an already impoverished citizen

3) Policy predictability and consistence is key in trust building and restoring confidence in the economy.

4) Return Zimbabwe to norm compliance with democratic governance and constitutionalism where the rule of law is supreme

5) Immediately begin an inclusive national dialogue that addresses all key reforms that may be deemed necessary steps in redirecting the country towards sustainable democratic development. We maintain our position that the current POLAD is a far cry from the envisaged dialogue process and inconsequential in delivering the necessary reform path to rescue the country from total collapse.

We remained further worried that the policy trajectory taken by central government to prematurely reintroduce the Zimbabwe Dollar further threatens social stability in Zimbabwe in an already volatile environment and urge government to take corrective measures.

Post published in: Business

HARARE (Xinhua) — Zimbabwe will explore ways of boosting the country’s exports to China at the forthcoming China-Africa Economic and Trade Expo.

Established under the framework of the Forum on China-Africa Cooperation as a new mechanism for economic and trade cooperation between China and African countries, the expo is scheduled for June 27-29 in central China’s Hunan Province.

James Manzou, permanent secretary in the Ministry of Foreign Affairs and International Trade, told Xinhua in an interview that the southern African country is looking at forging strong economic and trade ties with China, particularly anchored on its vast potential in the agriculture, mining and tourism sector, the mainstay of the country’s economy.

He said there were opportunities for cooperation with China on growing some of the crops in the country for export.

“We have agricultural products that China can grow here because we have a beautiful climate which is very good for agriculture,” he said.

China has been the biggest buyer of Zimbabwe’s tobacco for several years, and has also been a major funder of the production of the crop through contract farming.

Manzou said there were also other potential areas of trade and economic cooperation between the two countries, including in mining and tourism.

“There are a number of Chinese companies already operating in our mining sector but tourism is also a low hanging fruit as you saw with the recent visit of Chinese tourists that came to Zimbabwe,” he said.

Zimbabwe National Chamber of Commerce chief executive Takunda Mugaga said the trade expo was important for Zimbabwe to showcase its trade and economic potential.

“A platform like the expo is important for Zimbabwe in particular, knowing the infrastructure deficit the country is currently facing,” he said.

He noted the dearth of foreign direct investment into the country due to frosty ties with multilateral financial institutions requires Zimbabwe to fully exploit trade opportunities with China.

“I think it’s a very good platform to try to attract very good investors, especially from the infrastructure side of the Chinese,” Mugaga said.

The African Union Commission also hailed the expo and said it will present huge trade and economic opportunities especially for Africa which was moving towards a single, integrated free trade zone through the African Continental Free Trade Area (AfCFTA) which entered into force in May this year.

“The Chinese investors can come and scout for opportunities in the AfCFTA. They can come and produce goods in Africa for the African market and the rest of the world,” senior expert in the African Union Commission’s Department of Trade and Industry Khauhelo Mawana told Xinhua.

Said Adejumobi, the United Nations Economic Commission for Africa (UNECA) Southern Africa Office director, hailed the launch of the expo as a platform that will further boost trade and economic ties between the two sides.

He told Xinhua that the expo will provide Zimbabwe and other African countries with an opportunity to explore trade and economic opportunities in the vast Chinese market.

“It’s an opportunity to expose the goods and services. It’s an opportunity to broker networks, form partnerships and to really be able to learn lessons from the Chinese experiment,” Adejumobi said.

He said Zimbabwe should also clamor for more Chinese investment in the manufacturing sector, especially the textile industry.

Trade between China and Zimbabwe stood at 1.3 billion U.S. dollars in 2018, with Zimbabwe enjoying a trade surplus of 445 million dollars with the Asian country.

Chinese ambassador to Zimbabwe Guo Shaochun said the country wishes to expand trade scale with Zimbabwe and help Zimbabwe reconstruct its economy.

“We hope Zimbabwe can actively participate in the first China-Africa trade expo. It’s a great opportunity for Zimbabwe to show the advantages of its products to Chinese buyers,” Guo said.

Post published in: Business

“The stocks are from natural attrition of those animals,” he said on Monday at a two-day meeting of regional leaders being held in the resort town of Victoria Falls, on Zimbabwe’s border with Zambia. If given permission to sell the stockpiles, the money raised “would be able to finance conservation efforts for the next two decades.”

Zimbabwe has threatened to withdraw from the Convention on International Trade in Endangered Species because the organization won’t allow it to sell its stockpiles. The country is struggling to revive its economy after almost two decades of isolation and is considering seeking help from the International Monetary Fund.

While Zimbabwe currently remains committed to CITES rules, “we are gravely concerned by the one-size-fits-all approach where the banning of trade is creeping into the organization,” Mnangagwa said. “We call upon the institution not to be a policy-making institute, but to be one that promotes all wildlife resources.”

The summit in Victoria Falls is being attended by leaders from Namibia, Zambia and Botswana as well as Angola’s environment minister.

The instrument can be viewed on the Veritas website [link].

The effect of the instrument is that from today only RTGS dollars, whether in the form of bond notes or coins or electronic currency, are legal tender in Zimbabwe.  All other currencies ‒ the instrument specifically mentions US dollars, British pounds, South African Rands and Botswana Pula ‒ are no longer legal tender.

The instrument states that it is not intended to affect nostro FCA accounts and the use of foreign currency in those accounts to make payments overseas, nor does it affect the obligation to pay duties and taxes in foreign currency where required under the Customs and Excise Act and the Value Added Tax Act.

Effect of the SI

The SI is not so far-reaching as its makers perhaps intended.  As we pointed out in our Bill Watch 15 of the 21st March 2019:

“Legal tender” means a currency which, if offered in payment of a debt, discharges the debt unless the creditor and the debtor have specifically agreed otherwise.  So if a debtor owes a creditor $20, say, the debtor can normally repay the debt by offering $20 in RTGS dollars (because they are legal tender).  If however the parties have agreed that the debt should be repaid in US dollars, then the debtor must repay it in those dollars.  There is no law in Zimbabwe which invalidates a contract that stipulates payment in a foreign currency.  Similarly there is no law in Zimbabwe that requires prices to be marked up in legal tender or accounts to be drawn up in legal tender.

The new instrument does not specifically forbid contracts that require payments to be made or calculated in a foreign currency, so if shopkeepers mark their prices in US dollars, say, or insist on payment in that currency there is nothing to stop them doing so.

The instrument has all the hallmarks of a hastily concocted measure to stop the downward spiral of the RTGS dollar against other currencies.  Whether it will have any such effect remains to be seen.

Veritas makes every effort to ensure reliable information, but cannot take legal responsibility for information supplied.

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