Zimbabwe Review

Reflections on Zimbabwe

Archive for December, 2007

Gideon Gono’s star starting to fade

Posted by CM on December 30, 2007

by Chido Makunike

The last few weeks have not been good for Gideon Gono, governor of the Reserve Bank of Zimbabwe.

Gono featuredly prominently at the ZANU-PF congress at which President Mugabe somehow arranged yet another ruling party endorsement as its sole candidate in the elections scheduled for March 2008. We saw images of Gono grinning broadly, seemingly basking in the glow of Mugabe’s approval. He got tongues wagging with a tough speech in which he accused un-named high ranking government officials of being behind many of the nefarious “black market” activities that led to phenomena like the current perplexing shortage of Zim dollar currency notes.

Gono has never made secret of his personal closeness to Mugabe, which reports have traced to his being the president’s banker, dating from the days when Gono was chief executive of the Commercial Bank of Zimbabwe. Gono parlayed his revival of that once floundering bank back into solvency into a reputation as a “turn around expert.” It is that image he carefully cultivated over some years that eventually landed him the RBZ top job with much fanfare in 2003.

His closeness to Mugabe made him automatically an object of suspicion to many. But others hoped that he could use it to make Mugabe “see sense” about measures needed to right the economy’s many wrongs in a way the president light not have been prepared to do with previous economic advisors.

There was a circus around Gono’s taking on the job of central banker. The media was roped into hailing him as a conquering hero who had come to slay the dragon of high inflation, the country’s then first experience of local currency shortages and all manner of other economic ills.

If the media seemed to adore him, he clearly loved the media attention just as much. His “monetary review statements” were broadcast live, and his every word was treated as gospel. In the Gono-euphoria that erupted, cautions that the country’s deepening economic problems could not be separated from governance, political and diplomatic issues were swept aside. Gono promised to “turn around” the economy in short order, confidently making inflation-lowering and other targets which the country has come nowhere near to achieving, and vowing “failure is not an option.”

Four years after all the hype surrounding his appointment and all the high hopes in his tenure by many, the December 23 2007 main headline in the Zimbabwe Standard was a harsh summation of how far Gono has fallen in public esteem. It screamed, “Gono labelled ‘No. 1 saboteur.’

Citing the thousands of Zimbabweans who had to spend the end of year holiday season in long queues for cash from their bank accounts, the story quoted Elton Mangoma, an opposition party official, as saying, “Gono is clearly the biggest saboteur of Zimbabwe’s economy. He is simply playing politics with a serious national crisis that needs immediate attention from a central bank governor who takes the people’s suffering seriously.”

The MDC, the Zimbabwe Congress of Trade Unions and economists, all said the cash crisis was ample evidence that the RBZ had failed in its mandate to provide liquidity, the story continued. The critics said it was “very cruel” of Gono to plunge the ordinary people into the crisis in a miscalculated move “to fix” people whose identity he knew.

Critics said blaming cash barons was a diversionary tactic designed to mask the incompetence of the central bank. “There is no money from the so-called barons because if the money was there, the parallel market would be booming,” said Dr Daniel Ndlela, head of an economic consultancy firm. “This fellow (Gono) is not only heartless, but he does not understand who he is punishing. The people in the queues are not barons.”

The Standard’s story continued:

Mangoma added: “The people are not failing to access their cash because of the cash barons but because of Gono’s policies which have eroded people’s confidence in the banking system in this country. No reasonable person would put their money into a bank when they know they will fail to access it the following day.”

Ndlela said Zimbabweans could be in for more suffering “as long as we have a poet” for a central banker. “He has totally failed. If he had a bit of professionalism and dignity he should have resigned a long time ago,” he said.

This is unprecedented harsh public criticism for Gono. Until recently, he had somehow been able to straddle the awkward twin roles of being an intimate insider of a floundering, unpopular government and yet also able to cast himself as a “man of the people” folk hero. That bubble seems to have burst in a way that some cynics may say was inevitable.

Defending himself in The Herald in an interview which was gently but still unusually critical in the tone of the questions asked by the state’s primary propaganda newspaper, Gono said “The cash shortages that we see are a mere symptom of much deeper and greater fundamental misalignments in our economy than the ability or inability of the central bank to provide adequate cash.” In this regard, it was unfortunate that all the blame had been heaped on RBZ, the newspaper quoted Gono as saying.

Went on Gono in the interview, “We are back to economic fundamentals which we must tackle head on… It’s about sanctions whose debilitating effects on the economy and on the ordinary lives of our people must be a matter for which we must all speak with one voice as Zimbabweans to see that these sanctions are lifted. It’s about the productivity of … every form of economic activity in the country. We must raise the bar of productivity to underpin our commercial transactions.”

“It’s also about economic and pricing distortions, which we must deal with decisively. It’s about economic patriotism. It’s about discipline. It’s about building a corrupt-free economy. It’s about international relations. So don’t take a simplistic view of the queues and simplistically place 100 percent responsibility on the central bank or the Governor, however easily tempting or fashionable it might be.”

“That’s my interpretation of the cash queue. In the absence of a disciplined approach to our economic affairs, to corruption, hard work and economic patriotism, the winter of discontent with cash queues will not go away. “

Everything Gono says here is true, of course. But it was all just as true four years ago when he somewhat over-confidently boasted “failure is not an option” amidst warnings that the country’s problems were deeper than could be addressed by monetary measures. For instance, the lifting of sanctions and issues of international relations are beyond the purview of Gono and the RBZ. Yet they are critical components to Zimbabwe’s economic fortunes, and to Gono’s own success as RBZ governor.

All these points had been repeatedly made by many long before Gono came onto the scene as central banker. Some who had made similar points to those Gono is now making were accused of being traitors to the country and forced to resign their positions for publicly stating unpalatable truths. The hope had been that Gono’s reputation as a “favoured son” who enjoyed the particular attention of Mugabe’s ear would give him more leverage than others before him had.

While Gono has clearly been the most powerful central banker yet, with unprecedented latitude to try all sorts of economic experiments, he has met the ultimate brick wall: that there will be no solution to the country’s hyper-inflation or its cash, fuel and other shortages without going back to production, diplomatic, political and other basics which the ruling authorities have shown no inclination to do over the years.

In a way Gono is a victim of his own initial hype and over-promising of what he could achieve in the prevailing political environment. In taking the RBZ job, he gambled that he could influence Mugabe and the politicians to take measures they had resisted before, or alternatively, that he could use his wide-ranging powers to bring about economic improvements even without reform of the rest of the system of governance. The increasing criticism from all sectors of the media and the public suggests many people believe that he has lost his gamble.

Without giving details, in the Herald interview he promises to solve the immediate cash problems in the next several days. But this would seem to contradict his point in the same interview about how the cash queues will not go away without the country addressing a comprehensive raft of other issues than just how much currency the RBZ releases into circulation. Certainly his credibility is at its lowest ebb, even if he still enjoys the fickle Mugabe’s support, which I am not sure anyone knows for certain.

So what next for Gono?

Hyperinflation and the Zim dollar’s depreciation continue unabated, so two major reasons for the current cash shortage will still be in place no matter what he does to assuage the public’s anger about the shortages. The low farming/industrial productivity and international diplomatic isolation issues will likely continue for all sorts of reasons that are way beyond Gono’s ability to do anything about.

With his repeated “failure is not an option” mantra, resignation is not an easy option. I wonder if it is even an option available to him at all. In return for his unprecedented power, prominence and latitude of action as RBZ governor, he may have had to make personal concessions which may not make it possible for him to walk away unless Mugabe now wishes him to go. He may be too deep into the system as the author of many unorthodox interventions to attempt to stop the economy’s slide in the last four years that being seen to abandon the Mugabe ship would not be looked at kindly at all!

Could Mugabe, on reading the public mood of rising disaffection with Gono, be ready to sack him, in a way giving Gono the easiest way out of a continually sinking ship?

This is not unthinkable for a crafty Mugabe who is a master at finding and nailing scapegoats for problems that are ultimately his responsibility. But it is probably unlikely.

Whatever his faults, Gono has indeed worked very hard at a series of unconventional interventions to try to tame Zimbabwe’s economic melt down. Gono has also very carefully always made a sometimes almost slavish loyalty to Mugabe clear.

Unless Mugabe is now ready to go “conventional” in regards to economic management and international relations, he needs someone like Gono who is tireless at trying unconventional measures, no matter how half-baked some of them may be. In an economic environment even worse than when Gono became RBZ governor, it is hard to imagine Mugabe finding anyone as bold and hard-working at trying new things as Gono has proven himself to be. A more conventional economist at the RBZ would recommend to Mugabe the same conventional political and economic measures that Mugabe has found so unpalatable over the years.

Gono will therefore likely continue at the helm of the RBZ and the economy beyond his current term, but with no more illusions on anyone’s part of a dramatic “economic turnaround” on the horizon. Out of frustration at having failed to achieve it, as well as having lost the public and media adulation he wants enjoyed, he may become an increasingly bitter and capricious economic tsar. In the manner of his boss Mugabe in the political sphere, Gono may continue to be “in power” to issue warnings, threats and decrees to various sectors of the economy, but make little difference to the country’s economic slide.

Gono as RBZ governor rose to dizzy heights in public affection on the alluring but dangerous, fleeting back of a masterfully conducted public relations campaign and charm offensive. The only way to have kept that unrealistic momentum was for him to have then produced the kind of economic results which were not possible under an environment in which his boss continued to make statements and decisions that neutralised Gono’s efforts.

Those decisions are often influenced more by short-term populism and patronage considerations than what is in the best interests of the country. And so farms and implements are given to the political elite than to those best able to use them, with the attendant results on productivity, and ultimately, on inflation and the value of the Zim dollar. It is a waste of time to deal with the economic symptoms without addressing the political root causes.

Ditto for the current cash crisis. It is a waste of time to scapegoat a “cash baroness” who is simply a messenger of well connected and protected political players who are the real black marketeers. Gono says he knows most of them, but appears not to want to rock the political boat by naming them. That may be understandable, but the point is that being politically hamstrung like this makes nonsense of his economic efforts, dooming them to failure. Apart from nailing even the highly placed politicians and others who are “fueling” the black market, there is also the fact that only measures that make such a black market un-necessary will eliminate the problem, even if those measures go against Mugabe’s own brand of ideological orthodoxy.

Gono continues to run from pillar to post, trying this and that cosmetic measure to deal with the symptoms of deeper problems he increasingly shows signs of accepting are beyond the ambit of the RBZ to address. The carefully scripted story of his dramatic professional and public-image rise make for gripping melodrama, but his current floundering is also sadly predictable and depressing given the unchangingly negative political environment in which he chose to try to make a lasting positive impact as RBZ governor.


Posted in People | Tagged: , , , , , , | 3 Comments »

The mysterious case of the disappeared 10 billion dollar court exhibit

Posted by CM on December 30, 2007

I had to check several times to verify that this stunning story was really featured in The Herald (http://www.herald.co.zw/inside.aspx?sectid=28982&cat=1), the government’s own main propaganda rag sheet. Because the Herald’s online archives are so spotty, it is worth reproducing the article in full here:

HARARE provincial magistrate Mr Mishrod Guvamombe yesterday blasted the police and the Reserve Bank of Zimbabwe for frustrating the course of justice by disposing of the $10 billion exhibit recovered from illegal foreign currency dealer Dorothy Mutekede before it was brought to court.

Mr Guvamombe took a swipe at the police and the central bank when it emerged after the testimonies of deputy officer commanding CID Serious Frauds Section Chief Superintendent Alison Nyamupaguma and RBZ director of Financial Intelligence Unit Mr Mirirai Chiremba that the money had already been deposited with the RBZ before the case was finalised and that its serial numbers were not recorded.

In his testimony, Chief Supt Nyamupaguma told the court that on the night Mutekede was arrested, police took the $10 billion cash exhibit to the central bank where it was deposited into a cash detention account.

When the money was taken to the RBZ, it was not booked in the exhibit book at the police station, which is a prerequisite for all exhibits according to the Criminal Procedure and Evidence Act.

Neither did RBZ officials serialise the money on receipt but returned it into circulation.

This prompted Mr Guvamombe to criticise the two institutions for frustrating the justice delivery system, describing their conduct as tantamount to defeating the course of justice. This, he said, made it difficult for the court to establish the source of the cash.

When asked by the court to explain why the police failed to follow the normal procedure of handling exhibits, Chief Supt Nyamupaguma said, “There was a mistake and we need to revisit the whole system,” said Chief Supt Nyamupaguma. “I now see the loopholes in the system and they should be rectified.”

Mr Guvamombe was not convinced with the explanation.

“Both the RBZ and the police are defeating the course of justice. They have taken away our exhibits and we are left with no work to do. In future you should know that exhibits are court property and should not be disposed until the matter is finalised. The RBZ should not be used by the police to frustrate our cases here and I do not know how you should communicate this among yourselves.”

“Why are you not keen to investigate the big fish as opposed to this youthful lady? You are not interested in getting the barons. If you are after the cash barons why bring “runners” like this 24-year-old lady. If I was in your position, I would have investigated the leakage. It is clear that there is no way this woman could have possessed the cash without getting it from the RBZ. You should have the same zeal in investigating the source that you had in dealing with Mutekede’s case. I expect speed and diligence in matters of national interest like that,” said Mr Guvamombe.

Mr Guvamombe said it was apparent that the youthful Mutekede had no access to such a huge amount of cash.

“It is clear that the money came from the RBZ. The money ‘is talking to every one that it is coming from RBZ’, in view of its packaging,” said Mr Guvamombe.

The court also sought an explanation from Chief Supt Nyamupaguma why police were reluctant to probe Harare businessman Jonathan Kadzura on his alleged involvement in the case. He said the matter was still under investigation and they wanted to first complete Mutekede’s case before moving on to other people.

Mr Tapuwa Mudambanuki of Mudambanuki and Associates, who is now representing Mutekede, said his client had no access to such an amount of cash and does not qualify to be called a cash baroness.

“I appreciate that the cash is RBZ packed (sealed in the RBZ’s pre-dispatch plastic packaging) and such amounts are dispatched to meet a (bank) branch’s needs for a day. Commercial banks cannot give such a huge amount to individuals and it would be queer for a young lady like Dorothy to acquire it. The biggest amount deposited in Mutekede’s bank account was $500 million and would it not be a misnomer to call her cash baroness?”

“The RBZ Governor Dr Gideon Gono on (ZTV programme) ‘Face The Nation’ recently was visibly angry with cash barons and baronesses and there is need to get to the bottom of the case,” Mr Mudambanuki said. He attacked police for seeking to punish his client and leaving culprits who were hoarding cash.

“You should have done your work with due diligence. It’s a gross miscarriage of justice to seek to punish this innocent lady for being used as a conduit of cash barons who have access to large sums of money from the RBZ,” said Mr Mudambanuki.

He said his client was being prejudiced as the police applied the law selectively.

“It cannot be possible that she has access to $10 billion from the RBZ. We want to know the truth of this matter because it has an impact on her moral blameworthiness in this case.”

Asked why Mutekede was temporarily released on Saturday night and then rearrested on Sunday afternoon, Chief Supt Nyamupaguma said the arresting detail — a sergeant — thought the case was clearcut since Mutekede had admitted to the charge.

“The arresting detail thought the case was a straightforward one and that there was no need to detain her since she was pleading guilty. He briefed me the following morning and Mutekede was rearrested,” said Chief Supt Nyamupaguma.

In his evidence, Mr Chiremba said when the money was brought to the central bank, it was deposited into a cash detention account, where it could be released by way of a court order. He explained that it would be put into the system but if the police needed it, it would be released to them in the form of a cheque or through a transfer.

Under cross-examination, Mr Chiremba said the serial numbers of the $500 000 new bearer cheques were not recorded and its origin could not be traced.

“If police seize money, they can bank with us and it is treated like any other normal cash deposit in the cash detention account. If they want their money back, they will get it through a transfer or cheque payment. We did not serialise the money at the bank and the source cannot be easily traced,” he said.

Mr Guvamombe warned the RBZ against being used by the police to frustrate matters before the courts. “You should sit down and revisit the cash detention facility because in this case you have destroyed the exhibit. You have handicapped us and we do not know whether that was deliberate or a mistake and I am left baffled,” he said.

After the testimonies by Kadzura, Chief Supt Nyamupaguma and Mr Chiremba, Mr Guvamombe excused Kadzura and said the court would call him if the need arises.

Prosecutor Mr Zvekare argued that Mutekede’s case was now confusing as she initially pleaded guilty to illegally dealing in foreign currency but later shifted goalposts saying Kadzura had given her the $10 billion to source foreign currency for him on the black market.

Mutekede was remanded in custody to Monday for sentence. Earlier, Kadzura had told the court that Mutekede was his “casual intimate girlfriend” of seven months but denied he gave her the said $10 billion. He said he did not know anything about the money and was not aware why Mutekede implicated him.

He initially said Mutekede was just an “acquaintance,” but after further probing by prosecutor Mr Tawanda Zvekare, Kadzura told the court that she was actually his girlfriend but could not disclose the occasions they became intimate.

“She (Mutekede) was my casual girlfriend and I cannot disclose the number of times I took her to bed. It was difficult for me to firstly say she is my girlfriend because I did not see her regularly. If you do not see each other for months, it becomes difficult to safely say she is your girlfriend. Our relationship started about six to seven months ago and in that period I met her on not more than eight occasions.

“I used to visit her at Roadport (a Harare terminus for trans-border buses) but she would only come to my car and we would talk for about two to three minutes. I would go there about once or twice per week although I am no longer very sure of the frequencies,” he said.

Kadzura said he was neither an RBZ employee nor did he have any links at the central bank to facilitate the release of such an amount of money. “I am not a permanent employee of the RBZ and I am not even on the board. I am not even an advisor to the bank and the police in their papers lied. Some may mistake me for an advisor by merely being an economist,” he said.

Kadzura sat on an RBZ advisory panel which was dissolved in January this year. He admitted that he was aware of Mutekede’s illegal foreign currency dealings saying he even advised her on several occasions to shun criminal life. He denied having communicated with Mutekede after her arrest saying the messages purportedly sent to him by Mutekede never reached him.

Mutekede tendered her mobile phone to the court which showed five text messages she sent Kadzura after her arrest and two blank messages purportedly from him.

The phone had the following messages: “call,” “call urgently,” “Hillside Police,” “I am in trouble” and “Jonathan in trouble I need your help.”

In her statement read in court, Mutekede also claimed that she lied to Kadzura that one of her clients, Mohammed Mussa, had offered $20 billion in $200 000 bearer cheques to source foreign currency. She said this was to entice Kadzura to give her the $10 billion to source foreign currency for him.

Kadzura denied having received the said phone messages until the court adjourned to consult Mutekede’s cellular phone service provider, Econet, to verify her claims.

Econet could not provide proof of the messages she sent and received saying it required about two months to trace. But Econet did provide the court with a print out of calls made by Mutekede and it was stated that Mutekede phoned Kadzura on 16 occasions in one-and-a-half hours while she was in police custody on December 23 although Kadzura insisted that he did not communicate with her.

He said he was avoiding answering Mutekede’s calls after learning that she had been arrested. He further averred that his children had access to his phone and Mutekede might have talked to the kids when she phoned.

Mr Guvamombe said the evidence from Econet showed there was communication between the two.

One could take a long time peeling this story like an onion, it has so many juicy, pungent layers.

First of all, it is unprecedented for an arm of the system to openly call into question the integrity of the RBZ as magistrate Guvamombe did. Particularly under its current governor Gideon Gono, the RBZ has been portrayed as the country’s best hope of overcoming hyper-inflation and its many other problems. There almost seemed to be an official campaign to cast Gono as a super-hero who could work miracles, particularly in the state media.

Clearly all that has changed. It is a damning statement for the magistrate presiding over the case of the so-called “cash baroness” to openly say, “It is clear that the money came from the RBZ. The money ‘is talking to every one that it is coming from RBZ’, in view of its packaging.”

In whatever way the RBZ would explain it if Guvamombe’s suggestion on the cash baroness’ source of the Z$10 billion were true, it puts the central bank in an awkward position. It implies that the central bank is very much a part of the “illegal” street foreign currency market, as has been whispered for years. Having to source scarce forex from the street because of the official system’s unattractive fixed exchange rates is inevitable. Yet the RBZ has been crusading against the same market it is accused of being the biggest client of. Gono’s RBZ has always managed to be accuser and finger-pointer, but now more individuals and sectors are openly doing their share of pointing fingers at the once seemingly untouchable Gono and the RBZ.

And indeed, the failure by the RBZ and the police to ensure they had the serial numbers of the exhibit on which their whole case against the “cash baroness” rests stretched credulity. It inevitably causes one to ponder, like the magistrate did, whether this was a “mistake” as the quoted police commissioner claimed, or whether it points to something more sinister.

The pointed barbs of both the magistrate and the defense lawyer about the seeming reluctance of the RBZ and the police to vigorously pursue the real big guns who have access to huge sums of currency while the ordinary folk cannot withdraw small amounts from their own bank accounts are also telling. These open suggestions of the once-revered RBZ being involved in a cover up are unprecedented. They show the extent of the change in public perception of Gono and the RBZ in recent times. It has become obvious to a once unrealistically hopeful public that the problems it hoped Gono could magic-wand away are far deeper than can be dealt with by the RBZ without a wholesale change in the country’s entire system of doing things.

The involvement of Kadzura in Mutekede’s situation was strangely not pursued vigourously by the RBZ or the police. Even the magistrate seemed to contradict his own expressed sentiments about following cases to wherever the leads suggested. The Herald story suggests that Kadzura has far more interesting information to reveal than the investigation or judicial processes have sought to find out.

So the exhibit money has disappeared back into circulation in a way that it cannot be traced. The accused increasingly appears as merely a small cog in a much bigger machine. An apparently key accomplice of the accused is surprisingly given a lot of room and time to cover his tracks. The RBZ has been splashed with a lot of mud which it will be very difficult to clean itself of.

We may never get to the bottom of this particular case, but enough has been revealed to confirm the suspicion of many Zimbabweans that the rot and cynicism of the system runs very high and very deep.

Posted in Economy | Tagged: , , | 14 Comments »

‘Cash barons’ are only a symptom of deeper Zim economic malaise

Posted by CM on December 29, 2007

Things continue to spiral out of the control of the authorities in Zimbabwe in regards to the economy. They try all sorts of quick fixes for the multiple and increasing number of holes, but the bleeding seems to only get worse, whether in regards to inflation or general shortages of all kinds of goods.

The latest and most severe currency shortage to date has spawned all sorts of bizarre happenings. I say “latest” because I was recently reminded that Gideon Gono was brought in as central banker and general economic trouble shooter a few years ago in the midst of the first cash crisis, though not as severe as the current one. Lauded as a miracle worker by the state propaganda services then, Gono’s one-time idolisers are increasingly turning on him as it become clear to all that he cannot tame the economy’s multiple problems.

Where have all the Zim dollars gone to? Why must people queue endlessly to withdraw their own money from their bank accounts?

As in so many other areas of life in Zimbabwe, it is hard to get straight answers to these kinds of basic questions. But it seems a part of it is just that the local currency has so deteriorated in value against hard currencies (today one website says one (1) British pound is equivalent to seven million (7, 000,000) Zimbabwe dollars) that people who need foreign currency for one thing or another just need huge amounts of the Zim dollar to do the exchange. Currency speculation is no doubt also a big part of the reason for the “disappearance” from circulation of huge quantities of cash.

I don’t know if the fact that the amount of currency printed and in circulation is just failing to keep up with inflation and the Zim dollar’s continuing depreciation is also a significant factor. But whatever the reasons for it, it is certainly strange for the citizens of a country to fail to get their hands on their own currency!

We now have the bizarre situation wherein it is a reason for suspicion for a person to have large amounts of cash, and yet the situation forces one to horde it if one is involved in any kind of trade, particularly in import. The silly new term “cash baron” is supposed to conjure up the image of a sinister black marketeer who keeps large amounts of currency in order to deal on the “illegal” forex black market.

But one could easily make a case for the fact that it is not the dealing of forex outside official channels that is a problem. It is instead the ridiculously, unrealistically low exchange rates of the official channels that make it pretty much inevitable that anyone with forex will avoid those official channels like the plague and seek to sell it on the “illegal” black market. With so little forex available on the official market, buyers must resort to the black market. As the local currency hourly deteriorates in value from 10,000+% inflation, those buyers need higher amounts of Zim dollars everyday to purchase the same amount of hard currency.

By criminalising human behaviour that is entirely predictable under the circumstances, the authorities create a whole new list of “crimes” but also create an impossible situation for themselves. The reasons and incentives for dealing on the “black” money exchange market are so much more powerful than the fear of running afoul of the law that everybody is now technically a criminal in this regard, including the central bank and the government itself. In such a situation the applicable laws are nonsense, only useful for “getting” a few deliberately targeted people for show, but absolutely useless as a deterrent to the “crime.” It cannot and is not working.

We have now got accustomed to saying and believing “Zimbabwe has a shortage of foreign currency.” And indeed the country earns much less from exports and tourism than it is used to, and no longer has access to many of the sources of international credit it could count on in previous years. But it is also clear from the size and thriving nature of “the black market” that if you are willing to pay the free market rates, foreign currency is available in Zimbabwe. What is in real short short supply is forex at the low, government-stipulated rates that no sane person would willingly sell their hard currency at.

There is the interesting case of the 24 year old woman who was recently arrested and demonized in the Zimbabwean media for being a “cash baroness.” She was caught with Z$10 billion of the new $500,000 notes within days of this new currency denomination being introduced. This was despite the daily bank withdrawal limits for individuals being only Z$50 million (US$35 at today’s rate) and double that for companies.

In other words, if she had that much money in her account, it would have taken her 100 withdrawal-days to get it out through legitimate channels. It is not thought she bought it off the streets for forex because (1) the Z$500,000 denomination currency note was only a few days in circulation and not then widely available and more importantly, (2) the Z$10 billion was still neatly, tightly packed in its original Reserve Bank of Zimbabwe plastic wrapping!

The implication is that someone, unlikely to be her, either got much more from a bank than they should have been allowed, or that they got it straight from the RBZ itself! Indeed, there have long been allegations that the RBZ is one of the biggest customers of the black market forex dealers, despite Gono’s regular rhetorical huffing and puffing against them.

In an open society the several stunning revelations of the Mutekedeke case would have brought down the whole elaborate house of cards that is the foreign currency trading system in Zimbabwe. It would have exposed many of the country’s high and mighty as people who say one thing while regularly doing the exact opposite, to their considerable benefit and to the great suffering of the country.

The term “cash baron” may be meant to suggest an evil saboteur out to deliberately wreck the economy and inconvenience people. But the phenomenon of hoarding large amounts of cash is not the problem per se, but just another symptom of all the structural things that are wrong in the Zimbabwean economy as well as its overall body politic.

But for whatever it is worth, the internal contradictions of the whole system of the country’s rulership are becoming clearer by the day.

Posted in Economy | Tagged: , , , | 4 Comments »

China takes controllling stake in Zimbabwe chrome firm Zimasco

Posted by CM on December 26, 2007

Zimasco has long been an important but troubled mining and industrial asset for Zimbabwe. Shifting world metal prices, the need for expensive plant capital investments for which there was no money and political interference in management are just some of the issues that have made the steel and chrome company a perennial under-performer.

Now comes news that the Chinese have taken it over:

Sinosteel Corp, China’s biggest chrome importer, said it acquired 92 pct stake in Zimasco Consolidated Enterprises Limited (ZCE), the Mauritius-based holding company of Zimbabwe’s Zimasco. Under the deal, Sinosteel has the option to buy the remaining 8 pct of ZCE over the next two and a half years, the company said in a statement.

Zimasco is Zimbabwe’s largest chrome producer with annual refined chrome output of around 592,000 tons.

In November last year, Sinosteel signed an agreement to pay more than US $200 million for a 50 pct stake South Africa’s Samancor Chrome Co.


The Chinese will presumably be willing and able to do the plant improvement that has long been necessary but neglected. With virtually complete ownership, they will run it as they see fit for profitability, even if it results in conflicts with locals over managerial styles. Politically they are covered by Zimbabwe being now so dependent on Chinese largesse in many areas at a time when it is in diplomatic isolation from much of the world.

Its interesting that the Chinese have been able to effectively take complete of of an asset long considered a key, if ailing, strategic mining asset at a time of a lot of talk about indigenous Zimbabweans having at least a 50% stake in such investments!

Perhaps in this case the technical detail of the Chinese having bought Zimasco’s off-shore holding company gives them some loophole around the Indigenization Bill. Or just as likely, it could be a case of political rhetoric giving way to the reality of the power of capital!

Posted in Economy | Tagged: , , | 1 Comment »

Naming and shaming Zimbabwe’s alleged top crooks

Posted by CM on December 19, 2007

The Zimbabwe Today blog has an interesting story titled “Zim Mafia.”


Most of us here in Zimbabwe live in, or on the verge of, bitter poverty. But there are … those who don’t struggle … who glide over our potholes in Mercedes comfort, who live in elegant homes tended by armies of servants, who feed themselves from well-stocked freezers, and who comfort themselves in times of stress by reciting the numbers of their Swiss bank accounts.

… the Zim Mafia… are members of a special clique – all of them politicians and officials from our ruling Zanu-PF party – who take advantage of their positions of power to rake in millions of US dollars.

The article then proceeds with a ” far-from-comprehensive run-down on the graft, corruption, double-dealing and sheer theft that is the mark of our rulers…”

A lot of the personalities named have featured prominently in allegations of all sorts of business deals that are said to be shady. The majority of Zimbabweans, disillusioned and depressed about affairs in their country, will have no trouble believing the allegations made. Beyond that it is very difficult to tell the veracity or otherwise of the allegations, though they make for salacious reading.

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Are we seeing a wasted farming season of abundant rain?

Posted by CM on December 17, 2007

If the rain season continues until March or April 2008 like it has begun, there will no one who will be able to talk about drought as an excuse for any crop yield shortfalls. “Drought” has been one of Mr. Mugabe’s favourite refrains to explain why agricultural productions has plunged in the last several years. This season excessive moisture may actually develop into more of a problem if the current rainfall pattern continues.

Over the last few weeks I have been tracking and commenting on how the farming season has been progressing so far. Here are some excepts from a December 17 Zimonline story headlined Seed shortage cripples Zimbabwe farming season.

Zimbabwe’s defense department has told President Robert Mugabe that it can do little to revive food production in the face of a shortage of seeds that is hampering planting operations.

Mugabe has put the army in charge of agricultural production under a programme codenamed Operation Maguta aimed at boosting food production and end hunger stalking Zimbabwe for the past seven years. Under the programme soldiers have deployed at large farms across the country to produce strategic crops such as maize and wheat, the country’s main staples.

However, army commanders running the programme are said to have reported to Defence Minister Sydney Sekeremayi that Zimbabwe faced worse food shortages next year because a shortage of seed and resources for tillage had all but dashed hopes of a successful farming season.

According to our sources, Sekeramayi raised the following points with Mugabe:

•That since the onset of rains two weeks ago, less than a third of commercial and small scale farmers had started any planting because of a serious shortage of seed and tillage resources. The situation was worse among poor villagers.

•That the country had secured only 15 000 tons of seed maize instead of the required 50 000 tons. That seed shortages were more acute for soya beans, a key crop used for stock feeds and cooking oils among other products.

•That even those farmers that had secured seed and had planted grains faced low yields because of an acute shortage of compound fertilizers used for basal application when planting. Soldiers were only distributing Urea, a top dressing fertilizer only helpful after germination.

•Urged Mugabe’s intervention to ensure that seed manufacturers were paid market prices to entice them to supply seed to the local market instead of exporting the product to more lucrative regional markets.

•That the country was forced to import maize and soya bean seed from neighboring countries, yet local seed houses were exporting the same seed to the same neighboring countries. Raised a possibility that the country was importing at a higher cost seed exported by local firms.

•Urged Mugabe’s intervention in ensuring that the central bank released enough foreign currency to import seed to make up for shortfalls. Cited that only 3 000 tonnes of the anticipated 15 000 tonnes of imported seed had arrived in the country. Emphasized that even the 15 000 tonnes were not enough to meet demand.

The sources say Mugabe promised to look into the issues raised by Sekeramayi.

One could write a long commentary about this sad story, but it really isn’t necessary. It has been the same story each farming season for years.

But briefly:

The “shortage” of seed, fertilizer and other inputs is a symptom of the many others things that are wrong in the economy and the country in general. Because those things are so deep and widespread, it is possible that even with “enough” side and fertilizer, there would still be many other factors leading to a less than successful farming season. Fuel and labour availability are issues, the economy’s hyper-inflation affects everything, the general dispiritidness of the country.

The situation in Zimbabwe has reached a stage where it is no longer possible to isolate factors like agricultural inputs to explain or fix agriculture. The word “crisis” might now be over-used, but it aptly describes how so many systems have broken down that it is difficult to make any sector work as it should without addressing the holistic “state of the nation.”

With “shortages” of fertilizer every farming season having become utterly predictable now, it is astonishing that agricultural thinking has not broadened to think of encouraging alternative, non-fertilizer ways of building up soil fertility. They are particularly suited for small holder farming and are gaining increasing interest and respectability across the world.

Cuba was forced to do this when the Soviet Union collapsed, removing the supports it had received from there. They have built up a different type of agricultural system entirely, with a heavy reliance on ecological agriculture. This has drastically cut their dependence on expensive imported farming inputs while retaining admirable agricultural productivity.

The foreign currency “shortages” that are a big part of the reason we can not import so many things are going to be with us for some years to come. They should encourage Zimbabwe’s agricultural authorities to begin to think outside the box for solutions to many of agriculture’s problems. Instead they continue banging their heads against the wall every year with plans that are simply no longer workable in the prevailing economic environment.

A particularly sad and ridiculous development is re-purchasing our our own repackaged seed from neighbouring countries. Exporting it is the only way the seed companies can make a profit because of populist, well-meaning but unrealistic price controls at home.

The now deeply entrenched idea of the central bank “releasing” hard currency to purchase farming inputs or anything else is largely warped. This might apply to that component of essential imports, perhaps those being subsidised to make them affordable to the neediest.

But there would be no need for the RBZ to be the only source of forex for seed, fuel or anything else if private players who have or can get their own hard currency were allowed to do their own importing and to recoup the costs of doing so. In this case the seed, fertilizer and other companies would not be importing finished product, but the raw materials, as long as they could be assured their prices would cover the high costs of black market forex.

There would be many sharks who would take advantage of the situation of shortages and chaos to fleece the public. But trying to control that while ensuring essential goods are available, even if expensive, seems better than relying on a system of total dependence on the RBZ we now know cannot work.

All this is part of what I mean when I say the problems in agriculture or any other sector can no longer be isolated into shortage of one or another item. The country’s dysfunctionality has assumed much bigger dimensions.

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Yet another claimed oil deal for thirsty Zimbabwe

Posted by CM on December 17, 2007

We have had our hopes stirred by so many of these claimed oil deals over the past eight years of fuel shortages. None of them ever amounted to anything.

Here’s the latest one, in The Herald of December 17:

Zim strikes oil deal

ZIMBABWE has struck a deal with Equatorial Guinea in which the petroleum-rich West African country will supply crude oil, a Government official has said

“Following our engagement with Equatorial Guinea . . . Zimbabwe can now even get crude oil and arrange for its refinement through third parties,” said Industry and International Trade Minister Mr Obert Mpofu in his information memorandum to the Cabinet on his trade and investment mission to Angola recently.

The Government and Iran have already agreed to work on the refurbishment of the oil refinery here whose equipment has become obsolete. The refinery was built in the 1960s using Iranian technology and an agreement was sealed during former president Mohammad Khatami’s last visit to Zimbabwe.

Mr Mpofu said the Government was working on arrangements of paying for crude oil imports from Angola. Angola has been concerned with Zimbabwe’s payment terms. However, following consultation with stakeholders by the Ministry of Energy and Power Development, indications were made to the Angolan Ministry of Petroleum that Zimbabwe is comfortable with a 90-day credit facility. Alternatively, Zimbabwe could also repay with a refined product. In that respect, Zimbabwe would send a team to Angola to pursue the matter at a technical level.

Zimbabwe has been facing acute fuel shortages over the past seven years, a development that has affected key sectors of the economy such as tourism, manufacturing and mining. This has prompted the Government to look for alternative ways of producing fuel, including extracting bio-diesel from jatropha seeds and vegetables.

President Mugabe last month commissioned a multi-billion-dollar bio-diesel plant capable of producing at least 100 million litres of diesel per year, saving the country at least US$80 million annually.The plant is of its first kind in Africa. Plans are underway to set up such plants in all provinces.

There are also moves to revive the ethanol plant in Triangle.

As a Reuters report on the Herald story points out,

Zimbabwe agreed in 2005 with Iran to revive an oil refinery built using Iranian technology in the 1960s. Work at the refinery has not started to date.

This is not the first purported oil deal with Equitorial Guinea. None of the others came to fruition. What is different this time?

And it sounds very convoluted. The connection between oil from Eq. Guinea and payment needing to be made to the Angolans is far from clear to me!

Zimbabwe might very well be “comfortable with a 90 day credit facility,” but it is doubtful that anyone else who knows the problems the country has been experiencing all these years would be. The crazy idea to pay back the Angolans for their crude oil with refined fuel sounds like yet another of the many hare-brained schemes Zimbabwe’s desperate straits have forced the country’s rulers to conjure up over the years.

What would be in it for the Angolans? Flush with oil cash as they are, they could/should simply build up their own refining capacity. With their cash reserves, I can’t believe that would be so much more difficult than having to depend on the revival of a forty-something years old refinery in another country. The mess, logistics and expence of shipping crude one way and refined product the same way back to the original source would be silly. I cannot believe this is an option that would be seriously considered by the Angolans.

Apart from the implausibility of the story, the need for “reviving” both the Iranian built refinery and the sugar cane-based ethanol plant in Triangle is telling: They should never have been allowed to go to seed in the first place! Why were they? Is the money for the big capital expenditure required to refurbish them available, when the country cannot even import enough maize maize seed for the current farming season?

If the oil refinery was revived, how would the country afford to import the crude oil it has been failing to do in sufficient quantity for close to ten years now? Forget about private investors doing it: they would insist on charging fuel prices that made it possible to recoup their investment in re-starting the refinery, and we have seen over the years that this simple concept is not acceptable to the Zimbabwean government.

As for the Triangle plant, where is the feedstock going to come from when a lot of the area’s sugar cane production has plunged over the years, creating shortages of sugar on the market? Price controls have also been a concern, with producers being forced to sell sugar at prices below the cost of production, with predictable results-shortages on the local open market, a thriving black market and a preference for exports over supplying the domestic market. With none of these issues having been resolved for sugar, how would ethanol production be different?

As for the “100 million litres of biodiesel a year” from the new plant, I will believe that when I see the first drop. I have previously dealt with the reasons for my doubts about the workability of this otherwise good idea at this messy time in Zimbabwe.

Sadly, this latest Herald story is how the country has been strung along for eight years now. No one takes these stories of new breakthroughs too seriously anymore, and with good reason. They are too full of holes.

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Canaf ditches its Zimbabwe deal

Posted by CM on December 16, 2007

From MiningMx :

Canadian mining group Canaf Group Inc has abandoned a proposed plan to acquire Great Lakes Minerals and associated mining assets in Zimbabwe, citing the controversial Empowerment and Indigenisation Bill now awaiting assent from President Robert Mugabe.

Canaf president and CEO David Way said political risk in the country, now in its eighth year of a recession, was increasing, making the planned acquisition unattractive. The initial agreement with Midas Trust for the acquisition was adjusted after the announcement of the Indigenisation and Empowerment Bill, passed through parliament in Harare last month.

Way said in a statement. “After much discussion, we have decided that this acquisition is not in the best interests of our shareholders at this time,” he said. “We are committed to providing value to our shareholders and will focus on our now 90%-owned coal processing facility, with a view of increasing both our ownership stake to 100% and the overall profitability of the plant.”

Canaf is the majority holder of Quantum in South Africa, which currently supplies Mittal Steel with approximately 6,000 tonnes of coal per month.

“We will continue to search for new high-potential mining and mining related opportunities in Africa.” Midas Trust and Canaf remained on good terms and may choose to revisit the acquisition potential of Great Lakes Minerals at some time in the future, he said.

Canaf’s decision adds to increasing concern from foreign-owned mining companies over the effect of the proposed law on investment in the mining sector. Rio Tinto Plc recently indicated that it had put on hold plans for $250m of additional investment into expanding Murowa Diamond Mine pending the outcome of agreements with the government that will recognise and reduce the risks to Rio Tinto’s existing and future investments following passage of the proposed law through parliament.

Nothing at all surprising about Canaf’s decision. Long term speculative investments like Lonrho’s in areas like property may be fairly safe and smart in the long term, but high-capital productive investments like mining certainly look very dicey in Zimbabwe at the moment. There are all the uncertainties over policy and many other day to day, on the ground issues that would make a new investor in an area like mining very squeamish.

This is hardly likely to encourage the investors who the government is hoping will partner with locals in mining under the requirements of the Indigenisation Bill.

As with the take over of the farms, in mining Zimbabwe may be about to be reminded that physical possession of a resource is very different from having the capital, technology and managerial wherewithal to be able to exploit it for one’s benefit.

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Qatar oil refinery for Harare?

Posted by CM on December 16, 2007

If the following takes place, it would be a significant development for Zimbabwe:

Qatar’s Venessia Petroleum plans to build a 120 000 barrels-per-day refinery in Zimbabwe costing as much as $1,5-billion, the company’s general manager said on Monday.”We have signed the agreement with the Zimbabwe energy ministry and the feasibility study is nearly completed,” Jawhar Zaidi said.

Zaidi said the refinery, to be located in Harare, would move into the design stage by the end of the year. “We would look to import crude from Qatar or another Middle Eastern country,” Zaidi said, adding that the company had still to decide how the project would be financed.

Venessia Petroleum is chaired by Abdulaziz Bin Mohammad Bin Jabor al-Thani, a member of Qatar’s ruling family, Zaidi said.

Zimbabwe’s economy is on the brink of collapse with inflation running at an annual 6,600 percent, the highest in the world. Isolated from the West over its human rights record, the government has proposed a bill to transfer majority ownership of foreign companies to Zimbabweans. The bill, if passed by the Senate, would force mining and banking firms to give at least 51 percent control to Zimbabweans.

Another member of the Venessia group plans to build a hotel in Zimbabwe, Zaidi said, adding the company was not concerned about the political situation.

Engineering News

It is hilarious for Zaidi to say his company “was not concerned about the political situation.” That would make Venessia a very naive and foolish investor!

Obviously they would have received guarantees to safeguard their investment which they believe are credible enough to make it worthwhile. For a non-Western investor of that magnitude, and investing in the critical area of fuel, perhaps that is the case given the country’s energy desperation.

There is no question this is a good area to invest in in Zimbabwe given the chronic fuel shortages of the past eight years. And a Qatar company would certainly have no trouble with providing the crude oil for the refinery. An obvious issue would be whether for them to be allowed to charge fuel economic retail prices for the fuel. This has not been such a straightforward issue in the Zimbabwe of price controls often completely unrelated to production costs, and of a deep official mistrust of the business sector in general.

This would be a very good development for Zimbabwe if it came about.

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Lonhro’s Zim investment arm to float shares on Aim

Posted by CM on December 16, 2007

In a vote of confidence for Zimbabwe, LonZim, a Lonrho subsidiary established to make investments in Zimbabwe, will list on the Alternative Investment Market (Aim) in London, and expected to start trading on December 11, 2007.

Market capitalisation would be £36,5-million, at the issue price of 100 p a share. The company raised £29,2-million though its book building process, and 7,3-million shares were acquired by Lonrho.

In June 2007, it was indicated that LonZim would seek to raise a minimum of £50-million before listing.

LonZim has said that it would not have a particular sectoral focus, but may make investments in the tourism, accommodation, infrastructure, transport, commercial and residential property, technology, communications, manufacturing, retail, services, leisure, agricultural and natural resources sectors.

“We are pleased to have concluded the book building process for LonZim and to have successfully raised the capital required to pursue the significant opportunities that exist in Zimbabwe. My fellow directors and I look forward to identifying opportunities, which we believe will provide long-term returns for our shareholders,” stated Lonrho chairperson David Lenigas.

It added that it would use the investment skills of the company directors and their advisers, and would “seek to identify individual companies in sectors best positioned to benefit should there be improvements in Zimbabwe’s economy.”

Although Zimbabwe boasts several tourist attractions, tourism in the country has been reported to have dwindled over the years.

Industry opportunities in Zimbabwe could include the mining of coal, gold, platinum, copper, nickel, tin, clay, ferrous and nonferrous metals, steel, as well as wood products, cement, chemicals, fertiliser, clothing and footwear, foodstuffs, and beverages.

Engineering News

Fine, several articles have recently been written on how some investors are willing to gamble that there will be some kind of political change soon in Zimbabwe, which will make having a foot hold there now worthwhile. The country’s basic infrastructure and many systems still have few parallels in Africa, even in the country’s current pitiful state.

But it seems a little strong to have begun the story with “In a vote of confidence for Zimbabwe!” It almost sounds like saying “we believe things are being done properly,” which they are not with 8,000%+ inflation, many areas of the capital going for days or longer without electricity and no local currency available even from the banks! Perhaps that first line was meant to convey a recognition of the potential the country still has to come around under the right conditions.

In any case, with Mugabe likely to remain at the helm for several more years, I think Lonzim has taken a pretty risky gamble. But then again the Lonrho chairman did make it clear that they are investing for the long term, and for now, Zimbabwe still remains a good long term prospect in areas like property.

It will be interesting to watch how things pan out for Lonzim over the years.

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