… The year Santa Claus got stuck in the chimney
Annus horribilis! The curtain comes down on 2019 in less than a week and what a tumultuous year it was.
It was a year in which queuing became a national pastime: queues at service stations, queues in supermarkets to buy bread, queues to board cheap buses, and long winding queues at community boreholes to fetch water.
The only missing link were queues to enter one’s bedroom.
The forex crisis worsened during the year, pushing up rates at the parallel market to 1:22.
It was a year in which the economy tanked despite assurances from Finance Minister Mthuli Ncube that it was on the road to recovery.
Rolling power cuts
In 2019, companies and households experienced power cuts that lasted, and still last, for 18 hours daily due to low generation capacity at Kariba on low water levels and aging equipment at Hwange Power Station.
A survey by the Zimbabwe National Chamber of Commerce showed that companies are losing ZWL$2.5m annually in potential revenue due to crippling power cuts.
To cover for the shortfall, the state-owned power utility ZESA is importing expensive electricity from regional suppliers, mainly from Eskom of South Africa and Hydro Cahora Bassa of Mozambique.
ZESA is procuring very little from the Day Ahead Market, which is a market for trading power by regional players.
Biting forex shortages
The foreign currency crisis worsened during the course of the year as shown by the movement of the rates on the interbank and parallel markets.
From 1:2.5 to the dollar on the interbank market, the rate has quickened to 1:16.5.
On the parallel market, the rate has moved faster due to the increased demand of forex to 1:22 from 1:4 in February.
The monetary authorities say the economy has generated enough foreign currency which is not circulating in the economy.
Between January and September, Zimbabwe earned US$5bn.
RBZ dumps bond, US$ parity
In February, the Reserve Bank of Zimbabwe governor John Mangudya finally admitted what many had seen since 2016: the bond note and the greenback are not equal.
He introduced an interbank forex market in which the bond note began trading at 2.5 to the dollar.
The monetary authorities have admitted the system is not working and a new interbank platform modelled along the Reuters way will be introduced.
Buried Zim dollar resurrects
The Zimbabwean dollar was ditched in 2009 in favour of a multicurrency regime dominated by the US dollar.
In 2015, Mangudya demonetised the local unit.
Four years later, the banished Zimbabwean dollar was resurrected.
Statutory Instrument 142 of 2019 introduced the Zimbabwean dollar as the sole currency and outlawed the multicurrency regime.
This triggered a spike in prices. In a case of the right hand not knowing what the left hand is doing, some companies, especially exporters, pay their electricity bill in foreign currency while the service industry has a two-tier pricing regime.
New ZWL$2 and ZWL$5 notes were introduced last month and a ZWL$2 coin.
The market has already rejected the 25c and 50c coins. But the returned Zim dollar is the same bond note that has been with us since 2016.
In effect, the Zim dollar is in a spirit form, the bond note is its fleshly form.
In October, the Public Accountants and Auditors Board directed that all Zimbabwean entities with reporting periods ending on or after 1 July 2019 to apply hyperinflationary accounting. In terms of the requirements of IAS29 Financial Reporting in Hyperinflationary Economies, all entities reporting in a hyperinflationary environment are encouraged to apply the same indices to produce inflation-adjusted financial statements.
The directive saw companies announcing their third quarter financials after the deadline set by the Zimbabwe Stock Exchange.
That the economy has returned to the hyperinflationary era has been evident from the rising prices.
The Ministry of Finance would raise further dust after suspending annual inflation in June until February next year.
Muradzikwa takes over @IPEC
Insurance executive Grace Muradzikwa was appointed Commissioner of the Insurance and Pensions Commission three months after stepping down as MD at NicozDiamond following the merger of the short-term insurer with Tristar.
Return of TBs auctions
For the first time in years, the government dumped the private placement in favour of the auction system on Treasury Bills.
Since August, nine TB auctions have been held as government seeks to raise capital from the domestic market.
It has raised over ZWL$1 billion to finance its programmes.
Monetary Policy Committee
In September, Mthuli Ncube appointed a Monetary Policy Committee in line with international trends.
The MPC’s mandate is to determine the monetary policy of Zimbabwe; including the setting of limits on open market operations by the bank and ensure price stability as defined by the government’s inflation target in the national budget.
The committee has met twice since its formation.
Another IMF SMP
In May, the then IMF managing director Christine Lagarde approved a supervised economic reform plan for Zimbabwe, called the Staff Monitored Programme (SMP), to support the reform agenda in the period May 2019 to March 2020.
The SMP will be monitored on a quarterly basis, and is intended to assist the authorities in building a track record of implementation of a coherent set of economic and social policies that can facilitate a return to macroeconomic stability and assist in the reengagement with the international community.
In June, RBZ prescribed that investors who purchase shares in duallisted counters will only be allowed to sell on ZSE, or any other fungible shares can be traded 90 days after being bought.
The move affected nine counters – NMB, Hwange, Art, Meikles, CAFCA, PPC Limited, NMBZ Holdings, Seed Co International Limited and Old Mutual Limited.
Market watchers say the move was ill-timed as it brings stumbling blocks on the trading of shares.
This comes on the back of struggles by foreign investors to repatriate dividends due to the prevailing foreign currency shortages.
If gold rusts…
Zimbabwe’s largest foreign currency earner, gold, stuttered in 2019 after monetary authorities reduced the forex retention threshold to 55% from 70%.
This saw deliveries to Fidelity Printers and Refiners dipping in the first 10 months of the year to 23.03 tonnes, from 30.13 tonnes realised in the same period last year.
Gold contributes 38% of the country’s total earnings and more than 60% to the mining sector.
The government, however, is targeting a US$12bn mining economy driven by gold by 2023. Gold output of 100 tonnes annually is projected by 2023.
Movers and shakers
Clara Mlambo left BAT Zimbabwe in June at the end of her tenure.
She was replaced by the South African Kimesh Naidoo as MD.
Samuel Matsekete returns to Old Mutual as group CEO with effect from 1 January.
In his Monetary Policy Statement issued in September, Mangudya introduced US$-denominated Savings Bonds to promote a savings culture and to provide reasonable return on FCA Nostro account deposits and US$D cash held by individuals and firms.
The US$-denominated Savings Bonds have interest rate of 7.5% per year, have minimum tenure of one year, enjoys tax exemption in line with government policy, have liquid asset status, are tradable and accepted as collateral for overnight accommodation by the RBZ.
Faced with these and many more socio-economic problems – not many will be merrymaking this festive season.