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Zimbabwe Central Bank, banks fight reaches tipping point – The Zimbabwe Mail

John Mangudya

THE central bank is embroiled in a vicious fight with financial institutions over the suspected manipulation of local currency, barely two years after it wielded the hammer on mobile money transfer companies, the Zimbabwe Independent has established.

There are indications that the Reserve Bank of Zimbabwe (RBZ) has wielded the hammer on a number of errant banks that are suspected of fuelling the current spike in the exchange rate.

In the past, the RBZ has been battling with mobile money transfer companies, like Ecocash, accusing them of fuelling the parallel market. The focus has now shifted to banks, which are now accused of being involved in shady currency dealings at the expense of economic stability.

The RBZ’s Financial Intelligence Unit yesterday said there were some banks that were using suspense and other internal accounts under various descriptions for the purpose of purchasing foreign currency on the parallel market.

The financial intelligence arm will carry out an intensive audit on the accounts in question after every bank has submitted the required information. The information should be provided to the FIU by not later than today.

“We intend to carry out an audit of such accounts. To facilitate the planning of the audit, every bank is required to furnish the Financial Intelligence Unit with a list of all bank’s suspense accounts and other internal accounts used by the bank for its own transactions,” FIU director Oliver Chiperesa said in a circular.

“Subsequent to receiving this information, the FIU may request detailed bank statements for all or some of the accounts.

The FIU will take a serious view of a failure to disclose any particular account as requested therein.”

The latest efforts by the RBZ have been triggered by a recent depreciation in the local currency, which has stalked disharmony among the citizens.

In the past two weeks, the volatile Zimbabwean dollar has suffered its worst beating on the parallel market, depreciating to US$1:$450, after ending 2021 at US$1:$280.

Some student representative bodies and labour unions last week threatened a national shutdown, which saw President Emmerson Mnangagwa announcing rushed policy pronouncements aimed at dousing possible civil unrest.

On the other hand, industry has been castigating what they described as the RBZ’s dismal failure in carrying out its mandate of tracking how borrowed funds were utilised as well as unfairly punishing them through the suspension of lending by banks.

Mnangagwa last week announced a raft of measures to curb the rapid fall of the local currency, which included a directive to suspend lending by banks and micro-financing institutions (MFIs).

Companies, however, say the government cannot punish everyone when the central bank has the capacity to know who borrowed how much and what it was used for.

Analysts and market watchers have blamed the government for failing to consider that over 60% of banks’ incomes were now non-funded, implying that they could not be causing market distortions through lending.

While the traditional role of banks and MFIs is lending, arguments point to the fact that whatever impact this will have on the market depends on the time it will take before the government lifts the suspension.

A banking source this week told the Independent that the central bank had to ensure that banks made follow-ups to ensure that companies use the money for the purposes that it was taken for.

“A lot of companies have stockpiles and they are the ones taking money from banks to go and buy foreign currency on the market. It’s a pity no one is following up on how the money is being used. This is what is driving the rate,” the source said.

“The banks should be challenged to follow-up on what the companies are using the money for and what it was intended for and not used for buying foreign currency,” the source said.

“There is a link between lending and foreign currency as people are buying the US dollar for speculative purposes. The Zimdollar therefore depreciates. If you look at the composition of banks’ profit and loss, you will realise that it’s made up of fees income, not lending fees. So in the short term, one would not be affected by not lending.”

Dairibord chief executive Anthony Mandiwanza, however, pointed out at the CZI manufacturing survey that the central bank had the capacity to monitor, who got how much and what it was used for.

Meanwhile, in an interview on the sidelines of the launch of the survey, N Richards director Archie Dongo said there was no serious businessperson that would take money for the purpose of going on the parallel market.

“Speaking from the retail and wholesale sector that we are in, there is no sustainable business that we can run by taking money to go and play on the alternative markets,” he said.

“The funding that we seek is for business expansion or working capital. If there are people who are doing it, fine but any serious business would not do that.

”For the formal retail and wholesale, the financing we seek is for business expansion, to lubricate our working capital. That is the norm in our industry,” Dongo said.

An investment analyst, who requested anonymity, said the government should know that it could not instil market confidence by putting in place laws that scared the country’s citizens.

“People are rational and will always seek to maximise value. Any rational person will exploit any arbitrage opportunity in the market and it’s a fact, “ the analyst said.

“Banks have been lending less and less over the past few years so it does not support the view that bank loans are the source of parallel market activities.

“There is also a risk that is already ascribed to the country. It is huge and will be felt for generations to come. It is unprecedented for bank loans to be banned.

“The rate is moving because the market and everyone has lost confidence in the ability of the Zimbabwean dollar to hold value.” – Zimbabwe Independent

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Beacon of success: Zimbabwe rallies allies to push for legal ivory trade – RTL Today

Zimbabwe will this week press a drive to legalise the ivory trade, inviting officials from 15 nations to meet in a national park that’s a beacon of success in protecting elephants.

Hwange National Park is overflowing with elephants, which now routinely wander outside the boundaries to feed, sometimes running into deadly conflicts with people living in the surrounds.

Zimbabwe and its neighbours in southern Africa have seen their elephant herds thrive in recent years and are now home to about 70 percent of the continent’s elephants.

That’s a markedly different story than in the rest of Africa, where poaching and habitat loss have seen numbers declining.

Zimbabwe, by contrast, is home to 100,000 elephants — nearly double the number that conservationists say the country’s parks can support.

Elephants require vast areas for feeding. Even Hwange, a park nearly half the size of Belgium, isn’t big enough to support its population.

Zimbabwe and other countries with large herds say they’re left protecting vast stockpiles of ivory they can’t sell to raise funds for either conservation work or to support communities affected by the growing elephant numbers.

“These are pertinent issues that are difficult to address in a balanced manner,” Tourism and Environment Minister Mangaliso Ndhlovu said in a statement.

Zimbabwe last week urged European ambassadors to allow a one-off sale of $600 million worth of elephant ivory, kept in a warehouse outside central Harare.

International trade in ivory and elephants has been banned since 1989 under the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). One-off sales were allowed in 1999 and 2008, despite fierce opposition.

Countries in southern Africa say the ban prevents them even from supporting each other’s conservation efforts, for example, by moving elephants from Zimbabwe to countries that want to repopulate.

The conference brings together countries likely to support a legalisation move, including China and Japan, where ivory is highly prized.

Kenya and Tanzania, which fear legalisation will encourage more poaching, were not invited. But the island nations of Seychelles and Madagascar, which have no elephants, are attending.

– Dangerous signal –

A collection of 50 anti-ivory trade organisations issued a statement warning that opening the ivory market would decimate the African herd, which in some regions is near extinction.

“The conference is sending a dangerous signal to poachers and criminal syndicates that elephants are mere commodities, and that ivory trade could be resumed heightening the threat to the species,” they said.

But growing elephant herds pose real dangers to nearby communities.

Zimbabwe says 60 people have been killed by elephants so far this year, compared with 72 in all of last year.

“Governments of elephant range states are faced with social and political pressures on why elephants are prioritised over their own life and livelihoods,” Ndhlovu said.

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Cellphone check on Zimbabwe’s economy – Cathy Buckle – BizNews

The first thing many of us do within minutes of waking every morning is to check our cellphones for the time, weather, missed calls or SMSs. This is too often followed by social media; most, if not all, before even visiting the toilet, showering or brushing our teeth. Zimbabweans also check their phones first thing in the morning but for something completely different; they look for the three main exchange rates. Often, their hearts sink. Cathy Buckle shares a reality of a current ban on bank loans and that those caring for children, disabled people or elderly parents earn 13 US cents an hour. Without access to US dollars, you’re in trouble, she says. When your daily economic forecast is the weather equivalent of permanent mist with the occasional sunny interlude, keeping your chin up requires serious fortitude. Especially when paranoia rules at the top. – Chris Bateman

Thirteen cents an hour in Zimbabwe

By Cathy Buckle*

With my head swirling, trying to make sense of the latest economic absurdities in Zimbabwe, I set out into the mist early in the morning. Winter is coming; sunrise is at 6.14am but the mist hangs around in the valleys longer each day, hiding trees and kopjes, rocks and rivers and it often takes the sun three or four hours to burn through and let us see what’s really there. At the first corner on the path, three zebra suddenly emerged from the mist, they were grazing and looked up but didn’t run, my scent obscured in the mist but their stripes startling against rocks and golden grass.

Cathy Buckle

Every morning in Zimbabwe you look at your phone first thing, not for the time, date, weather or missed calls, but for the exchange rates. Every day we have to make a note of three critical pieces of information in order to survive the latest economic crisis in Zimbabwe. As usual there’s nothing simple about it. In fact it’s about as clear as the trees and rocks hiding in the mist. There’s the RBZ (Reserve Bank) rate, the interbank rate and the street rate. The RBZ rate is the exchange rate set by government for the US dollar; the Interbank rate is the rate widely used to quote for goods and services and the street rate is just that, the amount you can get for your US dollars if you buy or sell them on the street.

In the last fortnight new ‘economic stabilisation measures’ were introduced. Appealing to the youth to expose businesses that he says are “sabotaging the economy,” President Mnagangwa said: “We are aware that there are people who are working with detractors to bring about regime change through the manipulation of our exchange rate and unjustified price hikes.”

Ho hum, here we go again; the Zim dollar lost almost 50% of its value overnight. Look at these numbers since my last Letter From Zimbabwe a fortnight ago to get an idea of how crazy everything is again (this is the exchange rate for one single US dollar to purchase Zimbabwe dollars):

5 May 2022 – RBZ rate 159; interbank rate 310; street rate 360; inflation 207%
9 May 2022 – RBZ rate 275; interbank rate 310; street rate 450; inflation 207%
13 May 2022 – RBZ rate 278; interbank rate 310; street rate 450; inflation 256%
20 May 2020 – RBZ rate 291; interbank rate 340; street rate 450; inflation 256%

The ‘economic stabilisation’ measures did the exact opposite of stabilising anything and included:

1. Banning banks from giving loans. This immediately left companies stopping payment of dividends, agro-processing companies writing to suppliers saying they were suspending advance payments and even abattoirs telling farmers to stop supplying livestock.
2. The retention of a 2% withdrawal tax on Zimbabwe dollars.
3. A new 4% tax to send USD locally.
4. A 2% withdrawal tax for nostro accounts (local accounts which contain foreign currency).
5. 40% capital gains tax on shares sold before nine months.

The ZCTU Secretary General, Japhet Moyo, said: “We are concerned about the nocturnal announcement of these measures without any social dialogue.” He said the ‘economic stabilisation measures’ could trigger massive job cuts.

A week later, the RBZ said the suspension of lending didn’t apply to tobacco, cotton, sugar and maize. Then, in what was called a political move to “calm a restive population”, the government announced the suspension of import duty on a number of basic commodities including salt, rice, flour, sugar, margarine, maize meal, milk powder, infant formula, tea, soap, toothpaste and washing powder. The president of the CZI (Confederation of Zimbabwe Industries) Kurai Matsheza said: “Around the whole world, economies are looking within and protecting their industries right now. Here we are doing the opposite … if you look at the value chains that are involved, they are killing our economy.”

The Buy Zimbabwe lobby group said: “This development is likely to reverse the industrialisation gains that had been made by local industry in the supply of basic commodities.”

I’m not an economist, just an ordinary citizen and all this is as clear as the mist swirling out there. All I know is that people without access to US dollars are in dire trouble. Last night the news came of new wages just set by government. Read this and weep: child minder or disabled/aged minder Z$11 025 per month (that’s US$26.20 a month at the going rate today) or Z$55.68 per hour (that’s 13 US cents an hour at the going rate today.) Thirteen US cents an hour to care for a child, disabled person or elderly parent … what kind of inhumanity is this? Shame on Zimbabwe.    

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Zimbabwe’s youth caught between patronage and plunder – Mail and Guardian

At the time of its independence, optimism abounded about Zimbabwe’s potential to become a model African state that would leverage its abundance of natural resources towards the creation of a truly inclusive society. Sadly, this potential was squandered by weak and often predatory governance, leaving society with few prospects to prosperity. 

At present, Zimbabwe’s youth face an entirely different future to the one promised at independence and again after the “new dispensation” in 2017. 

Today, the country remains in a fragile state, characterised by chronic poverty, high levels of formal unemployment that has resulted in an overreliance on the informal economy, a virtually bankrupt state and endemic corruption. Declining state capacity not only translated into weakened relations between the state and society, but also fuelled growing competition for resources that has eventually yielded greater polarisation within society. 

Ultimately, this state of perpetual fragility within a country characterised by trust deficits and a population left to fend for itself, has fractured social cohesion and continues to threaten social and political stability. With millions facing economic marginalisation, the informal economy (with its own inherent vulnerabilities) has been the only means to earn a living. 

Zimbabwe now looks to the next decade where a decidedly young and vulnerable population must navigate declining living conditions with few options to secure gainful employment.

Recent research from the Institute for Justice and Reconciliation (IJR) finds that youth are now being driven to participate in risky and sometimes violent endeavours so that they can earn some form of income. Competition over scarce resources, low levels of human development and few opportunities in the formal economy have resulted in an influx of youth, politicians, gangs and other actors engaging in the illicit economy, where people are embroiled in violence.

One dangerous manifestation of this reality is unfolding at illegal mining sites. Artisanal small-scale gold mining (ASGM) has attracted desperate youth but also other actors such as political elites, illegal gold buyers, unscrupulous middlemen and criminals. Serious violence in artisanal mining was first witnessed in alluvial diamond mining in the Chiadzwa area in Manicaland province during the most difficult economic downturn in the country between 2005 and 2008.

One area under study was the district of Kwekwe in the Midlands province of central Zimbabwe. Originally established as a mining town in 1898, successive waves of economic decline and structural adjustments forced mines to scale down and eventually shut down, resulting in thousands losing their source of income. 

The ASGM in Kwekwe became the only lucrative option for the unemployed because of attractive gold prices offered by illegal gold buyers. Although artisanal mining was decriminalised in 2014, it has made way for pockets of lawlessness that have turned into sites of instability and violence.

Today, it is estimated that there are about one million people who are making a living from illegal mining activities in Kwekwe. With such a large influx of people to the area there has also been a growing demographic diversity and that has come with tensions underpinned by the differing interests of those involved in the sector. 

Women are also migrating to Kwekwe to sell goods and services to artisanal small-scale gold miners (ASGMers), ranging from food and clothes to transactional sex. 

Also involved are politicians, illegal gold buyers, middlemen, runners and criminal syndicates. The involvement of criminal syndicates has led to an increase in violence and murders in the Kwekwe area. 

Evidence points to violent conflict among different players in a bid to control resource-rich areas. The growing number of ASGMers and the informal nature of the sector have contributed to ongoing chaotic mining operations and rising instability. Economic inequity could help explain the phenomenon of machete-wielding gangs, Mashurugwi, who are largely marginalised youths that have resorted to violence and theft in mining areas. 

Data sourced from the Armed Conflict Location and Events Data (ACLED) project and used for this research, shows that this environment has led to a gradual increase in conflict events over the last 10 years. The surge in violence is largely attributed to an increase in the number of ”attacks”, “armed clashes” and “mob violence”.

Prominent actors in Kwekwe are gangs including a group locally known as Al Shabaab. They have strong connections to some senior ruling party officials from the province. Other criminal gangs include groups such as Mbimbos, Magombiro and Mabhudhi, who mostly specialise in raiding gold ore or demanding rents from ASGMers using machetes and guns. 

ASGMers have responded by forming defence syndicates to protect themselves from attacks by criminal gangs, also arming themselves with machetes and guns.

Growth and expansion of ASGM can be connected to the economic decline, rising unemployment and poverty in Zimbabwe. The situation has also been allowed to worsen with the government turning a blind eye to ASGMers’ activities because the sector now plays a significant role is supporting livelihoods of many families. 

In addition to creating pockets of instability, its unregulated nature has fed an increase in smuggling of metals and minerals, with much of the gold produced by ASGMers being smuggled out of the country. As such, there is no fiscal benefit to the country. It is estimated that gold worth $1.5 billion is smuggled annually out of Zimbabwe. 

Smuggling deprives the government of much-needed revenue and foreign exchange, yet the government earmarked gold production as a key sector contributing towards its Vision 2030.

Through this, Zimbabwe is also being deprived of its natural heritage with mining causing massive environmental damage on huge tracts of land. Mazowe River in the Mazowe district, another popular site for illegal mining, has more than 155 kilometres of its bank destroyed by alluvial mining. 

Damaged areas include portions with very deep pits and heavily silted sections. Other parts of the river have been diverted by ASGMers. These activities have affected the river’s aquatic life, farmers, wildlife and livestock. 

The water supply and quality of towns like Bindura and Glendale are also affected. Excessive use of chemicals like mercury means the towns now require additional chemicals to purify their water from this pollution.

In offsetting the dangers unlocked by these sites of illegal mining, is it critical that multilateral bodies like SADC and the AU support research and fact finding related to the illegal mining operations. Urgent attention and further research are required to better understand the circumstances and impacts of the ongoing and escalating illegal mining across the country. 

In instances where chemicals like mercury are affecting water quality, immediate action is needed to safeguard people, aquatic life, wild animals and farm animals. Environmentalists and affected communities must also be supported to work towards sustainable solutions.

The international community should also consider targeted sanctions against the trade in illicit gold. This, coupled with human development programmes for youth forced into the trade due to a lack of other options, can help offset the illegal trade and its impact on youth.

However, at the heart of driving these pockets of instability is poor governance, that has in turn sabotaged the formal economy and left youth with few prospects to prosperity. Unchecked youth unemployment within a state where patronage is accessible largely through the ruling party Zanu-PF is an option for some, leaving most youth forced into the informal or illicit economy, or to seek work in other countries where they are no less economically and socially vulnerable.

If anything, scarcity lies at the heart of threats to stability and it is crucial that the state facilitates an environment for private sector development and human development.

This means that it ought to concern itself with improving governance so that its core function is service to society. 

Without this, scarcity will continue to threaten the social fabric of society. To this end, SADC, as the regional body, should actively advance this agenda. It has a crucial role to play in holding the Zimbabwean government accountable to standards of good governance, which is also critical for the long-term peace and prosperity of the region. 

You can find the full analysis by IJRs Inclusive Economies project here

The views expressed are those of the author and do not necessarily reflect the official policy or position of the Mail & Guardian.

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