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War in faraway Ukraine is suffocating Zimbabwe – The Citizen

Harare. A war in far-away Ukraine has worsened Zimbabwe’s decades old multi-layered economic crisis with the southern African country’s agriculture industry being the hardest hit amid heightened food insecurity and rising cost of living, United Nations agencies have warned.

In a report titled: Impact of the Ukraine Crisis in Zimbabwe that covers the period between February 2022 and when Russia invaded its neighbour and October, the World Food Programme (WFP), International Organisation for Migration (IOM) and Food and Agriculture Organisation (FAO) painted a gloomy picture of the situation in Zimbabwe.

Before the war between Russia and Ukraine broke out, Zimbabwe’s economy was already saddled with rising inflation, low foreign direct investments, unsustainable foreign debt levels and corruption, among a litany of problems.

Zimbabwe was also emerging from a devastating Covid-19 pandemic that led to unprecedented economic disruptions globally.

The outbreak of the war led to a spike in prices, supply chain disruptions and a general deterioration of macro-economic and living conditions.

UN agencies that have been feeding more than half of Zimbabwe’s population for years fear that the Russia-Ukraine conflict will make things even harder for the southern African country.

 “The faraway war has had direct effects on increasing food, fuel and fertiliser prices and disrupted supply chains and trade, leading to fiscal tightening and a widening of inequalities and governance issues,” the agencies said in the report.

“Poor households have further fallen into food insecurity emanating from the increased cost of living.

“While some of these factors cannot be directly linked to the Ukraine crisis, analysis shows that the conflict in Europe has exacerbated vulnerability and migration as a coping mechanism.”

The WFP, IOM and FAO have been jointly monitoring the impact of the Ukraine-Russia conflict on rising food prices, food security, access to essential needs and agricultural inputs, and migration patterns in Zimbabwe.

They concluded that  the situation was “precarious because inflation still remains very high, the lean season has begun earlier than usual, high costs for agricultural inputs— particularly fertiliser are being observed, and there is possibility of a delayed start of the rainy season in the primary crop-producing northern regions of the country.”

Zimbabwe’s inflation, which is pegged at more than 280 percent, remains one of the highest globally and the only country in southern Africa with headline inflation above 50 percent.

The country is expected to struggle to get fertiliser for the forthcoming season.

Zimbabwe uses around 800 000 tonnes of fertiliser a season and over half of it is imported from Russia and Belarus.

“Zimbabwe depends heavily on fertiliser imports (ammonium nitrate, urea, potash, and ammonia gas) from Russia and Belarus and the conflict has far reaching consequences on availability and affordability,” the UN agencies added.

“In fact, 70 percent of the fertilisers used in Zimbabwe are imported as raw materials and or finished products and this exposes the market to the effects of global shortages and price volatility.

“These higher prices are making fertilisers unaffordable and out of reach to communal farmers and will have a negative effect on productivity of maize, soya beans and other crops in the main 2022/23 cropping season.”

Globally, the conflict has had a significant impact on the supply of fertiliser raw materials – creating a shortage and leading to all-time high price increases of over 100 percent.

“The rise in logistical costs by over 100 percent due to increased demand and a shortage of shipping vessels and fuel, has increased the landed fertiliser prices in Zimbabwe and other import dependent countries,” the agencies added.

Zimbabwe has also been struggling with fuel imports. The country gets most of its fuel from Mozambique, South Africa and Singapore.

The price of fuel, which was already on an upward trend prior to the start of the Ukraine-Russia conflict, experienced a sharp increase immediately after the start of the Ukraine crisis.

Fuel prices rose by 17 percent for petrol from US$ 1.51 a litre in March to US$1.77 a litre in June, while diesel rose by 25 percent from US$1.51 a litre in March to US$ 1.88 a litre in June.

“This upward trend was also observed on the global market and is largely attributed to the effects of the Ukraine-crisis,” the report added.

“In June, the government of Zimbabwe enacted measures to stabilise the price of fuel, resulting in a reduction of the average cost by 10 percent.

“However, the current price remains 18 percent higher than it was during the pre-crisis period.

“The rising costs of fuel contributed to the increase in the price of basic food and non-food commodities.”

During the same period, Zimbabwe also recorded a 15 percent decrease in the supply of vegetable oil.

The decrease was attributed to the Ukraine crisis as Zimbabwe imports 96 percent of its sunflower oil from abroad, making it vulnerable to the effects of the disruption in global supply chains.

Russian and Ukrainian exports account for nearly a quarter of the global total for the commodity.

The sharp rise in prices has seen the cost of a basic food basket in Zimbabwe increasing by an average of seven percent between January and September this year.

The price of bread increased by more than 100 percent from US$1 a loaf in January to about US$2.10 a loaf in May.

There was also a slight decrease in remittances, which the UN agencies said could be attributed “partially to the impact of the crisis in countries where remittances originate from.”

“Among those who received remittances, 90 percent reported that these were not adequate to cover essential needs,” the report added.

“Of the households who reported receiving remittances, between 62 and 75 percent use the remittances mainly for food, followed by education (17 to 21%) and health services (four to seven percent.”

Zimbabwe’s economy has been lurching from one crisis to another for the past two decades.

The economic problems started surfacing in 1997 when the regime of the late Robert Mugabe paid unbudgeted pensions to veterans of the country’s 1970s liberation war, leading to a currency collapse.

The situation got worse in 1999 when Zimbabwe sent its troops to fight in Democratic Republic of Congo civil war that also drew armies from Uganda, Rwanda and Angola.

A violent land reform programme that displaced nearly 5 000 commercial farmers precipitated the e

Disputed elections and human rights violations led to the country’s economic isolation, which has taken a serious toll on the economy.

Zimbabwe is one of the few African countries that have been vocal in their support of Russia’s excursion into Ukraine.

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ZimSat-1 deployed into orbit – The Zimbabwe Mail – The Zimbabwe Mail




Zimbabwe is banking on its first satellite, ZimSat-1 to give impetus to plans to solve the country’s power challenges, as it has capacity to, among other things, map regions where there is high sun intensity for effective solar farm distribution.

Zimbabwe and Uganda last month launched their first homegrown satellites into space aboard a United Sates National Aeronautics and Space Administration rocket.

The Zimbabwean satellite, named ZimSat-1, was designed and assembled by three of the country’s scientists who were supported and trained in Japan under the Joint Global Multi-Nation Birds Satellite (BIRDS) Project.

The satelite was launched into orbit yesterday from the International Space Station where it arrived last month.

For Zimbabwe, which is battling acute power shortages due to frequent breakdowns at Hwange Thermal Power Station and water shortages at Kariba, the satellite gives impetus to the pursuit of strategies meant to ensure a healthy energy mix to guarantee sufficiency.

Project manager Victor Mukungunugwa said the satellite would play a key role in the development of solar farms.

“The satellite will also provide solar illumination mapping for effective solar farm distribution,” he said in a presentation before ZimSat-1 and Uganda’s Pearl of Africa-1 deployed into orbit.

“Through solar illumination, the satellite maps the regions where there is high solar intensity and thereby optimising the deployment of solar farms in Uganda and Zimbabwe to solve the electricity distribution.”

Zimbabwe has already expressed its determination to accelerate the use of renewable energies such as solar, to boost local power generation capacity.


Other economic sectors, such as agriculture, would also greatly benefit from the satellite, including through the provision of vital information such as harvest estimates, and crop health.

“This is with the aim to promote agriculture in Zimbabwe and Uganda,” he said.

“It will also provide soil fertility assessments to support agricultural activities. This will optimise the distribution of agricultural inputs to various agricultural regions in Uganda and Zimbabwe.”

ZimSat-1 also has the ability to provide data on water quality.

“The satellites seek to survey the water bodies in Zimbabwe and Uganda to see sources of contamination and eliminate the contamination at the source. This will, to a great extent, minimise the amount of chemicals used to purify drinking water,” he said.

Part of its mission also includes providing early warning services for incoming natural disasters such as floods and landslides.

At its launch to the International Space Station last month, President Mnangagwa hailed the occasion as a proud moment symbolising a nation on a technology driven trajectory to achieve its developmental aspirations.

The satellite is a culmination of the 2018 launch of the Zimbabwe National Geospatial and Space Agency (ZINGSA), which operates under the Ministry of Higher and Tertiary Education, Science and Technology Development.

The satellite is also expected to enhance mineral exploration and mapping human settlements. — New Ziana.


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Hwang gets the message, South Korea advances at World Cup – The Zimbabwe Mail

South Korea’s team players celebrate after the World Cup group H soccer match between South Korea and Portugal, at the Education City Stadium in Al Rayyan, Qatar, Friday, Dec. 2, 2022. (AP Photo/Darko Bandic)


AL RAYYAN, Qatar (AP) — The sign said it all. Hwang Hee-chan got the message.

A young South Korea fan held up a sign that read “One More Goal” during halftime of the team’s match against Portugal on Friday at the World Cup. The teams were even at 1-1 at the time, but the South Koreans needed another goal to earn a spot in the round of 16.

Hwang delivered the dramatic goal in stoppage time, lifting South Korea to a 2-1 victory and its third trip to the knockout stage of the World Cup.

“I’m glad I was able to give this present to the fans,” said Hwang, who pulled off his jersey and struck a classic muscle-man pose after scoring as thousands of South Korean fans burst into a screaming, cheering frenzy at the north end of Education City Stadium.

It’s South Korea third trip past the group stage at the World Cup. The team reached the semifinals as co-host in 2002 and then made it to the round of 16 in 2010.

Hwang missed the first two group games in Qatar with a hamstring injury, and entered as a substitute in the second half against Portugal.

“In the first match it was impossible for me to play and the pain got worse,” he said. “I did a little running, but I thought I could play the second match, but they held me out.”


He finally made an appearance on Friday. And it turned out to be a match-winning, World Cup-advancing appearance, too.

“It was a little bit of a risk,” Hwang said. “But I didn’t care what happened to me personally. I just wanted to contribute.”

South Korea was heading out of the tournament in the final minutes when a Portugal corner got cleared and Son Heung-min raced down the right side of the field. He slipped a pass through an opponent’s legs and into the path of Hwang, who converted with a low finish.

“When Son got the ball, I was convinced he would pass me the ball,” said Hwang, who said his coaches and teammates gave him confidence as he was about to enter the game.

“They told me I was going to create something,” he said. “A lot of teammates told me they trusted me.”

Cho Gue-sung, who scored two goals in South Korea’s 3-2 loss to Ghana in an earlier group game, summed up what thousands of fans in the stands — and millions at home — were thinking.

“It really feels like a miracle,” Cho said. “Our players really gave their best. Our coaching staff did a great job preparing us and everything came together. Our dreams came true.”

___


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Zimbabwe now one of the fastest growing African economies – Bulawayo24 News

ANALYSING Zimbabwe’s unconventional economy always proves somewhat cumbersome because it is a country bridled with policy inconsistency, unfavourable operating conditions buoyed by decades of unilateral sanctions and a touch of political upheaval at every election cycle.

The International Monetary Fund (IMF) economic structural adjustment policy, 13 climate-related droughts, economic mismanagement and civil unrest have also contributed to the country’s rapid decline.

The lack of autonomy by the apex bank essentially means that monetary policy is compromised and is set to serve the interests of the ruling government, which can secure election funding willy-nilly to thwart the opposition.

Development has stalled for decades, as post-colonial infrastructure continues to dilapidate. Once Africa’s beacon, “the jewel of Africa” as it was formerly known, is now one of the saddest places to live in the world.

In fact, to put that into context, a recent study found that Zimbabwe was the third saddest country to live in the world, after Afghanistan and Lebanon in first and second place, respectively. Economic crisis after crisis has been the norm in one of the most resource-rich nations in Africa.

Although Zimbabwe’s mining sector is highly diversified, with over 40 different minerals, the ruling party has never been able to leverage the sectors’ returns to create value for its people.

Corruption persists like a festering wound slowly spreading to all of the state’s institutions.

From the outside, the situation looks dire and the economy is seemingly unlikely to return to its glory days. Most certainly, if the monetary authorities continue with their current policy trajectory, Zimbabwe will likely not attain middle-income status because simulations show that Zimbabwe will need to reach productivity growth rates of 8–9% per year in the next seven years to advance to UMIC status.

Achieving such unprecedented rates for Zimbabwe will require dramatic improvement in the policy environment to address the binding constraints to productivity growth.

The question is, does government have the incentive or the means to make such radical policy shifts, uncharacteristically? Well, there are two forces at play here. One is internal and within our control, but it is also important to take into account the impact of external forces such as sanctions.

First and foremost, sanctions have never achieved their intended purpose anywhere they were ever deployed. In fact, they often give rise to tyrannical governments that use the very sanctions as precedence for complete control of power.

Statistically, sanctions fail to achieve their aims in 65 to 95% of the cases in which they are imposed and it is the poorest that suffer the most through their implementation, rather than the elites that the sanctions aim to target.

Through the economic damage of the sanctions, a significant impact is felt by the public: GDP per capita decreases at an increased rate, exports and imports decrease, international capital decreases, and inflation increases.

Due to the already fragile economies of sanctioned countries, the sanctions run the risk of leading to an economic collapse, which in turn leads to greater impoverishment. As import and export-focused sectors are more affected by economic sanctions and these sectors tend to hire low-skilled workers, deprived groups in society are affected more by sanctions.

In 2001, Zimbabwe’s official development assistance reached a 20-year low of US$160,2 million as external debt reached 2,485% of the gross national income, a level not seen since the early 1980s.

For Zimbabwe, lost revenues reportedly exceeded US$42 billion from 2001 to 2019. Zimbabwe historically relied on foreign trade to sustain its economy. It last registered a trade surplus in 2000, at US$155 million, representing approximately 74% of its gross domestic product (GDP).

Overall production increased 1,44% in 2001 after a shortfall in previous years. However, sanctions targeted various entities in key productive sectors of the economy, including mining, manufacturing, tourism and agriculture, which made it challenging for Zimbabwe to rely on its trade and industry to promote growth. During the first decade under sanctions, the country’s trade balance spiralled to -23,8%, in 2010, and has stayed negative since then.

It does not end there. Sanctions also facilitated deindustrialisation, as key agriculture, mining and manufacturing companies were barred from selling their products in the United States and European Union markets.

The economic contraction went from -3,1% in 2000 to -17,7% in 2008. Thousands of workers were forced out of employment in the formal economy, and multiple local companies closed down. This nurtured the expansion of the informal sector as a method of resilience, estimated at 94,5% in 2014 and 75,6% in 2019.

Foreign direct investments were affected as investors avoided risks, given the negative perceptions about the economy and the country’s governance.

This led to increased unemployment, estimated at 94% in the formal sector by the end of 2008, and to a significant loss of qualified professionals. From 2000 to 2008, the gross national income per person fell by 35%.

The list of the effects of sanctions goes on and on, from humanitarian impacts, the access to food, water and sanitation, access to healthcare, education and basic fundamental human rights. The irony is that the west says it is fighting the abuse of human rights, but ends up inflicting worse damage on sanctioned economies.

Most economists consider this damage irreparable in the short term. Consequently, going into the 2023 election, even if the opposition party wins (let us assume sanctions are lifted), they will have to contend with the effects of the sanctions for at least half a decade.

Let us delve into the internal forces. Zimbabwe’s GDP growth in 2021, according to World Bank was 5,85%, making Zimbabwe the 10th fastest-growing economy in Africa in 2021.

Zimbabwe’s economic growth accelerated to an anticipated 5,9% in 2021 from a 6,2% fall in 2020 due to a bountiful harvest that expanded agriculture by 36,2% in 2021 as opposed to 4,2% growth in 2020.

The per capita GDP also increased, jumping by 4,9% in 2021 after declining by 6,7% in 2020. However, in 2022, economic growth was held down by unstable prices and deteriorating agricultural circumstances.

The real GDP growth rate is anticipated to decrease from 5,8% in 2021 to 3,4% in 2022. Zimbabwe’s economic growth is expected to end the year at 4% in 2022, down from 4,6% previously targeted, Finance minister Mthuli Ncube said in a speech on Thursday.

Growth is then projected to slow to 3,8% in 2023 before increasing to 4,8% in 2024 and 5% in 2025, he said. The overall fiscal deficit is seen at 1,5% of GDP for next year.

“This growth will be sustained by mining, construction and agriculture, as well as accommodation sectors,” Ncube said.

The mining sector is expected to grow by 10,4% in 2023 on the back of anticipated favourable international mineral prices, as well as the increase in investment, especially in exploration, mine development and mechanisation, he added.

A barrage of measures introduced by government mid-year, which include the introduction of gold coins, the temporary suspension of bank lending, higher taxes on capital markets, a 200% policy rate, and the temporary suspension of payments to contractors, have seen the economy stabilising and recording growth, riding on investments in the mining, agriculture and manufacturing sectors.

Month-on-month inflations for September significantly declined to 3,5% from 12,4% in August 2022. Meanwhile, foreign currency earnings amounted to US$7,7 billion for the eight months up to August 31 2022. 

This reflects a 32,4% increase from the US$5,8 billion recorded over the corresponding period in 2021. With increased activity in both the mining and manufacturing sectors where industrial capacity utilisation is now at 66% up from 47% in 2020, the country is now facing increased power demand, with solutions already in place to meet the growing demand.

A new mineral royalty policy announced earlier this year is being utilised, as the country considers more than doubling spending in 2023 to help revive the economy. The royalty policy that came into effect in October compelled miners to pay royalties as follows – half in mineral form, 40% in local currency and 10% in foreign-currency cash.

The government has made some significant strides in taking back the reins of the economy and looks set for another stable economy next year, ceteris paribus. However, to ensure this long-fought stability, government has to focus on three key metrics.

Investor confidence

After probably the longest foreign investor drought, the new dispensation has worked over- time to win back the confidence of both external and domestic capital, since coming to power in 2017.

Billions of dollars, primarily from big-ticket investments in mining, power generation and an assortment of infrastructure projects have been flowing into the country. One of these is the Greenfield US$1 billion Chinese-led steel venture in Mvuma, the US$1,3 billion thermal power project in Hwange, and huge road and airport re-development programmes around the country as well as Invictus’s gas exploration in the north of the country.

The Second Republic has not unlocked even 1% of the potential FDI Zim could receive and that is because the “Zimbabwe is open for business” mantra doesn’t leverage tax incentives to nurture and underpin investor love and confidence.

Government should look to reducing general corporate income tax, implementing tax holidays and tax-privileged zones. Governments may also choose to offset the investment cost of the FDI by providing subsidies, or paying for some of the expenses of the project. Opponents of this practice claim it takes money from taxpayers and gives it to foreign entities.

This is true in the short term, but the investment is also intended to boost the economy (local and national). Land can also be used as a subsidy, either through reduced prices or by giving it away for free. However, if large tracts of land are going to be subsidized, then why not set up a special economic zone?

Ensuring stable exchange rates

Of equal concern should be maintaining stable exchange rates to anchor the government’s short-term economic stabilisation, lay a strong foundation for medium to long-term growth, and ultimately foster the public’s confidence in the local unit.

The local unit on the exchange parallel market has seen some slight depreciation, while the interbank rate has been somewhat steady over the past month or so.

Ensuring a stable exchange rate will be anchored on the government’s ability to keep liquidity out of the parallel market. The gold coins have played a vital part in moving that liquidity back to the RBZ.

The 40% tax on short-term investments on the ZSE also got rid of arbitrage that was being exploited with returns being dumped back into the parallel market.

However, ultimately, the suspension of payments to contractors had probably the most significant impact on the exchange rate, so it will be interesting how the resumption of these payments affects the market, particularly because the issue of forex shortages has not been addressed.

Keep inflation in check

The other measure, still being rolled out, is the introduction of gold coins. These have sucked out billions of dollars from the market which could have otherwise ended up on the black currency market, thereby driving up inflation.

And as long as the RBZ is able to settle all gold contracts without a hassle, that should see market players taking a keener interest in the new saving instrument. Gold coins valued at ZW$9,5 billion were sold as of September 30, 2022. Smaller denomination gold coins have been unveiled by the Reserve Bank of Zimbabwe to broaden access and inclusivity and half of the released coins were bought within the first week.

Gwenzi is a financial analyst and MD of Equity Axis, a financial media firm offering business intelligence, economic and equity research. — respect@equityaxis.net

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