Eddy Nyatanga sues Coventry 

Source: Eddy Nyatanga sues Coventry – NewsDay Zimbabwe March 2, 2019 BY GARIKAI TUNHIRA ZIMBABWE National Soccer Supporters Association president Charles Eddy Nyatanga has taken Sports minister Kirsty Coventry to court, alleging that she erred in appointing a Sports and Recreation Commission (SRC) director-general and in denying Zimbabwe an opportunity to host the Council of […]

The post Eddy Nyatanga sues Coventry  appeared first on Zimbabwe Situation.

Source: Eddy Nyatanga sues Coventry – NewsDay Zimbabwe March 2, 2019

BY GARIKAI TUNHIRA

ZIMBABWE National Soccer Supporters Association president Charles Eddy Nyatanga has taken Sports minister Kirsty Coventry to court, alleging that she erred in appointing a Sports and Recreation Commission (SRC) director-general and in denying Zimbabwe an opportunity to host the Council of
Southern Africa Football Associations (Cosafa) tournament later this year.

In his application filed at the High Court yesterday under case number 1650/19, Nyatanga is seeking to invalidate the appointment of SRC director-general Prince Mupazviriho, whose appointment Nyatanga said violated section 24 of the Sports and Recreation Commission Act (Chapter 25:15).

Nyatanga also wants an order declaring Coventry’s pronouncement that Zimbabwe was incapable of hosting the Cosafa 2019 edition null and void, saying what she had said was “unlawful, invalid and in contravention of the minister’s powers in terms of the SRC Act”.

Through his lawyers Deme Attorneys, Nyatanga said he only got to know that Mupazviriho had been appointed SRC director-general from newspaper articles.

“… it was reported that the Chief Secretary to the President and Cabinet (Misheck Sibanda) made an announcement of a list of persons that the President had reassigned, Mr Prince Mupazviriho’s name among the list. No further detail was provided on the particular role to which he was reassigned,” Nyatanga said.

“Surprisingly, there is no record of any announcement of the SRC board inviting applications, calling for interviews or appointment of SRC director-general in accordance with the SRC Act. In actual fact, as a matter of public record, there is no SRC board in existence at the moment contrary to requirements of the SRC Act.”

He said Coventry was yet to appoint an SRC board yet she continued to work “closely” with Mupazviriho as SRC director-general.

“The respondent’s announcement of her decision, on behalf of the Zimbabwean government and ZIfa, was improper and beyond the scope of her powers in terms of the SRC Act. The decision was not for the respondent to make or announce as Zifa had only sought government guarantee in order to make an informed decision,” Nyatanga said.

“Mr Mupazviriho’s appointment as SRC director-general is invalid and void at law.”

Coventry is yet to file her heads of argument.

The post Eddy Nyatanga sues Coventry  appeared first on Zimbabwe Situation.

UPDATED: Court gives managers trade union rights

Source: UPDATED: Court gives managers trade union rights | The Herald March 2, 2019 Fidelis Munyoro Chief Court Reporter Workers in managerial positions have a right to form and join trade unions of their choice which promote and further their interests, the Supreme Court has ruled. The superior court made the landmark ruling in the […]

The post UPDATED: Court gives managers trade union rights appeared first on Zimbabwe Situation.

Source: UPDATED: Court gives managers trade union rights | The Herald March 2, 2019

UPDATED: Court gives managers trade union rights

Fidelis Munyoro Chief Court Reporter
Workers in managerial positions have a right to form and join trade unions of their choice which promote and further their interests, the Supreme Court has ruled.

The superior court made the landmark ruling in the case in which the Bankers Association of Zimbabwe (BAZ) was challenging the decision of the Registrar of Labour to register a union representing bank managers.

The Registrar had accepted registration of the Banking and Finance Managers Union of Zimbabwe (BAFMUZ). But BAZ held the position that managers cannot be members of a trade union because they represent the interests of employers.

However, Justice Bharat Patel this week upheld the lower court’s decision saying there was nothing sinister at law for managers to form or join a trade union that represents their interests.

He ruled that the appeal could not be sustained and that Section 45 of the Labour Act allows the registration of BAFMUZ as a trade union to represent the interests of managerial employees in the banking sector.

The judge also ruled that the registration of the BAFMUZ to represent managers would certainly not be unconstitutional and that such registration could not be regarded as being contrary to public policy.

“It follows that the findings and decision of the court-a quo cannot be factually impugned or legally impeached and must, therefore, be upheld,” said Justice Patel, dismissing the appeal with costs of suit.

Justice Patel said it was indubitable that a managerial employee is an employee, hence it should be accepted that he is entitled to the protection of all the rights correlative to that status.

“These include the right to collective representation at the work place,” he said.

“This is simply recognised in several key provisions of the Labour Act.

Section 4(1) of the Act gives every employee “the right if he so desires, to be a member or an officer of a trade union” and “the right to take part in the formation and registration of a trade union”. Said Justice Patel: “It follows that the court-a quo was undoubtedly correct in arriving at that conclusion.”

BAZ took the matter up to the Supreme Court following a Labour Court ruling in October 2015 in which president the court upheld the legality of BAFMUZ.

Advocate Thabani Mpofu instructed by Mawire and Associates acted for BAFMUZ, while Adv Tawanda Zhuwarara instructed by Kantor and Immerman argued the matter for BAZ.

The post UPDATED: Court gives managers trade union rights appeared first on Zimbabwe Situation.

JUST IN: ED Mnangagwa government pulls another shocker, increases duty by 300%

CUSTOMS and excise duties shot up threefold to the bond note value yesterday following government’s gazetting of Statutory Instrument 32 of 2019, ushering in the new currency, RTGS dollar. The central bank last week devalued the local RTGS currency and…

CUSTOMS and excise duties shot up threefold to the bond note value yesterday following government’s gazetting of Statutory Instrument 32 of 2019, ushering in the new currency, RTGS dollar. The central bank last week devalued the local RTGS currency and pegged it at 2,5 against the United States dollar from 1:1 and Zimra moved to […]

Zimbabwe hikes customs, excise duty by 300%

The government has issued in a new currency, which is mostly virtual. Source: Zimbabwe hikes customs, excise duty by 300% – The Citizen Zimbabwean bond notes. The Zimbabwe Revenue Authority (Zimra) has hiked customs and excise duties by 300 percent, it emerged on Saturday. This came as Government Gazette statutory instrument 32 of 2019 ushered […]

The post Zimbabwe hikes customs, excise duty by 300% appeared first on Zimbabwe Situation.

The government has issued in a new currency, which is mostly virtual.

Source: Zimbabwe hikes customs, excise duty by 300% – The Citizen

Zimbabwean bond notes.

Zimbabwean bond notes.

The Zimbabwe Revenue Authority (Zimra) has hiked customs and excise duties by 300 percent, it emerged on Saturday.

This came as Government Gazette statutory instrument 32 of 2019 ushered in a new currency, the real time gross settlement (RTGS) dollar. The RTGS dollar is largely a virtual currency, with the bond note released in 2016 also now classified as virtual currency.

A statement by Zimra explained how the new duty regime would work.

“The new currency affects clearance of designated goods by converting current balances in the nostro FCA [foreign currency account] prepayment account to ZWR at the prevailing exchange rate with the USD.

“All foreign currency payments then appear on the payment receipt or prepayment receipt as ZW RTGS dollars,” the statement said.

Zimra added that the prepayment account would be used to clear designated goods. “All values on the bill of entry and form 49 would be reflected in RTGS dollars although payment would be made in forex,” the tax collector said.

With the increase in the customs and excise duty, it will have a ripple effect on the prices of goods. In January, Zimbabweans protested against drastic fuel price hikes announced by President Emmerson Mnangagwa.

The protests left 17 people dead and more than 80 others wounded, according to civic society organisations, following a brutal and bloody crackdown by the military, police, and spy agents.

An independent policy research organisation this week warned that the country was likely to experience more protests until the government addressed issues of concern to citizens.

It said there had been a change in the cycle of protests since Mnangagwa’s rise to power following an effective coup in November 2017 and a disputed election in July 2018.

Sivio Institute executive director Tendai Muriswa said intervals between major protests had been shortened to four months under Mnangagwa’s administration as compared to up to seven months during former president Robert Mugabe’s lengthy stay in power.

The post Zimbabwe hikes customs, excise duty by 300% appeared first on Zimbabwe Situation.

Latest on Harare West MP Joana Mamombe who was arrested by 9 CID detectives

MDC Alliance legislator for Harare West Joana Mamombe has been taken to Harare Central Police station where she has been charged with attempting to overthrow and subvert a Constitutionally-elected government (Treason). The charges stem from an incident…

MDC Alliance legislator for Harare West Joana Mamombe has been taken to Harare Central Police station where she has been charged with attempting to overthrow and subvert a Constitutionally-elected government (Treason). The charges stem from an incident when she addressed a Press Conference on 14th of January 2019 at Civic Center, Malborough, just as the […]

Doubts remain over Zimbabwe’s new currency

In this edition: Zimbabwe struggles to convince consumers of the stability of its new currency. The RTGS dollar is still viewed as volatile by many. Also, political instability in Burundi has given rise to an increase in the number of online videos appearing to show people being abused. Finally, one of Africa’s most prestigious film […]

The post Doubts remain over Zimbabwe’s new currency appeared first on Zimbabwe Situation.

In this edition: Zimbabwe struggles to convince consumers of the stability of its new currency. The RTGS dollar is still viewed as volatile by many. Also, political instability in Burundi has given rise to an increase in the number of online videos appearing to show people being abused. Finally, one of Africa’s most prestigious film festivals celebrates its 50th anniversary. Fespaco opens its doors in Burkina Faso’s capital Ouagadougou.

Source: Across Africa – Doubts remain over Zimbabwe’s new currency

 

The post Doubts remain over Zimbabwe’s new currency appeared first on Zimbabwe Situation.

Botswana’s president denies report of $600 million loan to Zimbabwe 

Source: Botswana’s president denies report of $600 million loan to Zimbabwe | Reuters GABORONE (Reuters) – Botswana’s president on Friday dismissed a report that the country had offered Zimbabwe a $600 million diamond-backed loan and said his government had only offered to guarantee a $100 million private credit line for Botswana companies to invest in […]

The post Botswana’s president denies report of $600 million loan to Zimbabwe  appeared first on Zimbabwe Situation.

Source: Botswana’s president denies report of $600 million loan to Zimbabwe | Reuters

President of Botswana Mokgweetsi Eric Keabetswe Masisi addresses the 73rd session of the United Nations General Assembly at U.N. headquarters in New York, U.S., September 27, 2018. REUTERS/Carlo Allegri

GABORONE (Reuters) – Botswana’s president on Friday dismissed a report that the country had offered Zimbabwe a $600 million diamond-backed loan and said his government had only offered to guarantee a $100 million private credit line for Botswana companies to invest in their troubled neighbor.

Zimbabwe’s secretary in the ministry of foreign affairs was quoted in the state-owned Herald newspaper on Tuesday saying Botswana had offered to lend Zimbabwe $500 million to support its diamond industry and another $100 million for the local private firms.

“I want to clarify these reports that we are giving Zimbabwe hundreds of millions in loans. That is totally untrue,” Mokgweetsi Masisi told reporters in Gaborone, a day after visiting Zimbabwe for business and trade mission.

“We are not giving them a single loan. The only thing we gave them yesterday were medical supplies made in Botswana and supplementary feeding worth 2.1 million pula ($197,600).”

There is $100 million credit from private banks in Botswana and Zimbabwe to help Botswana private companies, Masisi added.

“What we have demanded, which we are waiting for, is a letter of guarantee from the Zimbabweans to counter our own guarantee,” he said.

Masisi also said Botswana, which is the largest producer of diamonds by value, would help Zimbabwe with its diamond trade because “it would be useful and strategic for Botswana” as it aims to become a global center of diamond trading.

Zimbabwe’s diamond sector has struggled since the government kicked out private companies from the eastern Marange fields in early 2016 after they declined to merge under the state-owned mining company.

Relations between Zimbabwe and Botswana have improved following a strained period when Botswana’s ex-President Ian Khama, who stepped down in 2018, routinely criticized Zimbabwe’s Robert Mugabe for holding on to power for too long.

A military coup in 2017 forced Mugabe to resign, ending his 37-year rule.

The post Botswana’s president denies report of $600 million loan to Zimbabwe  appeared first on Zimbabwe Situation.

Zanu PF Youth League members bury hatchet

Source: Zanu PF Youth League members bury hatchet | The Herald March 2, 2019 Cde Matutu Munyaradzi Musiiwa Midlands Correspondent The Zanu-PF Youth League members have buried the hatchet after attempting to dislodge its leadership last month. In an interview on the sidelines of a public lecture at Gweru Polytechnic College last week, Deputy Secretary  […]

The post Zanu PF Youth League members bury hatchet appeared first on Zimbabwe Situation.

Source: Zanu PF Youth League members bury hatchet | The Herald March 2, 2019

Zanu PF Youth League members bury hatchet
Cde Matutu

Munyaradzi Musiiwa Midlands Correspondent
The Zanu-PF Youth League members have buried the hatchet after attempting to dislodge its leadership last month.

In an interview on the sidelines of a public lecture at Gweru Polytechnic College last week, Deputy Secretary  for Youth Affairs Cde Lewis Matutu said now was the time for the Youth League to be united and push the socio-economic development agenda for the development of the country.

Votes of no confidence were passed against some officials of the party’s national Youth League executive recently, while reports of similar actions were being initiated in some provinces.

The party’s Youth League passed a vote of no confidence on its leaders — Cde Pupurai Togarepi, Cde Matutu, secretary for administration Cde Tendai Chirau, Cde Admire Mahachi and Cde Mercy Mugomo, for allegedly failing to defend President Mnangagwa, who is the party’s First Secretary.

Cde Matutu said the league members had since moved on.

“We are now united as the Youth League and we remain guided by the party principles and constitution,” he said.

Cde Matutu said the league embarked on a nationwide tour to interface with youths and strengthen the party.

“We are holding inter-district meetings with youths in all provinces,” he said.

“As we speak, some members of the national executive are in Bulawayo, Matabeleland North and Matabeleland South provinces.”

Cde Matutu said the Youth League had postponed the President’s Solidarity March to a date that will be announced soon.

“There are some events that are supposed to take place before we hold the youth solidarity march for the President,” he said.

“We will soon announce the new date.”

Zanu-PF Secretary for Information and Publicity Cde Simon Khaya Moyo recently said they have noted with concern the disciplinary processes being raised against party members without due process and in breach of the party’s constitution.

Cde Khaya Moyo said a motion to pass a vote of no confidence should comply with procedures set out under Article 28 General Provision, Section 265-266 of the party’s constitution.

The post Zanu PF Youth League members bury hatchet appeared first on Zimbabwe Situation.

$1,4bn Hwange project begins

Source: $1,4bn Hwange project begins | The Herald March 2, 2019 Minister Gumbo Leonard Ncube in HWANGE CONSTRUCTION of the $1,4 billion Hwange Expansion Project for Unit 7 and 8 has started in earnest, with the laying of the foundation stone at Hwange Power Station yesterday. Sinohydro is undertaking the expansion project in conjunction with […]

The post $1,4bn Hwange project begins appeared first on Zimbabwe Situation.

Source: $1,4bn Hwange project begins | The Herald March 2, 2019

$1,4bn Hwange project begins
Minister Gumbo

Leonard Ncube in HWANGE
CONSTRUCTION of the $1,4 billion Hwange Expansion Project for Unit 7 and 8 has started in earnest, with the laying of the foundation stone at Hwange Power Station yesterday.

Sinohydro is undertaking the expansion project in conjunction with the Zimbabwe Power Company (ZPC).

The two companies have formed Hwange Electricity Supply Company (HESCO) to implement the project.

Speaking during a tour of the facility yesterday, Energy and Power Development Minister Dr Joram Gumbo said work is on schedule.

“May I hasten to say since the inception of the expansion works, the project has seen considerable progress on the ground and is on schedule.

“Today marks an important milestone. The process of laying the foundation signifies the commencement of real construction works in a journey that will take us to the promised land of security of electricity supply as we set our sights towards the successful implementation of Vision 2030 which will transform Zimbabwe into an upper middle class economy,” said Dr Gumbo.

He said the expansion project is a key economic enabler as it would positively impact on the economy through the employment of in excess of 3 000 people and enhance skills transfer.

Already, 450 people from around Hwange have been employed.

Dr Gumbo said the project will reduce electricity imports and save foreign currency.

Yesterday workmen poured the first load of concrete for the plant footing to mark the start of construction work, with 38 percent of work set to be completed by year end.

Eight percent of the initial work has been done and the contractor targets to complete the other 30 percent by December.

Excavation work has been done while conceptual designs for the power plant, substation and transmission lines have been finalised.

President Mnangagwa did ground-breaking for the project in June last year.

Other works to be done this year include clearing the transmission line and completing the boiler steel structure, while transmission line conductors will also be delivered.

Upon completion in 2022, the project will increase power generation from the current 600MW to 1200MW. The power station has a capacity of 900MW but is currently generating 600MW.

To enable transmission of additional power from the new plant, there will be need for construction of new powerlines from Hwange to Insukamini and Sherwood for stability as currently power is transmitted using 3x330Kv powerlines.

The $1,488 billion project is being funded by China Exim Bank, Sinohydro and Government through ZPC.

Sinohydro country representative Mr Wu Yifeng said existing units would also be refurbished.

The post $1,4bn Hwange project begins appeared first on Zimbabwe Situation.

‘Forex rate liberalisation a step in right direction’

Source: ‘Forex rate liberalisation a step in right direction’ | Herald (Opinion) THE INTERVIEW LEEROY DZENGA Reserve Bank Governor Dr John Mangundya last week presented the Monetary Policy Statement which liberalised the exchange rate, while its contents have been subject of debate to date. Our Features Writer Leroy Dzenga (LD) sat down with economist Ashok […]

The post ‘Forex rate liberalisation a step in right direction’ appeared first on Zimbabwe Situation.

Source: ‘Forex rate liberalisation a step in right direction’ | Herald (Opinion)

THE INTERVIEW LEEROY DZENGA
Reserve Bank Governor Dr John Mangundya last week presented the Monetary Policy Statement which liberalised the exchange rate, while its contents have been subject of debate to date. Our Features Writer Leroy Dzenga (LD) sat down with economist Ashok Chakravarti (AC) who predicted a decrease in prices in the short-term. Below is a full transcript of the interview.

‘LD: Zimbabwe recently saw the Monetary Policy Statement being presented, what is your assessment of the new direction the country`s currency approach is taking?

AK: If you look at the economic policy instruments that any country has got, to be able to stabilise the economy and grow, there are two sides to it. There is the fiscal side and the monetary side. On the fiscal side we have seen some very positive development with the new minister of Finance. For the first time in many years, we have come to a point where there is a fiscal balance. If you have a fiscal deficit and the printing presses are going at high speed then you can forget about stabilising the economy, it is not possible in any economy in the world. What a big fiscal deficit does it that it pumps money into the economy and if it pumps money into the economy it causes inflation. The first problem that needed solving was the structural fiscal deficit and our Minister of Finance has now done this, I would of course, wish him to go further but he has gone quite far already.

He has committed that for the rest of this year and perhaps even longer he would maintain the stance where the government expenditure would match government spending so that we will not have a fiscal deficit which creates a problem for the economy.

The second leg that any country stands on is the monetary policy. On that one, we were in a difficult situation because of the history of our country dollarising. We had gotten into a situation where essentially all our currency and bank deposits were stuck to US dollar at a 1:1 exchange rate. That was not viable and I argued against the position for many years.

A country has to have its own currency and that currency must be able to float and exchange with the US dollar. Unless you have that it is going to be difficult to deal with the balance of payment deficit, because people are going to import a lot because it would be cheap to import at 1:1. On the other hand, exporters who are the ones who are laying the golden egg, the ones who are generating the foreign exchange it is not profitable for them to be exporting at 1:1. To me, this is a very significant and important development that Reserve Bank and Government of Zimbabwe have moved to liberalise the exchange rate, it is a central component of the monetary policy.

That means now the monetary policy can start functioning which means our policy makers now have two legs to walk on, previously we were limping. In my opinion, once the interbank market which the monetary policy has put into place starts functioning properly I think our economy will be able to rebalance itself and we will be able to achieve high rates of growth and in due course Vision 2030.

LD: In the monetary policy, if my interpretation is right there is no inflation targeting. How do you see the inflation rate performing in the short to mid-term?

AC: At this stage, it is very difficult to do inflation targeting because there are so many unknown variables in the economy. We are moving from a situation where we were a dollarised economy into one where the US dollar disappeared and now we are moving into a more normal situation where we are going to have the US dollar as a foreign currency which is mainly for external transactions. In this kind of circumstance, it is very difficult to do inflation targeting, it is unrealistic and it would not be appropriate for the RBZ and Ministry of Finance to do inflation targeting. But what we have to do, is to bring the rate of inflation down and that is the whole purpose of the fiscal policy that is being followed and the monetary policy that is being followed. In my prediction, what we are going to see is a decline in the rate of inflation going forward.

LD: There is a mismatch between the Governor’s statement of RTGS dollars in banks being 1:1 with the US dollar until there is a purchase of forex whereas Statutory Instrument 33 of 2019 implies that all balances, assets and liabilities are in nominal value. Is that not a contradiction?

AC: I am an economist, I don’t want to get into legalities but I have always believed the market leads and the law follows because the law is very slow to change. So when we go back to 2009, when we dollarised the economy you will remember that it is the people of Zimbabwe and the market that decided to use the US dollar it was still illegal in law. The law was changed about nine months later, so I am not worried about the legalities. There is no question of 1:1, the RTGS is now a local currency, it will trade against the US dollar and find its own rate. I suspect the rate equilibrium will be between 3 and 3,5. There might be something in S1 33 of 2019, if they are inappropriate for the market, they need to be changed so let`s not worry too much about the legalities of it. The critical thing is that the monetary policy has removed the 1:1 and people can exchange the money legally because the problem was the parallel market which was creating distortions. I think what the Governor was referring to in the Monetary Policy Statement is that after all we do want to preserve the value of the RTGS dollars which are in all our bank accounts.

To preserve those values there will be other policies which may have to be put in place. Those policies, I think are under consideration they might include certain instruments which will help maintain the value of those RTGS balances.

We cannot just say as long as you keep the money in your account it is 1:1 and the moment you choose to trade in forex it is not. The reality is the RTGS and the Bond are local currency, they have an exchange rate with the US dollar which will be determined by the market.

Going forward, we have to put some instruments in place to protect the value of the RTGS, other countries have done the same. There are two ways of doing it, one is if inflation comes down then the value of your bank account is obviously better. That is one of the targets to ensure that inflation goes down so that the limited money we have does not reduce in value.

The second is to bring in an instrument, for instance in Latin America they introduced an instrument the Brady bond it is a US dollar instrument which can be used to back domestic debt or domestic deposits. Those are things going forward we should consider doing.

LD: Still on inflation, recently you were quoted saying there is room for salaries to increase by 50 to 60 percent. Will that not be inflationary?

AC: What causes inflation is not wage increases but inflation in any country comes when the Government of the day through the Budget or monetary policy pumps more money into the system. So if you print money electronically or physically, that is what causes inflation.

Recently, the Ministry of Finance has put into place a number of taxation measures, firstly you know there is a 2 percent monetary transfer tax, that is going to generate revenue. Secondly, the prices of fuel were increased and most of the increase in the fuel is excise duty which is about $2 a litre, which is substantial. That is going to generate additional revenue. Also, going forward, the market exchange rate is going to be used by ZIMRA for charging customs and other import duties, it is not going to be 1:1.

If I am going to import US$1 worth of goods I am not going to be charged $1 RTGS, it is going to be at whatever the current rate. These are new sources of revenue to the Government of Zimbabwe which they did not have before. Those sources of revenue are very substantial. I have not done a calculation but I am sure if we do an off-hand calculation, it will run into perhaps many billions of dollars.

Based on that, if you look at our wage bill, our wage bill currency is about $3,8 billion in last year`s Budget. So, to me if we do our numbers properly a significant wage increase in line with the inflation is possible. But I don’t want to confirm that, I am saying there is potential for a significant wage bill which is non-inflationary. It is non-inflationary because the money has been taken out of the system, it is given to the people and they bring it back to the system. A lot of people think the moment we increase wages there will be a spiral of prices but this is money which is coming out of our pockets.

The two percent tax is coming out of our pockets, the $2,30 fuel tax is coming out of our pocket, the import duty at a higher exchange rate is coming out of the pocket of the importer and eventually we will pay. So if we take all that money, put it in a pool and give it to civil servant. So it is not only civil servants because the profitability of companies and private sector should also increase as a result of these measures so they should also be able to afford to give higher wages.

I am very much in favour of the idea that these measures in due course can allow wage increases. Let me give you an example, let us say that an exporter previously was exporting US$100 worth of goods, if he had sold it at 1:1 he would have gotten $100 local currency. Now at today`s rate he will get $2,50 but I suspect the bank rate is going to go up to $3. So the same US$100 he is exporting will get him $300 in revenue, can he not give something to his workers?

LD: Still on that, let us say a worker’s salary was pegged at $300 during the US dollar regime, now that we have introduced RTGS dollars, should it be paid at the going exchange rate on their pay date?

AC: I think we need to be clear about this. You see, dollarisation worked during the period from about 2009 to about 2012 or 2013 when the economy was very small and there was a limited amount of US dollars in the economy. After about 2013, during the previous dispensation and I have spoken about this for many years, I had many arguments with the previous finance ministers about the size of the fiscal deficit. I said to him, Honourable Minister stop releasing too much money in the economy and that is going to create a problem. The idea was, we were printing a lot of electronic dollars between 2013 and 2018. That became the dominant currency, although it was written US dollars we always had this idea that it was US dollars but it was never US dollars, let us be very clear. I have said this repeatedly and there are many of my videos some of which have gone viral. About eight months ago, I said the $10 billion that we hold in our bank deposits are not US dollars. So what are they? It is called US dollars but in reality they were not US dollars because they were merely an electronic creation. It is very simple let me explain, supposing the Government of Zimbabwe has no money or let`s say they don’t have enough money, they get an overdraft from the Reserve Bank account.

That means they have got a positive balance in their account. Reserve Bank is minus, but Government has got some money. Then they transfer that money electronically to bank accounts for people`s salaries. Now would you call that US dollars? It`s just electronic money, you can call it mari, RTGS dollars and you can call it a goat but it is not US dollars. US dollars mean that there is some real US dollars which were coming from somewhere and that were being paid to people but that is not the case.

Let`s be clear, if someone got a payment of so-called US dollars, now we need to change our mindset it was called US dollars but it never was US dollars, it was 300 something. It was 300 something, but it enabled people to buy their goods and support their families. The value of that 300 must go up so that people are protected against inflation. In other words, the purchasing power of that 300 must be maintained. So if we say inflation is going up by 40 or 50 percent, to me it is reasonable that the salary goes up by 50 percent because it means that I am not worse off than I was before because I can buy the same goods that I could buy in the past.

LD: How are the RTGS dollars going to last in our economy?

AC: You see, currency is what you transact with, it can be called anything. Currency can either be physical currency or it can be electronic currency. RTGS dollars is basically our Zimbabwean local currency now and its physical equivalent is the Bond Note. There is no difference between the Bond Note and the RTGS dollar in our bank accounts. Many years when the Reserve Bank first introduced the Bond Note, I spoke out against it and I said do not introduce the Bond Note. At that time we were in an inflationary situation and we were in a situation where the Bond Note was likely to disrupt the presence of US dollars in the economy.

Now the situation is different, we have got RTGS dollars, we have the Bond Note and not too many US dollars. So there is no difference between the US dollar and Bond Notes. It is good to have some physical currency to pay for things like parking and commuting.

Currently, according to the Reserve Bank we have about $450 in Bond Notes circulating which is in my opinion that is quite adequate for the moment.

What we need to do is to have a stabilisation of the rate between this family of local currency and the US dollar. Once we have that stabilisation, that Bond Note can be replaced with a formal Zimbabwe dollar. If it is $450 million in circulation, I would recommend that we take that out and put in the same amount because if you put in more it is likely to be inflationary. It is important at this point that we keep our money supply under control.

LD: Still on currency, there have been opinions by some that the easy way out of the current situation we find ourselves in as a country is joining the Rand Monetary Union, what do you think of the proposal?

AC: I want to make it very clear that for many years I was one of the few people who did advocate that we should join the Rand Monetary Union. I advocated for it from as far back as 2009. I am not against the idea of joining the Rand Monetary Union, that is one of the possibilities we can consider in the future. That is one possibility, the other possibility is that we continue with the RTGS system and in due course we exchange that for a genuine local currency. Now, joining the Rand Monetary System has certain advantages and disadvantages. It has certain conditions that you have to put in place, you can’t just join like that. You can’t just join like that the South Africans and the other members of the RMU will not permit any country to join unless they fulfil certain conditions. Those conditions include having a local currency, for instance Namibia and Botswana have their own local currencies. So, whether we want to join it or not, we have to sort out the issue of the local currency first.

My view is that let’s not worry too much about the Rand Monetary Union, that is an option we could pursue in the future but right now either way we have to sort out the value and stability of our local currency. There are also other conditions of sorts which include rate of inflation and fiscal deficit. Those are the things that have to be put in place before our application can be considered by the RMU. So let`s sort out those issues and look at the question of the adopting the rand a little bit later. It does not help arguing about something that can only be made possible when we first satisfy the preconditions then we can discuss on whether it is the best way forward or not.

LD: Where do you think the exchange rate will rest when the interbank market gets into full swing?

AC: I think what is interesting is that you know recently there were protests and violence on the streets, that was a time when there was uncertainty and instability. Even at that time you will notice that the parallel market rate did not go beyond 1:4. Because normally when people become more cautious, the parallel market rates shoot up because they think that their money will be more safe in US dollars.

I am pointing this out because we have never seen the US dollar rate in the worst circumstances going beyond 1:4.

That is happening because the parallel market functions illegally so people are afraid and secondly it happens on street corners, in closed rooms. The amount of transactions that happen over there is very small compared to what we can have on the interbank market. Potentially on this interbank market we can have between $3,5 billion to 4 billion per year, we have made a calculation. So, if this interbank market starts functioning properly which we hope it does.

There are a lot of discussions in place between the involved stakeholders, the RBZ, Ministry of Finance and other to make that the interbank market is functional. What we are likely to see is a stabilisation of the rate much lower than 1:4. The RBZ has started with an indicative rate of 1:2,5 personally I do not think it is sustainable my own feeling is that it will settle somewhere between 1:3 and 1:3,5.

LD: Does Zimbabwe need a retention scheme where part of the money earned by exporters is taken by Government and replaced in local currency?

AC: The current situation is where we have a lot of essential commodities which were being imported by the RBZ to maintain price stability. This include fuel, wheat, cooking oil, power and various items. The idea is that if you liberalise the foreign exchange market in one big bang, then the prices of these essential commodities may also increase very quickly. I am not in favour of the big bank theory, the idea is to do these things gradually. I am also not in favour of the retention but there are two components in the foreign exchange market, there is money earned by the exporter and remittances. That is one component of the market which is around $3,5 billion. We are hoping that will be put on an interbank market which should start functioning properly. Now then the balance is the surrender that the exporters are giving to the RBZ. As we find that the rate begins to stabilize, I think it is proper for the surrender to be removed completely.

But it is quite good to have it in an interim transition phase so that the RBZ does have some foreign exchange to maintain the stability of prices. The RBZ should be able to enter the foreign exchange market if there are some speculators who are trying to move the rate in one direction or the other. They should have some firepower to be able to step into the interbank market and to make it come down to a more reasonable rate. To me, in the long term this must be removed this surrender but many developing countries have had it for a certain period of time. It may not be very long, it depends on what happens on our interbank market.

If the interbank market stabilises at 1:3 or lower, I would recommend that the surrender should be removed immediately. On the other hand, if the rate remains a bit higher my recommendation would be to wait a little bit longer. So, we may remove it in six months, in nine months or one year, eventually it should go. One very big change that has already happened is that in terms of the surrender amount, previously they would surrender it at 1:1 and that was not viable. Now, whatever they surrender to the RBZ would be at the market rate of that, so they are now in a better position than they were before the MPS.

LD: It seems the success of the MPS is anchored on the functionality of the interbank market, are there enough foreign currency reserves to back the interbank market?

AC: Yes, in my opinion there is enough money in the market for the success of this platform. But it is key that the platform operates properly, openly and with transparency. The position right now is that we have quite a substantial amount of money which is held in the nostro accounts exporters it has accumulated over the past many months. They were not releasing because of the 1:1, that is now gone and exporters are now in a position to put the money on the table on a willing buyer, willing seller basis as per the RBZ directive so that money is going to come there. We also have diaspora remittances it is quite a substantial market, the RBZ says it is around $1 billion a year. It has been going through the parallel market, if you have a reasonable rate why should people go to the parallel market instead of normal banking channels. So some of that money should start coming to the interbank market. We should not forget that the RBZ also has its own lines of credits, there are some lines of credit that is has to be able to inject money into the market to stabilize it.

The issue really is confidence and trust, right now the confidence and trust is very low because of our past history so people may not be bring money to the market. But as you begin to see that the market is functioning properly, that no one is touching people`s money I think more money will come onto the market which will result in the rate going towards the direction I am suggesting. I don’t think we have a structural problem in terms of shortage of foreign exchange. The problem was we didn’t have good policy and we didn’t have a proper mechanism for trading. Now the policy has been put in place and the trading mechanism has been put in place, once these two get together and people have some confidence you will find that the market will function.

LD: What`s the ideal preferred exchange rate which will ensure medium to long term price stability?

AC: I think you have to look at it from the point of different sections of the economy. So, let us start with exporters. Exporters have said any rate above 1:2 is good for them because it creates viability. 1:2,5 is good for rate for exporters but it is in my opinion not high enough to limit imports. We need to restrict imports so that there is a balance between imports and exports therefore, we need a higher rate.

So as I see it that the rate fluctuates around 1:3 and 1:3,5 it will be favourable for both sides and assist price stability. In fact, in the short term we may see price declines. Think about it I am a businessperson and I have imported US$1worth of goods, for me to stay in business I have generate RTGS to generate another $1. So, any cautious businessman who wants to stay in business is likely to overprice so that they have enough RTGS to buy US dollars to restock. So the tendency by importers has been to overprice their products so as to be able to buy US dollars in the event of a rate change. This interbank is going to remove that completely because once the rate stabilizes, it means that one can go to their bank with an invoice for their import and bid 1:3,5 and I can get my foreign exchange.

So importers will not be in an uncertain situation on what the rate will be and they will price their products fairly. Once we have stability of the interbank market, my suspicion is that importers will use that rate to price their goods and services. In the long run it will result in price stability, in the short run it will reduce prices.

Feedback: dzengavisuals@gmail.com

The post ‘Forex rate liberalisation a step in right direction’ appeared first on Zimbabwe Situation.