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Econometer Global Capital

Econometer Global Capital

Monday, 26 August 2019 13:39

CBZ’s new role in Zim-US reengagement

Zimbabwe’s largest financial group by assets CBZ Holdings last week announced the appointment of its new board chairperson, American banker Marc Holtzman.

Holtzman succeeded Noah Matimba after Akribos Capital fronted foreign investors in taking over the 24 percent majority stake in CBZH. Holtzman’s appointment has generated a lot of interested given the financial services group central role and how it has been under the spotlight of US sanctions.

CBZ was up until 2014 banker to government after the Reserve Bank became almost technically insolvent following the introduction of the multiple currency system in 2009. The multiple currency regime ended this year when government introduced the mono-currency system this year to manage foreign exchange movements.

For a bank that is facing a hefty fine from the United States Office of Foreign Assets Control (OFAC) for carrying out thousands of transactions on behalf of ZB Bank which was under sanctions, Holtzman, who has over three decades of political and public service in the US is expected to help the bank negotiate for the lifting of a penalty. OFAC had initially slapped CBZ bank with a $3.8 billion fine but after mitigation the penalty was reduced to $385 million.

Holtzman’s new job could also signal Zimbabwe’s multi-pronged approach in pushing for full re-engagement with the US which imposed the Zimbabwe Democracy and Economic and Recovery Act (Zidera).

Zidera is a restrictive measure that has been a major hurdle in Zimbabwe’s interactions with international financial institutions, particularly the Brettonwoods institutions in which the US has majority shareholding. Already Zimbabwe has hired US public relations firm, Ballard Partners which is headed by prominent Washington lobbyist Brian Ballard.

However recent developments in Zimbabwe such as repressive acts by state security agents have put Zimbabwe back on the spotlight. The European Union has also raised concern over growing human rights violations.

Holtzman faces a herculean task in changing Zimbabwe’s narrative beyond the country’s borders. The deep-seated issue around the imposition of sanctions is something that could take a generation to reverse. Zimbabwe is at crossroads.

Monday, 26 August 2019 09:20

Zim’s delicate fiscal position

Government appeared to have buckled to pressure when it announced that it was effecting a salary increment for restless civil servants soon. The lowest paid government employee will now receive $1023 but the Apex Council, a union representing civil servants is rejecting this offer.

The council argues that the offer does not meet the stated position of the workers which is pegged at $4750 for the least paid civil servants. Before the new proposed minimum salary the least paid government employee was paid $582.

Latest figures from the Zimbabwe Revenue Authority show that while revenues for the first half ending June exceeded target on both gross and net positions, going forward, maintaining this would be difficult given the current state of the manufacturing sector, mining and agriculture.

The recent issuance of Treasury Bills to fund undisclosed government programmes will not only mop out excess liquidity in the market but is gradually driving the stock of the domestic debt. This has had a double edged effect on the private sector which will be crowded out.

Zimbabwe faces deep macroeconomic imbalances following the introduction of the mono-currency which ended dollarisation which was introduced in 2009.

After adopting the multi-currency system which was mainly dominated by the United States dollar, fiscal deficits increased substantially during 2016-18, financed by the issuance of quasi-currency instruments nominally at par to the US dollar and the continued accumulation of external arrears.

A fragile equilibrium was maintained through exchange controls and other restrictions on access to foreign exchange, providing a deep distortion for economic activity.

By nearly doubling the minimum salary, government will be shooting itself in the foot. As we predicted in our analysis after the Mid Term Fiscal Review and Supplementary Budget, Treasury fiscal consolidation thrust will effectively go off the rails as domestic expenditure balloons. In the final analysis one can conclude that treasury’s fiscal surplus is not sustainable in the short to medium term.

It is just under three years after Zimbabwe had deflation, the economy may be sliding back to hyperinflation which will be driven by money supply growth and rising fuel prices.

On Monday the price of fuel hit the $10 mark per litre as it continues to track foreign exchange movements. While it is still below the US$1.40 per litre, the increases are already piling inflationary pressure on the economy.

The Finance minister has few options to quicken economic growth. Firstly he should consider incentivising low-hanging fruits like tourism which are all part of the real sector. Tourism players should enjoy relaxed exchange control measures to ensure that they can also re-invest into their business to maintain its attractiveness.

Tuesday, 20 August 2019 11:27

Is government’s appetite for TBs growing?

 

 

 

 

 

 

 

 

 

 

 

The Reserve Bank has announced that it is borrowing $60 million from the domestic market to finance its programmes in a third auction system which is market-oriented.

The auction comes after government abandoned the private placement system which has been in use over the years. It also reflects government’s growing appetite for the debt instrument.

Before that the apex bank borrowed $15 million and $30 million respectively. With interest at 50 percent, local financial institutions have taken a conservative lending approach and are now driving income through non-interest income and government paper such as Treasury Bills.

Offer for the 365-day $60 million Treasury Bills opened on Monday and closes on Thursday. Allotment and payment will be done on Thursday.

The commercial paper enjoys prescribed asset and liquid asset status, is tradable and enjoys tax exemption. It is acceptable as collateral for overnight accommodation by the central bank and allotment will be at weighted average rate.

Government could also be borrowing to mop up excess liquidity in the market while at the same time improving the process of price discovery.

However two issues make the issuance of Treasury Bills worrisome. Firstly, lack of full disclosures on what the debt instruments are being used for suffice to say “government programmes”.

Unlike Agricultural Marketing Authority bills in which government divulges purpose (e.g. buying grain) of the debt instrument, the government is not providing adequate disclosure on Treasury Bills.

For a government that has been hyping its exploits in fiscal consolidation, an excessive issuance of the debt instrument could choke government in the long term as domestic debt spirals out of control.

The timing of the debt instruments also comes against the backdrop of pressure from a restless civil service which is pushing for better wages.

Secondly, the issuance of the treasury bills will crowd out private sector lending at a time many companies are on their knees.

Government has also been borrowing from the central bank and breaching the prescribed central bank overdraft limit by several billions to fund its operations. Last year, the overdraft was ZWL$3 billion which was 55 percent of the previous year’s government revenue in violation of Section 11 (1) of the Reserve Bank Act (Chapter 22:15) which states that borrowing from the central bank should not exceed 20 percent of the previous year’s government revenues at any given point.

Thursday, 15 August 2019 05:38

Mid-Term Fiscal Policy Review

Finance minister Mthuli Ncube on Thursday presented a largely populist Mid-Year Budget Review and Supplementary Budget in Parliament at a time the economy is facing serious inflationary pressures. In this analysis we focus on key topical issues that mark a paradigm shift in policy as well as dissect new measures introduced ostensibly to stimulate economic growth.

The introduction of several subsidies seem to confirm that government has run of ideas to stimulate the economy and now wants to grow the already unsustainable domestic debt to economic sectors such as agriculture. A cocktail of subsidies were introduced to help the underperforming agriculture which was once the mainstay of the economy in the mid-1990s. The era of fiscal consolidation in Zimbabwe is now fading as government goes full throttle on expenditure growth.

Admittedly Ncube revised the country’s economic growth targets to a negative 2.1 percent citing after effects of ravaging drought, a devastating cyclone at the start of the year and the country’s energy crisis.

 

 

Indigenisation policy

In an attempt to strike a balance between an inward looking mercantilist thrust to a liberal one, the Finance minister relaxed the controversial Indigenisation and Empowerment regulations which compelled foreign investors particularly in the diamond and platinum sub sectors to cede 51 percent stakes to locals. The finance minister highlighted the private sector’s role in turning around economic fortunes and the need to improve operating efficiencies of state-owned enterprises.

“Government through the 2018 Finance Amendment Bill amended the Indigenisation and Empowerment Act and platinum and diamonds are now removed from the reserved list and shareholding will depend on negotiations with investors,” Ncube said.

“Subsequently, the Indigenisation and Economic Empowerment Act will be repealed and replaced by the Economic Empowerment Act which will be consistent with the current thrust “Zimbabwe is open for business.”

The major policy shift was meant to complement President Emmerson Mnangagwa liberal policy on investment after the 2008 Indigenisation Act was widely criticized for spooking investors.

While this policy shift is one of the major steps taken by government to attract FDIs, which have been averaging US$500m over the last decade, matters relating to the ease of doing business are vital in making Zimbabwe a preferred investment destination. More so government should ensure that this “case by case” basis of dealing with investors has checks and balances that mitigate corruption especially among members of the elite who are privileged to interface with investors.

The relaxation of the Indigenisation regulations may also prompt some people to start acquiring mining concessions for speculative purposes which in a way may also discourage investors from investing.

The new Budget framework which ran under the theme “Building Strong for Future Prosperity” all but confirm that Zimbabwe’s economy is not ready to start ticking but requires more structural reforms to perform.

 

Current account

On the country’s current account, Treasury figures show that for the first time since the adoption of the multi-currency regime in 2009, registered a surplus in the first quarter of 2019.  A surplus of US$196 million. Treasury attributed this to a sharp contraction in imports through import management, against a moderate increase in exports in line with export promotion measures under implementation. But when one looks closely to the latest revenue figures from ZIMRA there is a significant growth in foreign currency based duty primarily of car imports which may suggest that the surplus position is driven by duties not necessarily exports.

Taxes

A populist new tax regime proposed in budget supplement will be a reprieve for workers in the interim but current inflationary pressures will in the short to medium term push government’s wage bill to ensure that all members of the public service will be taxed. This will be inflationary despite government being optimistic that inflation will close the year at double digit figures. Treasury proposed to double the monthly tax free threshold to ZWL$700.

On the downside a tax rate of 40 percent for employees earning ZWL$30 000 (circa US$3000) is somehow self-defeating on government’s agenda for skills retention. Studies have shown that Zimbabwe has lost skilled labour to neighbouring countries and beyond due to low remuneration. Lack of skilled labour retards the country’s innovation and development

At current levels most civil servants will be exempted from paying PAYE, a development that will be of huge impact to government revenues. In this supplementary budget, Treasury increased vote appropriations to ZWL$21 billion from ZWL$10 billion which reflects partly on the country’s inflation outlook.

 

Inflation

Another major highlight of the Finance minister’s statement was the rebasing of inflation figures. Forthwith, he announced that the country’s statistical agency would suspend the publication of year-on-year inflation until 2020 arguing that government now wants to map out a new inflation trajectory following the new monetary reforms adopted in February. Zimbabwe removed parity of the domestic currency with the United States dollar in February and in June this year Treasury abandoned the multicurrency system which was introduced 10 years ago to tame inflation for a mono-currency system (re-introduced the Zimbabwe dollar.)

In our view the re-basing of inflation figures is meant could be a ploy by the Finance minister to ensure that Zimbabwe’s month-on-month inflation closes the year at 10 percent from a high of 32 percent in June this year.

While rebasing is common in economic practice, Zimbabwe has largely been using its local currency in the past year due to shortages of the green back and like what used to obtain then, prices continue to be benchmarked against movements on the foreign exchange market. The only difference is that government has effectively criminalized use of the dollar in some sectors, a development which has to some extent narrowed premiums between the formal market and the parallel market.

 

Turning to the three-fold increase in electricity tariff, as we have repeatedly highlighted, one of the reasons why the country’s power utility is on its knees is an unsustainable tariff regime and failure by some government entities and politically exposed persons to service their debts.  The new tariff increase while it remains lower than the proposed increase together with a special arrangement allowing exporters to pay electricity bills in hard currency will to some extent improve Zesa’s operating efficiencies. Zesa last reviewed its tariffs in 2011.

Finance minister update on the expansion works at Hwange thermal power station exposed the inconsistency and discord within government. Addressing delegates attending the Zimbabwe National Chamber of Commerce breakfast meeting on energy, the country’s Deputy Energy minister Magna Mudyiwa said the expansion project would address the country’s energy needs in the short to medium term. But Ncube yesterday said the works were 18 percent complete indicating that the project. Something is not adding up here.

Statutory 142 of 2019 which effectively banned the use of multiple currencies left most assets in Zimbabwe under-issued. While other sectors are now allowed to pay their bills or receive payments in US dollars, the insurance sector’s primary exposure remains in Zimbabwe dollars. As the local currency continues to weaken, many assets will remain under-insured posing serious risks. The Finance minister should have considered allowing the payment of premiums in hard currency in a move that was also expected to improve the asset quality of the insurance sector.

On fuel rebates which were introduced early this year to stimulate domestic production, the Finance minister failed to provide an update on this rebate. This is contrary to claims by government that it has become more accountable following the exit of the former administration.

After announcing in the previous budget that Treasury would suspend the initial funding model of the import substitution programme known as Command Agriculture, Treasury made a U-turn on this announcement after it introduced a cocktail of subsidies for farmers. Government budgeted ZWL$1.67 billion for agriculture and did not provide a breakdown on how this money would be sourced. In the absence of budgetary support we believe that government will turn to debt instruments such as Treasury Bills to fund agriculture and this exercise will be inflationary.

In light of the above factors, we can conclude that while trying to tame inflation, the Finance minister’s budgetary measures; such as adjustment of toll fees, will be inflationary hence the rebasing of CPI figures.

Last but certainly not least, the new tiered regime on energy tariffs is not only populist but also serve as a warning sign to other service providers to show how reluctant government is in approving rates that are reflective of the market. These are command economy tendencies by a government which is showing a façade of liberalism in the economy.

Tuesday, 13 August 2019 18:32

The fallacy of Zimbabwe surplus position

Government in partnership with the World Food Programme and other international development organisations on Tuesday launched a revised humanitarian appeal of nearly US$500 million to assist people facing food insecurity due to last year’s ravaging drought. A previous flash appeal which ran from January to June raised US$133 million. The latest SOS shows that nearly a fifth of Zimbabwe’s 16 million population are in need of food aid. This figure may increase as the year progresses. Our attention was immediately brought on to the recent announcement made by Finance minister Mthuli Ncube that Treasury has a
surplus at a time social spending is in need of funding.

The Finance minister said Treasury attained a fiscal surplus of ZWL$803.6 million and the country’s current account had a net positive of US$196 million during the first quarter from a deficit of US$491 million during the same period last year. Public hospitals have run out of basic drugs, state-owned schools are in a dire situation and pensioners are struggling to make ends meet. Long winding fuel queues that have become the order of the day indicate that Zimbabwe could be having less than two week’s import cover. Apart from maladministration, the country’s utilities are on their knees partly due to failure by government departments to pay debt. Zimbabwe currently has a budget deficit of $4 billion which translates to 10 percent of the budget. After undertaking to pay South Africa’s Eskom US$890 000 weekly to service its legacy debt, we anticipate movements on the foreign exchange market.

The local dollar which is trading at an average of ZWL$9.5: US$1 is set to weaken both on formal and parallel market. Also top on the import list are fuel supplies, grain and medicinal drugs. Source: Ministry of Finance Zimbabwe, Figures are in Millions. As we reported in our post Mid Term Policy analysis, measures announced by Finance minister are not just inflationary but also lack that cutting in reversing the economic meltdown. In our view, the immediate focus for government is to push for the much-needed political reforms which will anchor Zimbabwe’s re-engagement with the international community. In the absence of
the restoration of good relations with bilateral and multilateral creditors Zimbabwe’s socio-economic situation will further deteriorate. For now the Finance minister should focus on stimulating economic growth instead of hyping a hypothetical surplus.

Monday, 29 July 2019 04:41

Is Zim sliding back to hyperinflation?

 

Zimbabwe’s year-on-year inflation raced to 175.66 percent in June from 97.85 percent in May driven by a rise in the price of food and nonalcoholic beverages, latest figures show. This comes as a pricing conundrum worsens with business chasing US dollar rates despite government in June formally throwing away multiple currency regime introduced in 2009. The year on year food and non-alcoholic beverages inflation was at 251.94 percent whilst the non-food inflation rate was 143.94 percent. The month on month inflation rate in June 2019 was 39.26 percent advancing 26.72 percentage points on the May 2019 rate of 12.54 percent raising fears that the economy is heading towards hyperinflation.

The hyperinflation was tamed by dollarisation in 2009. While dollarisation improved macroeconomic stability, the economy deteriorated in 2015 with high deficits financed through the issuance of Treasury Bills. Exports steadily rose but Zimbabwe remained generally uncompetitive compared to regional peers due to several factors such as high  overheads. Hyperinflation is when prices of goods and services rise more than 50 percent a month. During hyperinflation prices will also be rising daily. Zimbabwe is facing one of its worst droughts in a decade and this has pushed the price of food commodities up as the economy will now depend on imports. In our view this trend will continue due to low production and the weakening of the Zimbabwe dollar. The current power outages which are now lasting up to 18 hours each day are now pushing production costs as many companies in the manufacturing sector are now relying on diesel which is in short supply. Erratic supplies of fuel across the country are also forcing many to buy the commodity on the parallel market where it is being charged in US dollars. Government’s decision to introduce the monocurrency system which replaced dollarisation will also have an impact on the inflation outlook of Zimbabwe. Treasury also announced its commitment to settle legacy debts following the monetary reform, a development which will make banks run short of their treasury position.

 

That history repeats itself seems to be true in Zimbabwe. At the height of the hyperinflationary era which ended in 2009, then Reserve Bank of Zimbabwe governor Gideon Gono would repeatedly say, “Inflation is Zimbabwe’s number one enemy.” Fast forward to 2019, current Finance minister Mthuli Ncube seems to be singing the same hymn as government battles to contain inflation which has effectively wiped out domestic savings. Workers are now agitated and are threatening to go on strike. The central bank was on overdrive printing notes which eventually became worthless after market forces pushed for dollarisation. Along the way several instruments were introduced in an effort
to arrest rising but it yielded little or result. On Monday, the Zimbabwe Energy Regulatory Authority announced new fuel prices. The maximum pump price for diesel rose to $7.19 from $5.84/litre last week while blend per litre increased to $7.47 from $6.10. This is the second increase in just over a week. Fuel prices and inflation are often seen as being
connected in a cause-and-effect relationship. As the price of petroleum products moves up or down, inflation follows the same direction. However, this relationship between oil and inflation started to deteriorate after the 1980s in other economies. During the 1990's Gulf War oil crisis, crude oil prices doubled in six months to around $40 from $20, but CPI remained relatively stable, growing to 137.9 in December 1991 from 134.6 in January 1991. But that cannot be said in Zimbabwe.

Year-on-year inflation for the month of June rose to 175.66 percent, the highest in 10 years. This immediately evoked fears that Zimbabwe could be retracing the hyperinflationary era. The year on year food and non-alcoholic beverages inflation was at 251.94 percent whilst the non-food inflation rate was 143.94 percent. The month on month inflation rate in June 2019 was 39.26 percent advancing 26.72 percentagep oints on the May 2019 rate of 12.54 percent raising fears that the economy is heading towards hyperinflation. With the real sector underperforming, domestic output will for the larger part of the year remain subdued while imports will grow. Under this current mono-currency system, a growing import bill will push the exchange rate and ultimately consumer prices. As it stands government seems to be losing its battle on inflation as there are no quick-wins to turnaround the economy. We still maintain our view that annual inflation by year end should be around 480 percent.

The African Development Bank (AfDB) has launched Zimbabwe Infrastructure Report 2019 which shows that Zimbabwe requires US$34 billion to upgrade its infrastructure. This was revealed in the flagship report by the regional lender which among other things serves to provide the government with a master plan for rehabilitation of infrastructure assets and recovery in infrastructure services within the context of Vision 2030. Zimbabwe aspires to be a middle income economy within 11 years.

The report also presents a game plan for reengagement with the international community; a platform from which a strategy for possible AfDB and other donor operations in Zimbabwe can be drawn up. Last but certainly not least this report was presented as part of the Joint Needs Assessment including costing of infrastructure sectors. The focus of this Report is on the services associated with transport, electric power, information and communication technologies (ICT), and water and sanitation in Zimbabwe.

Over the last 37 years, Zimbabwe’s economic performance has been mixed, as a result of policy lapses, targeted sanctions and adverse weather conditions that affected agricultural output. From 2000 and 2008, a sustained and broadbased decline in economic activities led to a cumulative decline of nearly 50% in real GDP growth. The crisis can be attributed largely to a combination of factors, including economic mismanagement, poor governance mainly arising from weaknesses in the rule of law in the context of the Government’s fast-tracked land reform programme, the concomitant loss of support from the international community, capital flight, and low investment.

Zimbabwe growth rate and Sub-Saharan Africa 1980-2017
Source: AfDB

Official figures show that in 1980, Zimbabwe had the tenth highest gross national income (GNI) per capita in SSA at US$980 (current USD). SSA GNI per capita in 1980 was US$663. GNI per capita income fell sharply from about US$644 in 1990 to US$433 in 2006 and to an estimated US$338 in 2008. During the period 2000-08, which is now referred to as the “lost decade” Zimbabwe’s GDP contracted by 50 percent and this meltdown resulted in the deterioration of infrastructure. This deterioration across all major infrastructure services has also been attributed to poor maintenance and limited new investment in key infrastructure such as power and transport services. Poor infrastructure is a critical barrier to accelerating growth and poverty reduction in Africa. Studies have shown that increasing the stock of infrastructure by one percent can add up to one percent to gross domestic product. Infrastructure is considered a key component of the investment climate by reducing the costs of doing business and enabling people to access markets.

The total cost is put at about US$34 billion at 2017 constant prices, including US$8 billion of private investment in upgrade of existing infrastructure and new capacity. The water supply and sanitation and resource management would require an outlay of US$3.67 billion for capital works and related technical support. The power programme would require about US$1.14 billion, the transport sector requires approximately US$28.56 billion of which most is equired in the road subsector. The communications sector would require about US$412 million, primarily to the creation of a national fibre optic backbone network. Not included in these estimates is US$43 million for routine road maintenance.

The regional bank noted that while Zimbabwe has potential to grow in leaps in bounces in the short to medium term, a variety of threats such as failure to stick to the policy of fiscal consolidation, stability of the financial services sector, unfavourable investment climate and failure to access long term financing for critical infrastructure could stifle growth.
According to the AfDB, the political and economic crisis experienced in Zimbabwe in the past decade has also reduced the growth of ICT. Limited depth, the report reads of innovation has been shown to restrict growth and this can be particularly relevant in Zimbabwe’s case as the country school enrolment and literacy rates still remain high in comparison with other African countries. For economy saddled with a huge external debt which represents 40 percent of GDP, Zimbabwe’s prospects of raising US$34 appear dim. But the regional lender advised that a multi-pronged approach to finance such mega projects is the only way to get out this financing rut. The regional bank said the state enterprises involved with service provision in these sectors would account for US$1.5 billion of the total requirement of US$34 billion. Private sector would account for 23% at US$ 7.9 billion.

The national government and local authorities would account for a further US$20.7 billion, with donors providing the balance of about US$ 3.7 billion. Assuming an arrears clearance process is initiated in the near future, and full donor support is restored, the proposed infrastructure programme would require a majority of the bulk of the donor funds be allocated to water and roads. Currently, the AfDB is the Executing Agency for the Programme for Infrastructure Development in Africa (PIDA); the programme designed as successor to the NEPAD Medium to Long Term Strategic Framework (MLTSF), to develop a vision and strategic framework for the development of regional and continental infrastructure (Energy, Transport, Information and Communication Technologies (ICT) and Trans-boundary Water Resources). The PIDA initiative is being led by the African Union Commission (AUC), NEPAD Secretariat and the Bank. The Bank’s role as Executing Agency covers the responsibility for contractual, financial, technical and administrative management of the programme including  responsibility for procurement procedures, in conformity with its existing regulations, budget management and disbursements. Zimbabwe should step up its efforts in reengaging with the international community and multilateral and bilateral creditors to improve its prospects of getting funding for capital projects.

Corporate and individual investors in the property sector are beginning to cash in as the sector redollarises to preserve value. A snap survey by Econometer Global Capital shows that most property owners in Harare and other major cities and towns are now cashing in rental income in United States dollars. In Campus towns like Gweru, Chinhoyi and Bindura, that has also become the trend. Property owners cite rising inflation for this development saying a stable currency will also maintain the value of their properties. According to a report by Zimreal Property, rental fees in Zimbabwe’s volatile property market have shot up by 80 percent over the past six months while other property owners demand rentals in United States dollars. With annual inflation for April standing at 77 percent, returns on the Zimbabwe Stock Exchange remain depressed compared to the property market which also has arbitrage opportunities when rentals are  charged in the greenback.

In the pre-dollarisation era (before 2009) the main buyers of real estate property in Zimbabwe were those in the diaspora and a few locals who had access to the USD (United States Dollar) as the local properties had become relatively cheap in real terms.After dollarisation (post 2009) the diaspora market suddenly crumbled as local properties became expensive in real terms. The high prices of property coupled with the liquidity crunch saw the market turn into a buyer`s market. The entry level price for a small property basic four roomed core house in high density suburbs like Highfileds, Budiriro and Kuwadzana is approximately US$25 000 (R353500). In medium density areas like Waterfalls, Bloomingdale, Waterfalls and New Marlborough, the entry level is approximately US$80 000 (R1.31 million) for a two bedroom, apartment or basic house. In low density areas in the northern suburbs, the entry value is US$130 000 (R1.83 million) to acquire a two bedroom garden flat. According to the world population review the city of Harare accommodates over 1,5million thus excluding surrounding towns such as Chitungwiza which has over three hundred thousand yet little development has been done in the capital to sustain these numbers.

Experts state rural to urban migration in search of employment prospects, as one of the reasons why Harare’s population has ballooned since Independence in 1980. Is inflation continues to haunt the economy, the Zimbabwe Stock Exchange (ZSE), a once go-to destination for companies seeking to raise cheap
funding, is planning to overhaul its trading platform by introducing several new investment alternatives due to worsening economic conditions. ZSE chief executive officer, Justin Bgoni was recently quoted in local press saying the local bourse, which has an equities and debt platform, was at different levels of negotiations with authorities and stakeholders to establish the Real Estate Investment Trusts (REITS), exchange traded funds (ETF), multicurrency trading platform, participatory bonds, dual and cross listing and increased equity listings from different sectors. However this has not been the case for office space in
towns and cities. Zimbabwe is suffering from economic and liquidity challenges which have stagnated office market activity. Supply is higher than demand and tenants are voluntarily surrendering space. Market players say office buildings in the Harare CBD have void rates in excess of 50%, making them unattractive investments. Suburban offices have become more sought-after investments, due to their lower void rates, but there continues to be few sales transactions. To reduce vacancy levels, some CBD landlords are converting office space to shops, while others are partitioning floors into smaller suites. Given the challenging
market, no new multi-storey buildings have been constructed in the last twenty years.

Tuesday, 02 July 2019 23:20

Market Watch

Breaking News: Zim drops multicurrency regime.

Government has dropped the multicurrency regime nearly 10 years after adopting it to tame runaway inflation. According to Statutory Instrument 142 of 2019, the Zimbabwe dollar will be the sole currency for legal tender.

Zim forges ahead with debt clearance plan Zimbabwe will turn to G7 countries to secure bridge financing for its arrears and debt settlement programme, Finance minister Mthuli Ncube has said. View: Zimbabwe owes the World Bank US$1,4bn, African Development Bank (US$678m) and US$309m to the European Investment Bank. The failure to resolve the external debt has stymied efforts to access cheap lines of credit to reboot the economy. The country’s debt and arrears settlement plan is tied to a raft of political and economic reforms Wage deal for civil servants Government has fended off a potentially crippling industrial action in the civil service after President Emmerson Mnangagwa assented to a pay increase for the restive workers effective next month. The new deal will see the least paid government worker being paid RTGS$1000 from RTGS$600. View: Budget has projected a RTGS$2billion budget overrun this year and while treasury currently has a surplus, this position will change due to growing expenditure mainly driven by wages and salaries. Zimra to engage companies over tax compliance The Zimbabwe Revenue Authority has intensified its tax compliance drive to widen revenue inflows. With no budgetary support, Zimbabwe
solely relies on taxes to finance its operations. View: Official figures show that the country’s tax agency is currently owed RTGS$4 billion by companies and individuals in unpaid taxes and duties. This exercise is seen as one of the measures to grow the revenue bases. Meikles Hotel sale approved The Competition and Tariff Commission has approved the sale of five star hotel Meikles to Dubai-based entity Albwardy Investment. In a board resolution released last week, the CTC said it had approved without conditions the proposed acquisition of the iconic hotel. View: While the deal was approved by the CTC is still has to go through other regulatory authorities such as the Zimbabwe Stock Exchange, the Securities and Exchange Commission and the Reserve Bank of Zimbabwe. t also awaits approval from the company’s shareholders