Alcohol Sales Banned Countrywide

As of yesterday alcohol sales have been banned in all retail outlets countrywide. This comes into effect as a means to mitigate the spread of the Covid-19 pandemic. Currently Zimbabwe has 9 reported cases and 1 death from Covid-19. While globally there are 1,016,401 reported cases with 53,160 deaths recorded.

The ban was put in place to allow shops to sell essential products during this 21 day lockdown while minimising social disorder.

The national police spokesperson Assistant Commissioner Paul Nyathi said the measure had come into place as people were defying social distancing practices.

Police have been deployed to take action on shops that defy the ban. We will see over the next week if this is enforced or if the Government does a U-turn on this decision?

“The lockdown measures were clearly stated and in light of ensuring that we fight Covid-19, there will be no sale of alcohol at any point in places like bottle stores and supermarkets. This comes as we have realised that people who buy alcohol at supermarkets are giving us challenges. They buy and drink as groups, be it either in their vehicles or places of residence thereby defying social distancing,” Assistant Commissioner Paul Nyathi.

“Action will be taken on all those who will defy the order and sell alcohol at any bases. The police today (yesterday) started to take full action and will be visible on the ground throughout the lockdown.” Assistant Commissioner Paul Nyathi.

“People should take heed of Covid-19 and put their health first and that of every citizen in the country as the pandemic is affecting all of us,” he said.

This comes at a time where Delta’s revenue is under massive strain. We are in a situation where disposable incomes are either falling or becoming zero in the extreme case where people are losing their jobs due to the pandemic.

Source: Herald

We are on our own!

First things first; we promised to update you once the SI Instrument (85 of 2020) was published to confirm the return to multi-currency. It has since been published and boy were we right! Goodbye mono-currency and all the best to ZWL is what we can say for now.

Back to today’s business. Treasury has since published a statement on ‘Economic Mitigatory Measures to contain COVID-19.”

We have seen how other governments have responded to help resuscitate their struggling economies. Ours is such a big yawn. The statement is all over the place and lacks details. Only ZWL500m explicitly mentioned (USD20m at the fixed 1:25 rate). There is also a ZWL200m proposed monthly transfer. How much is that per individual? Even assuming a conservative 1m affected people, that’s like ZWL200/person/month. How much ZESA does it buy? Loaves of bread? The rest remains a wish list.

Companies and individuals expected more concise direction from Treasury. Tax breaks maybe? IMMT waiver? Corporate tax reduction? These are extraordinary circumstances. Money has been wantonly printed before for agriculture. This is a nationwide pandemic which needs all hands on the deck!

For now we are really on our own. This was a perfect opportunity for gvt to ramp up whatever resources, even through the printing press, to help companies keep afloat.

Is the ZWL History for the Second Time?

As everyone (Since all Zimbabwean’s are economists now) already knows the RBZ yesterday released a loaded, but ambiguous statement ‘in response to the COVID-19 pandemic.’  There are a lot of questions that we still have and had hoped the anticipated SI was going to clear a few questions up. In the meantime, we try and break it down according to our understanding, at this stage. Once the SI is out, we will send an update.

Honestly the two are not directly related. We don’t see how the use of any hard currency to transact helps reduce the spread of COVID. If anything, most of the USD is held as physical cash by individuals and not electronically. This was just an excuse by government to bring back the multi-currency regime and at the same time save face. Remember the ‘no going back, Mono-currency here to stay’ statements?

This could be the crux of the issue. Zimbabwe is having a serious FX crisis with gold production plummeting (not helped by an unfavourable retention regime), tobacco season opening uncertainty and the little issue related to the closure of the only certified refinery to deliver gold to major international banks in South Africa. The only way to access FX would be to allow it to be used formally and hopefully have more of it circulating.

We are not sure if majority of our “free funds” will be transacted digitally as users still don’t have confidence in the financial system and the regulators. As a gold, tobacco or cotton player why would I trust that what is deemed as USD in the system is really USD. Can I use it to pay offshore? If so can I withdraw some of it as hard cash? Or if I don’t spend it will it be swept at 25:1 after 30 days?

Another U-turn reversing the managed float announced some weeks ago! This, in our view, is for the privileged select few that will continue to access USD at this artificial non-market level. We think retailers and service providers will price in such a way that it makes sense for you to pay in hard currency, so they can restock, etc. You cannot have a multi-currency regime with a weak currency that is fixed. There is only one conclusion, ZWL will fail as it will be shunned by users.

In short, mono currency regime is gone. We are back to multi-currency with the ZWL as part of the basket at a fixed rate. It’s a clever 1:1 regime, except users are (or rather, should be) more the wiser now. There is no coming back from here, de-dollarisation is history!

Bureaux de Change’s need transparency and freedom not constant tinkering

On Friday the Reserve Bank of Zimbabwe made another proposed policy change regarding the operations of Bureau De Changes in Zimbabwe. Apparently the Central Bank is mulling a series of measures that they claim will “capacitate” the neutered exchanges which have been a non-event in the forex market for months.

Below is a full text of the RBZ notice:



Pursuant to the deliberations of the Monetary Policy Committee and representations from various stakeholders on the need to enhance the activities of bureaux de change on the interbank foreign exchange market, the Reserve Bank will capacitate bureaux de change and enhance their buying and selling activities under a comprehensive compliance framework.

This arrangement will culminate in improved visibility of bureaux de change and improve their contribution towards an effective and efficient interbank foreign exchange market.


6 March 2020

Why not just let Exchanges have free reign?
Bravo to the RBZ’s attempts to “capacitate” exchanges however here is a thought: Why not let exchanges have free reign and operate freely? Better still: Why not make the interbank open to all, and use a transparent trading system, then there will be no need for Bureaux De Change’s to play such a big role?

The only reason why these exchanges have virtually become useless is all thanks to the central bank’s measures and unparalleled desire to drive the rate down. Last year in September they issued a set of measures that required these exchanges to offer rates within a 7% band of whatever the interbank rate is.

Given how artificially low and opaque the interbank rate is, that was a death blow which mortally wounded these exchanges. A mortal wound from which they haven’t recovered. In the meantime, the interbank rate, far from being the thriving market which we were promised, has become a mere vague number used in official government calculations.

By the Bank’s own admission very little foreign currency is traded at this rate.

About the Author:
Garikai Dzoma is a business-tech blogger, you can find more of his ramblings at

New investment options for Pension Funds? Let’s walk the talk Minister!

The press has of late been awash with news about government coming up with some initiatives to help protect the Pensions and Insurance Industry. Some of the proposals relate to an introduction of a  ‘…number of derivatives and investments assets by the end of the first quarter, which will help soften pension funds skewed investments in the equities market and property sector’ and permission to invest offshore. On paper this looks fair and dandy! Digging deeper however exposes serious flaws with these so called proposals: For starters, it’s not the prerogative of the government nor the Minister (we know he likes these fancy products) to come up with or introduce new products. The industry is awash with talent and the required expertise can be harnessed to come up with these products. All government has to do is create that conducive environment and as they say the rest will follow. An example is the Prescribed Asset debate. Government should be asking themselves why they have not been able to raise funds in the required areas, and work to fix those disincentives, before considering measures such as Prescribed Assets. The appetite is indeed there for well-conceived public investment programmes. Secondly and more importantly, Pension Funds already own some offshore assets like Nedbank, Quilter, SeedCo International, etc. If government really means well, they should start by allowing holders of these assets to sell them and keep the proceeds offshore or reinvest in any other assets of their choice. At the moment all proceeds from these assets, including dividends, are required to be remitted back home. In conclusion, we think this is just a token approval. Where will the money to invest offshore come from? We need YUWESI for investments outside the country! Should we start with the list of critical items needing hard currency?

Have the ZSE bulls run too far?

In the last 2 weeks we have witnessed an exponential jump in prices of stocks on the Zimbabwe Stock Exchange (ZSE). We probably last witnessed such a run sometime in 2018. Using ZSE lingo, the market has been limiting up in the last couple of trading sessions. This means prices were moving up by the maximum allowable range per day – which is 20%. For some penny stocks, ZSE Trading rules allow them to shoot up or down by 100%. This means without these trading caps, the prices could have potentially gone up by a higher percentage. A lot of questions have obviously arisen.

Why has the market run?

Most market players would agree that an upward re-rating on the ZSE was way overdue. Most stock prices, adjusted to USD levels, were at historic lows. This has no consideration the capex spent over the years. An increase in prices was expected, but it is the way in which it happened that is raising eyebrows. A slow, gradual bull run is what market players anticipated. To make it even more intriguing, the parallel market seems to have been muted. Theories abound mostly pointing to a government related fund pouring lots of liquidity into the market – via fund managers. If that is true, why the rush? Why would they be that reckless in a market that has been liquidity starved?
These questions bring us to our next question:

Is this run sustainable?

We do not think so for a couple of reasons. As trading closed on Friday – we began to see some selling creeping in, especially in the heavyweights, and buying disappearing? Delta ended net offered with no buyer at market. Could the big-pocketed buyer(s) have run out of liquidity? Or will they be back on Monday? In addition, these high prices will entice speculative sellers into the market who may see the opportunity in offloading and buying USD since the rate has been flat to down over the last week. This is called profit taking. In addition, there is generally a month-end rush by fund managers to present good books to Trustees and boost management fees calculated using ending of month portfolio values. Next week signals the start of a new month and we doubt if the same buying momentum will be sustained. Foreigners have also been net sellers of late exiting Zimbabwe via the interbank, where we are told they were being given allocations. At these new prices, they may try capitalise and leave Zimbabwe at relatively better rates.

Econet and Cassava will be the counters to watch on Monday as the company enters a closed period and the buy-back programme is expected to stop. While we expect prices to come off, we do not expect them to decline to the pre-rally levels.

Lets see what the first week of February brings!

The unspoken ZSE bloodbath

2019 was a devastating year for all on the Zimbabwe Stock Exchange (ZSE) as pensioners lost a significant portion of their savings for the second time in just 10 years. Local equities have failed as an inflation hedge as pension funds are not allowed to invest outside our borders. While performing better than fixed income or money market assets the currency devaluation took its toll on the ZSE industrial index. Property markets fared better only losing about 30-40% in real terms over 2019. The ZSE index started the year at ZWL18.94 billion (USD $5.4 billion) and ended at ZWL28.84 billion (USD 1.27 billion), which is a 77% real dollar loss for 2019. These losses are directly linked to the currency devaluation, where we saw the ZWL go from 3.5:1 to 22.7:1 in 2019 alone. The year 2019 raised some serious questions and concerns for investors and pensioners alike. With no local based inflation hedging assets where do you invest? Or do we think the ZSE has gone too far and will we see a bounce back in 2020? It is impossible to accurately answer the above two questions as we have seen time and time again that politics far outweigh economics. What we can say is that something needs to change, or else the ZWL will continue on its 2019 trend. The ZWL is being rejected more and more each day and at some point it may be abandoned totally.

Yes you are right Governor; we don’t need to fret about coins!

We woke up to an article in the Herald today, where the RBZ governor was telling us not to fret over the rejection of coins in certain sectors of the economy. Apparently the informal sector and some retailers are not accepting some coins especially those under ZWL1. This is hardly surprising as the coins, individually buy just about nothing! As usual, the governor had a solution; we should just take these to our banks! You go and queue to deposit these and then hope to be given higher denomination coins/notes. The point is we do not need any of these coins at all. If anything we need higher denomination notes. Implied annual inflation is just under 500% and our biggest note is $5. You need about 4 of those to buy a loaf of bread or a litre of diesel. So yes, you are right Doc Governor – we need not worry about those coins – we DON’T need them!

ED sends Mthuli straight under ZUPCO

……..whither policy consistency In his 2020 budget, Finance Minister Mthuli Ncube had a detailed section dealing with what he called ‘Subsidies and Other Market Distortions.’ He correctly highlighted that ‘_…..subsidies present an additional risk to macroeconomic and fiscal stability._’ To be specific, he highlighted subsidies related to Command agriculture, ZESA financing and fuel as having led to significant budget deficits in prior years. Amongst other measures, the Minister announced an intention to remove the (then) existing grain marketing subsidies for maize and wheat that were being provided to Grain Millers through the Grain Marketing Board. Ultimately, the GMB and the millers would have had to sell or acquire these two commodities at the market determined prices, even if it meant importing. Before the ink had dried, and in typical ZANU PF style, the President reversed this at a youth rally in Kadoma some weeks ago! The President claimed not to have been consulted when this policy initiative was being crafted. What hogwash! In response, and embarrassingly, Mthuli was forced to issue new measures last week announcing the restoration of the subsidies. This is one of the very many reasons why the citizenry finds it difficult to believe anything that comes out of this government, no matter how noble it seems. Decent policies have been and will continue to sacrificed for political expediency.

Is it a new currency or new notes? What does this mean?

The recently announced Monetary Policy Committee held its inaugural meeting yesterday and its chair (who happens to be the RBZ Governor) announced, post the meeting that the ‘government will be introducing new notes and coins ($2 and $5 denominations) in the next two weeks.’ Finance minister, Mthuli Ncube, in a separate post cabinet briefing, also mentioned the looming introduction of new notes. It’s important to note that these announcements are not the first ones, with the governor in the Mid-Term Monetary Policy Statement making a similar pronouncement. Since these announcements, there has been debate about what this entails and the implications on the broader economy. Does this mean we now have a new currency? What happens to the bond notes? Will the cash queues and premiums disappear? What about inflation? We briefly try to answer these questions below: Do the new notes signal another new currency? No. Zimbabwe introduced a new currency in June this year through SI 142; which also brought to the end the multi-currency regime. This was initially the RTGS$ and has since transitioned to the ZWL. Strictly speaking however, this is the FIRST time, since the Gideon Gono era that the government will issue notes for their currency. We have had the bond notes, but they were never our currency. Semantics, right? What happens to the bond notes and coins? The existing bond notes and coins will continue to be used alongside the newer notes and coins. Also, very interesting to note is that new bond coins will be minted. The new notes and coins will be issued at par (yes that term again!) with the existing bond notes and RTGS$ (electronic cash) Will this ease cash queues? Really depends on how much cash government prints and injects into the economy. As also mentioned by the governor, to function normally we need about 10%-15% of our deposits to be in form of cash. Using the last publicly available statistics and applying a conservative 10% ratio, a minimum of ZWL1 bn will need to be injected in form of cash; to buttress the just under ZWL 700m we had in bond notes and coins. We speculate the number could be larger as bank deposits have most likely increased between July and October. Our view is RBZ will most likely drip feed the new notes into the system. This, in our view was well captured in the mid-term MPS review statement when the governor said, ‘…the bank will continue to inject additional notes and coins on a gradual basis…’ Also critical from a government perspective, will be to manage the impact of a predominant cash based system on the 2% IMTT (which we think has been the main reason why no new notes are issued). Forced to choose between availing cash for the public and increasing government revenues through the intermediated tax, government seems to have chosen the later. We have no reason to think they have changed or are changing tact! And what about the cash premiums? Ideally, and linked to the above, an improved access to cash should reduce or wipe out the premium on cash; currently at about 60%. For the reasons explained above, we do not think new cash issuances will be substantial enough to make any impact on the rates. While there might be short term declines as speculators take advantage of the confusion, at best rates will most likely hold at these levels. Inflation implications Generally speaking, any printing of cash not backed by economic activity is inflationary as this results in money supply growing faster than output. The government is aware of this and has been at pains to explain that the new notes will be printed out of the existing stock of electronic/RTGS$ dollars. If true, this should not result in price increases. However, we have been here before and been given a lot of promises before that have been broken. Therefore, don’t hold your breath! In conclusion, no new currency has been introduced, but new notes and coins will be issued. How this impacts cash queues and premiums, is dependent upon the quantities issued in the system. We doubt there will be much issued and therefore no change on the status quo. As a side note, we would have preferred that RBZ prints higher denomination notes. We are already in hyperinflation and our highest note cannot even buy half a loaf! It’s just enough to buy approximately 300ml of petrol at the new price of ZWL 16.75/litre!