BH24 19 January 2016

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  • BH24 Reporters

    HARARE -Industry and farmers have rejected the proposed 49 percent elec-tricity hike by Zimbabwe Electricity Transmission and Distribution Company (ZETDC ), saying the power company should improve efficiencies.

    In a joint press statement by Confedera-tion of Zimbabwe Industries, Zimbabwe Farmers Union, Zimbabwe Commercial Farmers Union, Commercial Farmers Union and the Chamber of Mines of Zimbabwe, industry said the ZETDC should dispense with its banking halls and reduce headcount in various depart-ments.

    "Significant cost reduction can be realised within the utility itself. With prepayment system now supposedly working , bank-ing halls can be dispensed of. Head-office overhead can be significantly reduced.

    "Taking depreciation and return on assets (ROA) out of the revenue required, we find that payroll costs are 32 percent at ZPC (Zimbabwe Power Company) and 20 percent at ZETDC which we believe should be reduced like what is happening in all other sectors of the economy," said industry. Industry has also called for a review of the electricity tariff determina-tion model. "How relevant is the current model of tariff determination in the cur-rent circumstance of the Zimbabwean economy?"

    In an earlier study, University of Zim-babwe economics lecturer Dr Takaw-ira Mumvuma posited that the power authoritys current pricing model has been rendered unworkable in terms of ensuring future infrastructure refur-bishment by the extensive debts owed to it by consumers. This limited finan-cial capacity has resulted in the power authority failing to institute significant

    levels of infrastructure refurbishment and upgrades at its power stations.

    The national power utility is currently able to provide around half of Zimba-bwe's 2 200 megawatt (MW) electricity requirement. It is currently dependent on imports from the region insofar as the thermal plant at Hwange is using ageing equipment, while the Kariba hydro-power plant is facing a water shortage challenge. The business community dismissed the proposed 49 percent elec-tricity tariff hike, saying both firms and individuals are currently struggling to pay the present tariff as evidenced by the high debt levels.

    Various consumers owe the ZETDC around $1 billion. "We are seriously per-turbed by the decision that was taken to bring into the tariff equation, the emer-gency power from diesel generation. This proposed 200MW emergency power is

    coming at a huge cost to the economy. "The investment by the economy in this proposed scheme can be better utilised if deployed to give a permanent solution to this energy crisis, even if it means that permanent energy will be realised three to five years down the line.

    "All imported power is coming from util-ities operating in weak currencies, and therefore we believe the cost thereof should be low, not to cause a review of tariffs upwards," said the business repre-sentatives bodies. They added: Regional competitiveness is under serious threat with the currency crises in emerging/regional economies. Strong headwinds are also facing commodities.

    With no monetary ability to devalue cur-rency, there has to be internal devalua-tion to remain competitive. This, by defi-nition, means costs (electricity included) has to come down.

    News Update as @ 1530 hours, Tuesday 19 January 2016Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

    Industry, farmers reject proposed energy tariff hike

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  • By Tawanda Musarurwa

    HARARE - The Hwange-based RHA tungsten mine is set to be commissioned next month, with plans to convert it from open-pit to underground mine progressing .

    Parent company, AIM-listed Premier African Minerals, said plans to access the 870 under-ground level of the mine are currently on track.

    In view of the on-going, Pre-mier expects to update its resource estimate at the tung-sten mine following the com-pletion of an underground implementation study.

    The study, prepared by RHA and Whaleside Shaft Sinkers Zimbabwe, showed that the company would need $406 000 in capital cost for underground development.

    It also confirmed that the pro-ject schedule for equipping the vertical shaft hoist and com-missioning of operations on

    870 level remained on schedule for next month.

    Premier chief executive Mr George Roach said the move to expedite the conversion of the mine had been necessitated by unpredicted occurrences.

    "RHA was always planned, in the longer term, to be an underground mine. Unfore-seen developments during the initial open-pit operations led the company to accelerate the move to underground mining.

    This change in strategy has resulted in the need to finance company overheads for an extended period with-out recourse to cash flow gen-erated from the open-pit and finance substantial additional debt generated by RHA, he said.

    Mr Roach said Premier had suc-cessfully extracted and stock-piled ore from underground since late November and now anticipated RHA to generate positive operational cash flow during the course of this year.

    According to the company, after February, the aim is to process approximately 32 000 tonnes of run of mine ore at an average grade of 6,20 kilogramme per tonne to produce 249 tonnes of concentrate at 63 percent WO3 over six months.

    First production and positive operating cash flow from RHA before capital expenditure and working capital are now expected later this year.

    3 NEws

    RHA tungsten mine set for February commissioning

  • BH244

  • By Funny Hudzerema

    HARARE - Government says it has stepped up efforts to explore alternative power generation ave-nues such as gas and wind to curb current power shortages that have hit the country.

    Energy and Power Development Minister Dr Samuel Undenge said efforts are under way to exploit gas in different areas across the country to reduce power short-ages.

    We have considered the use of gas which is in Lupane we are developing strategies to exploit it

    for the benefit of the country.

    There is gas which is in Lupane and as we speak now there is a company which is carrying out experimental drilling to see whether we can fully exploit that gas for commercial use so that we can use it to turn the turbines to generate electricity, he said.

    Zimbabwe discovered billions of cubic feet of coal bed methane gas in Lupane and financial and infrastructure investments are required to harness the gas.

    Estimates say the country is home to more than 40 trillion cubic feet

    of potentially recoverable coal bed methane gas which is found in the Lupane - Lubimbi area.

    Work is underway that side and we are expecting to get results in some few months concerning for how long we can use the gas available in the area.

    Use of gas is part of Govern-ments initiatives to do away with power shortages in the country in future.

    As Government we are also call-ing for partnerships to look for ways to use wind and solar to sup-ply power to all the different areas

    around the country, he said.

    He added that if these sources of energy are fully exploited along-side with other projects which are underway in the coming five years we will have enough power in the country.

    The Government is also imple-menting a number of projects around the country to boost power generation projects, including long-term projects such as the Batoka Gorge Hydroelec-tric Power Station, which is being implemented alongside other independent power producers.

    5 NEws

    Zim eyes gas, wind as alternative power sources

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  • BH246

  • HARARE The United Nations World Tourism Organisation (UNWTO) has ranked Zimbabwe as one of the top 30 countries that have made major efforts to reduce travel restrictions and allow free movement of tourists in the past seven years.

    In its 2015 Visa Openness Report released last week, the 157-member UNWTO, ranked Zimbabwe number 29 out of the top 54 member countries deemed to have made signifi-cant progress in relaxing tourist restrictions.

    Overall, 54 destinations sig-nificantly facilitated travel for citizens of 30 or more countries by changing their visa policies from visa required to eVisa, visa on arrival, or no visa required, the UNWTO said.

    These 54 destinations took a total of 6 357 individual measures, presenting 86 per-cent of all improvements made between 2010 and 2015. This demonstrates that destinations,

    when reviewing their visa poli-cies, tend to thoroughly review and introduce changes.

    According to the report, Zimba-bwe implemented a total of 117 reforms that made it easy for tourists to visit the country dur-ing the period.

    At number one was the island country of Niue with 195 reforms followed by Micronesia, Palau, Djibouti and the Bud-dhist kingdom of Bhutan in the top five.

    Mozambique, which was at number seven with 189 improvements was the top ranked African country with Guinea-Bissau, Togo, Cape Verde, Rwanda, Mali, Maurita-nia, Uganda, Kenya and Tan-zania also among top African reformers.

    The UNTWO said the reforms led to an improvement to the worlds average openness in the period.

    Prioritizing travel facilitation is central to stimulating eco-nomic growth and job creation through tourism.

    We are pleased to see that a growing number of govern-ments around the world think likewise said UNWTO Secre-tary-General, Taleb Rifai.

    UNWTO recommends desti-nations to focus in particular in a stronger segmentation of travellers, in improving visa application processes and entry procedures, in making use of regional integration opportuni-ties, and last but not least, on providing precise and accessi-ble information for tourists.

    The UNWTO hopes that increas-ing openness will help the number of international tourist arrivals grow to around 1.8 bil-lion annually by 2030.

    Zimbabwes Tourism and Hospi-tality Industry Minister, Walter Mzembi has on several occa-sions called for the lifting of

    visa requirements.

    Such a move, he has argued, would allow the country to achieve its target of attracting five million tourists and achiev-ing a $5 billion income for the industry by the year 2020.

    Last year, the country relaxed the visa regime for Chinese tourists who are now allowed to get visas on arrival instead of applying for them while in their homeland.

    In advocating scrapping of the visa, Mzembi quotes the bibli-cal prophet, Isaiah who encour-aged nations to keep their gates open to foreigners if ever they intend to cash in on the visitors wealth.Hostile western media has battered Zimbabwes image over the years, choking efforts to boost tourist arrivals.

    But the industry has largely been resilient, and is continuing to defy the odds.

    - New Ziana

    7 NEws

    UNwTO ranks Zim among top reformers

  • BH248

  • BH249

  • HARARE -The equities market sus-tained a downward trend following today's trades, on the back of prevail-ing weak macro-economic fundamen-tals.

    The mainstream industrial index slipped a further 2.30 (or 2,13 per-cent) to close at 105.86 as giant bev-erages producer Delta lost $0,0303 to trade at $0,5803, while conglom-erate Innscor was down by $0,0300 to $0,2100 after announcing this

    morning that pursuant to the groups strategy of focusing on core business, with effect from January 1, 2016, the group divested its interest in the six SPAR Corporate Stores which it oper-ated in Zimbabwe. Giant retailer OK Zimbabwe decreased by $0,0080 to settle at $0,0400 and Proplastics was $0,0010 weaker at $0,0230.

    On the upside, Fidelity Life rose $0,0024 to close at $0,0974 as insurer NicozDiamond and banker NMBZ

    were each $0,0010 up to $0,0161 and $0,0360, respectively.

    Telecoms giant Econet added a mar-ginal 0,0009 to settle at $0,2010.

    The mining index was again unchanged at 21.74 as Bindura, Fal-gold, Hwange and RioZim maintained previous price levels at $0,0128, $0,0050, $0,0300 and $0,1040, respectively.

    - BH24 Reporter

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  • MOvERs CHANGE TOdAy PRICE UsC sHAKERs CHANGE TOdAy PRICE UsC

    NicozDiamond 6.62 1.61 OK ZIM -16.66 4.00

    NMBZ 2.85 3.60 INNSCOR -12.50 21.00

    FIDELITy LIFE 2.52 9.74 DELTA -4.96 58.03

    ECONET 0.44 20.10 PROPLASTICS -4.16 2.30

    INdEx PREvIOUs TOdAy MOvE CHANGE

    INDUSTRIAL 108.16 105.86 -2.30 points -2.13%

    MINING 21.74 21.74 +0.00 POINTS +0.00%

    13 ZsE TABlEs

    ZsE

    INdICEs

    stock Exchange

  • BH2414

  • 15 dIARy OF EvENTs

    The black arrow indicate level of load shedding across the country.

    POwER GENERATION sTATs

    Gen Station

    19 January 2016

    Energy

    (Megawatts)

    Hwange 550 MW

    Kariba 285 MW

    Harare 16 MW

    Munyati 15 MW

    Bulawayo 18 MW

    Imports 0 - 100 MW

    Total 1209 Mw

    21 January 2016 - CZI/Herald Business Annual Economic Outlook 2016 Half day symposium; venue: Meikles Hotel, Harare; Time: 08:30 to 12:50hrs

    10 February 2016 - Nampak Zimbabwe Annual General Meeting: venue 68 Birmingham Road, southerton, Harare: Time 12:00

    THE BH24 dIARy

  • BH2416

  • JOHANNEsBURG - South Afri-ca's rand gained against the dollar early today and could continue to benefit from inves-tors culling their long dollar positions after a recent heavy sell-off.

    The JSE securities exchange's Top-40 futures index was up 1.1 percent, suggesting the local bourse would open more than 470 points higher at 0700 GMT.

    At 0755 GMT the rand was at 16,7400 to the dollar, up 0,65 percent from Tuesday's close at 16,8500.

    "There does seem to be an overhang of long dollar posi-

    tions," Standard Bank trader Warrick Butler said. "On a short term basis there is minor trend line support around 16,6800." The local currency has fallen more than 8 per-cent against the dollar this year, weighed down by con-cerns over the outlook for the sickly local economy as well as slowing growth in China, a key importer of South African com-modities.

    Despite the lethargy in the South African economy, trad-ers and analysts are pricing in the chance of a 25 or 50 basis point rate hike when the central bank holds its first pol-icy meeting of the year next week, against the backdrop of rising inflation.

    In fixed income, the yield for the benchmark government instrument due in 2026 was down 6 basis points at 9,77 percent in early trade - Reu-ters

    REGIONAl NEws 17

    Rand firms as investors trim long dollar positions

  • BH2418

  • In a world awash with cheap oil, buyers in the worlds big-gest consuming region arent clamoring for an additional 500,000 barrels a day from Iran.

    As international sanctions against the country are lifted and Oil Minister Bijan Namdar Zanganeh looks to make good on his pledge to regain market share lost in Asia, hell have to contend with a global glut thats dragged down prices and spawned a buyers market with abundant supplies from the Americas to Africa and the Middle East.

    While consumers such as Japans Cosmo Energy Hold-ings Co. and Indias Hindustan Petroleum Corp. are open to buying more, they say Iran will have to provide an incen-tive. Purchases by some cus-tomers in Asia dropped about 50 percent after sanctions were imposed on the Middle East producer over its nuclear program.

    We can accommodate more Iranian crude but it will depend on what terms and conditions they offer, Sanjiv Singh, the

    director of refineries at Indian Oil Corp., the nations largest processor, said by phone Mon-day. Refining capacities and configurations have changed since the time Iran went under sanctions, so cant say if vol-umes similar to that time will be bought by refiners.

    sanctions Effect

    In South Korea, shipments from Iran have tumbled by more than half since 2011, according to government data compiled by Bloomberg. While Asias fourth-biggest oil user imported a record amount of crude last year, purchases from Iran fell about 8 percent to the lowest in data going back to 1995.

    Iran was the second-biggest producer in the Organiza-tion of Petroleum Exporting Countries before its disputed nuclear program prompted the European Union to ban purchases of its crude in July 2012. Countries including China, India and Japan had to get a waiver from the US to buy limited amounts of Ira-nian oil or risk losing access to parts of the global financial

    system.

    Until now, refiners had to annually reduce Iranian crude imports due to international sanctions, South Koreas Min-istry of Trade, Industry and Energy said in an e-mailed statement on Jan. 17.

    They can now voluntarily decide their own import lev-els, considering domestic demand.

    Brent crude, the benchmark for more than half the worlds oil, added 48 cents to $29,03 a barrel by 1:34 p.m. Singapore time. Prices fell to $28,55 on Monday, the lowest close since December 2003.

    Exports Boost

    Iran is targeting an immedi-ate increase in shipments of 500,000 barrels a day, Amir Hossein Zamaninia, deputy oil minister for commerce and international affairs, said Sun-day in an interview in Tehran. Iran plans to add another half million barrels within months.

    Japans Chief Cabinet Sec-retary yoshihide Suga said Monday the Asian country

    welcomed that Iran com-plied with the deal on its nuclear program. The nation cut annual crude purchases from the Middle East producer nearly half to about 166 000 barrels a day by 2014 from 2011 levels, according to data from the Ministry of Finance.

    Japans Cosmo Energy will decide on an increase in Ira-nian crude purchases only if it makes economic sense, Eita Ushioda, a Tokyo-based spokesman for the company, said by phone Monday.

    I hope Iran will consider better terms for Indian refin-eries to make their way in this growing market, B.K. Namdeo, director refineries at Indias state-run Hindu-stan Petroleum Corp., said by phone on Monday.

    Better terms could be in the form of services like more loading days. Cant say at this point whether we will be able to return to the volumes before sanctions any time soon. It will all depend on prices and other terms.

    - Bloomberg

    INTERNATIONAl NEws 19

    Iran's next test is winning back buyers in biggest oil market

  • By Fatima Bhoola

    Given that South Africa oper-ates within a flexible exchange rate regime, the value of the rand, like any commodity, is determined by the market forces of supply and demand.

    The demand for a currency rela-tive to the supply will determine its value in relation to another currency.

    Theoretically, the demand for a floating currency and hence its value changes continually based on a multitude of factors. In the case of the rand, its cur-rent weakness can be attributed to a myriad of structural prob-lems facing the local economy.

    The main determinants of a cur-rencys value include demand for a countrys goods and ser-vices. This is closely linked to the growth and national income of its main trading partners.

    Equally important is the domes-tic interest rate.

    If it is high it is likely to attract

    foreign capital, causing the exchange rate to strengthen. But high inflation can wipe out the benefit of high interest rates to foreign investors. Addi-tional factors serve to drive the currency down. These include a current account deficit.

    The current account deficit gets bigger when a country spends more on foreign trade than it is earning and has to borrow capital from foreign sources to make up the difference. This implies that a country requires

    more foreign currency than it is getting through sales of exports, and it supplies more of its own currency than foreign-ers demand for its products.

    This excess demand for foreign currency leads to depreciation in the value of a currency. Fac-tors such as political instability and poor economic performance can reduce investor confidence. This inevitably forces foreign investors to seek out stable countries with strong economic performance.

    Thus, a country that is per-ceived to have positive attrib-utes will attract investment away from countries perceived to have more political and eco-nomic risk. There is a further complication to currency move-ments.

    The buying and selling of cur-rencies is no longer driven only by the need to facilitate trade but also by the demand for currencies as financial assets. This means that currencies are bought and sold like any other asset. Decisions by traders to buy or sell a currency can have a marked effect.

    The impact of the turmoil in China South Africas currency lost 26 percent of its value in the six months after turmoil gripped Chinese markets in June 2015. This was when the Peoples Bank of China sur-prised markets by executing a 2 percent devaluation of the yuan and changing the way it traded its currency. The aim was to weaken the yuan to boost its export competitiveness.

    20 analysis20 ANAlysIs

    How currency markets work and why the south African rand is falling

  • 21 analysis21 ANAlysIs

    This, coupled with slower eco-nomic growth, has aggravated the situation for South Africa as well as other African coun-tries that rely on oil and min-eral exports to China. Emerging markets most exposed to lower growth prospects and subdued commodity prices have seen the sharpest falls.

    The rand is expected to remain under pressure with many ana-lysts predicting that it will fall further in 2016. It is not alone. Many other emerging market currencies have been dealt the same fate. But the rand is sub-stantially weaker than it might have been.

    The sudden reshuffling of the finance ministry was seen as weakening one of the countrys key macroeconomic institutions and continues to undermine market confidence. Implications of the weak rand The weak rand has a number of implications for the countrys growth prospect. Firstly, the weakening currency carries the risk of pushing up inflation because imported goods are more expensive.

    This means that the South Afri-can Reserve Bank faces a diffi-cult decision. It can keep inter-est rates low but then faces even higher inflation.

    This will only devalue the rand further. If the central bank takes more aggressive action by raising interest rates, it risks stifling growth in an economy that is only growing at 1,5 per-cent.

    The rands weakening could not have come at a worse time for South Africa. The country is suf-fering from the worst drought since 1992 which has increased food costs and pushed the farming industry into recession.

    The price of white corn, a sta-ple food in southern Africa, has more than doubled on the South African Futures Exchange in the past year. With large parts of the economy already in recession, coupled with wors-ening debt levels and the threat of credit-rating downgrades, it looks like the economy will con-tract.

    This implies that Finance Minis-ter Pravin Gordhan has limited room to boost spending. The weak rand will also see the cost of imported goods for consum-ers rise. In addition, while the rest of the world benefits from record low oil prices, the coun-trys weaker currency means it will not able to take full advan-tage of this and may face higher fuel prices in the near future.

    On the flip side, the weaker rand does have some bene-fits. It is helping mines stay afloat. And gold mines could make profits again as the gold price has held up more than the prices of other minerals. There may also be a boost in tourism.

    The weaker rand may also have short-term benefits for sub-Sa-haran countries importing sub-stantial volumes from South Africa. Finally there may be a boost for local exporters. But this could be stifled by the rise in the price of imported raw materials which will contribute to higher costs of production for manufacturers.

    Is the rand over-traded? In 2013 the South African rand was ranked as the 18th most-traded currency in the world.

    Surprisingly, while South Africa accounts for only 0,3 percent of the worlds daily foreign exchange market turnover, the rand accounts for 1,1 percent of worlds daily currency trading.

    This difference is largely due to the daily trade taking place out-side South Africa by non-resi-dents.

    This is partly a result of vir-tually no exchange control restrictions for foreigners trad-ing the rand but many in place for South Africans who wish to trade in foreign currency. This has been highlighted as a fur-ther problem faced by the cen-tral bank in trying to influence the value of the rand. - Polity.org *Fatima Bhoola is a lecturer in Economics at the University of the Witwatersrand This article was originally published on The Conversation.

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