News Update as @ 1530 hours,Monday 7 July 2014Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

By Lynn Murahwa

The Government has engaged the private sector in seeking out solutions on how to effectively coordinate the country's Industrial Development Pol-icy (IDP) and the National Trade Policy (NTP).

Effective coordination and imple-mentation of the two policies could see Zimbabwe realising $7 billion in exports by 2016.

Through the IDP and NTP Government plans to restore the manufacturing sector’s contribution to GDP from the current 15 percent to 30 percent as well as contribution to exports from 26 percent to 50 percent by 2016.

Government today said it is working with the public and private industrial sectors to determine whether there are problems in synchronisation of the IDP and NTP.

Ministry of Industry and Commerce director of research and domestic trade Charles Mujajati said private sector investment and development policies are essential for economic growth.

He was speaking at a policy dialogue workshop on improving trade and industrial policy coordination in Harare

this morning.

“Economic progress depends on a business climate that is conducive to private investment and enterprise , private sector development policies , infrastructure and supporting laws and regulations which are designed within a coherent policy framework,” he said.

The effective implementation of an industrial development policy will also mean corresponding effectiveness in trade policy insofar as industrial and trade policies always - or at least ide-ally - should go hand-in-hand.

An industrial policy deals with the productive capacities of an economy, while a trade policy determines strat-egies and policies that facilitate their exchange/trade.

According to University of Zimbabwe senior lecturer Dr Albert Makocheka-nwa, Zimbabwe is currently experi-

encing a "competitiveness gap".“The country is experiencing a competi-tiveness gap where total imports are expected to grow to $8,3 billion in 2014 from the $6,6 billion recorded in October 2013,” he said.

He said close to 67,5 percent of prod-ucts consumed in the country are foreign against the expected GDP of $12,33 billion of the country .

“Against the expected GDP of $12,33 billion for our country in 2014 , almost 67,5 percent of the products con-sumed locally are foreign produced. This shows the nation is currently pro-ducing about 32,5 percent which is far less than the 50 percent of the coun-try’s GDP,” he said.

Coordination of the two policies, especially making the manufacturing sector competitive by improving the operating environment will drive the fortunes of the export sector. •

Govt engages private sector on industrial, trade polices coordination

BH24

3 NEWS

BH24 Reporter

Zimbabwe's exports have taken a knock from the struggling manufac-turing sector which is operating at around 37 percent of installed capac-ity.

Latest trade figures from the Zim-babwe National Statistical Agency (ZimStats) show that manufactured exports presently constitute below 9 percent of the country’s exports.

This figure could be lower by year end as the sector has entered the sec-ond half of the year operating under sub-optimal conditions.

The ZimStats figure confirm a ZimTrade Local Export Manufacturing Capacity Survey 2013 report which notes that only 40 percent of manu-facturing firms currently operating in the country are exporting their prod-ucts and of those firms, the level of exports relative to total production stood 40 percent.

This has contributed to a worsening balance of trade position for the coun-try.

ZimStats says the country's imports during the first five months of this year stood at $2,46 billion, while exports amounted to $990,32 million

resulting in a trade deficit of $1,47 billion. The country's exports were down 23 percent from $1,3 billion from the prior comparable period.

But on a slightly more positive note imports also fell 23 percent from $3,2 billion compared to the same period last year.

Observers say this is probably indic-ative of the deflationary state of the economy, with consumers and com-panies having very limited spending power.

South Africa remained the largest trading partner accounting for $1.04 billion of imports and $609.12 million of exports.

Currently, the major export con-straints relate to access to affordable capital, duty on imported raw materi-als, ageing equipment, high interest rates and high electricity charges.

Economists, however, contend that there is scope for significant export growth if the business operating envi-ronment is improve. •

Manufactured exports below 9%

4 AGRICULTURE

By Tawanda Musarurwa

Cigarette manufacturer BAT Zimbabwe says it is focusing on building its man-ufactured cigarette portfolio after stop-ping semi-processed tobacco exports last year.

In an interview, BAT Zimbabwe man-aging director Lovemore Manatsa said although they used to supply Cutrag to the Mozambique market, those exports had been stopped as the gains were "negligible".

Cutrag is semi-processed tobacco, or tobacco that has been cut into fine strips for use in cigarettes.

Manatsa said the Cutrag operations had been moved to South Africa since the operation that side had a "bigger plant."

"BAT Zimbabwe was exporting Cutrag or semi processed tobacco to its sister company BAT Mozambique but this was discontinued and moved to BAT South Africa as its impact to our bot-tom line was negligible and we decided to focus on the processing of finished goods for the domestic market," he

said. The local operation was now focusing exclusively on the domestic market.

"BAT Zimbabwe does not export fin-ished goods or products. It is the only cigarette manufacturer in Zimba-bwe that manufactures for 100 per-cent domestic consumption," added Manatsa.

Wholly focused on cigarette manufac-turing, BAT Zimbabwe has an installed production capacity of 2,3 billion sticks per annum and is currently operating at around 70 percent of that capacity.

This makes it one of the most effective industries in the country at present. Average industrial capacity currently

stands at around 37 percent, accord-ing to the Confederation of Zimbabwe Industries.

But the BAT boss believes that their only limitation in this regard is depressed demand.

BAT International Holdings UK Limited holds 42,98 percent in the company while Old Mutual Life Assurance holds 11,97 percent. Employees own a com-bined 20,76 percent while the rest is held mainly by pension funds. •

BAT builds manufacturing portfolio

5 MINING

By Dumisani Nsingo

Hwange Rural District Council is owed more than $2 million in unit tax which has accrued over the past six years as mining houses operating within its area of jurisdiction continue to default, an official has said.

The council’s chief executive officer, Phindile Ncube, said failure by the mining companies to pay unit tax was affecting the local authority to effec-tively carry out its mandate of ensur-ing infrastructural development and undertaking projects to improve the livelihood of people in its communities.

“There have been some challenges in terms of interpreting the legislation to the extent that some companies feel they are not supposed to pay unit tax. We are owed in excess of $2 million which has accumulated since dollarisa-tion,” Ncube said.

Rural district councils are empowered by section 96 of the Rural District Coun-cils Act chapter 29:13, in particular sec-tion 96 (a) (b) and (c) to charge unit tax on all owners of mining locations

situated on rural land within the council area, mining for gold, silver, platinum or precious stones and employing more than five workers. There are five companies extracting coal in Hwange, namely Hwange Colliery Company Limited, Makomo Resources, Coal Brick, Zambezi Gas, Chilota Colliery while others are at various stages of starting mining activities.

Ncube said the local authority was continuously engaging the mining companies to honour their payments. “We are engaging the companies, it’s a continuous process so that they can own up but most recently Coal Brick have started to make payments and we hope others will follow suit in spite

of the challenges they are facing. “The local authority uses the cash from unit taxes to spearhead infrastructure development in communities in the form of building clinics, schools and road rehabilitation. Even provision of clean water to the pro-poor in its com-munities,” he said. Coal Producers and Processors Association (Copaz) presi-dent, Charles Msipa, said his organisa-tion was aware that coal mining com-panies had not been paying unit tax to the local authorities for some time.

He said non-payment of unit tax to the local authorities was reflective of the general financial challenges confront-ing Copaz members, which has seen some companies failing to pay wages and salaries for several months.

“Furthermore, there is confusion as to how unit tax which is based on mine output will be harmonised with the pro-posed Community Share Ownership Trust Fund (CSOTF) payments. “We have requested HRDC to engage the Indigenisation and Economic Empow-erment Board (IEEB) and other stake-holders over this matter so that we can map out effective strategies to achieve

the noble objectives of the unit tax and CSOTF,” Msipa said. The CSOSTF is a Government initiative under the indige-nisation programme aimed at ensuring that communities have shares in com-panies that exploit natural resources in their areas and use the proceeds from the shares to fund development pro-jects in their respective areas. The pro-gramme is already transforming lives across the country where it has been launched.

Msipa said HRDC, IEEB and Copaz should in the interim defray unit tax and CSTOF payments through the identification, co-ordination and imple-mentation of suitable projects under the rubric of the Public Private Partner-ship because coal mining companies may be in a better position to deploy road making and other civil contracting equipment than to effect cash pay-ments.

“Communities would in the meantime reap significant benefit from the road works, dams and other civil works con-structed by the equipment in this win-win arrangement,” Dr Msipa said.―Sunday News. •

Coal mining companies owe $2m in tax

BH24

7 MINING

By Rumbidzayi Zinyuke

The Zimbabwe Mining Development Corporation needs to realign its costs to current production levels to be able to revive its gold mining operations, parliamentarians heard today.

Giving oral evidence to the parliamen-tary portfolio committee on Mines and mining development, ZMDC acting general manager Wilson Chinzou said the mines were operating on fixed costs that were derived when they were still operating at full capacity and making profits.

“These mines were structured on capacity to produce a fixed amount of gold and the costs were structured in such a way to achieve those production levels. And we are talking about fixed

costs going up to about 80 percent of the total cost, which really affected the ability of the mine to make profit.

Fixed costs are hard nuts to crack and we were not able to align those costs to the level of production as it fluctuates throughout the years, which meant we

were making loses at a certain level because of the high fixed costs,” he said.

ZMDC owns Elvington mine, which was shut down more than 10 years ago when the main shaft collapsed due to intense faulting and inadequate pillar

support in the area, Jena and Sabi mines which are also struggling.

Chinzou said the mines needed more than $45 million to ramp up produc-tion.

“We lack geological informa-tion because exploration has been neglected for m any years due to lack of funding. So we are working on rais-ing funds for exploration to justify end production,” he said.

He said ZMDC also needed to replace the old mining techniques still being employed at the mines with newer technologies that yield higher produc-tion. •

Fixed costs haunt ZMDC gold operations

AdM-DI156506-

BH24

The equities market opened Monday 0.19 percent weaker, bucking last week's three-day gains.

The industrial index today was lower at 187.09 points after shedding 0.35

points.

Losses were recorded in Natfoods, which declined 4 cents to close at 211 cents.

Bankers CBZ and holdings company TSL both slipped a cent to trade at 12 cents and 26 cents respectively.

On the upside were gains in Masimba, which added 0.28 cents to trade at 2 cents and Fidelity Life which was up 0.20 cents to trade at 9.20 cents. Tur-nal rose 0.15 cents to close at 3.15 cents.

Mash Holdings and Zimplow both increased by 0.10 cents to 2.60 cents and 8.10 cents respectively.

Depressed activity amongst the mining counters saw the ZSE's mining index remaining flat at 54.56 points.

Bindura, Falgold Hwange and Riozim all maintained previous trading days’ lev-els. — BH24 Reporter •

9 ZSE REVIEW

Equities market opens week on bearish trend

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BH24

In an interview with The Banker last week Finance Minister Patrick Chinamasa noted how the sanctions imposed upon Zimbabwe had brought the economy to its current precarious position.

“Over the past 15 years our economy has been battered by the imposition of sanctions by Western countries," he said.

He offered a solution too. “Because of the sanctions, we are basically on our own. We have to look inward to see what we can do to leverage our own resources and mobilise fresh money.”

Zimbabwe presently has all the symp-toms of an economic depression, nota-bly a long-term downturn in economic activity.

But as Minister Chinamasa explicitly highlights, Zimbabwe needs to start building up savings.

Economists contend that savings are critical for economic growth because savings are offered to businesses that need credit hence boosts investment and economic growth.

To this extent, it becomes clear that

the liquidity constraints in the country is an indication of low savings and low incomes, which has led to low aggre-gate demand and low economic activ-ity hence declining inflation and the cycle continues.

The situation therefore needs critical and urgent redress.

First, need to ensure that all economic related policies are consistent and in line with what it is trying to achieve. Policies have effects on credit distribu-tion and availability, FDI, external credit attraction and private domestic invest-ment and ideally these effects should be positive.

This step will help identify and under-stand the factors that can assist in attracting the much needed capital and

the factors that disrupt the attraction.

If these are identified Government may begin to immediately work on imple-menting the factors that will improve the liquidity situation in the short term then develop the ones that have a long term effect.

Second, considering that resources are extremely limited, the Governments needs to focus on special and critical areas that need to be addressed.

The ZimAsset is a good policy but it is extremely broad in the areas that need to be sorted out yet funding is limited. The State needs to take a specialisation approach in resolving the economic cri-sis rather than trying to divide the little Government revenue it has on a large number struggling sectors. The Gov-

ernment needs to identify the few well performing sectors at the moment and try to focus of boosting them so that they become the drivers of investment. Income from these sectors will then be spread to the other struggling sectors for their growth and development. Because of the low revenue levels the state has it is almost impossible that all sectors can be assisted adequately at this point.

Third, Government should assertively tap into the informal sector and illicit activities that are feeding both exter-nalisation and the underground econ-omy.

Zimbabwe is only a few steps and a few decisions away from righting its wrongs. •

11 BH24 COMMENT

Few decisions needed to avoid economic depression

BH24

The Central Bank of Kenya will probably hold the benchmark interest rate as it tries to contain accelerating inflation without sti-fling economic growth.

The bank’s Monetary Policy Com-mittee will leave the key lending rate unchanged at 8.5 percent, according to eight of 10 econo-mists in a Bloomberg News survey. The rest predicted an increase of half a percentage point. The deci-sion will be announced tomorrow afternoon in the capital, Nairobi.

Kenya has held the key rate steady for a year as it weighs the pros-pect of inflation exceeding the 7.5 percent upper end of the govern-ment’s target range against slow-er-than-expected growth in East Africa’s largest economy. Inflation accelerated for the third straight month to 7.4 percent in June.

“Inflation has picked up and the central bank will still want to wait for longer to see the trend,” Aly-Khan Satchu, chief executive officer of Nairobi-based Rich Man-agement Ltd., an adviser to com-

panies and wealthy individuals, said by phone.

The World Bank last month low-ered its 2014 economic growth forecast for Kenya to 4.7 percent, from a projection of 5.1 percent it gave six months earlier, citing worsening insecurity and a delay in seasonal rains that has affected crops. Agriculture accounts for more than a fifth of output in the world’s largest black-tea exporter.

Foreign travel warnings that fol-lowed attacks, including a raid by Islamist Somali militant group al-Shabaab on a shopping mall in Nairobi in September that left more than 67 people dead, have dented the country’s tourism

industry. At least 22 people died in attacks on July 5 on two villages near the coast in an area where at least 60 others were killed last month.

Tourism in Kenya, home to Indian Ocean coastal beaches and wild-game parks, is the second-largest source of foreign exchange, gen-erating about $1 billion a year. ― Bloomberg •

13 REGIONAL NEWS

Kenya may hold key rate as inflation nears target ceiling

enjoy the CAIO ride!

BH24

15 DIARY OF EVENTS

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

POWER GENERATION STATSGen Station

7 July 2014

Energy

(Megawatts)

Hwange 352 MW

Kariba 750 MW

Harare 40 MW

Munyati 28 MW

Bulawayo 20 MW

Imports 0 MW

Total 1162 MW

16 July - Mobile Markets & Telecoms Forum Conference & Exhibition, Place: Holiday Inn (Harare), Time: 8:00am

23 -25 July - Mine Entra, Place: Zimbabwe International Exhibition Centre, Bulawayo

24 July - OK Zimbabwe Thirteenth Annual General Meeting Place: OKMart Functions Room, First Floor, OKMart, 30 Chiremba Road, Hillside, Time: 15:00 hours.

THE BH24 DIARY

BH24

17 ZSE

ZSEMOvERS CHANGE TODAY PRICE USC SHAKERS CHANGE TODAY PRICE USC

MASIMBA 16.28% 2.00 CBZ -7.69% 12.00

TURNALL 5.00% 3.15 TSL -3.70% 26.00

MASH 4.00% 2.60 NATFOODS -1.86% 211.00

CFI 2.67% 2.31

FIDELITy LIFE 2.22% 9.20

TRUWORTHS 1.75% 2.90

ZIMPLOW 1.25% 8.10

IndicesINDEx PREvIOUS TODAY MOvE CHANGE

INDUSTRIAL 187.44 187.09 -0.35 POINTS -0.19%

MINING 54.56 54.56 +0.00 POINTS +0.00%

Stocks Exchange

Previous

18 AFRICA STOCkS

Botswana 8,664.65 -11.96 -0.14% 12July

Cote dIvoire 246.37 +2.18 +0.89% 07Mar

Egypt 7,949.60 -75.68 -0.94% 06Mar

Ghana 2,352.45 +6.43 +0.27% 27June

Kenya 4,885.09 +51.07 +1.06% 30June

Malawi 12,662.47 +0.00 +0.00% 07Mar

Mauritius 2,074.51 -3.51 -0.17% 07Mar

Morocco 9,544.10 +21.01 +0.22% 07Mar

Nigeria 42,482.49 +714.93 +1.71% 30June

Rwanda 131.27 +0.00 +0.00% 24Oct

Tanzania 2,018.97 +25.40 +1.27% 07Mar

Tunisia 4,624.39 -39.32 -0.84% 07Mar

Uganda 1,503.90 +0.81 +0.05% 10Sep

Zambia 4,242.74 +14.95 +0.35% 10April

Zimbabwe 186.56 -0.52 -0.28% 30June

African stock round up Commodity Prices

Name Price

Crude Oil 1,300.91 -0.21%

Spot Gold USD/oz 1,292.63 -0.26%

Spot Silver USD/oz 19.38 -0.46%

Spot Platinum USD/oz 1,421.25 -0.33%

Spot Palladium USD/oz 798.50 -0.64%

LME Copper USD/t 6,770 -0.18%

LME Aluminium USD/t 1,780 -1.17%

LME Nickel USD/t 18,230 -1.73%

LME Lead USD/t 2,095 -1.41%

Quote of the day —"I don't know the key to success, but the key to faIlure Is tryIng to please everybody." - bIll cosby

Globalshareholder.com

China's economy probably steadied in the second quarter with annual growth holding firm at 7.4 percent, a Reuters poll showed, suggesting that a recovery is taking hold as a flurry of government stimulus measures kick in.

All but three of the 21 analysts polled by Reuters predicted that growth either stabilized or edged up between April and June, reinforcing the view that authorities have successfully arrested

a cool down with a modest loosening in policies. Indeed, even though econ-omists expect the headline growth rate to cling to an 18-month low of 7.4 percent, they also believe that China's export and manufacturing sectors likely enjoyed their best performances in sev-eral months in June.

"We expect China's upcoming June and second-quarter data to show an economy that is still recovering," UBS

analysts said in a note to clients. "With more easing measures underway and an ongoing export recovery, sequential growth momentum should warm up further in the third quarter."

Exports are forecast to rise 10.6 percent in June from a year ago, faster than May's 7 percent expansion and the best showing in five months. Imports likely snapped back into positive territory, growing 5.8 percent, after May's 1.6

percent drop. Growth in China's trade sector has gained traction in recent months, helped by an improving U.S. economy and as the government gave exporters more tax breaks, credit insur-ance, and currency hedging options.

Manufacturing output, which accounted for 45 percent of China's gross domes-tic product in 2012, is forecast to have grown 9 percent in June, up a shade from May's 8.8 percent. ― Reuters •

19 INTERNATIONAL NEWS

China second-quarter GDP seen steady at 7.4 percent, recovery in sight

An opportunity has arisen to enable HelpAge Zimbabwe to facilitate the implementation of the Rural WASH project, to improve water, sanitation and hygiene in Bubi District

1. Carry out an assessment of the WASH related health risks and needs within - General Bookkeeping- Cash book and petty cash management the targeted population and make recommendations for actions which are - Order and control office stationery consistent with agreed guidelines and protocols. - Liaise with project staff in procurement and maintenance of project stocks

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- Degree in Accounting or equivalency and/or accounting

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1. Vacancy: Participatory Health and Hygiene Education Officer

TLM-DI

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Two vacancies have arisen in HelpAge Zimbabwe.

BH24

By Lynn Murahwa

Although very common, the phrase “Cotton is a poor man’s crop” are words that take away dignity and pride from the struggling farmer trying to make a living though the crop.

Cotton farming in Zimbabwe in the recent past years has been a struggle, particularly with the farmers getting lit-tle return from their endeavours.

This is especially so, as relates selling their crop. The 2014 cotton selling sea-son has been marred with confusion as haggling continues over negotiations for a selling price so much so that the Agricultural Marketing Authority (AMA), Zimbabwe Commercial Farmers Union (ZFCU) and agronomists have made calls for cotton farmers to negotiate "selling prices for themselves".

But reality on the ground shows that the problem with cotton farming lie much deeper than challenges at selling point. Speaking at the Cotton Com-pany of Zimbabwe (COTTCO) AGM recently, managing director Collins

Chihuri noted correctly that cotton is a "political crop" hence a "poor man’s endeavour". “The world over cotton is a political crop. Why? It is a poor man’s crop because it is grown in vulnerable areas with marginal rainfall,” he said. Chihuri said as the current situation stands, the current farmers cannot be trusted to produce a sensible yield.

“The cotton business is fairly volatile we have also noted that just to rely 100 percent of the people skills with the farmers that tend to run away is not sustainable. We are currently looking at initiatives that will ensure that we have got some guaranteed minimum

threshold from all our other initiatives,” he said. Traditionally cotton farming can be identified with Western slave trade and the harsh and laborious con-ditions that the imported “cotton pick-ers” had to endure. Over a hundred years later the cotton business is still enslaving Africans in bad debts, lack of loans and pride. It is perhaps too, the failure of the cotton farming industry that has led to a slow but sure death of the local clothing industry as cloth-ing companies continue to shut down on the back of stiff competition from cheap imports.

Without the faith and support of the market and ginners subsidised inputs and loans may be hard to come by resulting in farmers defaulting on loans and creating a cycle of mistrust. Chihuri said one of the problems they face with farmers is that of integrity.

Brutal words, but at least it is comfort-ing to realise that large players such as Cottco are searching for initiatives to ensure success and profit in the coun-try’s cotton especially while the cotton community feels largely disheartened

by low producer prices with no hope of improvement. “As a business we are going to increase our stronghold in the traditional cotton hubs basically Gokwe, Sanyati and the new cotton developing areas such as Chiredzi and Muzarabani, that’s our focus. “We are fully aware and cognisent of the fact that there are areas where we cannot compete. Areas like Bindura and Chin-hoyi we will never compete if we want to grow cotton in those areas.

“We are looking at reviewing the fund-ing mode and looking at trying to tap the developmental findings. For the past two years I have been talking to developmental institutions saying can we not get cheaper funding for cotton and they say no because cotton is a non-food item,” said Chihuri.

To be realistic, there are no “panacea” solutions to the extensive problems facing the local cotton industry as the challenges tend to differ from year to year and according to specific circum-stances, but there is need to continue to tinker around to find solutions to some of these challenges. •

21 ANALYSIS

Cotton: a poor man's crop?

The only thing that makes a thing a thing is thinking about that thing.

Otherwise it won't really be a thing.

So Mobster was thinking a solu-tion had been found to the prob-lem of small-scale farmers failing to access monies from the banks after they were granted A1 per-mits last week.

Well, that was a short-lived hope.

News coming from the banking

sector is "banking chief executives are reviewing recently introduced A1 farms permits to determine whether or not they are accept-able as collateral for loans."

Considering the over-thinking nature of Zimbabwean executives in the banking sector (and any-where else really), there goes the baby and the bathwater!

Chances are the banking sector will later this week release a state-ment dismissing the practicability of small-scale farmers using the new A1 permits as collateral.

After all, they ARE thinking about it. Why wouldn't the A1 permits, which were granted by the Zimba-bwean Government to its citizens not be acceptable to Zimbabwean banks?

It's like questioning your brother's birth certificate.

Zimbos are just an over-thinking lot. That's perhaps attributable to the super high literacy levels, hence no-one never gets noth-

ing done. As a people we seem to reside in the darkest and most hidden sanctums of our collective mind where out-of-the-question ideas reside...that place where only solitary confinement can take you.

It's self punishment.

There are countries with far less erudite populations who are doing better than us, simply because they get things done.

Last week Mobster was complain-ing about yes-man....just had a change of heart. Sometimes, just sometimes, you need a few of those.

The bankers are simply over-ana-lysing the new documents and Mobster sees it complicating things on the road ahead.

Or Maybe Mobster is over-think-ing?

(Mobster is a Zimbabwean phi-losopher who has an opinion on just about anything. She however has a particular liking for business and economics stuff. However her opinions are not necessarily represent-ative of this platform. You can send your feedback to her on mobsterzim1980@gmail.com) •

22 MOBSTER’S MONDAY MUSINGS

An over-thinking lot