Dollar creep

28 03 2021

The Optimist – not and easy state of mind in Zimbabwe these days

Slowly and surely the US dollar is creeping back. It’s perfectly legal, as is the local Zimbabwe dollar, but it’s getting increasingly rare to be quoted prices in them. Even the road tolls, which were always quoted in local dollars, have now stated that prices will be in US dollars though one is welcome to pay in Zimbabwe dollars at the official exchange rate. The road tolls are set by a government body.

Fuel stations are more blunt; only US dollars are acceptable and if paying by a foreign currency bank account you have to be prepared to wait whilst it’s ascertained that it really is real dollars you are using.

A visit to Kaguvi Street in the city area known as “the cow’s guts” (it’s filthy, raucous and vibrant) to source a car part was enlightening. I was offered the piece of radiator hose – not the correct one but with a bit of cutting it would do – and told it was $12 and did I have the exact amount? No, I didn’t but suggested I could use my local debit card for the equivalent of $2. Nobody had suggested that I could pay in local currency even though the debit card machine was in full view.

A couple of uniformed police walked into my office a few weeks ago. They were very polite as befitting the public relations department. My first reaction was that I’d be in trouble for not wearing my mask, even though there was nobody else around. It’s required under Zimbabwe law that a face mask is to be worn anywhere outside the home, including your own car even if you are alone. But they weren’t interested in that. They were after donations in cash or kind for building an office at the Borrowdale (my “local”) police station. I was dumbfounded. I was not surprised that they wanted to replace the ramshackle office that they currently use – it’s very temporary and probably wouldn’t last another rainy season. I asked if they’d approached the “powers that be” for funding. They had and had been told to go out and approach the community. I gave them my usual rant that I already paid tax to this government so why should I pay again? They shrugged and looked embarrassed and asked again if I could give them anything, anything at all would be appreciated.

I asked if they knew what it would cost. An architectural plan and a budget spreadsheet were offered. It all looked professionally done and of course the budget was in US dollars. The total was around $14,000 which I thought was quite a lot for what was being planned but they assured me that they’d got the required three quotes. I wondered to myself whose relative had won the contract but decided to keep quiet. I said I’d think about it and promised to get back to them.

I didn’t have to call back as the next morning they phoned me. I said I’d get them five pockets of cement – one of the perks of a farming company is that just about anything can be put through the books so the aforementioned cement could be listed as an expense and come off my tax bill. What would I get out of it? The police at that station would owe me a favour and that, dear readers, is how Africa functions. Indeed, in the past I’ve got off a traffic speeding fine because the enforcing officer used to get cheap meat from the farm where I lived.

Later the following week when I dropped off the cement some off-duty policemen in plain clothes unloaded the pockets from my truck. I’d witnessed them negotiating some after-hours guarding work with an Indian gentlemen. All the figures were of course in US dollars. I didn’t ask what their government salaries were or what the currency was – stupid question really as it was plainly not enough to get by.

A few local stores still quote in local dollars but they are getting few and far between. Where possible I pay in the local money as the majority of my income is in that currency. Customers do pay in US cash (the local cash notes are as rare as they are useless – the biggest note is ZW$50 which is about US50c) so I hoard it to pay at least part of the wages bill. My company also has a US dollar account that I use for importing raw material. One customer does pay me this way and last week I received about $24,000 for a big gum tree seedling contract that I completed last year. The gum trees will eventually be harvested and used to cure tobacco so the initiative is funded by a levy on tobacco sales which is paid in real US dollars. Hence the fact that it can be used to import materials.

I noticed on Monday that the figure in the nostro account, as the US dollar accounts are known, had been reduced by some 20%. At first I suspected there had been a mistake and somehow the depositor had withdrawn the excess. I decided to ask my bookkeeper who is knowledgeable in these sort of things. “Oh no”, she laughed, “the Reserve Bank have taken 20 percent and given it back to you as local currency. Check your other account”.  I couldn’t believe what I was hearing but sure enough, when I checked, there was the money deposited in my Zimbabwe dollar account at the official rate which is some 30% lower than the black market rate. Once again, the government is stealing our hard currency.

Still seething the next day, I mentioned this to my neighbour at work. She was not surprised. Her son is an export agent for fresh produce into Europe and the UK – the Reserve Bank takes 40% out of his account and pays him back in local currency. This is especially problematic as he has to book and pay airfreight in advance and they don’t want Zimbabwe dollars.

At the end of every year, along with various tax obligations, we have to provide to the local tax authority a comprehensive list of income, tax paid, allowances and bonuses of all employees who have paid tax over the course of the year. This is purely a fact gathering exercise – it has no bearing on the tax bill  – but if submitted late one can garner a heavy fine.

I haven’t up until now bothered with a specific wages software package as most of the time I employ 17 permanent staff and an Excel spreadsheet copes just fine. Income tax is calculated and paid on a monthly basis using a system known as PAYE (pay as you earn) and whilst a bit tedious there were only a few people paying tax. However, in 2020 the inflation has run well ahead of the PAYE tax tables and lots of people ended up paying tax who were earning less than USD2 a day equivalent in the local currency. This meant two weeks of sifting through spreadsheets and collating tables and filling in the required ITF16 form. This is not going to happen again so I’ve spent the last 6 weeks writing my own wages software package that will do all that with just a few mouse clicks. Writing the software that does the PAYE was enlightening. No surprise that not only is there a local currency table but there’s also a US dollar table! The tax threshold starts at $2.31 per day with a tax of 20% (less a 46c deduction). If you don’t believe me look here.

“The term “absolute poverty” is also sometimes used as a synonym for extreme poverty. Absolute poverty is the absence of enough resources to secure basic life necessities.

To assist in measuring this, the World Bank has a daily per capita international poverty line (IPL), a global absolute minimum, of $1.90 a day as of October 2015.”

Using the above definition (from Wikipedia), and it is a little dated, it might be fair to say that Zimbabweans start being taxed when they are not quite extremely poor. That’s how desperate our government is.

Of course it needn’t be like this. A report from the Daily Maverick newspaper in South Africa is particularly damning.

“The report focuses on business cartels because these are the vehicles used for state capture. One of the experts we asked to review the report pointed out that normally cartels work to undermine the state. In Zimbabwe, however, they are in league with the highest people in the land. #DemLoot, in the now-famous words of journalist Hopewell Chin’ono.” The Daily Maverick

Last week I was chatting to a customer who was looking for advice on what crops he could grow. I gave him my standard spiel on finding a market first and then approaching me. Then I asked him what he’d been doing. “I’ve been in Afghanistan for the past 15 years and I’m tired” he replied. I wished him the best of luck.


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The last cosmos

11 06 2020

The last cosmos of the season

This is a cosmos flower, the last of the season. It’s not indigenous but apparently was introduced in contaminated horse feed from Argentina during the Anglo-Boer War. It can be found in the grasslands (veld) of the high rainfall areas of Zimbabwe from about March into April. This one is in our garden and is not the species found in the wild which is Cosmos bipinnatus. This came from a customer at the nursery who had some spare and they have been self-seeding in the garden for a couple of years. I have no idea why its popped up now, very late in the season, but here it is making a defiant last stand.

The Zimbabwe dollar is also making a last stand but it is looking anything but defiant. The official exchange rate for the local dollar to the US dollar, i.e. if one went to the bank to sell US dollars, is 25:1. You cannot buy US dollars at the bank probably because the black market rate is around 82:1 so nobody is stupid enough to sell their dollars at the official rate. The banks just haven’t got US dollars to sell.

Fuel is also sold at controlled prices in Zimbabwe dollars. The current price for petrol is $22 per litre which your cellphone calculator will tell you is about US27c a litre at black market rates – probably the cheapest in the world if you have access to US dollars. The government, which does most of the fuel procurement and allocation to the filling stations has no US dollars. Well, not for fuel at least so what fuel does make it to the the pump generates VERY long queues.

The government DOES have US dollars to buy the senior military figures new Land Cruisers at around US$80,000 each. Apparently they were becoming disgruntled with their forever diminishing salaries and needed pacifying lest they felt like changing the government for a more pliant one. This comes hot on the heels of the Finance Minister’s recent trip to the USA with the begging bowl in full view and he actually admitted that Zimbabwe’s fiscal policies were not well thought out (“mistakes have been made” he said). Quelle horreur! The begging bowl returned empty. Zimbabwe’s elite are nothing if not thick skinned so no sooner was the minister back than another appeal went out for money to help with the Covid-19 pandemic. That too was unsuccessful. Nobody can, or will, explain where the money for the vehicles is coming from. Those of us who have Foreign Currency Accounts (FCAs) at the banks which as the name suggests are in real money, mainly US dollars, are feeling a little nervous. The Mugabe regime raided these accounts on two occasions and gave the owners local dollars at the official rate (yes, this is the second time down the tubes for the local dollar).

FCAs are a perfectly legal mechanism for exporters to keep their income for importing new inputs. Whilst the Covid-19 pandemic is raging the government has allowed anyone to trade in US dollars both as cash and between FCAs. The local dollar is also still valid but most people are skewing local prices to make it attractive for people to use US dollars. Last Friday I was buying some irrigation fittings at a local outlet and they admitted that they were using a rate of 92 local dollars to the US dollar. The black market rate was indicated at 72:1. It’s now 82:1 and sliding on an almost daily rate.

The cosmos will almost certainly pop up in the garden next year. I’m not betting that the Zimbabwe dollar will still be around. As for the US dollar – that genie is now well out of the bottle.

 

 

 

 


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The spiders are just fine – thanks

1 04 2020

The spiders are thriving – not a great photo though

The spiders are thriving in the nursery. It’s a long time since I’ve seen that many that fat. Well, I should qualify that last statement; the females are that fat, the males are as skinny as usual – probably all that escaping being eaten by the females that keeps them slender.

I am genuinely pleased to see all these spiders. It means there’s plenty for them to eat and that means our policy of using softer chemicals in the nursery is working. There have  been years in the past when the spiders never appeared (they are common golden orb spiders and harmless) which I put down to poor rains and a lack of prey. Curiously our rains have again been poor but the spiders haven’t noticed that, yet. Maybe there’s a lag phase but we’ll have to wait for this time next year to find that one out.

We are also going to have to wait a while to see how the covid-19 virus impacts us as a nation. Officially we are on a 21 day shutdown to reduce the transmission rate. It’s not likely to be that effective. On my way to work I didn’t notice much evidence of reduced activity and no police road blocks enforcing travel restrictions. It’s not a busy route at the best of times but there was still a long queue at the filling station and the usual amount of traffic up the short 4 km road past the rubbish tip which was quiet but still accepting waste removal vehicles. I was traveling legally as we are considered an essential enterprise and I needed to check up on our skeleton staff who are keeping the plants alive whilst there are no customers around.

The government did come up with a comprehensive legal document to enforce the lock-down remarkably quickly – I suspect it was largely copied from the South Africans who are enforcing their own lock-down. There’s nothing wrong with that and we do share the same type of law. Their other responses have been less well thought out.

The Zimbabwe public healthcare system is in a mess (see previous post A state of health ) with 7 known ventilators available to treat a population of some 11 million. So far as we know there’s been one fatality due to covid-19, a high profile local radio/TV presenter from a wealthy family. Relatively young at 30, Zororo Makamba was admitted to the local Wilkins infectious diseases hospital where facilities proved woefully inadequate. By the time the family had sourced their own ventilator from South Africa it was too late. Apparently he had contracted the virus on a recent trip to the USA and also had underlying health issues.

Testing kits are also inadequate. As of writing there have been 165 tests performed which accounts for the low apparent infection rate; just 5 positive so far. Strive Masiyiwa, local media mogul and sometime philanthropist, apparently took out newspaper adverts saying that his company would buy or lease ventilators from people who might have them on hand. Right, let me just go and dust off the one in the garden shed that I bought some years ago and stored for just this scenario.

While the direct health impact is still some time away the financial impact has already hit. Flower exporters have had to dump tonnes of flowers that cannot be exported due to airline shutdowns and are unlikely to be sold even if they could get them to Europe. Local vendors who rely on daily sales of produce have also been shut down. They must already be feeling hungry. We’ve had a large order of avocado trees cancelled, no doubt because the customer, who sells other fresh produce, cannot move the stock they have and cannot pay for the order. The financial cost to the country is going to be staggering. That the economy is already staggering under a burden of government incompetence and corruption will make it all the more difficult to endure.

The governor of a province to the north-west of Harare has taken matters into her own hands and is at least preparing in a way for the virus crisis. She sent out an email to local farmers for any medical supplies that included, among other things, boots, gloves, masks, body bags and quick lime. Why farmers would have body bags I cannot imagine or why they would feel any need to donate anything to a government that has done nothing to make their lives easier astounds me. I know this because a friend who farms in the area has become a de facto information hub and I’m on his emailing list. He’s also had a torrid time trying to stay on his farm and be productive whilst various fat cats try to evict him under the aegis of the previous government’s land reform programme.

While the covid-19 storm gathers the government has take the opportunity to ditch the ill fated Zimbabwe dollar. We can now legally trade in any currency we like (usually US dollars), again. The reason they gave was to mitigate the effect of the covid-19 on the economy. I think it was convenient to ditch the non-performing currency before it’s devaluation became, once again, a world recognised standard. They have stipulated that the exchange rate is fixed at 25 local dollars to the US but nobody is taking much notice of that when the parallel rate is 43:1.

On driving out of the nursery to come home I had to wait for a minibus to pass. It wasn’t supposed to be on the road during the lock-down,  that privilege belongs to the government owned ZUPCO buses which are apparently enforcing stricter hygiene standards.  I’m not sure what these standards are – it certainly won’t include social distancing given the seating arrangement. The seating philosophy on that minibus and others is pack them in, as many as possible. This has meant that I’ve decided to reduce work hours so that the majority of the labour who live within walking distance can avoid this virus highway and walk or cycle. It also means that they don’t get the transport allowance but hopefully we can do a bit to reduce the disease impact on my business.

Will we make it through the coming storm? I think so, we are semi-essential as witnessed by the rush on vegetable seedlings in the days prior to commencement of the lock-down. It is uncharted territory for us. The spiders of course will come and go as spiders do, influenced by the weather and factors other than covid-19. But for the moment they are doing just fine, thanks.

 


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A state of health

16 03 2020

Lots of hardware holding my neck together

This is my neck. It doesn’t look pretty but with this amount of hardware holding it together it’s pretty strong. Quite how it got to be such a mess is a long and convoluted saga but it’s worth telling if only to warn just how badly wrong surgery can go.

In 1977, just before I was to start my compulsory military service, I went on holiday to South Africa with my sister and friend of hers and the friend’s brother. We met up in Pietermaritzburg where my sister was at university and made our way to the east coast of South Africa to a small town called Uvongo. We found the campsite and quickly pitched camp. I made my way to the beach whilst the others went shopping.

The surf on the South African coast can be big as there are no reefs offshore so it helps to be surf-wise. The tide was out and the body-surfers were making their way out to the bigger waves, diving under the breaking waves and surfacing once they’d passed.

A wave broke and tumbled towards me, I dived as stylishly as I could straight into the sand. My head hit the sand, swiveled to the left and bent backwards and I became a quadriplegic. Coughing seawater I somehow got my head back to the surface and legs and arms started to move again. I staggered a few steps then stumbled back to the shore.

That afternoon I went to see a local doctor. He was in an old cottage in a quiet part of the town and was totally bored. I explained what had happened.

“Squeeze my hands” he told me.

I did.

“Here’s a prescription for some pills that should ease the discomfort in your right shoulder”.

“So I’ve pinched some nerves in my neck?” I asked.

“Yes, something like that” came the reply.

And that was it.

20 years later and whiplashes to the neck in a military parachuting jump, a car accident and a mountain bike accident, I was in trouble. I’d had crippling migraines since leaving university. Now I had electrical like nerve pain in my shoulders to boot. It was time to see a neurosurgeon.

The same surgeon who’d fixed my spine after gunshot injury sustained during military service way back in 1979 put the MRI film of my neck up onto the light box. He’d done a good job then so I had a lot of faith in him.

“That’s giving you headaches” he said, pointing to a very distinct constriction in the spinal cord channel. Even to my untrained eye it didn’t look good.

I mentioned that on a recent trip to Cape Town a local neurosurgeon had fitted me in for a quick consult. He’d said that on the strength of the X-rays that I probably needed surgery although a MRI would be necessary to confirm it (I didn’t have the time for a MRI).

“Why didn’t you get it done in Cape Town?” the Zimbabwean surgeon asked.

“He only fitted me in as a favour” I replied.

I only realised years later that the Zimbabwean didn’t want to do the surgery. By the time the surgery was done some months later I’d discovered the surgeon was 74, certainly not in his prime but he assured me that it was routine. When I walked out of the hospital after 6 days I was convinced the problem was fixed.

After 3 months I had a final consult and all the adverse symptoms were gone.

“Thank goodness” the surgeon said with relief, “I don’t need to see you again”.

We discussed other things for a short while and I went on my way. No follow-up X-ray was mentioned.

By the end of 2009 I was dropping things and my left shoulder had become very weak. I was advised to go to Johannesburg in South Africa. I duly sent a stack of MRIs to the recommended surgeon and the reply was; “You need surgery!”.

Early 2010 found me in Milpark Hospital in central Jo’burg.

“These MRIs are terrible” the surgeon commented. “Do you mind if we do them again?”.

I was not surprised. The machine in Harare was old and the collar for the neck MRI was broken. A plan had to be made Zimbabwe style and the results were indistinct. So I agreed. Fortunately it was covered by my medical insurance.

The next day I was being prepped for sugery when the surgeon came past.

“Those MRIs, it’s a good thing we redid them”

“Why’s that?” I asked.

“Because it’s worse than I thought – it means we are doing the right thing!” came the response.

After 5 hours of surgery I woke up in agony. It went from bad to worse after that.

On the 4th night I woke up in the early hours and couldn’t get my right arm off the bed. My left arm was slightly better and I could just reach the handle on the chain over my bed. The nursing staff were puzzled and insisted it could not be swelling on the operation site as that only happened up to the third night. The surgeon was concerned and redid all the MRIs. He told me that he didn’t see anything he wasn’t expecting to see though the report that got back to the referring doctor in Zimbabwe clearly stated there was swelling, and pressure on the spinal cord, at the operation site. Evidently my body hadn’t read the text books.

The pain eventually subsided but I never got the full function back to my right arm and hand and now have had to become left-handed (with limited success). Weakness to my left shoulder resulted in surgery to it to decompress a pinched ligament but that was not wholly successful and I’ve had to give up swimming as a result.

In early 2014 I was in trouble yet again – falling over my own feet and eventually had to admit I needed two walking sticks instead of the one I’d used for the past 35 years. My GP referred me to Dr. V. He put the images up on the light box and could hardly contain his excitement (beware of surgeons who sense a challenge – they love challenges).

New MRIs were ordered and the news, once again, was bad.

“You need to make a decision soon. This degeneration is moving quickly” Dr. V. cautioned. Unfortunately I’d already booked to go to a bucket list event; a World Horticultural Congress in Brisbane Australia. By the time I got back I was in further trouble so hurried up and booked the surgery.

“This is to stop the rot” Dr. V. said from behind his surgical mask as I was wheeled into the operating theatre. “Anything else you get back will be a bonus”. The procedure went well with no complications and the rot was stopped but there were no bonuses. Dr. V. had been as good as his word.

Recently I went back to Dr. V. for a checkup on the neck and to asses a potential problem with my lower back which is starting to show signs of degradation below the original war injury that I sustained in the Rhodesian military in 1979 (this is accounted in https://gonexc.com/reflections-on-the-first-half-abridged-and-mostly-expurgated/). It was well treated by the standards of the day but now if you look at the X-ray on the left it’s possible to see where one disc has collapsed below the L4 vertebra and I felt that my gait and balance had suffered as a result. Dr. V. wasn’t so sure and sent me off to see a neurologist for nerve function testing.

My lower back. Look for the collapsed disc between the 2nd and 3rd vertebrae from the bottom.

I got chatting to the technician who did the actual tests and discovered that he’d tested my hands back in 2009 in the big government run Parirenyatwa hospital. I was curious to know if it was still running as it had closed in 2019 when all the junior doctors had gone on strike over pay so low that they could not afford to feed themselves and get to work. When the government had stone-walled the doctors the senior doctors had also gone on strike in support and they were fired too. A wealthy entrepreneur had offered to pay the junior doctors a useful wage but they replied that even if they could get to work there was nothing in the hospitals to work with – no bandages, syringes, gloves, medication etc.

“The junior doctors were reinstated – well those that hadn’t emigrated were – but the senior doctors weren’t and now there is no-one to run the departments” said the technician. So the hospital remains dysfunctional. Which applies to many hospitals around the country.

Fortunately for me I can afford the local private healthcare system which is adequate for most things. For the more technical I have an offshore policy that I have used in South Africa. The vast majority of Zimbabweans have no health cover at all and no way to pay for any.

I have been out of Zimbabwe for 10 days now, staying in the USA where my sister is very ill. In that time the unofficial exchange rate for the Zimbabwe dollar to the US dollar has plunged from 30:1 to 40:1. Nobody except the banks and government use the official rate (called the interbank rate) at 18:1. It is illegal to use anything but the interbank rate but even a fuel station chain, part owned by the government, is now openly charging US dollars for fuel. Just before I left Zimbabwe I was in a big hardware store in the industrial sites of Harare buying electrical cable for a borehole pump. The customer next to me asked if he could pay for a car battery in US dollars. The till operator nodded and printed out the relevant invoice. At the end of the counter the man operating the in-store bureau de change was asleep. The electronic notice board for the exchange rates on offer indicated the official interbank rates. Nobody was interested as the store was offering the black market rate. Yet the central Reserve Bank and the finance minister continue to trumpet that the economy is on course to de-dollarize i.e. go back to the Zimbabwe dollar.

I read somewhere that the death toll from the economic impact of the current COVID-19 coronavirus is likely to be higher than the direct death toll from the virus itself. Given the disastrous state of the government health system this is difficult to imagine. Large swaths of the population are malnourished and undernourished. Many are immune compromised with HIV and its effects. Should the virus get to Zimbabwe in any substantial force the impact is going to be massive because those most at risk are the old, infirm, malnourished and immune compromised. It won’t be pretty.

 

 

 


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Of potholes and corruption

9 02 2020

Tyres supplied, fitted and balanced – price is local money but US$ are accepted!

The road to my work is appalling. In the distant past, when it was in good repair, it was quite possible to go 80km/h along it. No longer. Some stretches are so bad that one needs to slow down to 20km/h or less, especially when it’s been raining which is not a lot this season.

The farming and residential community that resides along the road gets together on occasion and patches up the potholes, usually just with some gravel or clay that doesn’t stay there long but makes the drive a little less tedious. There’s also a fair-sized high density suburb (if one can call it that – it’s closer to the definition of a slum) but they contribute nothing and short of putting up a toll gate there’s no feasible way of getting contributions from the cars and minibuses that ply the route.

The potholes all take a toll on one’s vehicle’s tyres. Mine needed replacing after a mere 60,000km – the tyre man at the service station at the bottom of the road estimated they should have lasted at least 75,000 km if the roads were good. By the time I’d had two punctures in as many days I threw in the towel and went looking for new ones. They are all imported (at least for my pickup size which is pretty common) and foreign currency is something that Zimbabwe has very little of right now. Yes, fixing the road would probably have been cheaper in the long run but our government doesn’t think that far ahead and prefers to pilfer the national exchequer while it can.

The first outlet I tried quoted me $US190 per tyre despite it being illegal to sell anything in Zimbabwe for US dollars. Curiously this does not apply to the passport office which has been directed to ONLY charge in US dollars for urgent passport applications.

The second outlet also quoted in US dollars at $220 per tyre but said I could pay in the local dollars if I wanted to (they are clumsily known as RTGS dollars if electronic or bond notes if actual notes which the government tells us are they same value but they are not – confusing I know) so I opted for that. It didn’t take long and anyway, the company paid for it even if it was a bit expensive so I consoled myself that it was coming off the end-of-year tax bill.

Suddenly, just before Christmas, a road maintenance vehicle arrived on the road with workers and tarmac to patch the potholes. There was much excitement and speculation on the local community WhatsApp group as to who was behind it. Perhaps it was a wealthy resident who’d finally got fed up with the dismal state of the surface?

The answer, which emerged the following day, was typically Zimbabwean. E D Mnangagwa, the country’s president, has a son who was getting married that weekend at a local resort that specializes in weddings and upmarket events. Of course he couldn’t be allowed to drive up a severely potholed road. We didn’t complain too much but the patching was superficial and will not last very long.

This week a post appeared on the community WhatsApp group; someone had sourced ready-to-use tarmac patching bags and would we like to buy 20 for US$380? There were a lot of pledges made and we have yet to see the product which is apparently made in South Korea but we are assured it will appear. I am really not sure how many potholes each pack will patch but I am reasonably certain it won’t be enough.

We had a meeting last year with a local opposition MP for a neighbouring ward and some engineers from the city council. They admitted that parts of the road were beyond simple repair and would have to be completely rebuilt. I mention that he is an opposition MP as we wouldn’t have bothered engagingly with a ruling party MP. It turned out there was little he could do. The engineers informed us that the road was earmarked for repair; “It’s in the top three but we don’t know when work will start on it and funds have been set aside”. Nothing has happened and we are not surprised. Zimbabwe is ranked 158th out of 180 countries by Transparency International in their corruption index – there are more important things on which to spend the public funds, even if it would save money in the long run.

A less direct method of measuring corruption in a country is to look for the proportion of luxury to ordinary cars on the road and it’s very evidently high. Last October on the way back from a vet in another suburb both Marianne and I spotted a new white Lamborghini sports car and I’m told there’s another yellow one about apparently belonging to the son of one of the vice-presidents. Then in December last year a Bugatti Chiron was spotted on the streets of Harare. It is apparently the world’s fastest production car and one of the most expensive at some US$3.4 million. This in a country that cannot afford the most basic of medical supplies to keep the government hospitals open. Yes, we are corrupt! The owner of the car has yet to be identified but I am reasonably certain he won’t be driving it up the road to my work anytime soon.


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The power is on (for the moment)

7 09 2019

As I write this we actually have mains supply power. According to our neighbourhood WhatsApp group it’s because a dignitary is attending a function at a local sports club. By dignitary I mean someone with political clout. That way they can pretend that all’s well in the power supply situation when the reality is 18 hour power cuts every day. We are in this mess for several reasons, the main one being we have possibly the world’s cheapest power at US3c a unit (kWh). Until very recently it was 1c.

It wasn’t always that way. Back in the days when we were using real US$ and nothing else it was around 10-14c a unit and power was plentiful. We could import what power we needed from Mozambique and South Africa and even if the rest of the economy was a mess, which it was and still is, power was there if you needed to use it. Then in 2016 the government decided to introduce another currency called the “Bond dollar” which locals quickly nicknamed the “bollar” or “zollar”. The government insisted it was equivalent to a US dollar and was backed by a bond from the Egyptian Afreximbank and it was there to reduce the problem of small change. It was a lie. There was no bond, those who could withdrew their real dollars from the bank and those who couldn’t watched as the value of their accounts was whittled away by the informal market exchange rate. Eventually the government admitted that the bollar was not equivalent to a US dollar and pegged it at 2:1. The informal market ignored it and the rate soared to 12:1  before the government made it illegal to trade within the country in anything but bollars which were now called new Zimbabwe dollars (though we have yet to see any actual notes). The official exchange rate has now risen to around 14:1 which is why our electricity is ridiculously cheap. We were informed earlier this year that our bank accounts that had been in US dollars were now in Zimbabwe dollars – and so was our real money stolen.

We now owe US$73 million to the power utilities in Mozambique and South Africa with no real hope of paying it back and getting ourselves reconnected (not surprisingly they refuse to continue to export power to us). We need to import power because local thermal generators have been badly neglected because they have not been charging enough for the power (the government regulates power and fuel charges). This means that maintenance has not been done and our main source of hydro power, Lake Kariba, has been over-utilised beyond its design limitations. To compound the mess last season there was poor rains in the main catchment area in north-western Zambia and Angola.

The effect of lack of maintenance cannot be over-estimated. Apart from effeciency loss in old switch gear and old machinery (turbines), transmission efficiency is also affected. Insulators get covered in dust, rain turns the dust to mud which then causes shorts to the supporting structure which heats and cracks the insulator. Local losses are around 12% (I’m told the internationally accepted level is 7%).

The local power utility, ZESA, has embarked on a programme of power cuts or load shedding as it’s known locally. Alternative energy suppliers’ businesses are booming. The Reserve Bank estimates that the diesel fuel import bill has jumped 20% since the power cuts started as people and businesses buy it for their generators – money that could have been put into importing power in the first place.

It doesn’t take a huge imagination to realize what the consequences of these draconian power cuts are going to be. Some of the bigger mines import their own power directly from South Africa but the smaller ones, which apparently are given priority, have to make do. Farmers irrigate their crops in the dead of night when the power comes on, usually between 10 p.m. and 5 a.m. but this is often not long enough for a full cycle and I’ve heard of farmers abandoning their winter wheat crops which have demanding irrigation requirements. Tobacco seed sales were down 30% in April but this was as much to do with the government reneging on it’s promise to pay a proportion of the sales in hard currency as a lack of power. The early tobacco crop (tobacco is a major foreign currency earner) does require irrigating and supplementary power sources for the irrigation will likely make an expensive to produce crop excessively so.

Cell phone connectivity is now noticeably reduced as service providers have to rely more on backup power sources – usually diesel generators and the cost of airtime has gone up considerably.

We recently had six days with no power at all – just us and a neighbour across the street. Marianne went into the local ZESA offices to see whom she could get to come and have a look. A technician duly arrived and walked around the property then said he’d go and have a look at the sub-station (which supplies the suburb) and nothing happened. The next day the neighbour tried with no success. By now we were having to throw away food as our solar system couldn’t cope with running the fridge, deep freezes and other appliances and borehole pump 24 hours a day. So I went along to the offices, fully prepared to have to pay a bribe/sweetener to get something done.

I asked for the local manager with whom Marianne had spoken and introduced myself by commenting that we had more in common than he realised – we are both going bald. He laughed and I knew we were off to a good start. After explaining the problem I asked him what the future of our electricity supply was. Without saying anything he pointed to the ubiquitous portrait of the President, E D Mnangagwa, that seems obligatory in government offices. I replied “Please don’t point to that picture and tell me Zimbabwe is open for business”. The occupants of the office found it hugely funny. The slogan “Zimbabwe is open for business” was widely used by ED, as the President is known, in his election campaign.

“Are you and engineer?” I asked the manager.

“I am” he responded.

“So”, I asked him, “what happens when the water level in Kariba gets too low to be used for power?”.

“We turn it off” he replied.

“You mean the whole country?”.

“The whole country” he confirmed.

“Unless we can find some money to import some power. But that’s unlikely to happen so long as we have the world’s cheapest electricity?” I responded.

He nodded to E D’s photo without commenting.

That afternoon our power supply was restored and I hadn’t needed to part with any money – sometimes engagement is all it takes.

I don’t expect that the whole country will be turned off anytime soon. Certain areas in Harare, where we live, seem to be exempt. The grids surrounding the main hospitals and the President’s residence don’t get power cuts. A friend who lives close to the state controlled broadcaster, ZBC, never gets power cuts. Another friend who lives in a rural part of Zimbabwe in the east is on the same line as a senior ZESA executive never gets cuts either. That said I’ve told Marianne that we need to expect ever more draconian cuts – we don’t live near anyone or anything of political consequence.

Some four years ago I was living on a farm close to where I work. It was for me the perfect existence – close enough to town to be convenient but far enough away to benefit from the peaceful countryside. Whenever there was a thunderstorm the power went off and could take several days to get it fixed. I got fed up and bought a small solar system to keep the fridge and deep freeze running. I’ve always been a bit of a geek and liked the idea of a bit of independence from the grid and yes, I got a bit of a fuzzy warm feeling that I was doing something good for the environment.

The system worked well and it was upgraded by two panels when we moved into town. Then earlier this year as the load shedding was introduced the original lead-acid batteries had run their life and needed to be changed. It was evident that the power cuts were only going to get worse so we decided on another upgrade. Foolishly we bought locally manufactured batteries which only lasted 3 months but at least we could pay for them in local currency. The company that sold them to us did admit there was a problem and replaced them but we’d decided to go with an initially more expensive but much longer lasting lithium battery. Yet more photovoltaic panels were added with our closely guarded US dollars and now we have a nearly-off-the-grid system. It’s OK if we get a few hours of mains every night to charge the battery but if it gets to the stage where we’re completely cut off (no important neighbours to please) we are going to have to think of upgrading yet again. It will be money that could have been spent on a couple of really good holidays.

Panels are put onto the structure. Whilst I did most of the welding I had to get a specialist welder in to do the final work

The area where my nursery is has been relatively unaffected by power cuts. The research farm where I used to live is on the same grid and likes to claim some responsibility. I think it’s mostly due to the military barracks just down the road – can’t annoy those that keep the government in power now can we? Whichever it is it’s unlikely the situation will last so just before the recent slide in the local currency I invested in a solar powered borehole system whilst I had the money. Fortunately I have a young friend who has a qualification in solar systems and he helped me put it in by doing the design work whilst I did most of the welding of the structure. We did have to wait a month to get the electrics hooked up as the electrician was simply too busy doing other installations. In a rare moment of common sense the government has removed duty from solar panels and other associated equipment so those who can afford it are scrambling to install systems.

So far our system works fine, weather permitting. It cannot pump all the water we need so we are still reliant on getting at least some power to keep the water tank full and if the power goes off during the day, as it sometimes does,

there is a generator but it can go through 25 litres of diesel a day which of course is in short supply.

The price of power has recently gone up by up to 300% but it is still ridiculously cheap especially since the exchange rate with the US dollar has started to run again. There is no obvious way out of the mess.

The final wiring gets done. The system allowed for the original pump and motor to be used so required specialist knowledge


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Categories : Economics

The Zimbabwe dollar is back…

7 07 2019

The last Zimbabwe dollar invoice through my business in January 2009 – are we heading back there?

Last Monday morning we were greeted with the news that the much dreaded Zimbabwe dollar had made a return.  Then it got worse, much worse as befitting a Monday morning. Only the “new” dollar could be traded within the country. All other official currencies (US dollar, yen, euro, UK pound) have been restricted to use for import purposes only. Those of us with bank accounts in foreign currency (usually US dollars) may not use them to trade within the country. They can be used to import goods otherwise they can only be used to buy Zimbabwe dollars at the official bank rate which, at the time, was less than half the black market rate.

Some background

Back in February 2009 Zimbabwe officially adopted the US dollar as its currency. It had to – inflation was the second highest on record and the largest Zimbabwe dollar note was one hundred trillion dollars (100,000,000,000,000). Inflation stopped and for seven years we enjoyed relative economic stability by our standards. But the government never stopped its excessive spending and by 2016 they were unable to pay salaries which make up some 80% of the budget so they introduced the bond dollar (supposedly backed by a bond from the Afrexim bank in Egypt which was later shown to be a lie) to cover a general shortfall in small change, and lots were printed. Their value was pegged at 1:1 with the US dollar and for a while the general population accepted this. Then the US dollars became more and more scarce until the banks didn’t have any to give out – the government had stolen most of them. The black market began to pick up as the public realised they’d been conned. It really got into gear when the government told us that our bank accounts, which were still listed on the statement as being US dollars, were actually a new currency called RTGS dollars and were still valued at 1:1 with the US dollar.  We were told that if we had hard currency, or were exporting and earned foreign currency, we could open a FCA (foreign currency account) and the money would be kept there for importing, or trading for goods locally that were priced in US dollars. In an import orientated economy such as ours US dollars became more and more valuable so the pressure increased to charge in them. The much derided Finance Minister, Nthuli Ncube, announced that the banks would be able to sell hard currency at the inter-bank rate, i.e. what the government thought the rate should be, which was about half the black market rate. In theory one was able to purchase hard currency at this rate but nobody in their right mind was going to do that except those “with connections” i.e. party fat-cats and their relatives who have been making quick money buying at the low rate and selling at the black market rate. This loop-hole made some people very rich very quickly in the late 2000s.

Inflation was soon above 100% and basic commodities became extortionately expensive for the ordinary folk. Fuel queues became legendarily long (and still are) as filling stations were forced to sell at controlled prices based on the inter-bank exchange rate way below the black market rate. In an unrelated development, power cuts were introduced to compensate for reduced generating capacity from the Lake Kariba hydro scheme – a victim of over development on both the Zambian and Zimbabwean banks of the Zambezi River and the poor rains experienced last season in the catchment area. Compounding this is the 50% reduction of generating capacity at the Hwange thermal power station in the west of the country due to a lack of maintenance and development caused by incompetence and corruption – the power station is built on top of a vast, high quality, coalfield.

Back to the present

The black market exchange rate leaped several points and those outlets selling or marking their products closed for “stocktaking” whilst they figured out what to do. The government directed banks to return money to the Reserve Bank owed to external clients which could not be sent out (as it is in Zimbabwe dollars) thus removing money that could be changed on the black market for hard cash. The black market has since dropped several points as a result. The government has released a propaganda video explaining that having our own currency is a “good thing” even though nobody wants or trusts it. We owe Mozambique and South Africa some US$83 million for imported power and have no way to repay them. The passport office has no money to import the paper and ink to print the backlog of some 240,000 passports. All maize, the staple diet, has to be sold to the government owned Grain Marketing Board (GMB) and there has yet to be an announcement as to how much the local farmers will be paid for their crop which has just been harvested. Will it be equivalent to imported maize? The GMB has been instructed to put 750,000 tonnes of maize to import tender to make up the shortfall from last season’s harvest that was badly affected by poor rains. The President has announced that Zimbabwe has a stockpile of rhino horn and elephant tusks worth US$600 million that he wants to sell, presumably to fund some of the country’s debts, and wants CITES to allow us to do it. They must be horrified.

Will it work?

Attempts to directly control the value of any currency seldom succeed. Most currencies in the world are left to float and find their own value. The memories of the desperate shortages of 2007/8 are still fresh and the distrust of the new currency are deep so acceptance of it is going to be sketchy at best. I have yet to see any announcement of plans to print new notes – if we don’t have money to print new passports how will we have money to print new bank notes? Of course “printing money” these days is much easier than printing notes; a few keystrokes on a computer and suddenly there is a lot more “money” in the fiscus. As cash notes have become scarce so the electronic banking has taken over – mobile phone banking in Zimbabwe is ubiquitous so we have little need for large amounts of cash. However the local population is well aware of this and would prefer money-in-hand, preferably a type they know cannot be fiddled.

There is much more to economic recovery than having one’s own currency. Only a few nations have ever de-dollarized successfully and it requires economic stability to be in place – the Zimbabwean authorities seem to think that this stability will be a consequence of the introduction of our own currency.

The Market Watch website showing the effects of policing

Most people used one of three websites to keep track of the exchange rates over the past several months. One of the more popular ones is shown on the left (a screenshot of my phone on two separate days). I’m not entirely sure how they ascertained the various rates but it’s clear that they have become victims of government pressure as the image on the right only shows the official rate, after the introduction of the Zimbabwe dollar, which is indicated by the line USD/RTGS. OMIR stands for Old Mutual Implied Rate. Old Mutual is a South African banking/insurance group that has a significant presence in Zimbabwe. It is also listed on the London Stock Exchange so it’s possible to get an approximation of the value of the Zimbabwe dollar by comparing what a share is worth in both Zimbabwe and the UK. RTGS stand for Real Time Gross Settlement dollars i.e. electronic transfers. BOND refers to the cash notes that should be equivalent to the RTGS but are not due to short supply. If you find this confusing then you are in the majority.

Also in the news this week has been a report that the Auditor General has noted that Air Zimbabwe (rebranded Zimbabwe Airways) cannot account for the purchase or leasing of three of it’s aircraft; turboprop MA60s. The troubled airline owes US$30 million to foreign creditors and $292 million to various government companies. Getting into a mess of that magnitude must have taken considerable effort. The Auditor General released her report on state enterprises to parliament earlier this week and it makes for depressing reading, not least because very little will come of it.

So will we be heading back to trillion dollar invoices of 2009? It’s difficult to say. In a way I won’t be too upset if we do. It means that we could pay off the bond on our house for a few US dollars – something I missed out on doing back then. Anyway, my computer will be ready (I wrote the software specifically to deal with multiple currencies. The box on the left is an algorithm that converts large numbers to their spoken equivalent so that my staff could explain to customers how much money was owed).


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Categories : Economics