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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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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