The Zimbabwe economy beetle

1 12 2018

The economy beetle

The Zimbabwe economy and this beetle have more in common than one might think.

They are both lying flat on their back.  Fuel queues have returned with a vengeance just 2 weeks after the last episode faded away and we breathe a sigh of relief. It turned out to be a temporary respite. Talking to a customer this morning he said that he’d pulled into a local filling station to be told that they were only accepting real US dollars (our local version is now known as “bond”) and that would be as international credit cards not cash, thank you.

The government insists that the local bond and the US dollar are still equal value but anyone, or should I say  everyone, knows that it is around 3:1. In a curious twist the local tax/revenue authority has announced that all taxes on revenue earned in US dollars must be paid in the same – even thought they are both officially valued the same. The accounting sector is flummoxed.

Neither has any idea how to get back on their feet.  President ED Mnangagwa’s international charm offensive prior to the recent general election was “Zimbabwe is open for business”. It drew a lot of interest as Zimbabwe is resource rich and potentially attractive to investors – an obvious way to get the economy going again. That all crashed in a bloody mess this past August when soldiers opened fire on protestors at a rally called by the opposition MDC Alliance to give vent at the blatantly fiddled results.

Both are hoping someone will be kind enough to help.  The beetle is pathetically waving its legs in the air, trying to get some purchase on the cement –  it has little chance of success. I don’t see any solution for the Zimbabwe economy either. The finance minister, Mthuli Ncube, has the dubious distinction of being in charge of the local Barbican Bank which collapsed a few years ago. He is also being advised by local economist Eddie Cross. Cross was a vocal supporter of the opposition MDC but now is a ruling party apologist. I have yet to hear him speak any sense. Back in 2016 when the local bond currency (so called because it was said by the government to be backed by a bond from the Afrexim Bank in Egypt) was introduced he predicted that the supermarket shelves would be empty within 2 weeks. They are not.

Everything is very expensive but Marianne (my wife) found Belgian butter on Tuesday at less the the price of local butter and half the price of a South African brand. At the time the Afrexim Bank would not provide details on the purported bond which was later discovered to be non-existent. The currency is based on an illusion. No-one can fathom why it still has any value at all. Perhaps the government is hoping it will collapse and then they won’t have to bother with it. Those people lucky enough to have an essential business with little or no competition are managing to successfully demand payment in US dollars and will likely survive. They are also taking the opportunity for a bit of price gouging.

My business is not one of these. I have a lot of competitors who are charging less in bond currency than I was charging in real US dollars 8 years ago. Given that fertilizer and chemical costs have more than doubled in the last 2 months I have no idea how they are going to replace them. I have had to slash my prices to compete and hopefully out-last them. I have enough raw materials and inputs for another 6 months or so – it’s going to be a nerve wracking process.

I picked up the beetle and put it on a patch of lawn where it quickly scuttled off. The Zimbabwe economy will not be so lucky.

 

 

 

 





The notorious MAPpers

27 11 2018

Making a plan with the blender

Zimbabweans are famous, some would say notorious, for being able to Make A Plan. You could say we are champion MAPpers.

When Zimbabwe was Rhodesia and under sanctions for Ian Smith’s UDI (Unilateral Declaration of Independence) from Britain, ingenuity thrived – it had to as precious little could be imported – so the tradition of MAPping was developed. We are no longer under sanctions and just about everything is imported thanks to the regime of the ousted Robert Mugabe who mismanaged the economy so effectively that very little is now produced in the country. The new government of Edison Mnangagwa has shown itself to be even better at spending money we don’t have so we are still furiously MAPping. The photo above is my effort for today.

1. The fertilizer. We use single super-phosphate fertilizer at the nursery as the supply for phosphorus in the coir growing medium. It’s much cheaper than the soluble forms so it’s mixed into the coir after the former has been expanded and washed by means of a locally made drum mixer. Because the cells in the seedling trays are small, a powdered form of the single supers as it’s known is preferred to ensure that it’s mixed uniformly into the coir so some will end up in every cell. The powdered form of the single supers is no longer available but I did manage to buy  some of an imported granular version which is more normally used for field applications as the granules are easily and uniformly distributed by machine. So I had to get creative with a blender/liquidiser.

2. The quantity. This is more important than one might think. Two of the plastic tubs seemed to be about right. More than this and the fertilizer was too heavy for the blender and it got hot and took a long time to shatter the granules into powder. Less and a large proportion of the granules were knocked out of the way by the blades and didn’t shatter.

3. The end product. Not as uniform as  the bought powder form of single supers but it will do.

4. The blade speed and time. The slowest setting for a minute worked well as did the highest speed for 30 seconds. It was interesting to watch the granules flow up the inside of the glass and then back down to the blades in a slow motion vortex. Not sure what this will do to the blades long term. They are not naturally very sharp but the single supers is quite dense and will definitely wear them down quicker than the average soup for which the machine was intended.

5. Cocoa. Essential drinking on a coldish, wet day.

Yes, the exercise was effective MAPping but it’s not viable for a lot of fertilizer – I think there’s another 150kg or so to do. I will have to ask my landlord, when he gets back, if he thinks a hammer mill (normally used for milling maize) will do the job. I did ask the ART Farm manager if he thought it would work but he was sceptical. There’s no rush – we are not remotely busy.

Ah, I nearly forgot, why do some consider us notorious MAPpers? Because instead of getting onto the streets and protesting about the appalling bad governance we just get on with Making A Plan to survive.





Open for business – sometimes

12 10 2018

Well I never, photo ops on stamps

The price spike when it came was as sharp and high as it was short. Last week a surprise announcement by the finance Minister triggered a slump in the exchange rate between local currency and the US dollar.

By Wednesday the value of the local dollar was 4 : 1 with the US dollar. Panic  buying spread to the supermarkets and taxi fares jumped 50%. I had managed to squeeze a pre-payment out of the company for whom we grow a large number of gum trees and dashed off to spend it. I was relieved to find that the fertilizer I bought had only doubled in price and I wondered what to do with the rest of it.

Yesterday I went shopping for roofing nails that we needed to finish off a carport for the new tenant in the cottage. The first hardware store I visited was shut. There were notices stuck to the doors but I did not bother getting out of the car to read them. The second store in the same shopping centre as the local Spar supermarket was also “Closed for Stocktaking” but they opened up when they saw me. The didn’t have the nails and were only accepting US dollars cash. The supermarket was closed

Closed for business

Only in Zimbabwe can one get a 90% discount

and Marianne told me that the previous day they were limiting items to one per customer – including toilet rolls. Panic buying was rife at other supermarkets that were said to be struggling with the influx of shoppers – nothing proliferates panic buying like panic buying.

On the way to work I visited another hardware store. They didn’t have quite what I wanted but we made a plan and I was given a 90% discount for using US cash. This is of course not comparable to the comparison between the local currency and US dollars in November 2008 but that had been years in development, not days.

On the way to the Central Sorting Office this morning to collect a parcel I attempted to get past a queue for fuel on Glenara South Avenue. Just as I thought I was making progress cars started to pass on my right and soon there was 4 lanes of traffic going one direction on a road designed for 2. Fortunately there was a road to a field on my right and I managed to get turned around and take the longer, but quieter, route.

The ladies at the sorting office asked me how I was. Resisting a facetious reply I answered in one of the few Zulu words I still know which translates to “I am here”. We agreed it was appropriate.

Getting back to the nursery I contacted Tony who has the keys to the fuel tank where I store the diesel I bought earlier in the year when there was another fuel shortage scare that didn’t develop into much. He told me his son, who follows these things, had told him the rate had dropped to 2 local dollars  to 1 US dollar and the whole spike had been driven by the government buying US dollars to pay off a debt the country owes. By 5 p.m. this afternoon my staff told me that the rate was 1.9 local to 1 US, down from 4.8 yesterday. Perhaps a sense of normality has returned but I suspect rates as reflected in the shops will not be this low – people will be very jittery and will want to maintain a buffer. I strongly suspect that some outlets will continue to demand US dollars.

Zimbabwe’s president, E D Mnangagwa campaigned with the slogan that “Zimbabwe is open for business”. I was unaware that he’d gone so far as to get the slogan put onto stamps with him schmoozing at Davos earlier this year with the likes of Christine Lagarde and the Chinese premier, among others. Investment has been slow in coming, not least because of the violent repression of protestors after the recent general election that was heavily slanted towards the ruling party, ZANU-PF. The past 10 days of chaos are unlikely to convince anyone that now is the time to invest.

On Wednesday there was a small horticultural expo at a local hotel. I went along hoping to pass out business cards and make a few useful contacts. It was a very small affair geared mainly towards the export flower market but I did have an interesting conversation with a French representative of the rose breeding company, Meilland. He recounted a meeting with the local French ambassador the previous day where he was told that there was considerable interest in Zimbabwe but potential investors were not ready to commit just yet. We may be open for business but investors are not convinced.

 





The Zim dollar is back (déjà-vu again)

7 10 2018

Who wants to look at picture of cars queuing at a fuel station?

“The bottom borehole is not working” is not the most encouraging announcement I want to hear on a Monday. The borehole in question is some 500m from my office and has  been a headache ever since I started my business. Originally it used a 3 phase motor which are more efficient than single phase motors but I got so fed up with the transformer dropping a phase to a low voltage that I swapped it out for a single phase motor. This means that if a phase goes low I can switch all critical motors onto a good phase relatively quickly with some simple wiring changes on the distribution box by my office (farming in Zimbabwe requires a good deal of DIY expertise). The cable to the borehole is not really large enough for the distance so if the supply voltage drops it can spell disaster for the motor. A quick test ascertained that the motor was drawing far too much current and probably was burnt out. We got it out the hole and I took it off to the supplier along with the warranty card that showed the it was to expire by the end of the week. I was advised that if I wanted a quick response to whether the motor would be replaced under warranty I should take it to the workshop in the industrial sites. Yes, they still had that model in stock and it was $380. The workshop people in town said they’d get back to me soon. On Tuesday there was a surprise announcement from the new finance minister, Mthuli Ncube, that bank accounts would be split into FCA (foreign currency accounts) i.e. real US dollar accounts earned from exports, and local money accounts. This is a tacit admission that the local money accounts are not in fact the same as US dollars even though they are listed as such. The local money immediately lost 10% on the unofficial market – the rate is now around 2.2 local dollars to US$1. Ncube also announced a new transfer tax on all electronic transfers of 2% starting at $2 to replace the old flat rate of 5c. Given that some 96% of all money transactions in Zimbabwe are electronic it is estimated that this will bring in some $4bn extra per year. This has already changed as of the time of writing with a lower limit of $10 being imposed. He also fired the entire board of ZIMRA, the local tax authority. There was no mention of how the government was going to reduce the budget deficit. By Wednesday we were running low on water at the nursery so I had to go and buy another motor for the borehole pump as I still hadn’t heard from the workshop. It cost me $430, up $50 from Monday. I decided I had to raise my prices at the nursery by 50% – still short of the estimated exchange rate but better than we had been. I have a lot of competition so I’ve been wary of hiking prices to realistic levels up until now. Other businesses around town have been less circumspect to the point of profiteering. Marianne went to buy some pharmaceuticals this week and they’d gone up 40% – US dollars cash! I priced a cordless drill at a local hardware outlet that had increased from $380 to $1030 in about a year. Some shops are no longer displaying prices on the shelves – you have to ask at the checkout or consult and easily changed list on the end of the shelf. Bread is now short and so is fuel. Pharmaceutical companies have stopped trading due to shortages of raw materials. Queues at fuel stations are blocking traffic. Apparently international trucking companies are taking advantage of the disparity between US dollars and local money by sending their trucks through Zimbabwe with just enough fuel to get into the country, buying local money with US dollars at 2:1 and then buying fuel with the local money. Do it this way and diesel costs about US65c per litre – way below what it costs to import. On Friday I got a call from the workshop – the motor had burnt out likely due to low voltage. Did I have one of their voltage protection units on the borehole? No I didn’t. Then the warranty was invalid. I was not surprised – like all forms of insurance they will look at ways to get out of paying. I have since put a 3rd party protection unit on the switch box – hopefully it will work. My seed supplier is not returning my calls. His secretary tells me he is trying to decide whether to charge US dollars cash for the seed or hike the local price. The former will be a disaster for my business which is already in the doldrums. We have a lot of gum tree seedlings for a local company charged with reforesting farmlands that have been denuded by farmers cutting timber for curing tobacco but we negotiated the contract in April. By the time we get paid in November and December the payment is going to be very small indeed. The future is not looking bright.

A very miniature mantis

                    And the roses at the top of the post? Like I said, it beats looking at pictures of a fuel queue. There is a neighbouring nursery next to mine that specialises in roses and over the weekend they had their annual charity open day. The roses were stunning – worthy of a diversion. The mantis? Well, it just called by this afternoon at tea time. The comparison with the hyper inflation of 2008 is obvious but this time the collapse has been much faster. It’s Tuesday now and over the weekend cooking oil (much used by Zimbabweans) prices have doubled and in some areas tripled. The public transport system is unreliable as many of the mini buses that ply the trade are in fuel queues. A friend who supplies agricultural chemicals has asked me if I want to trade diesel for chemicals I need. Yup, déjà-vu indeed.  




No quick fix

14 09 2018

“It’s one of the best shows we’ve had for a very long time” commented Merv as we walked into the show. He should know; he’s bee a stalwart of the Zimbabwe Orchid Society for many years. I had to agree. I do like to visit the biannual orchid show at the Mukuvisi Woodlands park in eastern Harare when I can and in the few years that I’ve been a regular visitor it’s the most spectacular show I’ve seen. It’s also nice to escape the depressing state of the nation for an hour or so and pretend that in some respects at least – we are normal.

Not much has happened since the election and in fact some aspects of the new government led by ED Mnangagwa are decidedly familiar. There a lots of new faces in the cabinet. The minister of finance really is an economist, the Minister of Sport is Olympic medalist Kirsty Coventry and the Minister of Health does not have the medical qualifications that he claims.

Professor Mtuli Ncube (a graduate of Oxford no less), the finance minister, is on record as saying he wants to clear Zimbabwe’s foreign debt as quickly as possible and wants to reintroduce the Zimbabwe dollar. There is no time limit specified for the latter – a wise decision. The last version of the Zimbabwe dollar was officially abandoned in February 2009 in favor of the US dollar when the former became worthless due to the second highest inflation in history. I really don’t see the point of this; it will simply replace our infamous bond dollar with another of a different name. The black market will still exist and nobody will trust the new currency such is the level of distrust in the system. Some say we should adopt the South African rand being that South Africa is our neighbor and biggest trading partner. However, there are simply enough rands to support the Zimbabwe economy and it is by no means clear that South Africa will agree. Of course a currency must be based on something which in our case is our exports as the manufacturing base collapsed with the Zimbabwe dollar and is still moribund. Export horticulture is the hot ticket to get into but takes some years to build up export crops and recover the farms neglected under ex-president Mugabe’s ruinous land redistribution policy. No quick fix there. Mining, another mainstay of the economy is also down and will take some time to build up pending investment from outside the country. It was also not immune from Mugabe’s policies – one of my foreman’s sons did his accounting attachment at a German run graphite mine in the north east of the country which was shut down for some time last year because of political “issues”.

At the last count 28 people have died from the current cholera outbreak – mainly in Harare. Such is the state of the economy that the finance minister has launched a crowd funding exercise to raise money to treat the outbreak. It is unlikely to have a lot of success given the controversy over new vehicles for ministers and the public’s mistrust of all things governmental.

Obadiah Moyo, the new health minister, whose claims to various medical qualifications have been questioned has certainly got his work cut out with the new cholera outbreak. What is certain is that he did successfully run the Chitungwiza Hospital for several years. Someone I know went there last year and said that although it was threadbare it was clean and functional. Perhaps we should give him the chance to prove himself. Good luck to him – he’ll need it.

Kirsty Coventry has several Olympic swimming medals to her name but I’m not sure how that qualifies her to be the Minister of Sport. Cricket, once a source of national pride, is in disarray after the recent firing of the entire coaching team for not getting the playing team into the World Cup. A crucial match was lost due to rain causing a complicated, and some say unfair, formula being implemented to calculate the winner. Corruption is rife and players are demoralized. And that’s just cricket. Good luck to her too.

Droughts are a perennial problem in southern Africa and it looks like the coming rainy season (November to March) is at best going to be erratic. An el Niño weather condition is nearly a 70% likelihood for our summer – not a good sign. At our house in the suburb of Mt Pleasant we have not had municipal water since we moved in just over 18 months ago. We had our borehole tested earlier in the year and were told it could handle 900 litres an hour – adequate for domestic purposes. A tank have been installed to catch water from the washing machine and another 5,000 litre rainwater tank is planned to add to the two others we already have. The borehole is only 40m deep which is shallow by Harare standards so we are not confidant it will last especially as I see a lot of green verges being heavily irrigated further up our road. Fortunately our hole is 180mm diameter, large enough to get a drill down if we need to go deeper assuming there is water to be found by drilling deep.

We visited my sister in June in the USA – She lives in Spokane in Washington State. A friend of hers asked me if we in Zimbabwe thought the USA “crazy” – she was referring to the Trump administration. I replied that we were just to busy trying to survive in Zimbabwe to view the Trump administration as anything more than entertainment. No, we are in this for the long term – no quick fix to this particular mess.





Voting is done – now where?

30 07 2018

Voting Zimbabwe style

I got the text message on Wednesday last week instructing me to go to a local elementary school to cast my vote in the general election. It even had the queue number to join and it came from the Zimbabwe Electoral Commission.

One of the few advantages of being physically disabled is that I don’t have to join queues so having located the hall where I needed to cast my vote I simply walked up to the door and the policewoman there waved me to the desk inside to start the process. It was all very orderly if a little slow. My ID was checked against the register and my name and photograph crossed out. The little finger on my left hand was fastidiously marked with a black felt tip pen all around the nail (a friend said he washed his off very easily later) and the three forms, colour coded and different sizes were explained. I went off to the cardboard booth, marked my choices and posted them in the relevant boxes. Then I waved to an observer whom I knew and walked outside. That was it.

The last election was held in 2013 and was much less organized and less well attended. One could vote anywhere and it was simply necessary to drive around and find the polling station with the fewest cars parked outside. The queues where I voted were long and everyone was standing around and talking, some had bought chairs and cooler boxes of refreshments. I got the impression that most people were young and quietly determined to have their say. Whilst the urban votes are expected to go to the offical opposition MDC coalition, the rural votes are expected to go to the ruling ZANU-PF and most people live in the countryside. We will have to wait until Friday to find out just how close the result will be. All the indicators are that the presidential vote will be close – if there is not a clear winner (neither gets more than 50%) a runoff vote for the presidency will have to be held.

News reports at this stage agree that the voting process was peaceful but in some cases badly disorganised. The EU observer mission was more critical than the regional SADCC observers. The counting has started so now we wait.





Waiting to see – as we usually do

26 07 2018

Heading towards the worst month in the nursery since 2009. Will it change after the election?

We’ve done a  lot of waiting and seeing in Zimbabwe but this is arguable the most crucial one. There’s a general and presidential election on the 30th of this month and the outcome really will define the foreseeable future of the country.

After a slow start the campaign for all concerned has got into high gear. Trees, lampposts and walls everywhere are festooned with posters for the hopefuls – and there are many of them. Not surprisingly politics is seen as the path to easy wealth and everyone wants a share. By far the most expensive campaign has been by the incumbent party (ZANU-PF) and the current president E.D. Mnangagwa who is usually just known as ED. His visage is on billboards throughout Harare often with the slogan “Zimbabwe is open for business”. Indeed, he has been saying all the right things that might interest investors including scrapping the 51% indigenous ownership of foreign based companies, compensation for commercial farmers (mainly white) who were kicked off their farms by the Mugabe regime and a free and fair election. Anyone is welcome to come and observe the elections and indeed on Wednesday I saw an EU observer team vehicle parked in town. ED has come across so far as supremely confident that he and his party will win the election without any obvious subterfuge. The key word of course is obvious because, as always in Zimbabwe, all is not as it seems.

The Zimbabwe Electoral Commission (ZEC) which is responsible for organizing all aspects of the election is most certainly partisan to the ruling ZANU-PF. Among their transgressions have been not releasing an electronic voters’ roll to the opposition parties, not listing presidential candidates in alphabetical order (ED’s name and photo is top thus biasing his chances), making the voting form a double sheet of paper (it should be single) and saying they are not answerable to anyone. The head of the ZEC has also been photographed wearing ED’s trademark Zimbabwe colours scarf and wouldn’t say when the photo was taken. Ghost voters abound on the roll some of whom are evidently the oldest people in the world. Whilst the bio-metric voters roll was put together in a rush and errors were bound to crop up people are wondering if they will be corrected in time for the poll.

The most credible opposition is the MDC Alliance. Once the MDC (Movement for Democratic Change) was a single party but I have lost count of how many factions there now are. For the moment they seem to have patched over their differences and their presidential candidate is one Nelson Chamisa who has impressed me not at all so far. He seems prone to making silly campaign promises such as a high speed train that will link the capital Harare and Bulawayo the second city in the south of the country. Given that is 450km that will make it the fastest train in the world. That aside he has been touring the country and if the pictures are to be believed the stadiums have been packed. The colour of choice for the MDC Alliance is red which does rather remind me of the EFF (Economic Freedom Fighters) party in South Africa which is known for it’s extreme views on taking land without compensation. It’s headed by the firebrand Julius Malema who has a very thin grasp of economics and models himself on the late Hugo Chavez. I hope that the colour is the only thing in common between the MDC and the EFF.

What I have not heard from any political party is any coherent policy to alleviate the critical cash shortage. The head of the central bank has stated that after the election he will flood the country with US dollars to put the black market traders out of business. Quite where the money will come from has not been stated.

The currency black market is flourishing at a level reminiscent of the Zimbabwe dollar days. My friend Shelton, who is also my French teacher, tells me that the currency traders are openly trading in the centre of Harare (he also tells me that the marijuana dealers are also trading openly but that’s another story). There are several rates depending on what is being traded. Bank transfers for US cash commands about 1.8 or more to US$1 cash. Bond notes, the Zimbabwe equivalent to a US dollar but only valid in the country, trade at about 1.6 or 1.7 to US$1 cash. Mobile banking on a cell phone is about the same as a bank transfer. Apparently there is no shortage of of either type of cash which is curious given that it is vanishingly rare in the shops and banks.

About 2 weeks ago a rumour did the rounds suggesting that the central bank was going to start issuing Zimbabwe dollars again. This started panic buying of US dollars cash and the rate, which had been stable for about 8 months, started to run. I wouldn’t be surprised if the rumour was started by those with the cash (both types), who are known to be the political fat cats, to force a run on the rates before the election.

All my accounts, both company and personal, are in US dollars – it says so very clearly at the top. We all know that they are not US dollars as we cannot go to the banks and get any and the “street rate” is fast closing on 1:2. This is going to pose a major problem for whoever wins the election. Zimbabwe imports a lot of goods, mostly from South Africa, and prices have gone up because those who are doing the importing are doing so at inflated rates. I bought a sheet of plywood this week to put in some extra cupboards at the office and it had more than doubled in a year. I paid by debit card so that would go into the seller’s bank account and immediately be registered as US dollars. Assuming that we do revert to “real” US dollars after the election those who have been charging at the street rates stand to have made a lot of money. I deal in seedlings and when the rates started to run towards the end of last year tried to put up my prices. My customers raised merry hell and I had to bring them down again or risk losing customers. That they put up with increasing prices elsewhere for chemicals, hardware and general cost of living didn’t seem to bother them as odd.

The public’s mistrust of the banks and the banking system is profound so that any cash released into the banking system will soon be mopped up by withdrawals that most certainly will not be redeposited and we’ll end up with a cash shortage of the type we’re experiencing now. I don’t see how this can be solved in the short term. The nation has made significant progress towards becoming “cashless” – payments are made using debit cards and a number of mobile phone platforms. As a result I have little need for cash but I would like to have the choice of using it if I want to.

As I write this the election campaigns are running furiously. The incumbent president, ED Mnangagwa, has gone so far as to woo the white electorate with a purpose-designed rally at Borrowdale racecourse in Harare. He must be feeling a bit nervous to go to that effort; there are very few whites left in the country and their vote is all but inconsequential. I predict a close result. Quite what the military, who were instrumental in removing Mugabe from power and installing ED will do if the opposition wins remains to be seen. Will they throw their lot in with the MDC and Nelson Chamisa? They must be only too aware that should the MDC win they and others in ZANU-PF may well be held accountable for their sins in violent election fixing in past elections. As usual, we will wait and see.