Zimbabwe hiked fuel prices by around half on Tuesday, the second sharp rise in four months, a day after the central bank effectively removed a subsidy by ending oil importers’ access to U.S. dollars at a favourable rate.
The fuel price rise, likely to push up the country’s soaring inflation rate, was accompanied by a plunge in the country’s RTGS dollar - which posted its biggest one-day fall against the U.S. dollar on the interbank market.
Oil firms started buying dollars on the interbank to import fuel on Tuesday, having previously been allowed to use a 1:1 dollar to RTGS$ rate.
The latest price increase had been expected. It followed a 150% fuel price hike in January, which sparked violent street protests and led to the death of a dozen people after a harsh security crackdown.[nL8N1ZE26M]
The Zimbabwe Energy Regulatory Authority (ZERA) said in a circular that diesel would now cost RTGS$4.89, up from RTGS$3.26, and petrol RTGS$4.97, compared with RTGS$3.38. It had earlier on Tuesday denied plans to increase the price of fuel.
The Reserve Bank had been under pressure to remove the fuel subsidy, with economists saying some fuel companies were accessing cheap foreign currency and selling it on the black market instead of importing fuel.
Traders at three commercial banks said the RTGS$ had weakened to a low of 4.6 against the greenback compared to 3.5 at the opening of trading on Tuesday, its biggest drop in a day since the interbank was launched on Feb. 22.
“We are still in a period of price discovery since the central bank said the exchange rate should reflect the market. It is still a buyers’ market and no sellers are coming in at this rate,” said a trader at a commercial bank in Harare.
On the black market, the RTGS$ was trading at 6 to the dollar, having come off highs of 6.3 last week Friday.
The fuel price hike will likely trigger another round of price increases in a country where the inflation rate reached 75.86% in April, the highest in a decade.
“On one end it is good that the fuel price now reflects the official exchange rate but the downside is that it will impact every cost in the country and put pressure on wages,” Harare-based economist John Robertson said.
The interbank market was meant to encourage businesses and individuals to trade foreign exchange using official channels and improve the flow of dollars.
But this did not happen, with traders accusing the central bank of manipulating the exchange rate, which forced many Zimbabweans to trade for dollars on a thriving black market.
The dollar crunch has led to prices of basic goods soaring. Some businesses charge for their goods in U.S. dollars to cushion themselves against the weakening local currency.
Treasury’s permanent secretary, George Guvamatanga, said the government would subsidize public transport and that the state bus company would charge a maximum of RTGS$1 for local trips to cushion commuters from the effects of the fuel price hikes.
Zimbabwe has started rolling power cuts lasting up to eight hours that will also hit mines, a schedule from the state power utility showed on Monday, after reduced output at both the largest hydro plant and ageing coal-fired generators.
The power cuts will add to mounting public anger against President Emmerson Mnangagwa’s government as Zimbabweans grapple with an economic crisis that has seen shortages of U.S. dollars, fuel, food and medicines as well as soaring inflation that is eroding earnings and savings.
The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) said power cuts, known locally as load shedding, would start on Monday and will last up to eight hours during morning and evening peak periods.
"The power shortfall is being managed through load shedding in order to balance the power supply available and the demand," ZETDC said in a public notice.
Isaac Kwesu, chief executive of Chamber of Mines, which groups Zimbabwe’s biggest mining companies, did not answer his mobile phone when contacted for comment.
Mining accounts for more than three-quarters of Zimbabwe’s export earnings and any power cuts in the sector will affect production and exports.
In the past, some of the big mines, including platinum and gold producers, have resorted to directly importing electricity from neighbouring countries like Mozambique and South Africa.
Zimbabwe last experienced its worst power shortages in 2016 following a devastating drought.
The southern African nation, which is producing 969 MW daily against peak demand of 2,100 MW, is entering its peak winter power demand season, which will increase electricity consumption.
Minister of Energy and Power Development Joram Gumbo was quoted by a local newspaper saying he would travel to Mozambique this week to try to agree an electricity supply deal with that country’s power utility Hydro Cahora Bassa.
Zimbabwe's government has reacted swiftly and ordered bread-makers to reverse a 50% bread price hike that had been effected.
Information, Minister Monica Mutsvangwa told journalists at a post-Cabinet press briefing that government had frowned at the increase that she said suggested a sinister agenda to "dampen the mood of the nation" ahead of independence celebrations.
"The Minister of Industry and Commerce presented to Cabinet a letter by the Bakers Association of Zimbabwe, stating their intention to immediately hike the price of bread without any recourse to consultations with the Government as is the normal procedure," Mutsvangwa said.
Bakers increased the price of a loaf of bread from RTGS$2 to RTGS$3 early Tuesday following a decision by government to increase the price of grains by 70 percent last week.
Cabinet according to Mutsvangwa believed the increase had ulterior motives.
"Of particular concern to Cabinet also is the timing of the planned price increase, which is coming exactly two days before the national Independence celebrations. Such a move, whether by design or otherwise, certainly has the effect of dampening the mood of the nation.
"Furthermore, the unilateral action does not bode well to ongoing efforts by Government to engage in dialogue with all stakeholders, business included, with a view to creating a stable environment where businesses can compete and thrive," the government spokesperson said.
President Emmerson Mnangagwa according to Mutsvangwa remained open to discussions on a possible solution to the crisis.
"It can be recalled that on 29 October 2018, His Excellency President Emmerson Mnangagwa met with business leaders at State House where he stated that Government has an open door policy and stands ready for any engagement and consultations in order to ensure that the economy stabilises.
"As such, unilateral price hikes, particularly on basic commodities that our people cannot do without is not in consonance with the spirit of mutual engagement that Government is encouraging," she said.
Then the order: "Cabinet, therefore, calls on the Bakers Association of Zimbabwe to defer the planned hike in the price of bread in order to allow the normal mutual consultations to take place.
"The consultations are aimed at facilitating a clearer understanding of the issues of concern and to explore solutions thereto."
According to Mutsvangwa government also released 20 million litres of fuel into the market to ease crippling shortages that have seen the continuation of queues.
Source: New Zimbabwe
It is in South Africa's interest to see a thriving and stable Zimbabwe. A collapse of its neighbour's economy would probably see an influx of legal and illegal migrants into South Africa – a situation that could fuel xenophobia and further strain service delivery.
Yet there has been a bewildering contrast between South Africa's messages of solidarity and its inaction where it matters. On the one hand, President Cyril Ramaphosa's government has maintained its support for President Emmerson Mnangagwa's administration. South Africa was the first to congratulate him on his electoral victory in August 2018. This has been followed by spirited calls for the unconditional lifting of sanctions and restrictive measures placed on Zimbabwe nearly two decades ago.
On the other hand, South Africa has come short of providing what Mnangagwa urgently needs: a financial bailout. The just-ended Zimbabwe-South Africa Bi-National Commission session – the third since the inaugural session in 2016 – might have put paid to the many rumours that South Africa would provide Zimbabwe with a much-needed cash injection. Instead, it ended with a joint communiqué that reads more like a political statement of solidarity with little in terms of relief for its cash-strapped neighbour.
Established during the tenure of former presidents Robert Mugabe and Jacob Zuma, the commission has been little more than an annual symbolic gesture of friendship between the two. Ramaphosa's team sent ahead of the Bi-National Commission engaged in robust meetings with key players in the private and public sectors presumably to try to establish how South Africa could help its beleaguered neighbour.
While the decision to not bail Zimbabwe out is probably based on practical economic calculations, the anti-sanctions rhetoric is a different matter. A cursory view of the anti-sanctions call might lead one to the conclusion that lifting sanctions would grant Zimbabwe access to lines of credit from the international market and thereby ameliorate its currency crisis.
However, considerations for South Africa are as much political as they are economic. Sanctions imposed on Zimbabwe by Western countries relate to the blatant human rights abuses of the Mugabe regime. South Africa's anti-sanctions position could also be interpreted as a general stance – shared by the wider Southern African Development Corporation (SADC) region – against sanctions in general.
The ‘sanctions must fall' mantra should be seen as a distraction from the economic mismanagement of the past three decades. Even Mnangagwa has said the ZANU-PF government shouldn't use sanctions as an excuse for the country's economic woes.
So why has South Africa taken up the ‘sanctions must fall' mantra while staying silent on the human rights abuses, killing of protesters and a heavy-handed clampdown on civic space during the January fuel hike protests?
South Africa is wary of being perceived as aligning with the West, especially the United States (US). The US government has been vocal and forthright against the Mnangagwa regime's use of force against protesters to the extent of renewing sanctions for another year.
Offering the Zimbabwe government unqualified support becomes an opportunity for South Africa to demonstrate its international foreign policy independence and to shore up against "invasive" Western neo-colonial tendencies.
At the same time, well aware of the depth of Zimbabwe's economic and currency crises, South Africa knows that giving bilateral aid of $1.2-billion wouldn't necessarily stabilise its neighbour's economy. Without addressing the enduring currency crisis, any bailout would be sucked into an economic black hole just to have Zimbabwe requiring more. The shortage of hard currency only begets more shortages.
The Zimbabwean government needs foreign currency for consumer goods, including for the procurement of fuel and wheat, as well as to service debt, which the finance minister estimates to be around $16bn.
The recently introduced interbank foreign currency trading system has so far not been able to address the foreign currency shortage. The real-time gross settlement (RTGS) dollar continues a steady depreciation against the US dollar from the 1:2.5 at its introduction to 1:3 in six weeks.
Worse, the floating of the RTGS dollar has not engendered confidence in the monetary system. On the black market, the RTGS dollar continues to plummet weekly and inflation is on the rise. Prices of basic commodities such as bread have risen steeply. There is still no guarantee against arbitrage and policy somersaulting from the cornered government.
Further, a bailout would put South Africa in an invidious position. South Africa is itself in the throes of economic stagnation emerging from sluggish growth of 0.8% in 2018. The country's unemployment rate is currently hovering above 25% – one of the highest in the world.
The recent worsening of power cuts only plays into an already volatile domestic situation. Any talk of bailing Zimbabwe out would probably elicit a backlash from the restive population already prone to xenophobic tendencies towards citizens from neighbouring states. The African National Congress can ill afford to antagonise citizens any more in an election year.
Strong parallels can be drawn with the situation in South America where South Africa has been supporting Nicolás Maduro Moros's government in Venezuela against the machinations of the US's Donald Trump administration.
While the matter forming the basis of the Zimbabwe crisis is different from Venezuela, the geopolitical script plays out in the same way. South Africa is choosing the course of solidarity with the "besieged".
As Zimbabwe's economic and political situation continues to teeter on the verge of chaos its southern neighbour seems to be taking a considered approach to the crisis. The dilemma for SA is that without a cash infusion, the economic crisis will worsen, and a worsening economic situation will probably result in more protest and civil unrest. The Mnangagwa administration has already shown itself only too eager to approach protest with force and brutality.
This pushes South Africa further into an unenviable choice between principle, as enshrined in its Constitution, and the realities of geopolitics. It remains to be seen for how long South Africa will give Zimbabwe a palliative response before the wheels come off.
Ringisai Chikohomero is a researcher, Peace Operations and Peace Building Programme, Pretoria
President Emmerson Mnangagwa's government, has begun registering former commercial white farmers who lost their land under the chaotic land redistribution exercise.
In a statement Sunday, the Ministry of Lands said it was identifying and registering former white farm owners who want to participate in the interim advance payments scheme. The scheme according to the statement is targeting those "in distress."
The programme is being coordinated by Commercial Farmers Union (CFU) and the Compensations Steering Committee (CSS) representing former farm owners according to the statement.
"The ad-hoc Compensation Working Group, comprising government officials and the representatives of former farm owners, is currently working towards the compensation and establishing the compensation quantum figure for farm improvements based on an agreed method of valuation," the Ministry headed by former Air Force chief Perrance Shiri said.
The statement added that the latest move reflected government's commitment to settling its side of the bargain.
"Given the significant progress made to-date, it is anticipated that this comprehensive farm improvements valuation will be completed by end of May 2019.
"Reflecting government's commitment to compensate former farm owners, for farm improvements and recognising that a larger number of farmers are still to be compensated government allocated RTGS$53 million in the 2019 National Budget for interim advance payments," said the statement published in the State media.
"These interim advance payments will be made to former farm owners affected by the land reform programme and who are in financial distress."
In a separate statement the CFU said it has developed a form which applicants will complete. The form according to the statement does not jeopardise future claims for full compensation.
"As this is a limited fund, it is hoped that those who are not in financial distress do not take up the offer so as maximise the effect on others not so fortunate," said CFU.
"Whether you take it up or not, does not alter your rights to be compensated in any way, except that what you receive now will be deducted from your final computation."
In his inauguration speech in 2017 President Emmerson Mnangagwa, promised to compensate over 4000 former white farmers whose land was forcibly taken away under the fast track land reform program. While the former farm owners have been demanding full compensation, government has passed a law that provides for payment in respect of developments only.
Credit: New Zimbabwe
The Zimbabwean government has brought back the Chinese to the Chiadzwa diamond fields, three years after former President Robert Mugabe drove them out on allegations of looting.
Chinese-owned Anjin was expelled by government on February 22 2016, along with Mbada Diamonds, on grounds that their special grant licences had expired. Prior to that, Mugabe had accused them of massive leakages and smuggling the gems out of the country. Now under President Emmerson Mnangagwa, Anjin and Russian diamond mining company Alrosa will spearhead the government’s target of raising at least US$400 million in revenue by the end of 2019.
They will form partnerships with the Zimbabwe Consolidated Diamond Company (ZCDC). “Anjin, which used to operate in the area, is now back on the ground. We expect that it will commence production, at the latest, by end of May. We are looking at it being a significant producer in that regard,” said mines and mining development minister Winston Chitando.
The Russians and Chinese – Zimbabwe’s “all weather friends”, key to the Mnangagwa administration – take up the diamond fields after neighbouring Botswana passed on an offer tabled by Harare.
As part of Zimbabwe and Botswana’s bi-national relations, Harare initially tabled an offer that would have seen Botswana give Zimbabwe a US$500 million loan facility – which is a US$100m more than the year-end revenue target. In return, Botswana would mine diamonds from Chiadzwa.
However, Botswana said that due to budgetary constraints, Gaborone would not be able to support the proposed Diamond Backed Loan facility.
Since the diamond find in 2005, it had been expected and targeted that the mineral would revive Zimbabwe’s ailing economy that was under targeted sanctions owing to human rights abuses and disbanding of the rule of law. However, the local community was only left with unfulfilled promises and human rights watch organisations accuse the government of using the diamond revenue to prop up the regime.
(Source, Sunday Times)
There is a commonly held view that Zimbabwe used to be the breadbasket of Africa, although the specific timeframe in history is usually unclear.
This vague narrative gives an impression that Zimbabwe lost its “breadbasket” status during former President Robert Mugabe’s tenure. While Mugabe’s land reform programme seemingly contributed to a decline in Zimbabwe’s agricultural output, there’s limited evidence to suggest that the country was a dominant player in Africa’s food production prior to that period – at least from a staple food production perspective.
Zim’s production never topped 10% share
A country should be able to meet its staple food consumption needs and simultaneously command a notable share in exports of the same food commodity to be considered a “food-basket”.
Looking at the production data of the key staple foods maize and wheat, Zimbabwe’s production of these commodities has never surpassed a 10% share on the continent over the past 55 years. (Note: The Food and Agricultural Organisation of the United Nations started recording African agricultural statistics in 1961.)
While that is the case, a closer look at the data paints a fuller picture.
For example, in the two decades prior to Mugabe’s leadership (1960–1980), Zimbabwe contributed an average share of 6% of Africa’s maize production, almost at par with Nigeria, but lower than Kenya’s contribution of 7%. During that period, Zimbabwe’s maize production outpaced consumption by an average 400,000 tonnes a year – making it a net exporter.
During the first half of Mugabe’s rule (1980–2000), the country’s maize production contributed a share of 5% to Africa’s output. While it was a net importer in most years, on average, the country remained a net exporter of maize, with a declining maize trade balance (the difference between a nation’s exports and imports).
The decline in Zimbabwe’s maize production and trade balance worsened following theintroduction of the country’s Fast-Track Land Reform Programme in 2001.
The country’s share of maize production on the continent dwindled to an average of 2% between 2001 and 2016. During this period, Zimbabwe’s maize consumption outpaced production by an average of 550,000 tonnes per year – turning it into a net importer.
Wheat and other grain commodities present a similar trend in Zimbabwe’s contribution to Africa’s food system.
Fails to fit idea of food-basket
The available data, which covers three distinct phases in Zimbabwe’s agricultural sector, suggests that the country was self-sufficient before and in the two decades after Mugabe came to power.
Even then, Zimbabwe’s maize and wheat output were generally modest and volatile. It wasn’t sufficient to support strong exports to the rest of the continent and world – which fails to fit the idea of a food-basket.
In the third phase, the country’s maize and wheat production significantly declined, which further weakened Zimbabwe’s standing in the continent’s food system.
Overall, we view Zimbabwe as a self-sufficient food producer prior to its land reform programme. However, there is limited evidence to support the notion of Zimbabwe having ever been “the breadbasket of Africa”.
Wandile Sihlobo is an agricultural economist at Agricultural Business Chamber (Agbiz). Additional reporting by Sifiso Ntombela, trade economist at Agbiz and Ph.D. candidate at the University of Pretoria.
The Ministry of Energy has blocked a plan by South African-owned Mining, Oil and Gas Services Company (MOGS) to construct a US$1 billion 550-kilometre fuel pipeline from Beira to Harare, arguing that the sector is oversubscribed and has no space for new players, an official has confirmed.
Zimbabwe's fuel sector, often described as opaque, is dominated by Sakunda Holdings which is owned by businessman Kudakwashe Tagwirei. The company also has interests in Puma, which is owned by Glencore and Trafigura
According to government sources, MOGS' bid to build a second fuel pipeline collapsed at a meeting held in December last year where the Ministry of Energy reportedly proposed a new fuel pipeline from Namibia to service the southern parts of the country.
Tagwirei, whose company controls the Beira to Harare pipeline that supplies Zimbabwe with most of its fuel, is allegedly blocking the construction of the second pipeline that is earmarked to go as far as Botswana.
Sakunda recently invested US$11 million into the refurbishment of the Beira-Feruka oil pipeline, and is jointly running the pipeline with the National Oil Infrastructure Company (Noic) as it recoups its investment.
Sakunda has enjoyed a monopoly over the pipeline, a move that has drawn the ire of other players.
MOGS, which has the backing of President Emmerson Mnangagwa's advisor Chris Mutsvangwa, has been pushing for a deal to build a second pipeline but some politicians have been reportedly blocking it.
Mutsvangwa, who has been vocal about dismantling Sakunda's monopoly in the fuel sector, approached Mnangagwa with a proposal to have MOGS build a second pipeline. The presidential adviser has been actively promoting the MOGS deal alongside former MDC legislator Eddie Cross.
In the meeting held in December, MOGS representatives were told that Zimbabwe was already getting sufficient fuel supplies through the existing pipeline, therefore there was no need to build another pipeline.
Speaking to the Zimbabwe Independent, the permanent secretary in the Ministry of Energy, Gloria Magombo, expressed government's reluctance to allow a new player into the fuel sector.
"So far, government is satisfied with the manner that Noic has operated the pipelines. There are no plans to bring other players to run the existing pipeline other than Noic," said Magombo.
While government argues that the pipeline is run by Noic, Sakunda has enjoyed a monopoly over the strategic facility.
Magombo was unavailable for further comment on Sakunda's monopoly over the pipeline although she had promised to respond. Energy Minister Joram Gumbo's phone was being answered by his aide who said he was busy. The MOGS deal was initially tabled in 2009, but failed to take off due to resistance from former president Robert Mugabe.
Tagwirei was also in partnership with Mugabe's son-in-law Simba Chikore in the controversial Dema Power Plant project which was producing electricity through diesel-powered generators for sale to Zesa at exorbitant prices in 2017. Zesa was making advance payment for the electricity.
MOGS proposed to construct a pipeline with capacity to move 500 million litres of fuel in the country compared to the 110 million litres supplied through the Sakunda-controlled facility.
MOGS was also promising Zimbabwe six months' steady supply of fuel and to provide government with foreign currency to assist in stabilising the economy.
Magombo said government had received numerous unsolicited proposals from potential investors in the energy sector.
"Besides MOGS, government received numerous unsolicited proposals from other investors who also wanted to invest in the fuel infrastructure. In all the instances, discussions are held in confidence and neither party can disclose such discussions without the express authority of the other," said Magombo.
Presidential spokesperson George Charamba last year said there were no laws impeding new players from venturing into the fuel sector, saying the only way to stop Sakunda's monopoly was to get a new player.
The pipeline from Beira to Mutare is owned by a Mozambican company, Companhia do Pipeline Mozambique (CPMZ), while Zimbabwe pays for the use of the pipeline up to Feruka.
The second part of the pipeline, which runs from Feruka to Harare, is owned by the Petrozim Line (Pvt) Ltd (PZL), a company 100% owned by the government.
Zimbabwe has endured crippling fuel shortages which are likely to be worsened by the devastating Cyclone Idai which has reportedly destroyed port facilities and fuel pump infrastructure in Beira.
Source: Zimbabwe Independent
Cyclone Idai, which struck the coastline of Mozambique on 14 March, has caused devastation and heavy loss of life.
The UN says 1.7 million people in Mozambique lived in the path of the cyclone, with a further 920,000 people affected in Malawi and many thousands more in Zimbabwe.
So how common is extreme weather in southern Africa, and were these countries sufficiently prepared?
Tropical cyclones in this part of the Indian Ocean are not that rare. Most form in the central Indian Ocean, sufficiently far enough off the coast for some preparations to be made.
Cyclone Idai was unusual in that it formed in the Mozambique Channel, close to the coastline, giving governments and aid agencies less time to issue warnings and make plans.
"The cyclone was by no stretch of the imagination the most powerful... but what made it so devastating was where and how it hit," said Clare Nullis, spokeswoman for the World Meteorological Organization.
"The ocean floor along the coast by Mozambique is conducive to give storm surges, which reached roughly 3.5m-to-4m in the coastal city of Beira - which is absolutely huge."
The low-lying coastal areas of central Mozambique are highly vulnerable to natural disasters but the budget for preparing and responding to them is very small.
Last year, the government received support from international donors for a disaster fund of $18.3m (£13.9m) for 2018 and 2019. This contingency plan is the main source of funding for any disaster response and is intended specifically for search and rescue within the first 72 hours.
For a major disaster such as Cyclone Idai, most of the funds for recovery and reconstruction are raised after a disaster has struck.
And even without this latest emergency, Mozambique was facing economic strains as a result of a controversial loan deal in 2016 which resulted in a suspension of some international donor aid to the government.
How much warning?
The meteorological office of Mozambique, Inam, issued weather alerts as the storm developed. Three days before the cyclone struck, the government raised the alert to the highest possible level, telling people to evacuate threatened areas.
Some people were moved out by boat beforehand, but many didn't respond to warnings or weren't aware of them.
"These public alerts were made in a timely fashion but it's always down to actors along the chain to decide how to act on this type of information," says Joao de Lima Rego, an adviser at Deltares, a research organisation focusing on coastal regions and river basins that has helped develop a forecasting system in Mozambique.
As part of the forward planning for severe weather, safe zones had been created in rural areas for evacuation above the flood plain. On this occasion, however, the flooding was far more severe than anticipated.
Preparations in urban areas
The port city of Beira, with a population of half a million, had introduced measures to strengthen resilience to cyclones and flooding.
Preparedness has focused on drainage systems, says Dinis Juizo, associate professor of hydrology at the University of Eduardo Mondlane in Maputo. Drainage canals and flood-control protection, such as a large water basin, have also been introduced.
However, much of the population of Beira outside the city centre live in informal housing often made of materials unable to withstand severe weather.
"The level of investment has not been high enough for an event of this scale," says Dinis Juizo.
Malawi and Zimbabwe
The storm that eventually became Cyclone Idai had caused deaths in Malawi, to the north of Mozambique, in early March.
People in lowland areas were warned, but because warnings about flooding and rainfall are an annual occurrence during the rainy season, many people were reluctant to move and didn't anticipate the extent to which the country would suffer.
In Zimbabwe, there were also warnings about the approaching storm.
But Zimbabwe's Minister of Defence, Oppah Muchinguri, has said her government failed to anticipate its strength. By the time the storm reached Zimbabwe it had weakened considerably and was no longer a tropical cyclone.
Nevertheless, it had a severe impact on the eastern regions of the country.