Gentlemen and ladies

we are all affected one way or the other by the current economic tamoil in zimbabwe. whether you inside or outside of zimba you simply can not escape the man made economic and political instability that has existed for the last four years.

this crisis is man made in the sense that if the govt really wanted they could have tried to counter the economic and political decline with prudent policies. but not so, they encouraged the decline and in the process accumulated wealth by dubious means. it is an open secret that most govt people were heavily involved in the black market.

all that said and done entered the current rbz govenor, gono with a mandate to rescue the economic side of the crisis. so far everything has been going his way. inflation is falling every month, foreign earnings are steadly on the rise. he says the worst is over and now he wants to stabilise economy and then set it on a recovery path.

the multimillion us$ question is, is the worst over?

Gazilam

Brilliant analysis mfowethu.
The way I see it, the theoretical inflation is presented statistically as falling every month. Yes, the figures they publish are seen as representing a fall in the inflation rate. However, I must hasten to add that this has not been seen to cascade down as a positive ripple effect of an improvement in the people’s economic lives. To that extent therefore, the incessant decline in inflation is more theoretical and numerical than tangible economic recovery that benefits the very people who are in economic quagmire (uquqaba).

Foreign earnings are on the rise in Mgaklaland. Yes indeed bra. However, is it significant rise that can be trumpeted upon? This reminds me of Prof Mike Wells from the University of KZN. He was delivering a lecture on segment reporting, and used Mozambique as an example of a rapidly growing economy. Then he emphasized that, starting from zero, even the smallest of growth in real terms, is perceived as huge growth. So much for Tracy Chapman saying: ‘starting from zero, we’ve got nothing to lose!’ Thus, in Mgaklaland, coming from the zero some state of 1999-2003, this current trickle and drizzle foreign currency inflow is being deliberately trumpeted far and loud. This is to a large extent as a public relations gimmick to spruce up the battered image of a tottering pariah regime. They’re basically hoodwinking the masses to believe the leopard has changed its stripes and is now the messiah of today and tomorrow. This will be used as a ZANU cheap smokescreen tool of convenience in the 2005 general elections. Lokhu kuyanyanyisa!

To that end I say the worst is not over. What Mgaklaland needs is an overhaul of the whole system of governance. The torch must be passed to a new order that will remove the pariah tag on the country. No country can prosper if it cannot maintain a sound foreign policy that woos foreign investment. There must be respect for the rule of law. The mad primitive state instigated agrarian reform must stop. Investors must be assured of the security of their wealth. Political stability must be ushered in. Foreign currency inflow must come in droves, from real trade on the international market. Let Mgaklaland take its rightful place among the nations of the world.

Suffice to say that all the fundamentals that make a democracy tick must be present if Mgaklaland is to see itself off this quagmire. The road is long. As long as Mgakla and his cronies remain entrenched in power as if it’s their divine right, then woe unto uquqaba and posterity. The worst is not yet over. It is yet to come.

I’m no prophet of doom and gloom. Neither am I an eternal pessimist. Just a realist.

uMntongenakudla kaNgogwane wakwaDlangezwa.
umcondo yegusha!
uVeyane
Inkwali yenkosi

Inxangiphilile.
KwaMtubatuba

Gaz

I have said many times in this forum and elsewhere that the financial and monetary policy that Gono went on to implement was drafted and crafted by none other than myself. I was requested by NewZimbabwe.com to draft a comprehensive document that policy makers in Zim can refer to in order to rescusitate the economy financially. I pointed out that the shortage of forex in Zim was artificial given the fact that Zim has more than 3 million people actively employed in foreign countries. Assuming that each one of them sends home US$100 per month, that translates to US$300 million per month into the Zim financial system. Talk of food shortage, talk of fuel shortage with so much money being pumped into the Zim's economy.

I pointed out that inflation and other related ills will disappear overnight except corruption, looting and lawlessness of course. So whether Gonorrhea has succeeded or not is open to debate. The question is did he plagiarise my input verbatim (in which case he must give due credit and courtesy) or did he do otherwise? But the coincidence looks far much more close to by "design rather than by default". Sizoyicela isivuthiwe.

Bafowabo!

It sounds encouraging of you to talk of falling inflation, economic recovery etc., but on the ground the reality is people are screaming of difficulties worsening. Given the magnitude of the inflation that Zim was experiencing 500%, when should the ordinary people really begin to feel the releif? I appreciate that other macro-economic fundamentals like employement levels, must also significantly improve but aren't you just being too hopeful in very little here? Mugabe has to go, he has lost credibility and trust to draw into Zim meaningful foreign currency inflows that will improve GDP significantly. Can the country really recover from the eratic US 100 we send home so often or does it require more sustained and dependable inflows. I am made to beleive that what they are able to collect on a montlhy basis pays for fuel one month, ZESA the other, drugs next time and debt settlement the other. What country lives on borrowed time like that!!

Mabila

Inflation ceases to be an issue or a pain when the ordinary man in the street does not have to worry about it when he (or she) makes his daily decisions on investments, lobola, price of bread, taking his girlfriend out or going to the movies. There was a time in Zim when, if you board a taxi in Magwegwe West, you had to quickly pay say Z$1000, otherwise if you delayed, you risked paying Z$1500 by the time it reached Mpopoma because of rapid increases in taxi fares. Equally if you wanted to go and spoil your one and only say, Lobengula , you had to do so immediately because delaying or postponing to the following day meant your costs could be doubled within those two days.

I was in Zim over the weekend, the situation has indeed significantly improved with these US$100 that we send home every month. Remember US$100 translates to Zim$500 000 (half a metre in their lingo). Fuel is plenty plus, mealie mal is reaching roof top levels in shops, bread and butter are mountains in various supermarkets. Those who love braais are having a field day: because Zim does not export meat to the European Union market, the best beef is now available to the ordinary chap in the street. You find these fellows having endless braais (with beer in hand) in all the popular spots Windermere, Mthwakazi (you remember the other Mthwakazi), Umguza, kwaMazinyane etc etc. Not only that, most of them are to be seen in these luxury cars that we send home from abroad. Particularly popular with our brothers back home are these truck heads (amahotch-coaches) that we send home, remember they have beds fitted on board and other luxuries, the young fellows just utilise them with their better halves on numerous nights out, I was told upon inspecting one of them deep in the night. But one thing stands out WEHAVE TO THANK AND APPRECIATE THE ROLE THAT HAS BEEN PLAYED BY ALL YOU BROTHERS AND SISTERS OUT THERE FOR KEEPING YOUR FAMILIES AFLOAT.

Lobengula
Mthiyane
Mpongo kaZingelwayo
Boya benyathi
Buyasongwa buyasombuluka

Eish waze wangibulala ngensini mpintshi yami!

Indaba uyibeka njengoba injalo ubuye uyihlobise ngamahlaya. Waze wangikhumbuza ngaleliyalanga sixoxa kwaze kwashaya u-0130hrs.

If ever there was a medal for the most entertaining contributor laph' esigungwini, bengizokugaya 9 9 khona manje. Cha ubaphethe Mthiyane!

Qhubeka uza ngomfutho Boya benyathi.

uMntongenakudla kaNgogwane waKwaDlangezwa
uVeyane.
Inkwali yenkosi.
umcondo yegusha.

Inxangiphilile.
KwaMtubatuba.

Lobs.

I really like your approach mfowethu, kukhanya futhi uyi mpintshi yema eriyen. Ngibona angathi lami uyang cava face 2 face.

Okusalayo, On this issue of inflation, i believe that the opposition must make tactiful attack on the way ***'s govt has handled the economy. This is one of the weakest point where poeple have no faith on this regime.

Its also sad that ordinary people like naDokotela, have no say in the economic issues of the country. They will just succumb to the decisions made for them by greedy officials.

Clearly, all of us send money ekhaya, and the only thing you will hear is that, u*** bought jets and ammunition and then asked blair to come for war.

I do not see any change in the inflationary rates until the *** and his worshipers are ejected from the system. Its really unfortunate.

The question raised by Gazilam in the beginning is "is the worst over?" That is where I am at. Kungabe kusosiwa izinyama labo beer, are those the indicators esizidingayo kumbe ngithi esizimeleleyo? Bangaki abayosayo leyo nyama. You could have remained within the circles zabantu with connections to forex. That gives an inaccurate picture.

Is the worst over??

Ye, bayosa bayanatha njalonje, kodwa bangaki? The people we send money to are mostly the ones who are enjoying lalaba abaphila ngoku'jingiriza'. Okwenza izitolo zigcwale up to roof-tops yikuthi balutshwana abenelisa ukuthenga layo ma'commodities'. On average i'council rates' zidlalela kubo ***x$25000-00, amanzi logetsi lakho kuthi khonapho, besekuzoza i'school fees' singakabali okwansuku zonke okunjengabo sinkwa lemitshova. Ungabulawa lizinyo, hokoyo zatsha, sokumele uzame ama'antics' abo'Homer Simpson', ngoba phela vele ngeke wenelise ukumbhadala u'Dentist'. A simple 'D&C' (buzani udade uMabila lobhudi Sgebengu ukuthi yini-le) eUBH will cost you an average ***x$350 000-00 while at Lancet House you might be asked to part ways with ***x$900 000-00. Hatshi akuthambanga njengendlela okuhlelwa ngayo ngumfowethu lapha. Kusa'mirage' nje okuyinto kwakhona, kukhona kungekho.

Mina ezom'conomy' kumbe 'finance' angizizwisisi kangako ngendaba zokuthi ngiqine ezandleni hayi engqondweni. Yikho nje ngizacela ukubekezelelwa lapha. Ngilomhlobo obevakatshele ko***x ngensuku ezisanda kwedlula. Ekuphendukeni, lindoda yabalisa njengoba umfowethu uLobengula ebalisa nje. Kodwa owangakwakhe painted a completely different picture. Kungayisikho ukuthi babephethe amaqubaquba (quid) hayi kwakuvele kuzoba nzima nje ukuthi uhambo lwabo lube mnandi. Kuhle kulula kithi esiyabesiphethe i'forex' noma ngithi 'forex-enhanced' mali. Kodwa kuquqaba (olwabonwa nguMnto)kuyabheda ngumqanso weDanger.

My feeling is that we should not be pouring our hard earned forex as it were to bolster the corrupt regime ka***x. Ye kumele sithi 'support' izimuli zethu ezisele kwa***x but akukho na ezinye izindlela esingenza ngazo na? As long as izinto zimi kanje mina bengibona kungcono uku'supporter' abakithi ngezinye indlela hatshi ngokunikeza i'forex' kubofeleba laba abazabe bethenga izikhali zempi ezingacina zisetshenziswe ukubulala bonalabo esithi siyaba'supporter'.

Lizaxola ngoba angilazo i'science' le'academics' zoku'supporter' imizwa yami le. Engikuzwa enhliziyweni yami kukhulu njalo kuyavutha. Siyiziphepheli nje kungenxa yabo, ukuthi sibesesibuya sibaholise izithukuthuku (zenja) yintwenjani? Sibabhadalela ukusidudula kwabo na? I have given to 'Caesar' more than what I should and continuing to do so will be doing God a disservice.

Lobengula uthi wena;

"I have said many times in this forum and elsewhere that the financial and monetary policy that Gono went on to implement was drafted and crafted by none other than myself".

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Wasusekelelani Nkosi ukubathsela ukuthi sifuna ukuvota! Abasoze badle imali zethu mahala lapha bengafuni sivote. Silapha ngenxa yokubalekela ubuqgxhangu lo chuku lwabo. Babonge ukuthi silabazali emakhaya ngiqinisile because they don't deserve not a single cent of my sweat! They did not help us find the jobs from which they now seek to benefit. Yibo ubusela lobu! Zimbabwe could afford to have an organised and well coordinated externalizing human resources policy given the high numbers of well its rich human reosurce base. Mina ngizasapota iBlack Market kuze kube lanini! Yekelani kufe kanye mani akusela lutho to salvage !!!!

bakwethu

your contributions make interesting reading. diversified thinking. everybody is looking from a different angle. i hope gonorrea or any of his advisors do get in and read what other people think. they say two heads are better than one.

anywhere my point of view is simple. the inflation might be declining but there are two issues that might stop that decline or even triger an increase.

first. this action system was a back door devaluation of the currency. remember the uncle was oppossed to devaluation but when they saw that they had no option and were too ashamed to admit in public they came with the auction. fine it was a great idea. but it was a concept any other economist could have suggested and which people had been crying for, ie to let the currency float freely and let the market determine the level of the z$ against other currencies. floating the currency was too risky for the rbz did not have enough forex reserves to support it against speculative attack.
the auction system has become too rigid, because the z$ exchange rate is no longer determined by the supply and demand concepts. in fact the rbz is rejecting bids at the action floor in order to try and equate demand to supply and keep the rate within a certain range. remember if the rbz let the currency depreciate further this will give rise to imported inflation which will feed into the economy and erode the people's purchasing power. this will have a negative impact on the uncle's revolutionary party with the elections just around the corner. so gonorrea is also playing a political game. forget about rbz independence, it just doesn't exist not mgaxa

great idea, so the rbz will control the rate. however those people and business whose bids are rejected at the auction for no good reason other than the shortage of forex are now resorting to the parallel market. the parallel market was reported paying z$7500 for a dollar just last week. i would be crazy to send my hard currency through the home link only to earn z$5600 per usd when i can get more from the black market.

secondly the exporters are now not happy with the current rate. some of them will go out of business, further reducing the amount of forex flowing into the economy through the right channels.remember 25% of their earnings are still being changed at z$825, depending on when they collect their debtors. even worse exporters might resort to changing their hard earned currency in the black market. remember these companies are faced with wages increases and ever increasing overhead costs whilst their earning are changed at an unfavourable rate. so the decline in forex earnings will certainly triger the much unwanted automatical devaluation of the local currency both in the black market as well as in the auction.

there are two possible options for gonorrea. either the uncle leaves and paves way for fresh leadership or gonorrea tosses the dice, holds his breath and change his stance on devaluation.

but the question is how long can he continue devaluating the currency? the issue here is, the whole world has no confidence in the uncle's leadership and his cronies, so as a way of voicing their concerns they simple withdraw their support for the country and discouraged foreign investors. so the long term solution is obvious. the uncle has to take a hike and sound monetary and fiscal policies have to be in place.

to gonorrea, you are working under very difficult conditions but lets face it. the worst is far from over.

Gazlam

Refreshing and sober. Quite interesting reading MrDube.

Bakwethu!

Mina I had first hand experience with the auction system on the shop floor in April.It is a nightmare. The banks wait daily for the daily rate ungani abayifuni leyo forex. Which means you must know the time your branch receives it's trading rate for the day, otherwise you wait at the bank for 2-3 hours umelele leyo rate. Phandle ngale oSiphatheleni baya thengisa with no commission, fast and no bearaucracy. Who will I choose....common sense dictates ukuya phandle.

You need a bank draft or TCs for an RSA visa, you must apply through the auction system one month or more in advance. Let us not even talk about the confusion of the bank forex staff who cannot give clear instructions on how to.There are days when the rates are not available. They have killed sponteneity in the way we all know it in doing business. The auction system is very far from being user friendly khatshana le! Kabatshiye ilizwe kubuse those with more prudent economic policies.

I av bn readin sum well researched and expert analysis of the situation in Mgaxaland and find them quite interesting. I would however point out that whereas the sterling and $US we may b remitting bk home has gone sum way in panelbeating various nkingas, it is ironically ths same money that is fuelling inflation bk there. Greedy business pipo don't thnk twice bout chargin absurd amounts coz they kno the pound is strong, sum pipo wil buy but abangala support from abroad ke?

s now you have opted to bail mugabe out after treating you thus? you are now the propagators of home-link? yini eselitsheki amaqolo e-industries so tha mugabe will have forex which he by his own trap told IMF and WB to go to hell with and crippled agriculture? eyami ngintshintsha koMaNdlovu angikwenziwa lokhu mina. i-idea kaLobengula akulambuzo yiyo esetshenziswa nguGono i think Lobengula gave it a little earlier.

Nxa leyo inflation isitsho ukuba kuzadubuka lokho okwasisusa ekhaya phambili layo. Sasihlezi kuhle ekhaya njalo silesifiso sokubuyela kodwa hatshi nxa lokho okwasidudulayo kusadikiza. Alibhoboke ithumba kunuke ngoba lelatshwa njalo.

While this Gonorrhea chap is breathing fresh ideas into the economy, he will eventually fail because he is not addressing the fundamental problems of the economy. He is merely scheming on the surface while leaving the real culprits walking scot free. Mugabe should be in prison by now if real economic destroyers were being sorted out by Gono.

I hear he is offering people houses bought through RBZ? Anyone with details about this Houselink?

For homelink loans visit http://www.angwa-associates.com They are probably the first project promoters appointed by the reserve bank. I believe however that it is cheaper and less riskier to go for a bank loan.

the loans offered to buy the houses are just another way to raise funds and prop up the great uncle. it has its own advantages and disdvantages to the borrower.

if you borrow you have immediate cash to buy or construct your house. if you building a new house you will be able to complete construction within a reasonably time.

the loans are repayable over a reasonable period of time, depending on what you bought.

as a way of raising forex, your repayments have to be in foreign currency. an exchange rate of us$1 = zwd6200 applies. the problem is that this rate is artificial because it doesn't reflect the true value of the local zwd.

the parallel market rate is currently at us$1 = zwd8000. so for every us$ that you repay you forgo zwd1800. this exchange rate differencial results in an indirect tax of about 29% to the borrower. furthermore you will pay interest on the borrowed funds based on the prevailing interest rates in the country of your residence.

if you are resident in poor african countries where interest rates are high, it will further burden you with finance costs making the whole package less attractive.

if the current forex shortages persist, the zwd will depreciate further widening the gap between the diaspora and parallel market rates. if this happens you lose more in the form of indirect tax mentioned above.

with the elections around the corner we are likely to see a lot of volatility in the exchange rate. chances are that the currency will further lose value. therefore i think we will benefit more and reduce the exchange rate risk by borrowing from a commercial bank, where repayments are in local zwd.

"Is the worst over?" It would appear that the gonorrhoea has reached alarming proportions and is now incurable? Usema tasatasa uGono..........The economy has plunged back to the miserable pre-Gono era with Gono driving the economic policies? Where did Gono go wrong?

He forgot to kill all abetshabi before implementing his textbook solutions?

I read in the forums that the official inflation rate according to RBZ and Gonorrhoea stands at 144%. What is the unofficial figure or in my terms the real figure? Nxa ekhona oyaziyo angisize bakwethu?

Bilas

Ungasa worry wena vele nge inflation uGons usenze kuhle sibili in negotiating ama loans lawana emali enkulu yama billion. Ngiwa engathi ama terms akhona athi nxa ingeseneliswanga ukubhadalwa imali yakhona, bazaphiwa abeTshabi to auction.

Mabi,

Idlalela kubo 600% dade.

Ngiyabonga impendulo zenu bafowethu. Kuyesabeka okungaka. Kanti pho lina elazi ngezomkhonomi kusaseleni nxa sekunjalo. Kumele kwenzakaleni ukuze uGono avale ibhanga avume ukuba ilizwe selifile!

I came across the following article will doing my research on the internet and i thought i should share it with you guys.

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The Forex Market:
A layman's guide to how it works, and why it does what it does

Like any other commodity - sugar, soap, mealie meal - the price of forex will go up and down, driven by the forces of supply and demand, provided there are no restrictions placed on that market. People who want US Dollars or Rand will pay what they have to pay to get it; if the currency is scarce, the price will go up, if it is plentiful, the price will go down or at least stabilize. This is a simplified way of explaining why the rates for forex move up and down.

Just as price controls on sugar, say, drive the sale of sugar underground or to the informal sector, so price controls on forex have driven it to the streets - the parallel market and the black market. The regime, in the guise of the Reserve Bank of Zimbabwe (RBZ), has put price controls on forex, saying that 1 US Dollar will only cost Z$9 200, or whatever. People can't buy enough forex through the official channels to satisfy their needs, so they resort to buying from those who will sell, at whatever price they demand. This is how the parallel and black markets have occurred.

The distinction between the parallel and the black markets is drawn along several related lines: how much is being sold, who is buying and who is selling, and where the transaction is taking place. So the parallel market usually deals in large sums - many millions of dollars; it is often between businessmen and companies and, in the past, had bankers as its middlemen; and it takes place in offices and sometimes homes. Black market transactions happen on the streets, in the flea markets, and in back-rooms; sometimes for small sums of money like 20 US Dollars; and the deals often take place between individuals.

In an effort to curb the trade in forex, the RBZ cracked down at the beginning of 2004, threatening bankers, businessmen and others. Many fled in order to preserve their freedom. This crackdown was totally inequitable as probably 90% (a very conservative estimate) or more of all businesses and businessmen were trading on the parallel market out of necessity; this was the only way to keep their businesses going and their staff employed.

Subsequent to this, the auction system was introduced. In theory, this was to function as any auction: those bringing money into the country would sell it to the RBZ (they got the bad end of the stick, as the proceeds they would get were always going to be controlled!) and those wanting to buy would bid for it, and the highest bidder would win.

In practice, not so! The political manipulation and scheming became evident as the months went on, when the rate stuck at Z$5 200 for months. Those with forex to sell soon saw what was happening and, after their initial compliance - which was probably determined by fear of the consequences - they soon decided to channel their money where they could get better returns, namely the parallel market. Another point to note is that there was never enough money being sold at the auctions, so people resorted to other outlets where they could buy the forex they needed.

Look at it from an exporter's point of view: he needs to manufacture goods and has to buy many of his raw materials from outside the country, so he needs forex to pay his suppliers. If he applies to the auction and is lucky enough to get some, that's great! If he doesn't get any, or doesn't get enough, he has to go to the parallel market and pay, say Z$15 000 for every US Dollar he buys. So he manufactures his goods and then sells them overseas. When he gets paid, he brings his money in through the official channels - the banks. Acting on behalf of government, they allow him to keep a portion of his proceeds in forex (so long as he uses it within a stipulated timeframe), but the rest he must sell to the RBZ for their rate, say Z$9 200. It doesn't take a rocket scientist, as they say, to work out that he is losing money!

It is also worth noting that someone must have been benefiting from this auction system. Suspicion falls squarely on the shoulders of the "chefs" - they got their money cheaply from the auction, and either sold it on at a huge profit on the parallel market (which they are otherwise castigating as "unpatriotic" !), or they used it to purchase large quantities of luxury goods like big-screen televisions which they could sell on at an enormous profit to themselves.

What about Homelink? This was another scheme of the regime to get its hands on the forex it so desperately needs to keep the country running (and to line a few pockets, it would seem). Many Zimbabweans receive small amounts of money from their relatives working outside the country. They bring it in through Homelink (so expensively advertised at taxpayers' expense), and get the auction rate, or the closely linked diaspora rate - a fraction of its real value. But at least this enables the regime to buy fuel, pay for the electricity it buys from Mozambique and South Africa, pay its embassy staff overseas and, if there is any left over, service some of its debt. On the other hand if these recipients bring their money in and change it at the flea markets, or the so-called World Bank (the white-robed women!), the regime sees none of it, but they get more Zimbabwe Dollars and are able to buy more mealie-meal and other food with the proceeds.

This is why the RBZ's efforts to stamp out the parallel market just haven't worked. People want to get what they are due; they want to make their money go that bit further, to pay school fees, to feed their families…..

And now, enter the recent Operation Clean-Up or Operation Restore Order! Who and what is this devious regime targeting ? Answer - the small traders and the flea markets. Suddenly there are fewer places to buy and sell this valuable commodity, and the forex rate (for the US Dollar) on the parallel market drops from around Z$25 000 right down to somewhere between Z$ 10,000 and Z$ 20,000 - at least for a short period.

What of the future? Time will tell, but the fact is that the regime must have forex for all its own import requirements, so we can expect the crackdown to continue. Long-term, the solution lies with freeing up the market and removing all forms of price controls (on bread, mealie meal, and fuel as well as forex). When this happens the rate will quickly find its equilibrium and, as the economy stabilizes, so the rate will also stabilize. But there is clearly no political will to open up the markets, and the old Marxist way of thinking continues to direct our rulers, despite all the evidence which points to the ineffectiveness of these methods.

What is really needed of course is new leadership - leaders who have a genuine desire to serve the people, to rectify the economic mismanagement of the past, and to embrace wholeheartedly the free-market economy - subject to minimal controls to protect the weakest and most vulnerable. Let us hope and pray that change will come before the economy has been damaged beyond repair.

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