Money laundering rife in the economy

Terence Zimwara

Zimbabwe could be a victim of money laundering by criminal syndicates seeking to ‘cleanse’ their dirty money and to evade government authorities in the region.

Organized criminal syndicates are thought to be bringing in fast moving consumer goods (FMCG) as way of converting proceeds from their activities into the American greenback.

Zimbabwe predominantly uses the US dollar since it dollarized its economy about five years and in addition it has lax foreign exchange controls which make it easy for anyone to move huge amounts of cash without problems.

This makes the country a prime target for anyone seeking to acquire cash dollars to do so without the fear being traced.

The country main’s main industry body, the Confederation of Zimbabwe Industries (CZI) made this allegation when it appeared before the Finance and Budget Committee of the parliament.

President of the Mashonaland chapter of the CZI Mr Sifelani Jabangwe told the committee that they were still uncovering this and a full detailed report is yet to be made.

 “There is a belief  that some of the foreign products on the local market particularly, FMCGs are being sold at uneconomic prices by people seeking to access US dollars from Zimbabwe,” Mr Jabangwe.

He added that at his organisation’s various deliberation forums they concluded that it was impossible for some imported goods to sell below the cost of production of locally produced ones.

Mr Jabangwe told the committee that smuggling and money laundering could be the main reasons why imported products were seemingly outcompeting locals.

 The CZI, however acknowledges that the 40 percent deprecation of the rand against US dollar over the last 18 months could be another significant factor leading to Zimbabwean producers suddenly becoming uncompetitive.

Investigations by The Parade into some of the pricing of imported products seem to support allegations made by CZI that there could be money laundering at play.

We identified two similar products that seem to suggest that there are other forces at play. Unilever produces a 500g of margarine (Stork Margarine) which is widely available in most retail outlets.

However of late there has been an influx of similar imported products like the 500g of Blue Band margarine which is now competing with established brands like the one mentioned above.

In one retail store we were shocked to learn that the Blue Band margarine sells for just one dollar while the locally produced ones were selling between $2.30 and $2.50, a staggering 150 percent price differential.

It is very difficult to understand how much of the price differences can be attributed to over pricing by local producers or smuggling by importing merchants.

Another example is that of boxed fruit juices. Schweppes Zimbabwe produces a two litre fruit juice soft drink which sells around $2 in most retail outlets. Interestingly there is now an imported version, Pure Joy made in South Africa which street vendors are selling for $1 while established retail outlets sell it at $1.50 or lower.

Again the pricing differentials seem to defy economic fundamentals in the case of the imported products.

An importer has to pay freight charges which are quite significant, he has to pay duties in addition to other costs that arise as a result of bringing the products into the country.

 Local products on the other hand, face no such extra costs in their production chain yet it is the imported products that are competing very well especially on the prices.

This where the charges of money laundering and smuggling are made and how this has devastated local producers.

During the question and answer session of the Budget and Finance committee, Bulawayo legislator Eddie Cross asked why Zimbabwean producers were uncompetitive.

Current CZI president, Charles Msipa responded by laying down a list problems that he said industry has faced not only since dollarisation but even before the multiple currency regime.

Chief among the problems include high cost of credit, infrastructure deficit, cost of labour that is unrelated to productivity and declining disposable incomes.

What is not clear from CZI is how much of this results in the price differences observed above. However the CZI boss did acknowledge something that has affected producers yet no one was in position to change it- was the depreciation of the rand.

“The rand has depreciated by almost 40 percent over the last 18 months and that means Zimbabwean companies have suddenly become uncompetitive by that much,” said Mr Msipa.

South African made products have become cheaper by virtue of the decline of their currency and this has made their products which are sometimes superior more appealing to consumers.

Zimbabwe cannot impose tariffs to counter this because the assumption is that market forces were responsible for the rand decline and the commitment the country has made with various regional trade blocs means nothing will be done.

Fake certificates used to smuggle goods into Zim- CZI

Terence Zimwara

Confederation of Zimbabwe Industries (CZI) is complaining that smuggling continues to be a threat to the survival of the few remaining manufacturers.

The CZI a lobby group for Zimbabwean producers repeated the same complaint when its leaders appeared before parliament recently with one of its officials suggesting smuggling was now being conducted via official channels.

Sifelani Javangwe raised the issue of faked certificates of origin that smugglers were easily obtaining in South Africa to facilitate the movement of goods into Zimbabwe with having to pay the relevant fees or penalties.

A certificate of origin is a document declaring in which country a commodity or good was manufactured. The certificate of origin contains information regarding the product's destination and country of export and is required by many treaty agreements before being accepted into another nation.

Since some countries limit or ban imports from certain countries altogether, all incoming goods would be required to have a certificate of origin. To encourage imports from specific nations, governments may lower the duty on goods if accompanied by a certificate of origin from those countries. 

However according oral given evidence given by CZI before the Finance and Budget committee of parliament, certain unscrupulous businessman were exploiting the lax system around the issuance of these certificates to import goods into the country.

“Once a certificate of origin is issued and once the South African Revenue Services (SARS) endorses the certificate by stamping it, Zimbabwe Revenue Authority is then forced treat the certificates as original,” said Mr Jabangwe.

He added that at the moment anyone (in South Africa) can issue such a certificate because there is no agreement between regional countries on the rules to ascertain the originality of these certificates and who issues such certificates.

Consequently, Zimbabwe has been at the mercy of smuggling cartels, which have brought everything from sweets to semi durable items like stereo systems or LED televisions.

A number of these products are not originating from neighbouring countries like South Africa or Zambia which are normally exempted from customs duties that apply to countries outside regional trading blocs.

Zimbabwe is a member of the SADC and the COMESA economic union. Countries in these trading blocs have standing agreements that allow for free passage of goods originating from inside member countries.

In order to evade the customs duties that will apply if the products are from outside the region, importers are resorting to using faked certificates that then give easy passage for their goods into Zimbabwe.

The net effect is that Zimbabwean producers will be forced to compete with products that enjoy subsidies in the country of origin and even products that do not meet local heath standards.

Such products create an unfair playing field, eventually driving out local products thus leading to job losses and a growing balance of trade deficit.

According Mr Jabangwe this is in violation of World Trade Organisation’s (WTO) standards on rule of origin in international trade.

Rules of origin are used to determine the country of origin of a product for purposes of international trade. There are two common types of rules of origin depending upon application, the preferential and non-preferential rules of origin.

Non-preferential rules of origin are used to determine the country of origin for certain purposes. These purposes may be for quotas, anti-dumping, anti-circumvention, statistics or origin labeling.

Preferential rules of origin are part of a free trade area or preferential trade arrangement which includes tariff concessions. These trade arrangements might be unilateral, bilateral or regional as is the case with COMESA and SADC.

 The rules of origin determine what products can benefit from the tariff concession or preference in order to avoid transshipment.

By forging certificates of origin, importers can benefit from trade concessions that naturally should be enjoyed by products that are made in countries that qualify for the concessions.

The CZI essentially sees this as a way of formalizing smuggling and the consequences of smuggling are quite apparent in the case of Zimbabwe. Smuggling distorts the entire production chain making difficult for producers to continue with operations.

In a parliamentary submission in November 2013, CZI at the time argued that there was abuse of COMESA and SADC certificates of origin to bring goods into the country.

CZI suggested to authorities then, to allocate a greater budget to the Zimbabwe Revenue Authority (ZIMRA) to specifically fund investigations into such activities.

No concrete steps have been taken to address this and in the meantime the economy continues to bleed as the recent events will show.

The economy is essentially now in deflation mode and according to Zimstats , the country trade deficit continues ( about $1 billion in the first quarter of 2014) to grow as imports to continue to flood the local market.

Government needs to take action to help local producers who employ thousands to remain afloat while elsewhere government has to work hard to convince international investors to come on board.

Dollarisation: The downside

 Terence Zimwara

There is no doubt that dollarization helped the Zimbabwean economy find its feet after years of decline. The use of multiple currencies particularly the American dollar has made it attractive even for foreign investors to consider pouring money into the country.

With inflation currently in the negative territories, the Zimbabwean economy offers some of the best returns on the dollar although the country risk remains an obstacle.

The last two years have not been great for the Zimbabwean economy however, national demand has been sliding while the current account deficit has reached unsustainable levels.

The use of international currencies has meant that the central bank has had little or no influence on where the economy is heading.

This has of course led to regular calls to reintroduce the Zimdollar and the government has consistently come out to say this will not happen anytime soon.

At the recent Zimbabwe International Trade Fair, a government official Mr Supa Mandiwanzira reiterated that the return of the currency was not imminent as had been speculated by some.

This followed both foreign and local media reports that the government was planning to re introduce the local currency as it tries to arrest the continued economy decline.

In this article, we will try to understand why there is an agitation for the Zimdollar’s return by mainly corporates and the reluctance to see this through by the general population.

Zimstats the country’s official statistical body recently reported a trade deficit of approximately $1 billion dollars in the first quarter of 2014 and indication that the appetite to import is not receding.

One has to walk through the pavements of Harare’s central business district to understand the problem from a layman’s viewpoint. The pavements literally packed with all kinds of imported goods ranging from foodstuffs to clothing and even semi durable items.

There is toothpaste, washing powder, fruits the list is endless suffice to say the same items are found in their abundance in retail outlets. Vendors and enterprising business people have suddenly started selling mainly South African made products at prices that beat locally made goods.

To illustrate a 500 gram pack of locally made margarine (Stock Margarine) costs about $2.5 in most stores yet there is an almost similar product which is being imported into the country and is sold for just $1 in some retail stores!

It is this staggering price differential that leaves one shaking their head, what exactly are the ingredients used in making margarine locally that makes it so expensive?

Local producers will claim that power shortages, high interest rates and a lack of credit lines raises the cost of production and in turn this local products uncompetitive.

Clearly there are no easy answers however, part of the problem also lies in the fluctuations of the currency of Zimbabwe’s major trading partner, South Africa.

The South African rand currency has performed poorly against major currencies particularly the US dollar. It has depreciated by some 37 percent since the end of 2012 and the effects on the Zimbabwean economy are now becoming apparent.

Suddenly it has now become lucrative for South African companies to sell on the Zimbabwean market than at home.

To illustrate, a loaf of bread sells for between 8 and 9 rand in SA while the same costs about $1. At the current exchange of U$1: 10 rand, then you would realize more by selling in the Zimbabwean market because the price would be 10 rands.

 Of course there are other hidden costs that may cancel out the extra arbitrage profit that can be realized in the case illustrated above. In reality however, there are quite a number of products where the price differences are so huge such that it would make economic sense to import.

While local businesses may find little motivation in importing, the same cannot be said of cross border traders and informal traders who have seized on the opportunities that the depreciating rand has presented.

These traders are selling everything from sweets to furniture and realizing profit as result of the depreciation of the rand. Two years ago this was not possible when the exchange rate was at just under US$1: 8 rand.

Due to the continued depressed value of the rand, local business leaders are now asking government to intervene by imposing heavy tariffs on imports in order to ‘protect local jobs’.

At a workshop organized by the Buy Zimbabwe lobby, players in the baking industry asked the government to intervene by way of banning imports of flour products.

A few business leaders if any have gone record and publicly called for the return of the Zimdollar however it is something that apparently is getting some consideration in the corridors of power.

For ordinary Zimbabweans, the return of the Zimdollar is certainly an unwelcome topic as evidenced by the recently reported panic withdrawal. This followed a report by Bloomberg Financial news service that the return of the Zimdollar was imminent.

The government is well aware of the demise of Zimdollar and what caused it. It is the continuing economic stagnation however that is pushing the government against the wall and this is notwithstanding the fact international donors remain unwilling to help.

The government finds itself in a conundrum, where either action has severe consequences not for it politically but in an economy sense as well.

It remains to be seen what course the government will take in light of all this.

Understanding lending policies of local and international banks

Terence Zimwara

The sharp differences between the lending policies of locally owned financial institutions and that of foreign owned banks calls in into question the real objectives and purpose of banks in an economy.

The recent round of results briefing by financial institutions has once again underlined the different approaches that banks have taken in line with their ownership structures.

Locally owned financial institutions led by CBZ holdings, have pursued an aggressive lending policy as evidenced by the respective banks financial results.

CBZ Holdings which, is the biggest bank in the country in terms of deposits mobilized, has been lending quite aggressively since dollarization in 2009. At the time of reporting, CBZ had deposits of $1.33 billion which is the highest by any single bank.

Advances on the other hand were at $1.03 billion for the period under review translating into a high loan deposit ratio of about 77 percent.

According to Dr Mangundya the chief executive officer this was well within CBZ board approved ratio of between 75 and 80 percent.

Dr Mangudya told a recent analyst briefing that their philosophy was that banks should lend and that his organisation would still lend if it made business sense to do so. CBZ’s business model is one guided by the desire to maximse shareholder value and not necessarily to maintain a particular loan to deposit ratio.

However Dr Mangudya believes that financial institutions need to play their part in turning around the economy because real economic growth can only come about if there is lending and that it is the trend elsewhere in the world.

Religiously sticking to set lending criterion, while ignoring the fundamentals on the ground may not get the best results, not only for the banks but for the general economy.

Dr Mangudya cited the example of a local baking company, Lobels which nearly collapsed a few years ago under the weight of heavy debts. CBZ along with other financial institutions agreed to save the bakery from imminent collapse by converting their loans into equity.

Consequently Lobels survived and now it is a major player in the bread making industry with capacity utilization at around 70 percent according to Dr Mangudya.

This would not have been possible if CBZ and other mainly indigenous banks had followed up with the option of liquidating the company.

This then underlines why most locally owned banks seem to have high lending ratios relative to deposits mobilized. The ratios have consistently ranged between 70 and 80 percent.

Foreign banks on the other hand, have been reluctant to lend as evidenced by their loan to deposit ratios that have rarely gone beyond 50 percent.

For instance, Barclays Bank whose major shareholder is Barclays plc reported that its deposits had grown to $248 million while advances were restricted to just over $115 million, roughly a loan to deposit ratio of about 46 percent.

According to Barclays, this was in line with their safe bank model which they had to adhere to meaning they would continue with the rigorous vetting of loan applications to minimize the risk of default.

The scenario with Barclays Bank is almost the same with all other foreign owned financial institutions, they have set limits, presumably set by the parent companies.

One source with a foreign owned bank claimed that his firm had a country limit set for them by the parent company.

“We have a country limit for advances set at $50 million, we cannot lend beyond that amount for one single customer,” said the source.

Consequently when a client wants a loan in access of $50 million, the foreign owned bank is forced to refer the client to a locally owned bank which is nominally more flexible in loan approvals.

A major plus for this model is that loan impairments are kept at very minimum, less than one percent in the case of Barclays.

One executive of a foreign owned bank claimed that they were hidden shocks in the market and it was necessary for them to take steps to pre empt any potential chaos to their institutions.

The so called hidden shocks are related to Zimbabwe’s perceived high country risk.

 A high country risk concerns a foreign investor more than it does to local investor and perhaps that is why only foreign banks have followed a policy of conservative lending as a shield against the perceived high country risk.

The high levels of non performing loans (NPL) is something that has been an Achilles heel for the financial services sector and it is one area which foreign banks use to justify their conservative lending policies.

There is certainly a clear distinction between the levels of NPLs of foreign owned banks and that of locally established banks with the former using this to point to the efficacy of their lending approach.

NPLs are lower in foreign owned banks and in that aspect they are seen as more stable than their local counterparts. However others have countered that this comes at the expense of industry that is starved of critical credit and the net effect is seen in stunted recovery of the economy thus far.

Dr Mangudya however, believes the lack of an interbank lending market and that of lender of last resort makes the entire financial system vulnerable to very minor shocks.

 As such he called on authorities to expedite the resuscitation of the interbank lending market as one way of minimizing risks to the country’s financial system. Once the environment improves, Dr Mangudya believes his group will lend even beyond the 80 percent maximum ratio that his board has set.

In fact there are instances where banks in some countries lend close to 100 percent of deposits mobilized and this is never an issue added the CBZ boss.

In South Africa, Nedbank one of the major financial institutions in that country, reported in its 2013 interim results that its loan deposit ratio peaked to 96.3 percent from 95.7 percent in the previous period.

Nedbank which has its roots in SA is a solid and profitable bank in spite of the high loan deposit ratio mentioned above. There is no doubt that the Zimbabwean economy and that of SA are worlds apart and perhaps that could be reasons why Nedbank is able to lend that aggressively.

Back in Zimbabwe, the government has announced intentions to restart the interbank lending market as well as the lender of last resort function as it attempts to return normalcy to the financial services sector.

It remains to be seen if the government will come through on this but certainly if that happens, it will not immediately change the sharp difference in lending policies between locally owned banks and foreign owned banks.

Zimbabwe ready for savings?

Terence Zimwara

The hyper inflation of the last decade is best remembered for the demise of the Zim dollar and the disappearance of products from shelves among other things.

However, the one serious consequence of hyperinflation, something which continues to inhibit Zimbabwe’s economic recovery- is the disappearance of savings.

In the first two decades since independence, savings were very much a part of life for most of the working class. Products which ranged from savings fixed deposits accounts to life assurance policies were popular with the general working population.

The uptake of these products by the majority of the working population then was an indicator of a functioning and healthy saving culture.

The hyper inflation that characterized the economy between the years 2000 and 2008 when the local currency finally collapsed played a huge part in destroying savings not to mention the culture saving itself.

In fact the dearth of the savings culture started well before 2008 but it became apparent in 2009 when Zimbabwe adopted the so called multiple currency system.

The use of multiple currencies had one major consequence for the economy, the central bank’s inability to perform the lender of last function coupled with the absence of an interbank lending market. It also meant that the central bank lost one of its critical function, that of creating credit and printing of money.

With no foreign direct investment flowing into the economy as a result of the perceived high country risk, suddenly there was no money available for funding medium to long term credit needs of industry.

In fact since 2009, the majority of deposits that have been mobilized by banks have remained transitory or very short term, resulting in the mismatch between what industry needs and what banks can avail.

On one hand, you have very short term funds available for lending at very high interest rates against the credit needs of industry which are not short term by any measure.

The high country risk means that the few lines of credit that the country has managed to mobilise come at a premium which often results in local firms not utilizing such facilities.

It is in this context that one financial institution, CBZ holdings launched a set of ambitious products which it hoped would allow it mobilize medium to long term deposits.

Speaking at a results briefing recently, CBZ chief executive, Dr John Mangudya told analysts that his group’s ‘CBZ cash plus’ product range had registered some success in mobilizing longer tenure deposits.

According Dr Mangudya, at least $20 million had been raised across the entire product range and this was pleasing to CBZ and plans were afoot to embark on further road shows to promote these products.

CBZ believes that there is potential to raise even more funds a reaffirmation of a belief by some economists that the economy is now ripe for a return to savings mobilisation.

However the question has been how to do that given the reluctance by the public to fully embrace the banking system following years of hyperinflation.

Inflation which was the biggest destabilizing factor to savings has since retreated to record lows, currently below one percent according to figures last released by Zimstats.

For its part CBZ said it was promising a return of between four and eight percent interest for individuals that chose to invest in its fixed term products.

Bank fees and charges which, are sometimes blamed for general reluctance by the population to fully  embrace the banking system, are nil in this case and the net effect is an interest earning above the rate of inflation something quite uncommon before dollarization.

However, a few banks if any seem to have followed CBZ’s lead on this, an approach which could potentially become a turning point in efforts to turnaround the economy.

Many economists and analysts have said up to $3 billion was or is needed to kick start recovery of industry which is in dire need of capital for re tooling and new technologies.

Ironically, a similar figure is thought to be circulating outside the banking system with Zimbabwe Economic Policy Analysis and Research Unit (ZEPARU), an economic think tank conservatively placing the figure at $2.5 billion back in 2011.

Banks will have to find creative ways of attracting that money and one way is offering interest rates that would entice people to keep their money with banks as opposed to the ‘under the pillow’ banking  system that currently prevails.

In absence of foreign direct investment and a central bank not fully functioning, this may be the only realistic chance that the country has to mobilize funds for true economic recovery.

Authorities need to encourage more financial institutions to take this root by even offering incentives to banks that take heed of this.

Of course confidence in banking hit an all time low in 2008 when Zimdollar account balances disappeared and foreign currency accounts were raided by the central bank.

The government has promised to deal with the issue by compensating all claims against the central bank. Expeditiously resolving this matter will go a long way in restoring confidence in the financial services sector a key factor in all attempts to mobilize savings.

Once mobilized, savings act as a pool of funds that local companies can tap into to fund their medium to long term credit needs.

More importantly, medium to long credit raised this way will have significantly lower interest rates compared to internationally sourced lines of credit which must incorporate a country risk premium.

It remains to be seen if other financial institutions will follow up with this approach and if indeed the government comes to the party by honouring its pledges to help restore confidence in the financial system.

January Disease- No lessons learnt

Terence Zimwara

As the festive season ends, a new season comes into play and it’s a season of bankruptcy as well as tough economic times.

The so called January Disease a term coined by the late popular musician, Paul Matavire, is a time when Zimbabweans are generally broke and penniless having overspent during the festive season.

Over the years Zimbabweans make it a point that they visit relatives and parents during the Christmas and New Year holidays. During this time expensive furniture, gifts or assets are bought as the festive mood demands.

For unclear reasons people overspent to the point of forgetting their financial obligations which become due immediately after the holidays and January of 2014 is not going to be any different.

In January schools fees and accessories become due and given the prioritization of education it is inevitable parents will have to pay for these even as they might not have the wherewithal when it is needed.

To add to the burden, rentals and other utility costs are often increased in January making it impossible for most households to survive this period.

As a consequence, many households resort to selling some of their assets to pawn brokers or securing loans from loan sharks after pledging their assets as collateral.

This January however the situation will be worse if the prevailing economic conditions are anything to go by. Most economists are predicting a tough year particularly the first few months of the year as the economy remains in deflation mode with the annual inflation last recorded at 0.54 percent from 0.58 percent in the preceding month.

It would appear people were already broke heading into the festive season this time around. There were numerous reports of cash shortages while business leaders were concerned that business activity had not picked as was the trend during this period in previous years.

Towards the end of 2013, Willard Zireva told an analyst briefing that Zimbabweans should brace themselves for a tough beginning of 2014 because there simply no money in the economy at the moment.

In light of this one would have hoped that people would skip the traditional festivities associated with the Christmas holidays yet judging with activities in the run up to the 25^th of December it appears few took heed of warnings of dire economic times ahead.

It is inevitable the auction houses will be busy in the coming few months as desperate people try to raise money to for school fees, rentals and other utilities. For some it will even be worse as they will have their prized possessions attached by the deputy sheriff and get auctioned off for ridiculous prices.

Unfortunately people seem to have a short memory and they repeat the same next year and the year after. The government should perhaps through the relevant department try to run a campaign to educate people on how best they can manage their finances especially during the festive holidays.

A successful campaign might potentially result in a less mentally stressed workforce and perhaps result in improved performance even in the present economic environment.

Buy Zimbabwe campaign: Facing the realities

Terence Zimwara

The Buy Zimbabwe lobby continues to struggle in making headway in as far as halting the appetite for imports is concerned. If anything the results on the ground seem to suggest that few people are taking heed of the Buy Zimbabwe message as the soaring balance of trade deficit will attest.

According to Zimstat the country’s official statistics body, Zimbabwe’s trade deficit has continued to widen reflecting a relentless appetite for foreign products. In August 2013 the amount of imports topped $704 million while exports were less with a value of $283 million.

In fact that has been the trend throughout the whole of 2013 with the overall deficit currently at $3 billion according to the last figures released and some are focusing that it will reach $4 billion by year end (2013).

It would seem there are a few takers for the Buy Zimbabwe initiative and this is in spite of this lobby receiving generous space in national media and support from government.

So the question is why is the lobby not having an impact in the mind of the consumer? What is it going to take to alter the perception of the average consumer towards the quality of local products? Or is it really about perception?

Obviously the first factor that local producers have to deal with is the issue of cost. Locally produced goods are in most cases expensive and given the dire economic situation consumers are justified in their preference for cheaper imported products.

 Local manufacturers face a host of challenges and these inevitably reflect in the final cost of their products. The country’s largest industry representative body, Confederation of Zimbabwe Industries (CZI) acknowledges that the odds are heavily staked against local producers.

In a submission to parliament last year, CZI identified the lack of access to long term affordable capital as one key factor affecting local companies. Since dollarisation in 2009, it became clear that the economy needed long term and cheap credit to help revitalize local companies.

Plant and machinery that became obsolete during the period of economic decline needs to be changed yet in the absence of a lender of last resort and the use of foreign currency as legal tender, the state has not been able to influence the direction economy.

However, the CZI submission also touches on other issues that it believes contribute to this quagmire. CZI believes the Zimbabwe labour market is highly inflexible and high labour costs that companies incur are not in line with productivity.

The fast developing economies like China and South Africa all have labour markets which are flexible to some degree. Flexible labour markets allow companies to hire labour only when needed and when there is no demand for labour workers are laid off easily without the companies facing enormous retrenchment costs.

Of course the issue flexible labour and reforming the labour is a controversial subject on its own where sharp differences exist between employers and workers.

The CZI also identifies another factor which the Buy Zimbabwe campaign should be focused on, the abuse of certificate of origin and the porous nature of the border points.

A certificate of origin is an international trade document that has to be completed by an exporter or its agent and certified by an issuing body. It attests that the goods in a particular export shipment have been wholly produced, manufactured or processed in a particular country.

The CZI alleges that SADC and COMESA certificates of origin are being abused to bring in goods of other countries into Zimbabwe.

 Abuse of such certificates allows goods from countries that do not qualify for reduced tariffs to find their way on the Zimbabwean market without paying the relevant custom duties. CZI says this creates an unfair advantage for imported goods against locally produced goods.

CZI recommends an increased budget allocation to Zimbabwe Revenue Authority (ZIMRA) specifically to fund investigations into such abuses.

This should become self funding over time as the penalties from culprits who have been caught will pay for the investigations.

Major retailers however seem to be singing from different hymn book if the recent statements by OK Zimbabwe boss, Willard Zireva are anything to go by.

Speaking at a results briefing late last year, Mr Zireva told analysts that while his company supported the Buy Zimbabwe campaign in principle that did not mean OK Zimbabwe was going to compromise on quality.

In fact OK Zimbabwe has maintained a ratio of 65 percent imported merchandise to 35 percent locally produced goods. OK Zimbabwe argues that most local producers lack the capacity to supply it and this forces it source from outside the country.

In addition there is the issue of ‘quality’ of local products when compared with imports, retailers are not convinced that local products now match imports on quality. This is perhaps where Buy Zimbabwe can work with local producers and the retailers to find ways to improve the perception of local products.

 If locals perceive locally produced products to be of inferior quality then it will not matter that local companies improve their technology or packaging. Consumers will still not buy and it is in that context that Buy Zimbabwe needs to be supported.

However this lobby should not try to influence government to impose penalties on imports just to prop up inefficient local producers.

 Lately there has been an increase in noise by those that advocate for protectionism yet they conveniently forget that the country has signed multiple free trade agreements and cannot hike tariffs without facing repercussions.

Dealing with the trade deficit is not going to be a walk in the park, it will take genuine effort, painful decisions and it will take time. These efforts have to begin now otherwise the economy risks collapsing again as the continuing liquidity problems already show.

Mandela’s Legacy: A Zimbabwean perspective

Terence Zimwara

Nelson Mandela, South Africa’s first democratically elected president who passed away in December of 2013 is widely regarded as the greatest statesman to ever come out from Africa.

Some even place him as the greatest statesman of all time because of mainly what he did after his release from prison. Mandela spent 27 years in prison and when he was released he chose to forgive everyone that had wronged him and it was this act that won him admirers for the rest of his life.

At his memorial service world leaders including three former United States presidents, incumbent  Barack Obama, French president and his predecessor, British Prime Minister David Cameron and Tony Blair all attended.

 In total more than 100 world leaders showed up for the memorial service something that normally happens in Western capitals like Washington or Brussels further highlighting the immense respect and popularity Mandela had.

On Facebook, twitter and other social media, messages of condolences poured in as ordinary people joined in reflecting the life of a man that brought some degree of peace to his country.

However Mandela’s legacy is not complete without criticism from those who feel he did not do enough to address the economic imbalances created under the apartheid system.

From inside South Africa, black people still complain that they are still relatively poor when compared to their white counterparts and more so this is still the case almost 20 years after the end of apartheid.

Others sensationally accuse him of being partly to blame for the high levels of crime and violence among the youths because it was Mandela that brought to an end corporal punishment in schools thus breeding an undisciplined youth.

Others say his policies have mainly benefitted whites who have remained rich despite initiatives like the Black Economic Empowerment (BEE). However it is north of the Limpopo River when where some of the stinging criticism of the man seems to emanate from.

Opinion is sharply divided among Zimbabweans when it comes to Nelson Mandela’s legacy. While some joined the rest of the world in the reflecting the life of an international icon, others were questioning what they termed the exaggeration of the man’s success.

Shane a 25 year old Zimbabwean male had this to say about Mandela’s legacy.

“Mandela was celebrated for the qualities that he had which many African leaders still do not have. Mandela served one term and stepped down a feat which has not been matched by any African leader,” said Shane.

Shane added that Mandela was a champion of reconciliation. Having spent 27 years in prison, he did not seek revenge against his former oppressors once he was in power.

Chiedza a young woman from Harare agreed with Shane although she felt the world ignored some of Madiba’s misdemeanors and chose to highlight only the positive that he had achieved.

“Although he was a hero, he was also a womanizer but the world chose to prosecute his ex wife, Winnie Mandela,” said Chiedza.

She said Winnie Mandela had an affair once but she came out the worst as the world has made it appear as she was the only one guilty of this.

“If Mandela was all about forgiving, how come he failed to forgive his wife for one act which he was also guilty of,” lamented Chiedza.

A journalist who prefers to remain anonymous believed that Madiba had delivered some positives during his reign but his heroism was staged managed.

“Mandela was a moderate leader who favoured negotiations while opposed to protests as was espoused by Steve Biko. In the end Mandela left blacks in the political reins while the economy was left in the hands of the minority whites and that is his legacy,” said the journalist.

These sentiments are shared by the majority of Zimbabweans who feel that while the man deserves his legacy there remains many unsaid truths that are being conveniently left out.

On the political front Madiba divides opinion again because of some of his policies which challenged the Zimbabwe’s long standing position in the region.

For the instance when the regional body Southern African Development Community (SADC) was created Zimbabwe had always exercised a leading role because it was largely its brain child.

While the leadership of the body was rotated between the member states, the Organ on Security and Defence of SADC was however permanently stationed in Zimbabwe as part of a long standing agreement between the states.

South Africa which later joined the regional body insisted that the chairmanship had to include the security organ as well leading to disagreements which were widely reported at the time.

Since then South Africa has replaced Zimbabwe as the big brother of the region and that is why many here do not share the same sentiments with the rest of the world when it comes to Mandela’s legacy.

So depending on one’s ideological leanings, Madiba’s legacy will remain a subject of an unending debate among Zimbabweans even as the rest of the world agrees he was a true hero.

Corruption is equal to sanctions

Terence Zimwara

The debate on the state of the economy has often been politicized and many unsuspecting commentators have entirely blamed sanctions as the real course of the economic depression of the last decade.

Indeed the United States and European Union countries have imposed what they like to call 'restrictive measures' on Zimbabwe and officials have seized on this as the cause of the economic collapse.

In the meantime corporate malpractices and general corruption have tended to receive less scrutiny suggesting that these issues were not seen as serious.

Over the last few weeks however, the whole Zimbabwean media has been on a crusade against corporate greed and public enterprises like the Zimbabwe Broadcasting Corporation (ZBC), Premier Service Medical Aid Society (PSMAS) and Harare City Council have been targeted.

Shocking details of remuneration packages have emerged, with officials awarding themselves packages of hefty salaries against a background poor service delivery.

Tendai Mahachi Harare City’s town clerk is reported to earn $37000 per month while he along with the rest of the city’s administration officials earn a combined figure of $500 000 per month in salaries and benefits.

Happison Muchechetere the suspended chief executive officer earned a cool $27000 per month at ZBC yet ironically the same state broadcaster had gone for close to year without paying salaries to its employees.

Cuthbert Dube, the chief executive officer of PSMAS has earned the ire of citizens after it was revealed he was earning a staggering $230000 per month when the medical aid society itself was reeling from a $38 million debt.

While the media onslaught has exposed these three individuals, it is only logical to conclude that this is just a tip of the iceberg, the real culprits remain unexposed.

What is even more scary are reports that Cuthbert Dube is still in the office or that he is in line for a huge severance package.

The town clerk, Tendai Mahachi was suspended after revelations of his salary yet the government reinstated him immediately after the suspension.

Similarly there were reports of corruption at the technically insolvent national airline, Air Zimbabwe but at the time of writing there has not been any form remedial action taken.

What is becoming clear especially from the organisations mentioned above is that their poor performances are certainly linked to the reported poor corporate governance at these institutions.

Such poor performance is seen in the pothole strewn roads, non collection of refuse or failure to provide accommodation to the growing housing waiting list in the case of Harare City Council.

For ZBC the result has been the very poor quality of programmes on national television or the embarrassing episode of ZBCTV failing broadcast the just ended CHAN tournament where the Zimbabwe team performed beyond expectations.

The desire by those running these organizations is to enrich themselves quickly before the next batch managers replaces them. There is no accountability and more importantly there is no deterrent at all.

Last year Deputy Finance minister Samuel Udenge acknowledged this during symposium on Anti- corruption and bribery that the country did not have a strong enough deterrent to prevent would be criminals from engaging corrupt practices.

Cuthbert Dube may have robbed PSMAS policyholders for several years but there has not been any talk of him going to court for his misdeeds.

The same goes for all those whose corrupt practices have been exposed, there is little chance of them being prosecuted until the Prosecutor General’s office has been furnished with dockets of the alleged crimes by the police.

The Zimbabwe government owns or controls several dozen commercial and non commercial enterprises and if most of them are run similarly to how the above mentioned corporations then it quite it probable that corruption at the companies may have played a greater role in ruining the economy than sanctions or the so called restrictive measures.

In fact efforts aimed at revitalizing the economy will fail as long as individuals entrusted with the job of executing policy are more concerned with their selfish needs rather than national needs.

It is one thing for government to tout ZimAsset as the panacea to the economy’s troubles and another to actually see the strategic plan working.

The government will have to deal with corruption head on first before it enunciates new economic blueprints because corruption can be as debilitating as sanctions effectively rendering much vaunted ZimAsset another usefuless document.