HomeBusiness DigestDown the valley, up the mountain . . .

Down the valley, up the mountain . . .

By Reginald Sherekete

DECEMBER 2003 ushered in a new era in the management of the monetary affairs of this country with the assumption of duty on December 1 of former CBZ managing director, Gideon Gono, as t

he Reserve Bank of Zimbabwe governor. December 18 this year marked the second anniversary of Gono’s first address to the nation.

Unfortunately, the day fell on a Sunday so the markets were unable to raise even a brief toast and traded with barely a murmur on both the preceding Friday and the following Monday. It would have been interesting to gauge how the stock market would have commemorated that watershed event.

The day is a key date in the country’s economic history as it dramatically affected most New Year resolutions and threw many a strategic plan, both personal and corporate, into disarray.

Not only did the inaugural policy statement precipitate the eventual collapse of hard runners such as ENG Capital, Century Discount House and First Mutual Asset Management Company, it also left a lot of wannabe big-hitter asset managers both out of jobs and having to make regular visits to the Rotten Row courts. The collapse of asset management companies and a number of banks severely dampened confidence in the financial services sector. The closure of more than five industry players during the course of this year has done little to calm frayed nerves. At the time of writing, little known VFS Asset Management Company had been denied the much coveted perpetual licence, with the licensing authority citing a number of contraventions of regulations.

During the past two years, the financial sector has undergone considerable metamorphosis with the banking sector losing some high profile players. At the same time depositors have voted with their feet (or funds) and decided that they would rather sleep more easily with their money parked with the international banks than gamble with the high yields on offer at some of the upstarts.

Below we illustrate graphically how the face of the sector has changed over the past two years.

Please note that the pie charts do not represent the full picture; there is a significant element of survivorship bias as those institutions, such as Trust and Time, which were casualties of the hard new broom have been excluded in the analysis.

When all has been said and done the landscape has changed with new chapters being opened. Zimbabwe Allied Banking Group, the new big brave bank may not live up to the hype that was promised by its prominent predecessor Trust.

It has also not been an easy road that we have travelled since that day, December 18 2003 when the Central Bank declared war on inflation. The dragon is proving hard to slay as experience in other countries has already shown. After the shock therapy of December 2003 the year-on-year inflation rate did, to borrow from Reserve Bank own statements, trend downwards from a peak of 622,8% in January 2004 to 123,7% low in March 2005. Being short of good news, the whole country reverberated with ululation, songs of praise and there was a lot congratulations and mutual backslapping.

However as in soccer, scoring a goal, while worthy of celebration, is not quite the same as winning the actual match; whilst the nation was basking in the newly found glory with projections of between 20% and 35% by December 2005 being seriously entertained, the much written-off foe started rising slowly before the referee could count to ten.

The fact that inflation awoke from its apparent slumber to catch many unawares is evidenced by spike that the year-on-year CPI has experienced since June. The disappointing thing about all this is that the sceptics and the doomsayers have somehow been proven right. Furthermore, it’s not as though pessimists and economic detractors have cursed the nation, but rather our problems are, by and large, of our own making.

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