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Developing effective strategy for business value

THE primary goal of many organisations is to maximise shareholder value. This implies that the ultimate measure of a company’s success is the extent to which it enriches shareholders.

This has a great influence on a company’s strategic management process and this article will focus on strategic cost reduction as a way of creating better business value that results in the maximisation of shareholder wealth.

Strategic cost reduction

Strategic cost reduction is the process of redirecting resources in a more efficient manner that results in growth stimulation and the creation of a differential advantage for the company. It involves perfecting an organisation’s operational capability, thus creating a competitive advantage in a fast-evolving marketplace.

Many cost reduction opportunities exist across a value chain of an organisation, and they differ from industry to industry. It is important that a company sets up cost reduction methodologies and has an effective cost management framework in place.

Good costs versus bad costs

Strategic cost reduction does not mean that companies just cut costs. It means that a framework is put in place that helps to redirect resources to the revenue generating activities or operations in an organisation.

This can be achieved through an analysis of bad costs versus good costs, which involves the shifting of resources from low-return segments to higher value opportunities.

Costs are aligned in a way that matches the overall growth strategy of an organisation. The question becomes, “how do you separate good costs from bad costs?”

Good costs are the critical areas of spending in a business. The following are characteristics of good costs:

Good costs drive growth of an organisation

They are targeted for investment purposes

Good costs enable a business to create new value propositions

They act as a business differentiator and allow organisations to better reach their targeted market and consumers.

Good costs support business capabilities and generate real returns in the medium term

Bad costs are the non-essential areas of spending in a business that are not aligned to the overall direction a business plans to take. The following are characteristics of bad costs:

Bad costs are linked to inefficient operations, that do not add value to business operations

Bad costs are associated with low performing business operations that waste resources and hold back returns

They are usually a short-term fix to a problem

Bad costs do not create additional assets for an organisation

It is thus imperative for an organisation to ascertain their critical activities that add value to their organisation.

Companies need to more accurately identify investment opportunities that maximise their strategic advantage and forgo inefficient operations. Thus, redirecting resources from redundant undertakings to value generating ventures. This can be achieved through strategic cost analysis.

Strategic cost analysis

This is the process of identifying, analysing and using strategic resources for the continued success of a business. It will result in minimising exposure to bad costs and maximising investments in the good costs.

This will help achieve a more resilient company growth model.

Significant cost savings can be realised and more profitable growth avenues explored. It will also ensure that quality of products and customer relationships are not compromised.

Bad costs can be cut at micro (ground-level) and macro level (structure level), and good costs can also be maximised at macro and micro level. Measures implemented at a macro level may have a stronger and larger impact financially.

This strategic cost analysis process will help create a cost-conscious culture in an organisation. It is, however, crucial that an organisation does not cut the wrong costs as this has dire consequences.

Effects of cutting bad costs

The redirection of resources to revenue generating activities should either maintain quality or improve quality of products and not lead to quality reduction. It should be a way of investing in the strengths of an organisation.

It should enable the creation of unique value for customers. Cost management should support the strategy of an organisation and fuel the organisation’s growth.

The rechannelling of resources should lead to increased efficiency. Cost savings should be channelled towards bettering innovation and the support of research and development processes. Measures implemented should be sustainable and lead to a cost-conscious culture and a mind-set shift among employees.

It is important that organisations do not lose sight of their strategy towards achieving their goals.

An organisation’s costs should always reflect its strategy. Customer needs are constantly evolving and businesses need to be more innovative and responsive to remain competitive.

Resources should be directed to areas that strengthen the operational capabilities of organisations and result in greater profits while supporting the growth model of an organisation.

Strategic cost reduction through identifying the bad and good costs and then redirecting the costs may not be easy or welcome among employees but the end results will be a stimulation of growth for the organisation and the creation of a differential advantage that ensures that the organisation will remain competitive.

  • Chimhofu is an auditor at Deloitte and Touche, Harare. — nigelchimhofu@gmail.com.Facebook: Nigel Albert Chimhofu. LinkedIn: Nigel Albert.

Scourge of corruption: Enhancing effectiveness of whistleblowing

Ozewell Chiengwa
RIGOBERTA Menchú, a Nobel prize laureate, once said that without strong watchdog institutions, impunity becomes the very foundation upon which systems of corruption are built. And if impunity is not demolished, all efforts to bring to an end corruption are in vain.

What can Zimbabwe do to decisively deal with corruption and other related ills? Regarding Zimbabwe’s ongoing quest to control corruption, some scholars are of the view that a greater focus needs to be put on strengthening institutions, developing and implementing national anti-corruption strategies. Having the necessary political will and leadership as the primary governance elements of future efforts in order to reign in corruption and mitigate its consequences. These are some of the measures at national level which, if applied consistently and held as routine, can raise the cost of kleptocratic behaviour and thereby discourage it.

Transparency International defines whistleblowing as the disclosure of information related to corrupt, illegal, fraudulent or hazardous activities being committed in or by public or private sector organisations, which are of concern to or threaten the public interest to individuals or entities believed to be able to effect action.

Whistle-blowers play a very instrumental role for maintaining an open and transparent society by finding the courage to report wrongdoing.

In December 2021, Finance minister Mthuli Ncube, suspended the whistle-blower monetary reward facility, amid allegations of scandals and corruption that cost the Zimbabwe Revenue Authority (Zimra) millions of United States dollars.

Whether the minister did the right thing or not is debatable. However, what is the significance of offering rewards to those who speak out?

To begin with, for any initiative to be successful, it is important that the goal is clearly defined. There is also a need to understand the audience and know certain things about them such as their culture and what would incentivise them to participate in these activities.

There is also a need to decide on the theme and format and get buy-in from key stakeholders across the organisation. By nature, most people are reluctant to change.

It is also of paramount importance that participation is encouraged. Whether these fundamentals were addressed prior to the launch of the Zimra whistleblowing incentive scheme, it is unclear.

Someone becomes a whistle-blower when they speak up. It is, of course, acknowledged that some, even with the full knowledge of necessary information, decide to remain bystanders, wilfully blind and for that moment, assume the infamous ostrich posture.

Among the reasons for this choice are beliefs (e.g., religiosity), values, culture, whistle-blower protection mechanisms, and availability or non-availability of rewards among others.

Of all these factors, the rewards can work for either side: those that would speak-up due to what they stand to gain (quid pro quo believers) and those that speak-up by virtue of it being the right thing to do.

This is so as one can still “blow the whistle” and turn down the reward or accept and donate the proceeds. The provision of a reward may well incentivise those who would not normally speak out. However, it may also encourage individuals to raise a concern only when there is concrete proof and monetary reward.

This could reduce the opportunity to detect malpractice early and prevent harm. There is no known reason why whistle-blowers should not be recognised and rewarded in the workplace and by society at large. Whistle-blowers unmask corruption and help bring the truth to light, often benefiting society in the process.

It is in the background that the Compliance Society of Zimbabwe (CoSoZ)is against the shelving of the incentive scheme at Zimra. Whether the action taken by the minister is temporary or not remains to be seen.

In Africa whistle-blowers face dismissal, victimisation and violence. Extensive legislation seldom offers real protection. In Zimbabwe, there are no whistle-blower protection laws now although the plans are in motion.

The Whistle-blower Protection Bill has not yet passed the drafting stage and will determine if these issues will be pro-actively addressed once the bill is in place.

In South Africa, there is no provision for any kind of reward or incentive for whistleblowing. However, Section 9 of the Protected Disclosure Act refers to any reward payable in terms of any law.

Transparency International principles support the idea that a system of rewards generally results in more and better-quality disclosures, and this seems to be borne out by experiences in the United States.

The 2021 Annual Report to Congress on Whistle-blower Programme notes that whistle-blowers make a tremendous contribution to the agency’s ability to detect securities law violations and protect investors and the marketplace.

The Securities and Exchange Commission (SECZim) chair noted that the assistance that whistle-blowers provide is crucial to the SECZim’s ability to enforce the rules of the road for our capital markets.

This is evidenced most clearly by the amount of financial remedies stemming from whistle-blower tips. He noted that since the programme’s inception, enforcement matters brought using information from meritorious whistle-blowers resulted in orders for nearly ZW$5 billion (US$10,8 million) in total monetary sanctions, including more than ZW$3,1 billion (US$6,7 million) in disgorgement of ill-gotten gains and interest, of which more than ZW$1,3 billion (US$2,8 million) had been, or was scheduled to be, returned to harmed investors.

Rewarding whistle-blowers and enactment of whistle-blower protection laws, of course supported by other interventions, can go a long way to fight corruption in Zimbabwe.

The presence of rewards and necessary legal framework effectively communicates and resonates with potential whistle-blowers that their information is valued. This also addresses the risks of retaliation.

Whistle-blower rewards and whistle-blower protection laws create a safe effective, and highly successful method for people to disclose fraud to the appropriate authorities.

Data shows that incentivising whistle-blowers is extremely effective in generating high quality tips that result in successful prosecutions.

For further interrogation is the glaring absurdity of the now removed whistle-blower facility itself becoming corrupt, with some individuals allegedly having found a new career as whistle-blowers.

The unspoken undertone is arguably that corruption in Zimbabwe is due to some fundamentals or lack thereof and to combat corruption will require unwavering and selfless political will.

While the reasons for some initiatives to fail in institutions vary from one case to the other, some of the causes are poor internal controls. These internal controls can be preventative, detective and corrective in nature.

Also, in some cases it is to do with failure to clearly define and articulate the goal of the initiative, lack of buy-in by some stakeholders to mention but a few.

It is thus imperative that from idea generation up to post implementation, appropriate measures must be taken to minimise chances of failure.

CoSoZ strongly believes in the use of incentives as a way of encouraging whistleblowing and dealing with corruption and other societal ills such as fraud, forgery, among others.

Whistleblowing incentives are effective measures in cases where other key fundamentals are in place and working, these include appropriate tone from the top, training and awareness program, stakeholder engagement and participation, whistleblowing policy, protection mechanisms for whistle-blowers to deal with fear of retaliation to mention only a few.

  • Chiengwa is Compliance Society of Zimbabwe (CoSoZ) councillor. These weekly New Perspectives column, published in the Zimbabwe Independent, is coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zim). — kadenge.zes@gmail.com

2022 Nissan Qashqai a polished performer

Andrew Muzamhindo
Family members have long loved the Nissan Qashqai. It is a family-sized SUVs that gained popularity in 2007 thanks to the first-generation model, and by 2022 the competition had fully caught up.

Nissan recently expanded its model portfolio with a cutting-edge hybrid system. Customers can now choose between 1,5-litre full-fat hybrid engines or 1,3-litre mild hybrid engines.

Let us look at the Qashqai’s practicality, interior, running costs and engines.

How much space is there?
The Qashqai was intentionally designed to be useful. There is more room for the driver and passengers because it is 32 mm longer and 35 mm broader on the outside than the previous model.

In the passenger compartment, there are plenty of storage spaces and USB charging stations. As you might anticipate for a car with such a high roofline, there is enough head and legroom in the front seats for anyone six feet tall.

In comparison to the previous model, there is now 28mm more shoulder room between the front passengers, 20mm more kneeroom for passengers in the back, larger cupholders, and additional storage for phones.

For a car in this class, there is sufficient space in the back. At the back, three persons can fit comfortably. It’s a terrific automobile for parents, especially those with kid seats, as getting in and out is very easy thanks to the doors’ 85-degree opening.

The boot has 504 litres of capacity. Included in it is the extremely adaptable Flexible Luggage Board System, which features a range of depths and an integrated divider. It has plenty of room for tall objects, and the package shelf can tuck under the boot floor.

A motorised tailgate is available, and it may be opened by waving your foot under the rear bumper, which is a way that is gaining popularity as a hands-free alternative. The inside has the two needed cupholders, a spacious glovebox, and a roomy cubbyhole under the armrest on the center console between the seats.

Easy to park
Because the Qashqai isn’t much wider and longer than a typical hatchback like a Volkswagen Golf, parking it is simpler than you might imagine.

All vehicles, with the exception of the base Visia model, are equipped with front and rear parking sensors as well as cameras, making it simple to pull into and out of parking spaces. Once you are outside of town, the Qashqai’s fast steering and upright driving position make it simple to operate.

Euro NCAP awarded the Nissan Qashqai a perfect score of five-out-of-five.

The Qashqai has automated emergency braking (AEB), blind spot monitoring, traffic sign recognition, and a driver attention alert system that prompts you to take a break if the vehicle notices that your concentration is waning or that you have been on the road for an excessive amount of time.

On the Tekna and N-Connects versions, the Tech packs are reserved for the superb ProPilot+ system with head-up display, and they are well worth the investment. As long as you maintain your hands on the wheel, this device aids with motorway driving by improving steering function at speed. Do not assume that it is an autonomous system; you must continue to pay attention to the road.

If you don’t want to go all the way, lane-keeping assistance is available too.

Basic equipment
The basic equipment list includes equipment that is standard across all versions of the Nissan Qashqai SUV:

  • 3×3 point rear seat belts
  • ABS
  • Alarm
  • Audio remote
  • CD
  • Driver’s airbag
  • Electric mirrors
  • Front electric windows
  • Heated mirrors
  • Isofix child seat anchor points
  • Parking sensors
  • PAS
  • Passenger’s airbag
  • Rear electric windows
  • Remote locking
  • Side airbags
  • Steering wheel rake adjustment
  • Steering wheel reach adjustment
  • Quality is much better than old model
  • New infotainment set-up very effective
  • Seats supportive, massaging function optional

How is the quality and layout?
The inside is an improvement over the previous one, and while it may not quite be the pinnacle of minimalist design, it is unquestionably among the best.

The seats are roomy and well-shaped, and more expensive models have pleated facings on appealing soft-feel leather finishes. It seems sturdy, and the materials are of the same high calibre as everything made by Volkswagen, although it lags somewhat below the nicely finished Mazda CX-5.

The driving posture is good with the exception of a hefty A-pillar that can obstruct your view into roundabouts and angled crossroads. The controls are conveniently located and easy to use. You will be pleased to see physical controls for the climate control system even if the majority of the car’s features are controlled by a touchscreen.

Nissan claims that its consumers desire traditional controls, and they do. In the high-end Tekna variant, front-seat occupants are also treated to massaging seats, a first for Nissan. They obviously contribute to comfort over long distances, although they are not nearly as effective as the system found in the Peugeot 3008.

Infotainment and tech
A head-up display and a completely programmable digital screen are both located behind the steering wheel. Along with wireless Apple CarPlay, Google Streetview, and the choice of Amazon Alexa voice recognition, there is a new 9,0-inch infotainment system. It connects to your smartphone fast and easily, being speedy and user-friendly.

It’s a major deal that Nissan’s ProPilot semi-autonomous car technology, originally seen in the Leaf, is now available since it can make driving in congested areas far less stressful. The system locks you into the middle of the lane and places you a predetermined distance behind the vehicle in front.

In stop-and-go traffic, it can slow down to 0km/h and begin moving whenever the vehicle in front of it moves. In actual use, it performs admirably and has the extra benefit of being simple to turn off when traveling on winding roads, which often confuse these systems. ProPilot can scan traffic signs and communicate with the car’s built-in sat-nav to modify the speed of the vehicle based on the posted speed limit.

The mid-spec N-Connecta grades offer the most recent system. Additionally, there is an adaptive headlight system that modifies the form of the beam based on the traffic and the condition of the road.

For example, it can turn off a portion of the light temporarily to prevent dazzling approaching cars. While all cars have LED headlights, only higher-end models will be equipped with this technology. In use, the technology is really amazing and has never once irritated oncoming drivers during a long midnight journey.

You have a commanding perspective of the road ahead as you sit high up in the Qashqai. The majority of buyers will value this. Despite the fact that taller drivers might feel the seats don’t descend quite low enough.

On bad roads, there are some tremors, but the Qashqai excels because to its motorway refinement, with barely audible engine noise and low levels of wind noise. The seat support is great for individuals who travel long distances and can be improved with the optional massaging feature.

Yes, it’s a worth your attention, but with a few slight caveats. The Qashqai should be at the top of your buying list if you are looking for a medium-sized SUV. It is one of the most technologically advanced SUVs on the market, is quite enjoyable to drive and is available with a variety of petrol engines to meet your needs. — andrew@muzamhindo.com

Egypt: The world’s biggest exporter of oranges

WHILE many may associate Egypt with pyramids and pharaohs, the country is fast on track to become an agricultural powerhouse in Africa.

According to the United States Agency for International Development (USAid), agriculture contributes 11,3% to Egypt’s GDP and accounts for 28% of all employment.

While the sector is still largely dominated by smaller farms that use conventional agricultural practices, this is quickly changing as the Egyptian government steps up its investment in the sector.

In 2021, Egypt exported 5,6 million tonnes of agricultural goods, compared with 5,1 million tons in 2020. According to the country’s Ministry of Agriculture and Land Reclamation, the export of citrus fruit was most significant, with 1,8 million tons exported in 2021.

This was followed by fodder beets (650 340t), potatoes (614 424t), onions (276 141t) and grapes (143 450t). Other important export crops include strawberries, pomegranates, beans, guavas, peppers, mangoes, garlic and watermelons.

In this article, we specifically look at Egypt’s production of oranges, and the challenges and opportunities in the country in this regard.


Egypt is currently the world’s biggest exporter of oranges, which accounts for around 80% of its total citrus production.

According to the US Department of Agriculture (USDA), Egypt is expected to retain this ranking, despite an almost 200 000t drop in exports to 1,45 million tons due to unfavourable weather conditions and their impact on production.

Egypt’s orange exports in 2021 were estimated to be worth around US$843 million.

However, with Russia and Ukraine being amongst the country’s biggest importers of oranges, Egypt may have to find additional markets for its produce, as the Russia-Ukraine war looks set to continue. In terms of expenditure share, Russia imports approximately 20% of its oranges from Egypt.

According to the USDA, Russia imported about 250 000t of oranges from Egypt in the 2020/21 marketing year, with Ukraine importing around 50 000t. Russia and Ukraine thus account for around 20% of Egypt’s total orange exports.

The USDA expects orange production to drop 16% (570 000t) to three million tons over the next season.

This is due to unfavourable weather conditions, including fluctuating temperatures during flowering, which has reduced fruit set.

Challenges for the upcoming season

Egyptian orange producers are struggling with many of the same problems that currently affect farmers across the world. These include high fertiliser costs, logistics problems and unfavourable weather conditions. However, the country also has a number of unique challenges.

For the upcoming season, for example, there is a lack of demand for larger oranges, which excludes a large portion of Egypt’s crop over the past season, according to Abdullah Tharwat, business development manager at Pyramids Agriculture.

“The Egyptian orange season started in December with the Navel and Baladi varieties. There was a high demand for small sizes of Navel, but only 30% of the harvest can be considered small. This leaves 70% of the production larger-sized, and, as stated, there has simply been little demand for these sizes.

“For the Baladi variety, the demand was low compared with the previous season. Some markets still have oranges from the South African season stored in their cold stores.”

Russia also recently set new rules on pesticide use, which means that farmers in Egypt will have to adjust their production practices, as Russia remains one of its biggest importers.

Despite these challenges, says the USDA, Egyptian farmers, growers’ associations and the government are working on replacing old orchards, improving on-farm irrigation techniques, and reducing post-harvest losses.  — Farmers Weekly.

HR policies, procedures

Memory NGuwi
THE starting point when developing human resources policies and procedures is to be clear on what the organisation intends to achieve overall and how the human resources function can assist in achieving such ambitions.

To ensure that the human resources policies and procedures continue to be taken seriously by management, they must be administered and applied consistently throughout the organisation.

Every policy needs to be in line with the laws that are currently in effect. Each one needs to be understandable, condensed, and current. Sometimes, inconsistencies in treating employee issues trigger the development of human resources policies and procedures. Sometimes they are triggered by situations where there is much ambiguity in certain aspects of the company or how things are done, and the organisation would benefit from a policy.

A policy can be written when a law requires an organisation to have a policy.

Policies are created for the many, not the few. When you implement a policy, you are setting a standard that will apply broadly across the business, not just to a few individuals who may be generating issues.

A policy establishes a norm or standard that must be followed consistently, limiting management’s ability to consider each circumstance unique. Poorly developed and implemented policies might cause more harm than good to your firm. It might be tough to modify policies embedded in your organisation’s culture and ways of operating (They tend to create legitimate expectations).

You want to ensure that any policies you implement meet a real need and are consistent with your firm’s beliefs and how work should be done.  You must also guarantee that managers have the necessary skills and resources to execute and monitor the policy.

Much of the substance of policies mandated by legislation may be determined by the requirements of the legislation. Compare yourself to other organisations implementing a similar policy (best practice).

What is the policy’s purpose? What are the outcomes? What role does this policy play in establishing our desired workplace culture? How will this policy be put in place and monitored? What impact would this policy have on a manager’s ability to act when evaluating performance, promoting, allowing leave, hiring, or terminating?

How will this policy affect our ability to attract suitable candidates? How has our organisation dealt with similar issues in the past? It is best practice to consult important stakeholders when establishing human resources policies and procedures. This includes consulting management, staff, and board members. This will ensure you gain buy-in, address the correct issues, and have a complete picture.

Structure of the HR policies

The human resource and procedures should have the following structure:

The policy’s aim is outlined in the purpose, which describes what the policy wants to achieve. For instance, the goal of a health and safety policy may be to guarantee that all employees are provided with a safe and healthy working environment that complies with the applicable health and safety regulations.

The policy scope describes the types of people to whom it applies. It is possible that every employee and staff member may be affected, or there will be some differentiation depending on level, location, job status, or department. In addition to that, the scope should specify any exceptions to the policy.

Policy statement

The actual rule or norm that the policy needs to express is included within the statement.

Describe the roles that will be played by the board, management, and employees in the policy, and indicate who will be in charge of creating, maintaining, monitoring, and enforcing the policy. Be careful to mention that failure to comply with the policy may result in disciplinary action.

Make sure that any phrases used in the policy are defined very clearly. If the definitions of the words are included in the law that underpins the policy, you must utilise the legislation’s definitions (e.g., retrenchment, overtime etc.).

 Final tips
You want the policy to speak directly to the people it is meant to, so be sure you use basic and obvious language and stay away from jargon and legal speak.

Make sure that the content and the way it is worded are objective and that they support fair and consistent treatment. Always use the same phrases, and define any unique terms.  Be certain that the standard or norm established by your policy can only ever be interpreted uniformly.

Consider a few “what if” situations to check if the policy still applies, bearing in mind that most policies will not, and should not, cover every potential event.

You should provide for exceptions to the norm in most policies. Use words like “generally,” “usually,” and “typically” instead of “always” and “never.” Include a disclaimer such as “this is just meant as a guide.” There are a few instances where you want to be completely certain that the policy’s standard will apply in all circumstances.

Human resources policies and procedures are formal commitments focusing on how employers deal with employees. Policies and procedures pertaining to human resources are considered to be the most important aspect of any corporation.

  • Nguwi is an occupational psychologist, data scientist, speaker and managing consultant.

Money-making season

THOSE with a passion for animal husbandry can make use of the summer season to set up or improve on what they have.

There are so many projects that one can venture into this summer but the key is to know that when the rainy season comes, most animals are affected, especially if there are no proper structures.

Animal diseases are prevalent during the rainy season, but this does not mean that one cannot start a project.


The best time to start rearing chickens is now. In summer it is easy to keep the day-old chicks warm. However, farmers must be wary of high temperatures as these usually tend to suffocate birds.

The good thing about chickens is that these days there are so many varieties. There are broilers which take at least six weeks to maturity.

The most hindering factor to this type of project is the availability of the day-old chicks. Also be sure not to be sold rejects and always look for accredited dealers for the chicks.

During the festive season broiler chickens have high returns.

There are also layers for egg production. Unfortunately these require farmers with good money reserves because of high demand for feed. The income is cumulative, meaning it comes in small amounts over a certain period of time.

Then there are also roadrunners which are a five-tier source of income:

You can sell eggs to other breeders

You can sell eggs to consumers

You can sell day old chicks

You can sell the chicken for food

You can sell chicken to breeders

The best deal in town for chickens is Zamavian breeders that can sell well during the Christmas period. They take about four months to mature and grow so big that you can actually sell them at US$8.


There has been a general interest in fish farming among farmers but unfortunately many have been disappointed by the market. It usually seems like there is no market for the fish but just like everything else in farming, timing is key.

During the cold season there is hardly any fish in the dams. Those with facilities to breed fish then maximise during that season and make a lot of money.

This summer one can start the construction of the fish pond and put his fish in the water.

Next year around May you can start harvesting your fish and enjoy brisk business. Fish seed is best bought from the Zimbabwe Parks and Wildlife Management.

Pig production

Those who already have pigs must be wary of high temperatures. Also make sure that the pigs are under a shade with lots of water to cool their temperatures.

The summer season is a good time for beginners because they do not have to worry about warming the new-born piglets.

Cattle, goats, sheep

The summer season is nightmarish for those with cattle, sheep and goats. Because there is hardly any grass for these animals. They usually break out of their kraals to look for food at night.

Usually they stray into those farms that are doing horticulture because that is the only place where they can get green plants in summer.

The other headache is water for these animals because most of those small rivers would have dried up. Even dams would have dried out too.

Farmers are advised to get supplementary feed for their cattle during the summer season. In addition there must be plans to get them water otherwise you will have sleepless nights as they stray away.

This summer, let it be different by starting out a project. If you have already started, make sure you maximise with these high temperatures that are only enjoyed for four months.

  • Gwabanayi is a practising journalist and a farmer in his own right. — 0772 865 703 or gwabanayi@gmail.com

Economics, equity note: The Zimbabwe syndrome

Morgan & Co
THIS report focuses on our insights on the outlook of the Zimbabwean economy following several monetary policy and capital restriction measures as well as the presentation of the 2022 Mid- Term Budget Review and Supplementary Budget.

A key concern has to do with emerging inflationary pressures in the domestic economy and a deteriorating Zimbabwean dollar (Zimdollar).

This has triggered the Government of Zimbabwe to institute measures that have impacted local capital markets.

Further the introduction of gold coins (Mosi oa Tunya) to the universe of investable assets has implications to traditional investment markets in Zimbabwe (such as the stock market).

Overall, while we expect the country to register modest growth in 2022, extreme economic risks still exist and continue to hamper the potential for a much-solid economic recovery.

The negative impact of the Russian/Ukraine war, a colossal debt overhang (US$13,15 billion in external debt), limited access to credit, country-specific issues, such as power shortages and election-related risks all present significant headwinds for economic growth in 2022 and 2023.

The Zimbabwe syndrome
According to the International Monetary Fund (IMF), debt loads in poorer countries around the world stand at the highest levels in decades.

For example, Zimbabwe currently has unsustainable external debt amounting to US$13,15 billion.

Squeezed by the high cost of food and energy, a slowing global economy, and a sharp increase in interest rates around the world, developing economies are entering an era of intense macroeconomic pain.

This includes limited fiscal space, weak growth, and increased poverty levels. Worse still, for a country like Zimbabwe that is twirling under economic sanctions, it has had to go-it-alone.

As a result, the government has been dipping its fingers everywhere through policy shifts that have largely made forecasting and planning a mammoth endeavour for business leaders and investors on local capital markets.

Our concern is that the policy shifts have become somewhat of a syndrome on the part of policy makers. Instability has become a common feature or condition in the economic structure of Zimbabwe.

Economic growth downgrade
The IMF has revised downwards global economic growth projections to 3,6%, down from the initial projection of 4.9%. The downgrade largely reflects the direct impacts of global tensions and spill overs.

In addition, the IMF trimmed Zimbabwe’s growth forecast to 3,7% from 4,3%.

On the other hand, the Ministry of Finance and Economic Development has revised its GDP growth forecast for Zimbabwe downwards from 5,5% to 4,6%.

Gold-coin effect
The gold coin has triggered a sell-off on the Zimbabwe Stock Exchange (ZSE) as institutional investors are switching to an alternative asset-class that has prescribed asset status.

As a result, the stock market has largely de-rated on weak demand because of tight liquidity on the market.

Equity strategy
One fundamental observation is that stock prices have declined significantly in real terms and the market is looking “cheap”. The recent sell-off on the ZSE has resulted in apparent undervaluation of traditional blue chips like Delta, Econet, Innscor, Hippo and Meikles while there has been no fundamental changes to business models.

Additionally, the financial services sector remains undervalued. BUY the ZSE!

New measures and policy shifts
Over the past 24 months, the Government of Zimbabwe has instituted drastic measures in a bid to control inflationary pressures, instil confidence, strengthen demand for the local currency and foster market discipline.

The thinking on the part of the government is that exchange rate movements are being driven by negative sentiments of economic agents as opposed to economic fundamentals.

That said, these measures have had an impact on local capital markets. We summarise some of the measures hereunder;

The suspension of trading of dual-listed stocks on the Zimbabwe Stock Exchange (ZSE);

Capital gains tax for shares held for a period not exceeding 270 days was reviewed to 40%. This measure is set to deter short term speculative buying and selling of shares;

The quarterly reserve money growth target was reduced to 0% per quarter;

Continuation of partial dollarisation (multi-currency system), while working towards a managed de-dollarisation process;

A review of capital markets regulations to curb speculative tendencies (inter account transfers between client sub account with a broker are now prohibited, third party funding of client sub-accounts is no longer permitted, transfer out of client sub account with a broker only allowed to the customers’ bank account and not to third parties);

Foreign currency tax obligations to be settled at interbank exchange rate;

All domestic foreign currency transfers to attract IMTT of 4%;

Entrenching the multi-currency system and inter-bank market exchange rate through legislation for the NDS1 period;

Periodic reviews of the remuneration framework for civil servants to cushion them against increasing cost of living;

Upwards review of the bank policy rate to 200% discourage speculative borrowing;

Introduction of a limit on the number of days for holding foreign currency by exporters to enhance

  •  Circulation in the economy; and
  • Introduction of Gold Coins as an alternative store of value.
  • Implications of the new measures

The new measures have had a negative impact on trading volumes on the local stock market given (i) limited access to ZWL liquidity and (ii) an increase in trading costs (increase in CGT).  On another note, the punitive tax regime in Zimbabwe is the major cause of the high level of informality in the economy.

Zimbabwe is indeed among the top five informal economies in Africa alongside Benin, Gabon, Central African Republic and Nigeria.

While the informal sector can sustain households, the main disadvantage for government is that it limits revenue collections given that informal businesses do not pay direct taxes and other social security contributions.

In terms of the ease of doing business, the country already ranks poorly according to World Bank Rankings. In 2020, the ease of doing business index for Zimbabwe was 54,47 score. Policy uncertainties further dents the ease of doing business rankings.

All in all, the instability has largely triggered low levels of investor confidence which has been a major impediment in terms of Foreign Direct Investment (FDI) flows into the country. Also, currency risks have also limited inflows.

This is because investors cannot freely move money in and out of Zimbabwe. This remains a barrier to the flow of new money into Zimbabwe. As a result, the country has also not been able to secure adequate lines of credit to capacitate local producers.

Morgan & Co Research contends that Zimbabwe needs to do all the things necessary to attract foreign and regional partners to not just grow but survive in the new global economy. International investors today possess a plethora of investment options in the form of asset classes and projects they can invest in. Zambia, Malawi and even South Africa are competing for investment allocations from the same global investment market.

In other words, Zimbabwe’s political or economic demise can be —  in a wa y—  an advantage for other African states. Curbing corruption, improving the ease of doing business and upholding democratic ideals goes a long way in attracting capital flows into Zimbabwe. Government policies in Zimbabwe should also be modelled around boosting productivity by focusing more on factors that lead to economic growth. These include (i) accumulation of capital stock, (ii) labour inputs and (iii) technological advancements.

Regional local growth downgrades
Economic recovery in Sub Saharan Africa (SSA) is expected to slow down to 3,8% during 2022, before accelerating to 4% during 2023. The region’s recovery will be supported by elevated commodity prices, gradual recovery in tourism, with vaccinations in some tourism-reliant economies already proceeding at a much faster pace than in the rest of the region.

Morgan & Co is a securities firm.
On the other hand, the Sadc real GDP growth is projected to decelerate to 3,1% in 2022 from a recovery of 4,4% experienced in 2021. South Africa, a major economy in the region, is projected to grow by 1.9% and 1,4% in 2022 and 2023, lifted by growth in trade, tourism, mining and manufacturing, although electricity supply constraints and underperforming state-owned enterprises may weigh down growth.

SSA economies GDP growth
Looking at the Zimbabwean context, the economic outlook remains highly uncertain. More recently, the World Bank trimmed Zimbabwe’s growth forecast to 3,7% from 4,3% on the back of the impact of the Russia-Ukraine war and the Covid-19 pandemic.

The Bretton Woods Institution also expects growth to marginally slowdown in 2023 to 3,6%.  On the other hand, the Ministry of Finance and Economic Development has revised its GDP growth forecast for Zimbabwe downwards from 5,5% to 4,6% because of the impact of external global risks such as the Russian/Ukraine Crisis.

In addition, growth has been weighed down by reduced output from the 2021/22 agriculture season.  However, government expects the economy to continue on growth trajectory and register 5% in 2023.

This growth is expected to be driven by favourable international commodity prices, stable macroeconomic environment, and improved production in all sectors of the economy.

Morgan & Co Research projects a modest 2022 GDP growth of 3.2% in 2022 and 4.0% in 2023 given that the country is not insulated from geopolitical headwinds and is also facing several regional and country-specific constraints such as power shortages.

Zimbabwe GDP Growth

Fiscal development

The Minister of Finance and Economic Development presented the 2022 Mid-Term Budget and Economic Review on July 28 that provided an update on the performance of the economy and the progress on the 2022 budget implementation during the first half of the year.

The presentation was done under the 2022 Budget theme “Reinforcing Sustainable Economic Recovery and Resilience”.

Morgan & Co Research notes that the 2022 National Budget was premised on revenue collections of ZW$850,8 billion (16,8% of GDP and US$1,8 billion at interbank rate of US$1:ZW$465) and expenditures of ZW$968,3 billion (target budget deficit of ZW$76,5 billion/ 1,5% of GDP).  The unaudited outturn during the first half indicates revenue collections of ZW$506,6 billion, against expenditures of ZW$534,5 billion, resulting in a budget deficit of ZW$27,9 billion, against a target deficit of ZW$45 billion.

Development partners complemented fiscal resources with an amount of US$190 million having been disbursed towards various projects and programmes. Of this amount, bilateral partners contributed US$164 million and multilateral partners US$26 million.

The Minister of Finance and Economic Development indicated that several constraints emerged during implementation of the 2022 Budget such as:

Requirements to review salaries to improve the welfare of civil servants;

Increase in requests for funding, including for unbudgeted expenditures;

Depreciation of the local currency (ZWL) and erosion of budget provisions;

Increases in international prices of fuel and other critical raw materials, among other key services that have rendered most budget allocations inadequate; and

Rescoping of critical components in some projects due to unforeseen circumstances.

As a result, cumulative expenditures for the first six months of the year amounted to ZW$534,5 billion, against a target of ZW$431,2 billion, resulting in a 19% overrun.

Of this amount, recurrent expenditures amounted to ZW$393,1 billion, against a target of ZW$286,5 billion.

In terms of composition, compensation of employees comprising the wage bill, salaries of staff at extra-budgetary institutions and pensions dominated the expenditures at 36%, followed by use of goods and services at 25% with capital expenditures at 25%.

Our concerns around the national budget include (i) a lean tax base given the rapid informalisation of the economy, (ii) the fact that revenues are not growing in line with inflation and (iii) the skew towards re-current expenditure (employment costs).

  • Morgan & Co is a securities firm.

Zim central bank considers currency board

Zimbabwe is considering establishing a currency board to support the Zimbabwean dollar, as inflation surges.

The southern African country is fast moving back into a hyperinflationary crisis, about 14 years since its unit collapsed in 2008 after the rate hit 500 billion percent.

The annual inflation shot up to 256% last month, after ending at 191,7% in June.

The rate was 131,7% in May leading to fears that inflation may reach four digit figures by the end of this year.

Authorities agreed to switch to a multi-currency system in 2009, before policy changes in 2019 brought back the Zimbabwean dollar as the sole medium of exchange in local transactions.

But the currency has been haunted by hyperinflation, which has eroded its purchasing power.

To address the crisis, the government allowed the United States dollar to operate alongside the domestic unit in 2020, but this has failed to stem its depreciation.

Bloomberg reported on Thursday that a monetary policy committee member had confirmed that authorities were looking at the possibility of introducing a currency board.

“The issue of the currency board is being looked at,” Ashok Chakravarti, a member of the central bank’s monetary policy committee, said on Thursday at an economic conference in the resort city of Victoria Falls, according to Bloomberg.

“It’s been done by 40 countries before, but it also requires a substantial amount of reserve money. It is being considered.”

A currency board must among other requirements back all units of domestic currency in circulation with foreign currency.

Zimbabwe will need about US$700 million to back the domestic money in circulation, Chakravarti said.

Reserve Bank of Zimbabwe Governor John Mangudya did not answer two calls by Bloomberg to his mobile phone seeking comment.

In a paper published in the Zimbabwe National Chamber of Commerce 2021-2022 report, Tinashe Murapata, an economist and founder of Leon Africa said to solve currency problems, Zimbabwe had two options: dollarisation or adoption of a currency board.

A currency board is a pegged exchange rate mechanism that guarantees full convertibility of domestic currency to an anchor foreign currency or a basket of currencies.

Under this system, the total monetary base of the economy is supported or backed by international reserves. The pegged exchange rate creates a stable currency and stable prices but takes away the ability of a country to increase its money supply willy-nilly.

“If Zimbabwe is to adopt a currency board, all issued domestic currency will be backed fully by an anchor currency. The anchor currency can be a basket of currency determined and weighed by our trading partners or hard metal commodities like gold, silver and platinum,” he said.

“It could very well be a combination of the above but essentially every issued domestic money must be fully convertible on demand for foreign currency at a fixed rate that does not change over time.”

Murapata said the currency board should maintain an international account where it stores or deposits all foreign currency receipts as reserves.

These reserves, he prescribed, should be held by South Africa Reserve Bank and the African Development Bank who will act as an underwriter for every issued local currency.

“They will agree to underwrite full convertibility of the local currency with what is in the reserves. Furthermore, a weekly audit performed by an audit firm confirms what is in the offshore reserves and in the issued currency,” he said.

Zim trade performance review

Respect Gwenzi
EXTERNAL factors driving the recent trends in trade

Zimbabwe set to achieve both record highs in exports and imports

Balance of payments to emerge positive

In June 2022, Zimbabwe imported merchandise worth US$751 million up 5% from US$716 million recorded in May 2022, latest Zimstat statistics show.

On a year-on-year (YoY) basis, merchandise imports mounted by 21% from US$622 million realised in June 2021.

In the same month (June 2022), merchandise exports came in at US$667 million up 30% from US$513 million achieved in May.

On a YoY basis, imports went up by 32% in June from US$361,1 million achieved in May 2021. Overall, June trade balance came in at -US$84 million which is a significant improvement from — US$203 million achieved in May, thanks to a record high export performance.

On a cumulative basis, exports for the year totalled US$3,3 billion, which compares to imports of US$4 billion, reflecting a — US$0,7 billion trade deficit.

In isolation, the year to date export performance reflect the best performance in the history of Zimbabwe.

The surge in export earnings is largely reflective of the strengthening commodities prices such as gold, nickel, chrome and the platinum group of metals.

Likewise, firm international prices have motivated local producers to ramp up production, which for most minerals reflects record high levels.

For example gold produced over the first six months of the year totalled 16 tonnes, which is 59% up from the same period last year.

At this pace, gold production by full year will become an all-time high.

Year to date, gold has raked in US$1 billion in receipts, a figure which has historically been achieved in a full year’s time.

However, in 2021, full year receipts reached US$1,6 billion, driven by strong bullion prices.

Metals prices are being driven by strong demand in the aftermath of Covid-19.

Gold, an asset typically preferred for risk aversion has seen prices remain strong due to global uncertainties following the invasion of Ukraine by Russia.

Traditional export drivers, such as tobacco have seen contributions remaining stable, but some, such as chrome and PGMs have realised strong growths.

Government, which for a long time, has sought to stimulate exports, has been incentivising exporters by allowing full retention of export funds on incremental exports for those listed on the VFEX and a substantial portion of the increment for any other exporters.

These initiatives have stimulated production and export receipts.  On the imports side, the cumulative year to date performance, projects the worst outturn by full year.

It is likely that imports value will swell to US$8 billion by December 2022, marking a record high.

The worse off outturn is a function of surging food prices globally given the Russia- Ukraine war.

The two players are major food suppliers globally and supply has been dampened since the invasion.

Further, fuel prices have skyrocketed as Russia a major global supplier drags in war, driving Zimbabwe’s import bill ballistic.

The country is a fuel importer and also relies on imports for soya bean, maize among other commodities.

From the chart above, data shows that the net trade gap enjoyed its most improved performance in 2019 and 2020 as imports largely came off, while exports enjoyed a steady growth.

However, in 2021 the net performance worsened, coming in at levels closer to dollarisation averages. Imports of rice, Covid-19 medicines and soya beans were some of the biggest movers in driving the net outturn upwards.

The current year’s outturn is likely to be worse off, driven by somersaulting prices for fuel and spiking food prices. These inflationary headwinds will drag global growth in the current year and push some economies into recession.

Zimbabwe’s inflationary outturn is fast spiralling into hyperinflation, a development which will curtail projected growth by almost half, according to our projections.

Overall what the trade data shows is that there has been a proportionate growth from both exports and imports. The growth in exports is partially driven by volumes and in part, price recovery.

Sustaining the current run rate for exports will be difficult going forward as global supply chains restabilise and revert to normalcy.

Likewise, gold prices may fail to maintain the current high levels if uncertainty comes off and the global economic recovery strengthens.

The strong performance in gold is also a function of stability within the local economy. Some policies have a potential of disrupting deliveries and these feed from or into the disparity between the official and the informal exchange rates.

The best chances of narrowing the trade deficit is by focussing on food production and this means attending to the overall value chain from field to the retail shelf.

Zimbabwe still has to address the issue of land ownership, which will answer questions, such as funding and skills onboarding.

Overall, a positive Balance of Payments is likely to be achieved in the current year anchored on surging remittances.

This will mean that Zimbabwe’s forex inflows will be higher than its outflows in a year and all things being equal, a more stable local currency is achievable.

The excess of government has been in financing projects using hot money in a very fragile environment.

  • Gwenzi is a financial analyst and MD of Equity Axis, a financial media firm offering business intelligence, economic and equity research. — respect@equityaxis.net

Gold coins in same league with bitcoin

Vanessa Jaravaza
THE gold coin currency adopted by the country has received conflicting views from citizens, especially as this economic measure was coupled with an economic pressure of increased interest rate.

As such, the impact of the gold coin as a solution to the high demand for the United States dollar (USD), on value of the Zimbabwean dollar (Zimdollar) on inflation, digitalisation, and overall well-being of the majority of citizens is unclear as the economic environment suffers defective policies that limit effective use of the coin.

Zimbabwe’s one troy ounce 22 carat Mosi oa Tunya, introduced on July 25, presents as a relief mechanism from the high demand for the USD.

The same USD had initially proved to stabilise the country’s hyperinflation when it was first introduced as part of the multicurrency system in 2008 after, which the crushed Zimbabwean dollar was officially suspended in 2009.

However, limitations of the optimal supply and use of the USD currency, such as low confidence in the financial system and sanctions have always been major loopholes in the complete adoption of the greenback.

The continued use has largely secured the monetary value of citizens’ finances and investor confidence albeit ill-matched demand and supply of the hard cash.

Attempts by the central bank to address this incongruence resulted in the introduction of bond notes in November 2016, which led to a manifestation of Gresham’s law as the USD further dwindled from circulation in the market leading the economy back to the tumultuous inflationary sequence.

While the value of the coin targets holders of USD there is no evidence of demand for this alternative store of value as citizens and corporations targeted already maintain their cash value through assets and foreign and local investments.

Without sufficient foreign reserves and economic activities, especially exports, the local currency, in which the gold coins can be purchased by, remains vulnerable to devaluation.

The country’s monetary autonomy, heavily watered down by use of the USD and fiscal and monetary policy vulnerabilities, has denied the central bank capacity to responsibly raise money supply and as such a significant increase in interest rates has been subsequently witnessed.

Investment and economic growth, as gates for foreign currency inflows, are afflicted the most.

The contradiction between unfavourable interest rates and foreign currency demand weakens, in part, the purpose of introducing the gold coin as value acquired may not be realised especially if the coin is sold back in the Zimbabwe banking system.

While the gold coins can be bought in both USD and the local currency, the inflationary value in the local currency together with the undesirable official exchange rate diminishes the reselling value of the coin in the local currency which discourages initial purchase in USD, if ultimate purchase is necessary.

Also, from a social perspective, neither gold coin nor increased interest rate addresses the impact of rapid inflation on the general citizen’s money value, in the short term at least, thus making the economic measure highly exclusionary.

The steep upsurge of the policy rate to 200% while aimed at curbing currency speculation only poses as a symptom of policy quandary as it overtakes the willing buyer willing seller auction system rates while undermining free market rates.

Resultantly, price stability is overwhelmed by the race to the most cushioning exchange rate pushing forward the maximum employment of over-inflated prices.

Social culpability is least considered as a greater portion of Zimbabwe formal and informal employees’ income is mainly in local currency and it goes without saying how the increase in interest rate adversely affects the consumption capacity and decision.

Furthermore, small businesses and general citizens that thrive on loans are disregarded in the economic measure.

The gold coin neither addresses arbitrage, currency speculation or at least price stability of its own value as the market forces do not determine the exchange rate.

The official current exchange rate of the gold coin is 1:441,79 while the market exchange rate sits at ranges between 600 and 950.

This sizable variation repels purchasing of the coin in USD and the nature of the coin as a lucrative means of storing value or investing.

Many versions of the Gold Currency have emerged, including the Digital Gold Currency (DGC), which have been introduced in the global markets since the mid-1990s. The US, UAE and India launched their gold-backed DGC in 2020.

The intent is to protect consumers and businesses from volatile swings of the market. The USG token (DGC) is currently trading at US$1 370.

The emergence of gold-backed currencies world over is no new concept especially as a panacea to economic and political ills.

However, optimal adoption is limited as gold coins and tokens are not yet universally traded at equal values, countries that suffer poor governance carry higher management risks, and governments may fail to practise autonomy due to the independent nature of gold-backed currency from financial systems.

However, governments are keen on introducing gold-backed trading and reserves as alternatives to the weakening US dollar as has been the case with the recent China and Russia gold backed trading standard. Zimbabwe’s public finance management policies and practices have proved deficient in addressing illicit financial flows, transparency of budget utilisation and excess unbudgeted public expenditures and as such the public management risks regarding adoption of the gold coin is still high.

Moreover, irresponsible monetary autonomy further devalues the local currency. Pertinent to a successful adoption of the gold coin is the actual gold reserves’ sufficiency in backing the coins and whether external versus domestic minting is a sustainable public and budgeted expense.

Considering the exclusionary nature of the purchase value of the coin, responsibility lying on taxpayers who are largely excluded from purchase and benefit to elites who largely perpetrate tax avoidance and evasion are highly ill-matched.

From a social perspective, more value is retained on money and investments outside of local financial institutions and as such adoption of the gold coin may result in the local buying and selling of the instrument at highly discounted local prices.

Resultantly, this economic measure may exacerbate the local financial crisis at the current management risk levels. While adopting the gold coin is a positive step towards digital currencies, issues of liquidity and safe storage still need to be addressed.

The country is already inclined to hoarding and storing greenbacks ‘under mattresses’ which has resulted in a surge in armed robberies and as such if the same practice cascades to how the gold coin is stored, crime may worsen.

Another popular digital currency, the Bitcoin, was introduced into the global market in 2009 and has gained bankable momentum where countries such as the Central African Republic have adopted the cryptocurrency as a legal tender.

Like the DGC the bitcoin limits monetary autonomy and has anti- bureaucratic and inflationary systems , but unlike the DGC, is highly price volatile. In essence, the DGC provides better investment and savings stability.

The Gold Currency as both a physical and digital measure of maintaining value is gaining momentum and worth introducing into global markets as a constant alternative to the US dollar.

However, the economic and fiscal environment in which it is being introduced limits its effectiveness. With concerns about levels of possible arbitrage and inflation, and exclusionary value of the coin, its presence in the market may not address actual economic strains regarding excess supply of local currency units and mismatched official and market value of the Zimdollar.

The coin is not a solution to economic decline unless it comes with resolutions of flawed economic policies and practices such as review of the amount of local currency injected into the market and the auction system USD rates.

  • Jaravaza writes in her personal capacity. Her interests are in sustainable entrepreneurship and social economic policies and activitiesThese weekly New Horizon articles published in the Zimbabwe Independent are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society (ZES) and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). —  kadenge.zes@gmail.com and mobile No. +263 772 382 852.