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An upside-down economy

Harare - Nearly 90 percent of Zimbabwe’s currency is kept outside of the banking system, which, analysts say, illustrates that the parallel market is the driving force in the economy, while the formal sector withers. Far-reaching currency reforms, instituted this month by Reserve Bank governor Gideon Gono, were aimed at redressing the imbalance between the two sectors and reining in hyperinflation, hovering around 1,000 percent.

Gono said recently that of the about Z$40 trillion of old currency in circulation, only about Z$5 trillion, or 12.5 percent, was passing through the banking system. The remainder was in the parallel market. The central bank introduced a new currency to replace the old denominations at a new exchange rate, forcing people to return cash hoarded at homes, offices and outside the country to the formal banking system.

Gono set an August 21 deadline for exchanging old currency for new, and also adjusted the official exchange rate from Z$250,000 to one US dollar to Z$250 to one dollar. The sting was that individuals could only exchange Z$100 million daily, in a window period that allowed a maximum of Z$1,6 billion to be exchanged before the new currency comes into effect. The reforms were launched in tandem with nationwide roadblocks, manned by the police and youth militia of the ruling Zanu (PF) party, who confiscated money from individuals carrying more than Z$100 million. A Reserve Bank statement has claimed that the operation, in which airports, companies and homes were also searched, has so far recovered Z$10 trillion, or a quarter of the money in circulation.

Isaac Kwesu, an economics lecturer at the University of Zimbabwe’s Graduate School of Management, said the parallel economy, which consisted of the black market and informal trade, was what maintained the economy.

“The parallel economy now underpins Zimbabwe’s survival. The black market in particular has been flourishing over the years, and this has been made possible by the ever-shrinking formal market, due to reduced productivity in industry and in agriculture, shortages of foreign currency and a steep decline in investment,” Kwesu said.

“Informal trade and the black market have been growing, owing to the economic problems the country has been facing for a number of years now. It has been easy for the two to take root, because they normally do not require a lot of money to start and they can easily be managed,” he said. Although parallel economies are difficult to quantify, economist and former president of the Zimbabwe National Chamber of Commerce (ZNCC) Luckson Zembe said the amount of money outside of the banking system was a useful indicator.

“As the Reserve Bank has said, more than 50 percent of the money has been circulating outside the country. If you add to that the amount that is in informal trade and the local black market, you could safely say upward of 80 percent of the money is driving the parallel economy,” Zembe said.

Zimbabwean bearer cheques have been used as cash since 2004, and are found in large quantities in Mozambique, South Africa and Zambia. Unregistered foreign-currency dealers based in these countries do business with cross-border traders, so they can buy goods to trade in Zimbabwe when they return.

Cross-border trade has been on the rise as the economy has declined. The fast-track land reform programme that began in 2000 and led to the seizure of white-owned farms resulted in aid cutbacks and stringent borrowing measures being imposed by international financial organisations, such as the International Monetary Fund and the World Bank.
The economic shock was compounded in 2003 when a widespread shortage of cash in banks eroded confidence in the banking system. The combination of these factors, including the disruption of the agricultural sector, a major foreign currency earner, coupled with President Robert Mugabe’s alienation of the West, brought a crippling shortage of foreign currency, basic goods and hyperinflation.

Analysts say the rapid growth of the informal economy has been counter-productive, because the money generated is used mainly for consumption rather than development. “The parallel economy is not concerned about the building of schools, hospitals or the setting up of infrastructure that the majority of the people can benefit from. Instead, it creates a dangerous situation, because those who are involved in it do so for self-enrichment,” said Zembe.

“Policy planning becomes difficult because the activities in the informal and black markets are not recorded, while people speculate and push inflation up, in addition to the creation of artificial shortages of foreign currency, basic commodities and industrial inputs,” he commented.

Mugabe has publicly backed Gono’s monetary reforms, but the measures have angered the poor, the middle-class and members of the ruling elite. Independent economist James Jowa recently alleged that most “corruption taking place, like market manipulation and forex deals, were done by the ruling class.”

Economic analyst and former member of parliament for the Movement for Democratic Change (MDC), Tapiwa Mashakada, said companies were being compelled to withhold large sums of money in order to remain viable. “It does not make sense to say all the money that the Reserve Bank prints should be found in banks, because individuals and companies need to use it, but because of hyperinflation, they do not have a choice but to keep large amounts for regular transactions. After all, banks tend to limit the amount of money that can be withdrawn on a daily basis,” Mashakada said. - IRIN



The rise of Gideon Gono
BY TATENDA MUGWAGWA

HARARE - The Reserve Bank Governor, Gideon Gono, has assumed powers that go

well beyond the authority of his position. Faced with a government that has abdicated its role as manager of the national economy, he has stepped into the breach to take charge of responsibilities that should be the preserve of the executive arm of government. Even the finance minister, Herbert Murerwa, now plays second fiddle.

Observers say "Leave it all to Gono" is now official government policy. “He is now the de facto prime minister of the country filling in the vacuum created by a clueless President and an emasculated cabinet,” says one source. This has led to speculation that Gono's long held ambition to be President of the country may not after all be a fanciful dream.

This has led to speculation that Gono’s long held ambition to be President of the country may not after all be a fanciful dream. Here is how Gono has risen to the top and will continue to do so until he gets the presidency - or spectacularly crashes:
- entered Mugabe’s inner circle by becoming his family’s banker and financial adviser;
- ued his relationship with Emmerson Munangagwa – to whom he is related by marriage – to embed himself in Zanu (PF’s) inner sanctum;
- was appointed to Grace Mugabe’s Children Rehabilitation Fund Board raising substantial amounts for the body. Became business advisor and consultant to the First Lady;
- used his position as managing director of Commercial Bank of Zimbabwe (CBZ) to dispense substantial loans to politicians in local and foreign currencies. “Consider it done” was Gono’s trademark response to request for money from the political elite.
- forged close relationships with Nicholas Goche (Security and Intelligence); Jonathan Moyo (Information in the President Office) and Augustine Chihuri (Commissioner of Police) to further entrench his position;
- got appointed chairman of Zimbabwe Broadcasting Holdings (ZBH). As ZBH chair, increased his national exposure on television soon attaining title of “ turnaround specialist” Failing parastatals and ZANU (PF) bigwigs turned to him for financial help;
- intervened in overcoming shortages of basic commodies such as sugar and cooking oil. Travelled to Libya with Mugabe to structure a deal to secure fuel for Zimbabwe.
In the battle to succeed Mugabe, Gono has aligned himself with the Munangagwa faction opposed to the one led by retired army general Solomon Mujuru. Blinded by ambition, he seems oblivious to the dangers of treading on a political minefield. His tirade against those who brandish liberation war credentials to intimidate him – a reference to Mujuru – shows he has now entered the political arena with guns blazing.


Jamming continues
BY KJW

LONDON - The Zimbabwean government might be winning the “odd battle” in their attempts to jam independent radio broadcasts into Zimbabwe but according to SW Radio’s Gerry Jackson “they certainly are not winning the war”.
The Zimbabwean government has been using Chinese equipment to step up their campaign to jam the broadcasts of the three independent radio stations: SW Radio Africa, Voice of America’s Studio 7 and the Voice of the People. SW Radio’s shortwave frequency was first jammed in the run up to the 2005 elections.

“Although our shortwave signal was jammed we were also broadcasting on medium wave and were under the impression that this would be more difficult to jam. Unfortunately this year the government either brought in new equipment, or revamped the old, and jammed not just us, but also Voice of America,” said Jackson.
Eric Matingo from the Media Monitoring Project in Zimbabwe reported that it had been especially difficult recently to monitor broadcasts from Studio 7.

“We can no longer receive any signals on the Medium Wave and on the alternative Short Wave frequency, reception is sporadic. Either we don't get any clear signal at all or we get it for a few minutes before it’s drowned in a droning sound (like that of a motor). As a result, during the last two weeks we have not been able to meaningfully monitor any of the station's news broadcasts,” he said.

The Voice of America’s (VOA) Studio 7 has assured its multitude of listeners in Zimbabwe that it is working on preventing the jamming of its broadcasts into the country.

Brendan Murphy, the Co-ordinator of the Zimbabwe Project, confirmed to MISA recently that their broadcasts into Zimbabwe were being jammed. “We know we are being jammed, and we believe we know by whom. We are collecting empirical evidence and when that is in hand, the Voice of America will make its position clear.
“However, I do not think that it will be much longer before VOA comes out with something more definitive,” said Murphy. VOA’s Studio 7 broadcasts on Short Wave from Washington DC.

Despite repeated problems with Jamming, Jackson remains optimistic. “The jamming does clearly indicate the action of an increasingly desperate regime. With technology as it stands today the Zimbabwe government can't win in clamping down on freedom of speech. In fact, the media repression is completely failing as we all manage to get around every blocking mechanism thrown at us,” she said.

Are you a regular listener to any of the above stations? If broadcasts to your area are being jammed please write to The Zimbabwean and let us know the station that you listen to and the frequency on which they are being jammed. Letters should be addressed to: The Zimbabwean, c/o P O Box 6560, Harare, and emails to: mbanga@thezimbabwean.co.uk

Meanwhile British newspaper reports say internet companies including Google, Microsoft and Yahoo have been branded 'morally unacceptable' by a powerful committee of MPs for collaborating with Chinese state censorship of the web.

In a wide-ranging report on east Asia, published at the weekend, the MPs said human rights groups had evidence that China was already exporting the relevant repressive technology to governments including that of Zimbabwe.



Slashing zeroes proves failure - But state media fawns on Government
By a Correspondent

HARARE – Seeking as ever to divert attention from the country’s worsening economic crisis, the state-run media went into celebratory overdrive about the Reserve Bank chopping three zeroes off the near-worthless Zimbabwe currency – a move widely regarded as doing nothing to solve the fundamentals.

But the fundamentals – scarcities, lack of jobs, hyperinflation, business confidence dead and the rest – are strictly off limits for the regime’s mouthpieces. So, it seems, is the word devaluation. Never mind the 150 percent devaluation in the official rate of the local currency against the US dollar. It was, in the evasive words of Reserve Bank Governor Gideon Gono (now Giden Gn), the new “exchange rate management system.”

“They muffled them (real economic problems) in their commendation of the new currency, seen as a genesis of an economic turnaround rather than a symptom of a failed economy,” the Media Monitoring Project Zimbabwe (MMPZ) said of the state media’s coverage in its report covering July 31 – Aug. 4.

The private media, with the usual exception of the state-supporting Mirror stable, generally dismissed Gono’s so-called reforms as of no consequence, saying they did not address the economic fundamentals that led to the proliferation of zeroes on the old currency in the first place.

The Financial Gazette described the zero-slashing as a quick fix aimed at forestalling a “looming politically embarrassing situation in which Zimbabweans would need wheel barrows to wheel huge bundles of cash.” The Zimbabwe Independent quoted economist Blessing Sakupwanya as saying the removal of the zeroes was “a mechanical process that we will have to do again if inflation remains at current levels.”

Naturally, the state media ignored the implications for human rights of the searches by police and youths and the taking of people’s money.

Instead, The Herald and other state-run newspapers passively carried advertisements with what MMPZ described as “childish and misleading slogans.” These included “zero to hero” and “we are fighting for you to get more bang for your buck,” as if removing zeroes from the old currency translated into more buying power.

The absurd and fawning coverage of Gono was epitomised in The Herald which likened him to Jesus, describing him as “The Second Coming.” “The paper also carried cartoons portraying Gono as a warrior defending the people by shooting down the ‘offending’ zeroes as if they had somehow manifested themselves without the government’s knowledge,” said MMPZ.




media watch

Vacancies at CAJ News
Africa’s fasted growing news agency, the Centre for African Journalists (CAJ News) has four vacancies for journalists at their Johannesburg Head Office and in Harare.
CAJ News is looking for four highly qualified and competitive journalists to fill the following positions: Africa Editor, News Editor, Chief Reporter and Personal Assistant (PA) to the Editor.
Applicants must have at least eight-to-10 years experience in Journalism. The positions require strong writing skills and diverse knowledge of all countries in the SADC region.

AFRICA EDITOR - must have worked as a news editor for not less than three years with some good writing and administrative skills.
The Africa editor shall be responsible for the African copy to the editor. He/she should act on behalf of the editor when off duty.
NEWS EDITOR - must have eight years journalism experience. The aspiring candidate must have worked as a news editor for one year to five or held senior position in journalism with some good writing and administrative skills.
The News editor shall be responsible for news production at the Johannesburg head office. The news editor will meet or liaise with CAJ News correspondents throughout South Africa and discuss the news diary with the editor as well as news selectors.
CHIEF REPORTER - must have worked as a senior journalist for a reputable news organisation for at least five years with traceable journalism background.
The incumbent must possess a degree, diploma or equivalent in journalism.
The successful candidate will be responsible for writing feature stories, good analytic stories in business, environment, HIV/AIDS, poverty and refugees issues.

PERSONAL ASSISTANT - must have good administrative skills, good English language command and public relations experience.
Will be required to co-ordinate meetings for the editor with SADC presidents, diplomatic missions, corporate executives, political parties, NGOs and various corporate bodies.
REMUNERATION: CAJ News offers highly competitive packages for all positions. All applications must reach the Editor by 31 August 2006. Candidates are invited to submit their curriculum vitae and samples of their written work to:
Editor
CAJ News
P.O.Box 30880
2017
Braamfontein
Johnnesburg
South Africa
Tel: +27 11 403 7333, +27 11 403 7622
Cell: +27 76 862 2569
Or email application letters to: saparkwi@yahoo.com or editor@cajnews.co.za
If you have not been contacted within five days after the closing date of this advertisement, please consider your application unsuccessful.