BETWEEN THE LINES:Hamilton Cain

Title: Out of Darkness, Shining Light
Author: Petina Gappah
Publisher: Scribner
EVEN in this golden age of African women writing in English, Zimbabwean author Petina Gappah stands out.

Her earlier books — two lyrical short-story collections and an elegant debut novel, The Book of Memory, garnered awards and widespread acclaim.

Now with her searing, poignant, often hilarious Out of Darkness, Shining Light, she upends the conventions of historical fiction in a tale based on the true account of 69 men, women and children, who in 1873-74 ferried the body of British explorer David Livingstone from present-day Zambia to Zanzibar in order that he might be brought by ship to his homeland for interment.

Gappah’s two narrators could not be farther apart in training and disposition.

The first half of Out of Darkness, Shining Light is told by Halima, Livingstone’s cook, who both adores and resents the famous man she calls “Bwana Daudi”.

The novel opens with the long-infirmed Livingstone’s death, an event that galvanises his copious household to do the right thing by their cherished leader.

After a spirited debate, they decide to preserve the corpse, burying his heart beneath a mpundu tree.

Halima is a kind of African Wife of Bath, regaling her peers with earthy opinions, unsolicited advice, a comic shrewdness tinged with self-contradiction.

In stream-of-consciousness fashion, she weaves from memories of her childhood in a sultan’s kitchen to her own roving eye — bossy, brassy and brilliantly realised.

Gappah’s other narrator, Jacob Wainwright, a freedman and sanctimonious missionary, does not like Halima much, calling her “a particularly troublesome woman, given to much levity and unable, apparently, to think seriously on any matter.

Her propensity for causing quarrels among the women is great.”

Gappah frames the book’s second half as a series of entries in Wainwright’s diary, while the entourage slogs for nine months across swamps and savannas, struggling with hunger and hostile peoples, to reach the coast.

If Halima is the novel’s gleeful id, Wainwright is its superego, imperious and self-regarding, with little patience for his fellow Africans who are like strangers to him: “It is a licentious business, this travelling, with far too many opportunities for sin, for the men all have wives awaiting them at home.”

Gappah’s treatment of her characters’ odyssey, by turns playful and tragic, is underpinned by a larger theme: The legacy of colonisation.

As a boy, Wainwright was abducted in the flourishing (and abolished) slave trade along Africa’s eastern coast.

Gappah’s literary language reflects these tensions, her crystalline English sentences blended with phrases and idioms from Swahili.

The result is an intricate storytelling that delves deep into the disturbing yet indelible relationship between two continents, with the enigmatic Livingstone, both an avatar of colonial aggression and a figure beloved by the people who knew him best.

Out of Darkness, Shining Light beautifully evokes the moral ambiguities that lurk within the human heart, revealing a talent that continues to grow from book to book.
— Star Tribune

BY BRENNA MATENDERE

HEAVY rains that pounded the Midlands province’s Vungu district over the weekend left a trail of destruction, submerging homes and damaging roads, with scores of motorists and pedestrians struggling to navigate the flooded streets in the vast area which covers Gweru’s peri-urban suburbs such as Woodlands.

When Southern Eye arrived in Woodlands Park yesterday morning, residents were removing valuables such as refrigerators, television sets, blankets, clothing and food from flooded homes.

Vungu Rural District Council ward 16 councillor Parirenyatwa Nyika, who was helping some residents to remove their valuables, said the disaster had happened at a time they least expected it.

“Some residents actually spent the night standing in their homes as there was water everywhere. Schoolchildren had their books and stationery destroyed by the water, while household property was affected. It is a bad situation,” he said.

Nyika called on well-wishers to chip in and alleviate the disaster.

“The people who were affected right now are distressed and traumatised. We call upon people and organisations with a heart to help us. They can come down here to witness the problem. Some affected families said a stream from Mkoba had burst its banks, directing its waters into their homes during the time it was raining,” he said.

Midlands Provincial Affairs minister Larry Mavima was said to be in a meeting when sought for comment and did not respond to questions sent to him.

Chiwundura legislator Livingstone Chimina, whose constituency covers the affected area, said he had visited the affected families and was in the process of engaging government and the corporate world for support.

“We are looking into that crisis with a view to assisting the people who were affected. I visited the area and saw that people had encountered big losses. At the moment our councillor Nyika is on the ground. We hope to find a solution,” he said.

BY VENERANDA LANGA

TOP MDC leaders Lynette Karenyi-Kore (vice-president) and Job Sikhala (vice-chairperson) this week lost their relatives to the violent machete clashes in mining areas in the country.
In an interview with NewsDay yesterday, Karenyi-Kore said she lost her 41-year-old uncle, Liberty Dadirai, who was stabbed to death on Monday in Chimanimani by two youths that were armed with knives and claimed to be diamond buyers.

“Dadirai was murdered yesterday (Monday) near the diamond-rich area of Hotsprings by two men aged around 19, who approached him claiming that they were selling diamonds,” Karenyi-Kore narrated.

“They asked him to accompany them to the place where they kept the diamonds, but he was stabbed and by the time he was rushed to hospital, it was already too late,” she said.

Karenyi-Kore said the people that murdered her uncle used knives and not machetes, which are the common weapons used by violent gangs robbing people of their minerals throughout the country.

“My uncle was not an illegal miner, but I think he was acting as a middleman for people buying diamonds when he met his demise. I think the country is under siege and we really do not know what is happening. It is the first time that someone has been killed because of minerals in this area and people are very shocked because the motive was to instil fear and to murder, as the assailants were said to have been carrying knives,” she said.

Sikhala also confirmed that his uncles, Yeweight Senzere and Elvis Matsikidze, were brutally attacked by machete gangs last week in Mvuma.

He said Senzere died on the spot, while Matsikidze is battling for life in the intensive care unit at Gweru General Hospital.

“Machetes have now become a national genocidal menace, which Zimbabwe must stop immediately. There is need of national consensus by all Zimbabweans to deal with these merchants of death,” Sikhala said.

Yesterday, the MDC released a statement on the MaShurugwi threat, claiming that the gangs were sponsored by the ruling Zanu PF party top leadership.

“MaShurugwi have wrought serious insecurity and if the menace is not stemmed, the country could plunge into chaos. What Zimbabweans desperately need is a true people’s government that can guarantee their personal security, which security is enshrined in the country’s Constitution, which Constitution the people made themselves and affirmed in a referendum,” MDC deputy national spokesperson Luke Tamborinyoka said in a statement.

Government has responded to the menace by arresting over 1 500 artisanal miners following a public outcry over the machete gangs.

editorial comment

EXACTLY a year after Zimbabwe’s first biggest fuel hike since President Emmerson Mnangagwa took over the reins of power from the late Robert Mugabe, the administration was at hand to celebrate the January 14, 2019’s 150% fuel hike anniversary with a yet another fuel price increase.

While this time around the increase over the weekend was a modest 10%, it represents a major milestone in a year that the fuel adjustments have brought nothing but misery and death upon the Zimbabwean citizenry. At the weekend the Zimbabwe Energy Regulatory Authority announced new petrol and diesel prices of $18,28 and $19,55, respectively, which essentially means that in just a year the price of fuel has risen by a jaw-dropping 1 284%.

While the country’s so-called financial gurus held the entire country hostage, held the gun to every citizen’s head and banned any talk of inflation whatsoever, this simple kindergarten mathematical observation clearly shows that even the assumed unofficial inflation figure of over 500% is a gross understatement.

Finance minister Mthuli Ncube promised to start publishing the annual inflation figures next month, and many are definitely going to accept whatever the minister dishes out to the nation with a pinch of salt simply because the fuel price increase alone tells a harrowing story. Is it not high time the government stopped hoodwinking its citizens as far as inflation and the country’s general economic performance is concerned? The general outlook does not appear good at all, given the obviously poor rainfall season that spells disaster for one of the country’s major foreign currency earners: Tobacco.

It is a fact that many tobacco farmers failed to return to the field this season after proceeds from their last harvest fell way too short to afford them the chance to stock up on inputs following government’s poor handling of their pay cheques. Having promised to pay the farmers half in foreign currency and the other half in local currency, the government made a violent about turn and decided to force the farmers to buy their other 50% foreign currency component at a rate which was essentially a moving target. This significantly eroded their earnings at a time the Zimbabwe dollar was losing value to the US dollar every day. In other words, there will be very little tobacco to shore up the country’s economic performance.

Ncube has already admitted that food, power and currency stability are the three things that are giving him sleepless nights and as yet another drought looms, his hours of lack of sleep will evidently lengthen. There is little hope that Zimbabwe’s main power supply source, Lake Kariba, will have enough water to improve generation capacity given that the devastating drought is regional. With tobacco in a poor show, there is little chance that food crops will fare any better. And on the currency front the situation on the ground already points to the Zimbabwe dollar heading for a brutal bashing from other major currencies having, for the first time, been upstaged by the South African rand with which it has for some time traded at 1:1.

So many hope and fervently pray that Ncube and his colleagues will be honest and stop pulling wool over people’s eyes as far as the country’s overall economic performance is concerned.
There is no reason or justification for government to keep lying to itself and the nation that all is well at the front when it is not.

By Rex Mphisa

A BEITBRIDGE male teacher at the weekend knelt down before Vice-President Kembo Mohadi begging him to influence an upward pay review for teachers.

Poloko Malapela, a teacher at Dulivhadzimo Primary School, who was the master of ceremonies at the funeral of Admire Mbedzi, Mohadi’s nephew who was buried on Saturday, drew both sympathy and praise from the crowd when he made his passionate plea.

“I have a request Vice-President Mohadi, I am going to kneel down to drive home this important message to you,” Malapela said, as he crouched in front of Mohadi.

“We are suffering and life has become hard and can you please put word for us so we can have a salary raise.”

For a moment, the sombre mood at Mohadi’s Mtetengwe homestead was lightened as mourners cheered on Malapela, who soon after driving his point home returned to funeral business.

Earlier, Mohadi had explained that if government released more money into the market, it would have inflationary effects.

He did not respond to Malapela’s request, but merely nodded his head.

Zimbabwean teachers have reportedly gone on a nationwide go-slow to press for a pay rise, arguing that their salaries were too low and they could not afford to send their children to the very schools they are stationed.

Civil servants received cushioning allowances ranging between $400 and $800 this month.

However, they have been demanding that their employer adjusts their salaries to match what they used to earn during the dollarisation period.

guest column:David Mhlanga

MANY commentators, researchers and economists the world over are increasingly talking about the potential impact of the fourth industrial revolution. Researchers are fully admitting to the fact that the fourth industrial revolution is changing how we live and work, how the economy works and countries are governed.

The Citi and Oxford University in 2016 estimated that 57% of jobs across the Organisation of Economic Co-operation and Development community are at risk of automation and the Financial Times reported in 2016 that between 2000 and 2010, of all the jobs lost in the United States, over 85% were lost to new technologies, and the Bank of England estimated that two thirds of all jobs are capable of being automated within 20 years.

Regardless of the specific data, an indisputable fact is that the fourth industrial revolution has already come, and the current workforce is already feeling the heat. The question which remains is what is the fourth industrial revolution
The fourth industrial revolution describes the blurring of boundaries between the physical, digital and biological worlds. It’s a fusion of advances in artificial intelligence (AI), robotics, the Internet of Things (IoT), 3D printing, genetic engineering, quantum computing and other technologies.

In fact, it is the collective force behind many products and services that are fast becoming indispensable to modern life. For example, the GPS systems that suggest the fastest route to a destination, voice-activated virtual assistants such as Apple’s Siri, personalised Netflix recommendations and Facebook’s ability to recognise your face and tag you in a friend’s photo.

As a result of this perfect storm of technologies, the fourth industrial revolution is paving the way for transformative changes in the way we live and radically disrupting almost every business sector. It’s all happening at an unprecedented, whirlwind pace.

This requires economic agents, politicians and policymakers to come up with innovative mechanisms to ensure that they are found prepared. Businesses should also build customer success platforms to keep up with the changing customer expectations.

While the fourth industrial revolution, sometimes called the 4IR or industry 4.0, is set to change society like never before, it builds on foundations laid by the first three industrial revolutions.

The advent of the steam engine in the 18th century led to the first industrial revolution, allowing production to be mechanised for the first time, and driving social change as people became increasingly urbanised.

In the second industrial revolution, electricity and other scientific advancements led to mass production. A third industrial revolution, beginning in the 1950s, saw the emergence of computers and digital technology.

This led to the increasing automation of manufacturing and the disruption of industries including banking, energy, and communications. The person who labelled today’s advances as a new revolution was Klaus Schwab, founder and executive chairman of the World Economic Forum and author of a book The Fourth Industrial Revolution.

In a 2016 article, Schwab wrote that “like the revolutions that preceded it, the fourth industrial revolution has the potential to raise global income levels and improve the quality of life for populations around the world”.

While the business world is already discussing and preparing for how this revolution will affect their businesses, dubbing it “Industry 4.0”, the wider societal impacts of this new revolution have not, to date, been discussed in depth nor planned for.

There are many questions which governments should be prepared to answer. Are we going to see a rise in the levels of poverty or we are likely to see a fall in the levels of poverty?
Will there be an improvement in the quality of life of the people or a decline in the quality of life? Past industrial revolutions have forced society to undergo major and often painful processes of adaptation, for example, from rural, largely agricultural societies, to urban, industrial societies, and then to post-industrial societies dealing with the loss of traditional industries and sources of employment.

The societal impacts of the fourth industrial revolution also appear likely to be far-reaching, resulting not only in the social and economic impacts of the loss of many current jobs, but also fundamental, and increasingly volatile shifts in the nature of work and future jobs, and in how public and private services will be delivered.

The loss of jobs is not a unique feature attributed to the fourth industrial revolution alone, but in all the revolutions there were massive displacements in the labour market.

With all other revolutions, there was movement of labour from one sector to another ie from the primary sector to secondary sector. However, with the fourth industrial revolution, we have other creatures that are taking the jobs previously done by humans. These creatures include computers, robots etc. As a result, this should act as a wake-up call for everyone to be prepared.

BY MTHANDAZO NYONI

ZIMBABWE’S agriculture sector players should immediately come up with strategies on how to grow the sector in the face of climate change and limited access to appropriate funding among other challenges, a government official has said.

Addressing delegates attending the ongoing integrated results-based strategic planning workshop in Bulawayo yesterday, Lands ministry permanent secretary John Bhasera said challenges such as climate change were a threat to the agriculture sector.

“Climate change, low productivity, pest and diseases, limited access to appropriate finance, to mention just a few, are hitting our sector hard. These are our current realities, but we need to face them head-on so that we grow,” Bhasera said.

“Importantly, we need to shift our thinking gears from negative-thinking to positive-thinking, from positive-thinking to possibility-thinking, from possibility-thinking to creative thinking. Let’s come up with strategies on how to grow our sector, lest we die. Anything which is not growing is dying. It is our responsibility to grow the agriculture sector….,” he said.

Bhasera said agriculture, which is the country’s economic backbone, had been experiencing several challenges, mainly caused by climate change.

The country has been experiencing extreme weather conditions such as recurrent droughts and heat waves over the past few years.

The other challenges include limited access to finance, low productivity levels, high cost of doing business as well shortage of water and electricity.

He urged industry players to start harnessing their comparative advantages, climate proofing agriculture, come up with irrigation development agenda, increase mechanisation development, improve all farms efficiencies and to build competitiveness, capacitation of extension services as well as improve linkages between research and extension services.

Bhasera said industry players should also improve water management systems, climate change adaptation and research, access to appropriate finance for farmers and agriculture value chain, private sector participation in agriculture, private public partnerships, land tenure system and 99-year lease agreement, tapping into ICTs, growth plan for national herd, finalisation of the agricultural policy framework.

“We need to grow our agriculture and our economy. Our agriculture will play a central role in that…,” he said.

guest column:John Legat

Funds held in the banking system at RBZ, the interbank market or in cash notes totalled $ 14,8 billion.
Some $7,4 billion was held in FCA accounts.

The remainder of the assets of the banking sector were held in contingent assets, non-financial assets and other assets. In theory then, the banks could reduce their liquidity to lend more to the private sector or buy more government securities.

Threat of bank failure
The reality is different, however. First, the bulk of bank deposits are demand deposits. This explains the large amount held in the banking system to cover customers’ use of swipe cards and mobile money. Second and more concerning is the level of bank capital and reserves which stood at $3,9 billion or just US$257 million.

This compares with “other liabilities” that have grown rapidly to $4,6 billion (US$300 million), which we have to assume are foreign exchange linked liabilities given their rapid rise since February 2019 when they represented 31% of bank capital.

This is another scary number that we would like to look into in greater detail as it might be highlighting the possibility of a bank or banks failing. Put another way, banks need to maintain very high liquidity levels and restrain from lending medium and long term either to government or the private sector.

We noticed this at the end of last year when a number of the listed companies we speak to highlighted the difficulty of obtaining loans of any meaningful amount from their banks.
No lending capacity
Further in our last Notes we made mention of the fact that bank balance sheets were falling rapidly in real terms as compared with their client base as a result of bank assets largely being held in Zimdollar denominated assets, whilst their clients’ revenues and profits could move more in line with inflation. Put simply, banking sector borrowers have become far greater in balance sheet terms than the banks themselves.

This in turn has forced the private sector and government to turn to the pension funds and the insurance sector for liquidity. As we have highlighted above, these two sectors have very little liquidity and it is entirely held in $ denominated assets. The private sector’s needs though are based on the US$ rather than the Zimdollar.

Farmers have no source of funding as liquidity bites
For example, to plant and grow a hectare of maize is estimated to cost around US$800 for dry land or rain reliant maize which covers mainly diesel, fertiliser, spare parts, among others. All of which are US dollar denominated.

So a crop of one million tonnes, assuming an average yield of say 4,5 tonnes per hectare, would require say US$180 million which, at the interbank rate at the end September, would have equated to $2,7 billion. At the parallel rate of $19 at that time, this number would rise to $3,4 billion and at today’s rate of $24 would imply a need for $4,3 billion.

For large commercial farmers with access to irrigation on the other hand, the cost per hectare would rise to US$1650 per tonne but the yield will rise to maybe 8 tonnes or more per hectare. In reality, Zimbabwe relies on both dry and irrigated land but the amounts involved provide a good illustration that can be compared to the current size of the domestic capital markets.

Anecdotally, we saw this at the end of 2019 as we were approached by a number of agricultural commodity consumers seeking capital to provide farmers for the 2019/2020 planting season, capital that they would normally obtain from the banks. Sadly the pension and insurance industry could not fill those shoes and as such we assume that the number of hectares planted was substantially down on the previous year.

We were very interested to see CBZ Bank last week offering a $500 million bond together with a US$50 million bond in order to raise a total amount of US$80 million at current interbank rates.

Late ‘planting’
These funds would be used for the current agricultural season, 2019/2020, specifically to grow maize (170 000 hectares) and soya (30 000 hectares). The offer closed last Friday on January 10. This strikes us as being rather late as we understood planting needed to take place by the end November in time for the rains, which have yet to materialise in any consistent way.

We note, however, in the risk clause within the term-sheet that should farmers not be able to supply the products to the Grain Marketing Board for whatever reason, government will step in and supply the necessary amount of Zimdollar to allow for the conversion by the RBZ to cover the US$50 million repayments together with interest at 9,5% in USD terms.

That equates to an unlimited liability in the Zimdollar. The same is true for the local $ bond, with the government guaranteeing the repayment plus an 18% coupon all in $.

There appears to be no risk to CBZ. Given the lateness in the placement of these two bonds from an agricultural perspective and the likelihood of drought, the default risk must surely be high and could therefore prove expensive for government in 270 days’ time which is the maturity date of the two bonds.

That of course assumes that both bonds are subscribed for which given the liquidity numbers we have outlined in these Notes, suggests that this will be a tall order. The Ministry of Finance must be hoping as much!
Starting the printing press
This brings us back to a point that we made in our last Notes published in October where we surmised that “the RBZ has become the lender of ‘first resort’” given the constraints of the domestic capital markets.

We explained that if government was unable to fund itself through taxation and the issuance of Treasury Bills, then one of the few options would be to print money thereby undermining the currency by boosting reserve money.

This of course happened in August 2019 as we highlighted in our October Notes and resulted in the currency halving on the black market in a matter of weeks. That action by the RBZ has also put at risk the IMF’s Staff Monitored Programme (SMP).

Returning to the domestic capital markets and specifically prescribed assets (‘PAs’), IPEC is encouraging the insurance industry as a whole to move to 15% of assets in PAs. That would require investing an extra 2% or $216m as at September 2019, the equivalent of US$14m at the time.

Pension dilemma
For the pension fund industry, the IPEC level stated in their quarterly report is 10% (until December 2019) implying a further $230m or US$15m. Although these could be funded out of money market assets, in reality this could not be the case as liquidity is required to pay pensions, insurance claims and run the various businesses.

In the overall scheme of the economy US$29m (at September 2019 rates) does not fund very much even if these sectors coughed up those funds.

IPEC or government could force the insurance/pension sectors to sell down their property and equity assets but in reality that would be very difficult indeed; outside of strategic shareholders local pension and insurance funds are the largest owners of domestic property and equity which implies that foreign investors would be required to purchase these assets from the local institutions. This seems highly unlikely as foreign investors remain net sellers of the Zimbabwe Stock Exchange (ZSE).

Further, as IPEC states in its report, equity and property have proved to be the best performers of local assets even if they haven’t kept pace with the decline in the local currency.

Local debt assets have lost significant value in real terms by contrast. Herein lies the dilemma for pension fund trustees.

On the one hand their fiduciary duty to their stakeholders (employees and pensioners) is to protect the real value of the pension funds under their supervision as best they can.

If they then knowingly buy an asset that will likely lose real value — if not all of it compared to other assets such as property and equity which both have proven to be excellent assets to hold in the event of the demise of the Zimdollar (eg 2009), then they risk being sued for negligence by those stakeholders and maybe their unions. Under the new Company’s Act passed in the latter half of 2019, that would mean being sued in their personal capacity.

On the other hand IPEC may fine the pension fund for not meeting the targets.

For now IPEC is giving trustees the time to attempt to comply with their targets all of which would delay implementation. In a hyperinflationary environment, the longer this implementation takes the better for the stakeholders as value would be preserved to some extent.

Most of the prescribed assets on the market are debt orientated and denominated in $. In the event of the demise in the $ at any point, these assets would cease to exist — and become valueless – as occurred in 2009. We have found few such debt instruments that have a clause that protects investors should such an event occur, by for example an immediate conversion to US$ or into a related equity instrument.

We have seen one such instrument in the making but it is not a prescribed asset. It is even harder to find an equity-related prescribed asset and those that exist may not make economic sense to the investor.

The search for US$
As stated in our previous Notes during 2019, we have looked at a number of private equity investments as alternatives to equities and property.

Similar to agriculture though, the difficulty is that all of these projects usually have some need for US$ or the Zimdollar capital requirements are linked to the US$. That implies an unlimited liability for $ investors should the Zimdollar continue to decline.

Take for example, a solar project of which there have been a number approved in recent months. An US$10 million investment either in debt or equity (usually a mix) equates to $170 million at today’s interbank rate or more appropriately $240 million at the black market rate.

That might provide 10 megawatts of power. Since the equipment has to be imported, the solar company may well have US dollar debt on its balance sheet which would need to be funded and eventually repaid.

But Zesa can only pay in Zimdollar even if the tariff paid to the solar company is in some way linked to the US dollar. The risks therefore remain extremely high. As illustrated above, the pension and insurance industry do not have the free funds to invest in such a project. The project may be scaled back into smaller bundles at which point the economics of power generation start to fall away.

A time to sell or buy?
Meanwhile, as highlighted in our October Notes, the valuations of listed equities in US dollar terms remain extremely low and cheaper arguably as compared with the latter days of the Zimbabwe dollar in 2008. That of course is not surprising; foreign investors have been net sellers of equities over the past twelve months and domestic investors have had little surplus money to buy more.

Valuations of any asset around the World tend to fall when few want to buy whilst they rise to very high levels when investors refuse to sell as prices rise, sometimes to astronomical levels as we have seen on Wall Street in the recent past. The best time to buy an asset is therefore when nobody else wants it, or indeed is able to buy it and that is usually when assets can be bought at a huge discount to their intrinsic or real value.

Equally, the best time to sell is when there are no sellers despite rising valuations.

In this regard we have been asked by a number of our pension fund clients whether now is not a good time to wind up their pension funds as they have lost so much real value since 2016 (US dollar terms). There seems little point they argue in making contributions if they will lose real value, better to spend that money now.

The answer of course is that now is very much not the time to be selling undervalued assets and indeed it is the best time to be buying into such low valuations by continuing to make contributions to their pensions.

Recent history has shown that to be the case when valuations in US$ terms rose exponentially between 2008 and 2013 as the economy recovered. We have no idea when this may occur again but as with 2008, the current economic situation is unsustainable ultimately. Something will have to give.

If what “gives” leads to stability in Zimbabwe’s monetary foundations as occurred in 2009, then the prospects for the domestic pension and insurance industries will be excellent so long as they enter that period with solid or real assets such as the ones they hold today. In other words, valuable stakes in Zimbabwe’s finest companies and secure property assets.

Meaningless numbers
The International Monetary Fund team was in Harare in early December to continue negotiations with regard the SMP and the Article IV Report, the latter is expected to be published in February 2020. This will give us an idea of how the IMF is thinking and whether indeed the SMP will be extended or cancelled.

With inflation running at 521% per annum (December 2019), the economic numbers that government, the IMF and economists are dealing with are fairly meaningless. This was apparent in the national budget where the numbers both in real and nominal terms bore little resemblance to any prior budgeted figures.

As we write, the rains have been worryingly erratic. Early warnings back in September suggested above or normal rains prior to January with below average for the rest of the season.
Rains prior to January have been below normal with long periods of no rain and if there is little change to that between now and the end of the rains in April, agriculture will suffer dramatically. Dams are already below 50% whilst the water table has not recovered implying that boreholes will likely struggle through 2020.

This would cause a contraction in the agricultural sector with knock-on effects across the economy. The World Food Programme has already issued an alert to the international community to raise funds for Zimbabwe in the likely event of a severe drought. Even if we receive food aid, the logistics of bringing that food in will be enormous not least in terms of the number of trucks required to ship it in and of course the fuel to drive those trucks.

Low dam levels suggest that electricity from hydro-power plants will remain constrained. Without external assistance, 18 hour power cuts are likely to persist well into 2020 with the consequent strain that this will put on the industrial and farming sectors. With more foreign exchange directed to food imports, the ability to source petrol and diesel will also be tough and hence we expect shortages to continue during 2020. A weaker economy is, therefore, more likely than a stronger one.

2008 rewind?
The prospects for Zimbabwe in December 2008 looked bleak and uncertain. Industry was devastated after years of neglect and under investment.

The domestic savings industry was in a far worse state than it is now but thanks to the ZSE it was at least invested in non-monetary assets. The banking sector could not lend back then due to the second highest hyperinflation the World had ever seen.

Real disposable incomes had been destroyed with a large part of the population on the poverty line. But then in 2009, something “gave”, and the country dollarised in its entirety providing the economy with a stable monetary foundation from which to grow. It grew rapidly from then on.

We knew back then that the status quo was unstainable and that something would have to “give” but it was hard to predict how it would end. When it did end, asset values grew rapidly in US dollar terms enabling the domestic capital markets to once again provide capital to those that needed it.