A Brexit. If only…

12 11 2016

Saturday midday we like to gather at the Gallery Delta in town. It’s Robert Paul’s old house, one of the oldest still standing in Harare and thus is listed. It also has good contemporary art but we like to sit and discuss politics, finance and generally anything of interest. Interesting people come through – it can attract diplomats and others but today it was the turn of local financial wiz Melissa. Married to a local Zimbabwean she has consulted to all manner of financial institutions both local and international and always has something of interest to contribute. The conversation inevitably turned towards Zimbabwe’s impending financial implosion and, of course, bond notes.

Background
In October 2008 the Zimbabwe dollar became worthless. Having been revalued three times and had 18 zeros removed over the period of 18 months (not of course in linear fashion) it really was worth less than toilet paper and also less effective. In the previous month my company went broke despite being  busy and after much soul-searching I brought in US$2000 of my own money which covered my expenses for the following month when customers started to ask if they could pay in US dollars.  The Zimbabwe dollar was officially abandoned at the beginning of February 2009 and the US dollar became the de facto currency in this part of the country. In the southern regions the South African rand and Botswana pula became more accepted due to the proximity of these countries. Change was initially an issue and supermarkets gave out sweets and ballpoint pens in lieu but come 2013 -2014 the South African rand was valued at close to 10 to the US dollar (2013 – 2014) so it made for useful change. We also had our first brush with bond coins (valued in USc but not exchangeable outside the country). Initially ridiculed they gained acceptance once the rand drifted above 11 to the US dollar. Currently there are a number of currencies that are officially trade-able; UK pound, US dollar, Australian dollar, euro, yen, Chinese yuan, Botswana pula and of course the rand.

As Melissa explained adapting the US dollar was a mistake. Zimbabwe became a magnet for criminals and money launderers the world over as there was little control over the use of hard cash – if you had it in the bank you could withdraw it as cash. Millions of dollars in cash were taken out through our extremely porous borders. The start of the rot was nearly instantaneous.

The rest of us were too enamoured with the new freedom to do just about anything we liked with our money to notice. You could travel unfettered by the need for endless currency applications; real VISA cards worked anywhere! South African supermarkets moved into the country and bought out the local chains and imported goods flooded the shelves at vastly inflated prices. But hey, we had choice.

The economy expanded due largely to the mining sector and high prices of gold and other minerals. Agriculture, once the mainstay of the economy, continued to flounder on the back of the land redistribution exercise though there were a few years when tobacco enjoyed a resurgence, driven by buoyant prices. Attempts to get external investors interested were hamstrung by the contradictory message; invest with us but the majority of the shares must be held by a Zimbabwean.

Corruption and nepotism have gone from strength to strength. Perhaps a new word should be coined here – nepotist + kleptocrat = neptokrat. Readers are welcome to make suggestions. It seems that every day there are new revelations of squandered, stolen and diverted funds. The most famous is the fifteen billion dollars that was unaccounted for from the Chiadzwa diamond fields in the east of the country, alluded to by none other than President Mugabe himself. Now $15bn is a lot of money for a small country like Zimbabwe, a bit more than the GDP in 2014, which could have wiped out our external debts and left a sizeable chunk to get things going again but nothing appears to have happened to those responsible.

As the economy founders so the tax base shrinks and there is little wonder that lower ranking civil servants have not been paid for months (civil service salaries gobble 97% of the cash budget). The military of course do get paid – the police have been told to raise their own wages and do so by the myriad road blocks and spot fines throughout the country that have left them thoroughly discredited and despised.

It’s all about trust
In May this year the Reserve Bank of Zimbabwe (RBZ) governor announced the introduction of the bond notes and the run on the banks began. The proposal was to ensure the value of the bond notes at an equivalent to the US dollar but they would be for internal use only so no good to those who would seek to externalize them. The public saw it as a ruse to bring back the Zimbabwe dollar in another guise. The restrictions on withdrawing cash soon followed and served to fuel the panic. It didn’t help that the bond from the Afreximbank that serves to support the value of the bond notes is veiled in secrecy and ignorance. Unexplained delays in releasing the notes and the refusal of a German company to print them haven’t helped.  Some banks are allowing more cash to be withdrawn than others but reports abound of clients queuing overnight to withdraw as little as $20 a day.

Zimbabwe has been slow to adapt to the plastic money found elsewhere. ATM and debit cards have been around for years and mobile banking has seen a major increase with the rise of smart phones which are ubiquitous even among the poor. The RBZ has been pushing the plastic money hard and most outlets now have POS (swipe card machines as they are known locally) machines and accept mobile banking. While unemployment is difficult to quantify (there haven’t been any recent surveys) it is undoubtedly high and a substantial proportion are informal traders who have to pay for the goods they bring across the South African border in hard cash. No small wonder they are suspicious of bond notes and local plastic money.

Cash is now commanding a premium of some 15% and I’m told traders abound at the local Roadport (bus terminus) in town and they have lots of $100 notes that cannot be found in banks. Likely they are in the employ of the neptokrats. I can now only buy the low sulphur diesel for my pickup with cash and some filling stations restrict the amount of fuel that can be bought with a card. Most businesses will give a discount for cash.

Legal challenges to the introduction of the bond notes have followed but on the 1st November Robert Mugabe signed the notes into law. Fait accompli.

Imports and nostro accounts
Nostro accounts (the money banks use to pay for imports) are heavily depleted due to our massive trade deficit. A friend who imports agrochemicals cannot pay his external suppliers despite having the money in the bank. VISA cards, which also depend on nostro accounts, work anywhere in the world for the moment and the crippling power shedding of last year and earlier this year have not reappeared largely due to the pay-as-you-go metering installed by the national power provider but I for one don’t expect this to continue. Greenhouse plastic, considered an essential import, is no longer available and this week when buying some basic pharmaceuticals I was informed that the calcium tablets had to be paid for in cash!

Smoke and mirrors
The people behind the bond note issue are not stupid – they must have known what the reaction would be. Why did they do it? I think it’s all a red herring to force us into the digital money arena where zeros are easily added with a few computer key strokes. After all, only $75m bond notes will initially be introduced in the form of $5 and $2 denominations. This is very small money though few actually believe that the neptokrats will be able to resist printing more, which may or may not be backed by a bond. The bulk of the cash in circulation is in US$100 and US$50 notes so the bond notes will have minimal effect on the nation’s liquidity. The various protest movements that sprung up this year, over various other social issues, including #thisFlag and #tajamuka were instrumental in sparking the riots that rocked Harare and Bulawayo, the second city, in July and August this year but it’s been quiet over the last 2 months as people’s attention is diverted into getting their cash out of the banks. Was this intentional or just fortuitous from the authorities’ point of view?

It's not looking good (Chatham House report)

It’s not looking good (Chatham House report)

We may yet be bailed out by the IMF Melissa suggested. Mozambique is also in dire financial straights as are Angola and Malawi. Zimbabwe imploding might well drag down the whole sub-region –  propping up the current regime would be preferable. Zimbabwe has cleared its debt with the IMF so this is possible.

And last but not least
As with any crisis of this proportion there are those who will find the humorous angle. “With the tumble of the English pound, the waver of the US dollar, the volatility of the rand at least the bond notes are stable” is a popular social network joke. When Harare’s main rubbish tip mysteriously caught alight a week ago, and dumped noxious fumes over the northern suburbs, there were those who postulated it was being fueled by bond notes!

20161107_082741

Pomona rubbish tip burning – bond notes the fuel?

Ah the Brexit, if only our problems were so small.

 

 





A country on the brink of disaster

1 11 2016

We in Zimbabwe are apparently teetering on the brink of disaster. The much-dreaded bond notes alluded to in the previous post have been signed into law by President Mugabe (yup, Bob notes are real guys!) and it’s all down hill from here. We are still not sure where they are coming from as the German company behind the printing of the now defunct Zimbabwe dollar refused to print these. Never fear, someone will step up to the plate where there’s money to be made.

Marondera air day. Fun in the name of fund raising

Marondera air day. Fun in the name of fund raising

Going out to an air day organised for charity at Marondera, a small agricultural town 3/4 hour from Harare, on Saturday there was little sign of impending disaster. Vehicles clogged the road and drivers drove badly. There were no queues at filling stations but I’d had to search out low sulphur diesel the previous day as my regular supplier didn’t seem to have it anymore. When we arrived at Marondera aerodrome there was a fair collection of aircraft  both ancient (see the Cessna 182 in the foreground) and brand new – a 2 seat helicopter. I guess it was all small fry compared with a similar event in the civilized world but hey, it was actually happening! The Air Force had even been roped in (camouflage aircraft back left) to supply parachutists for entertainment and paid rides for the public. The parachutists certainly were entertaining with some spectacularly hard landings and bad approaches through trees to the LZ. And yes, I mean THROUGH trees! The inevitable party after the show was over was not well attended and the music was not great either but hey, we could still buy imported beer.

The man in charged of the local parachute school said he was still very busy though it seemed that paramotoring, which is why we were there, is not so attractive as we didn’t have any inquiries. The next day the wind was too strong for us to fly so we packed up, had a late breakfast with our host the other side of town and headed home along a busy road.

Today I am breaking news to my employees that they will no longer be paid in cash and like the rest of us will have to get themselves a debit card. It’s not going to be a popular move but they were warned 2 months ago that this was coming. Cash can now be bought for as much as a 15% premium which can make for a useful bargaining tool when buying. My partner and I have decided to embrace the crisis and have bought a house in a suburb that needs considerable refurbishing before we move in. Surprisingly not all the companies we’ve got quotes from are that interested in cash and only offer a 5% discount but with the bond notes now inevitable that might change. Who knows, we might be able to pay off the mortgage with a few bond notes and actually save a lot of money as they rapidly become worthless. (People who had mortgages in the Zim dollar days were often able to pay them off for a few notes as they became completely worthless.)





“Bob” notes

14 10 2016
Any currency will do (almost)

Any currency will do (almost)

Here in Zimbabwe we have no currency of our own. It was finally discarded in February 2009 along with all 12 zeros that were commonly attached. Notes are now collected by curious collectors. The US dollar is the currency of choice but even that is running out, hoarded away from banks by a public terrified of the introduction of Bob notes. Oops, I meant BOND notes.

Bond notes you ask? Yup, notes with a US dollar value printed on them but no actual value outside Zimbabwe. An awful lot of people think that they will not have any value inside Zimbabwe too so are hoarding the real currency away from the banks.

So whose bright idea was this? Well, maybe I should explain what a Bob note, sorry it just seems to slip out, I mean BOND note, actually is. Earlier this year, as it became apparent that the government was running out of cash to pay its employees (some 80% of the budget goes on paying wages – the rest is siphoned by other means but maybe the figures are the wrong way around), the Reserve Bank of Zimbabwe (RBZ) came up with this workaround. They would get a bond of $200 million from a reputable external bank and print notes amounting to the same value for use solely in Zimbabwe. They were at pains to point out the last condition. After all, we already had bond coins which had been initially rejected by the public but had become accepted as a means of supplying change once the South African rand had ceased to have a convenient exchange rate of 10:1 to the US dollar. So why not have bond NOTES? Surely the public would understand and anyway, with parity to the dollar and no mention of bond notes being deposited into one’s account the cash crisis would be solved?

Right. Like there is any trust at all for anything this government suggests. Panic ensued. There was a run on the banks which was exacerbated by the restrictions that were imposed on drawing cash and promises from sources that it was NOT a reintroduction of the Zimbabwe dollar just made things worse. Riots ensued and now diesel is short. Point-of-sale (card swipe) machine supplies ran dry and banks couldn’t install what stocks they had fast enough. Predictions of food shortages proved false (well not in the supermarkets) and cash money now commands a premium of up to 15% over transfers and card swipes.

So we’ll accept just about any currency. The bond notes were due to be introduced this month but have now been deferred to next month. Maybe it will be added to the list on the bottom of the till slip but I’m willing to be there will be a few zeros too. Oh, I paid in cash. US dollars.

The term Bob note is a reference to the name of the Zimbabwean president – Robert Mugabe. It’s not my creation but has appeared on the social media recently.


 





Urban wildlife

23 09 2016

wildlife-urbanWhile out running the dogs this morning we spotted these two reed buck (a type of antelope). While there are only two in this picture another three were lying nearby, apparently unconcerned about our presence. And yes, that’s the outskirts of Harare in the background – to the south.

When I first moved onto this farm 12 years ago there were an estimated 70 reed buck on the property. We saw a total of eight this morning. Of course there will be others but certainly not close to the 70 of not so long ago. The rest? They’ve been poached.

The fence around the farm, once electrified, is now rather porous. Depending on the route we take we bump into a school boy off to school on his bicycle. Where exactly the school is I don’t know but he gets to the fence, climbs through, and then pulls his bicycle after him. Nope, it’s certainly not electrified now!

On the right of the photo are some houses which now extend all up the western boundary of ART Farm. A lot are incomplete but nevertheless they have inhabitants and they’d be unlikely to pass up an opportunity for a bit of fresh meat. On the eastern boundary is another farm once inhabited by a good customer of mine. He was kicked off by a Connected Person (about as connected as one can get in this country) some four or five years ago. At the time his farm was replete with duiker (another smaller antelope than the one pictured) to the extent he was getting fed up with them eating his cabbages. Well, that’s what he said but I could tell he was also rather fond of them. At the time his electric fence worked well so the duiker had a great excuse not to go anywhere else and so they proliferated. The fence most likely doesn’t work now and I haven’t seen a duiker for a long time (though they’re mostly nocturnal I did see them occasionally during the day).

So the reed buck can only go north now. That’s a problem because there are a lot of mesh fences to the north which are supposed to protect the research section of ART (that’s Agricultural Research Trust), and while certainly not impenetrable, they are a definite obstacle. From the food aspect they don’t need to go anywhere for the moment. There are a number of cattle on the farm and they have plenty to eat so by extension so do the buck but the encroachment of Harare, pretty much stalled as a result of the appalling economic environment, is inevitable and then their future will be questionable.

A bit more flexible are the two jackal we occasionally see. They are usually on the boundary of the grassy vlei (wetland) area where they most likely have a den. Zak likes to chase them but they see him coming a long way off and are much more nimble and cunning – the fox of Africa. They are hugely adaptable. There is one that has lived on a nearby golf course for some time now. Again it is conveniently trapped by an electric fence but the course is bounded by a rubbish tip so there is no shortage of rats and other vermin for it to eat. The club gate is just a boom gate so it could, if it wanted to, get out.

rubbishThe rubbish tip is itself a supporter of wildlife. Apart from the obvious rats there are crows, egrets and maribou storks. The latter can often be spotted in huge wheeling flocks soaring majestically amidst plastic bags lifted in the thermals generated by the rotting garbage. I don’t suspect they mind to much but to me the tip is a hideous eyesore that I pass everyday. And that’s before it rains and the whole area smells like vomit.

The maribous are scavengers and attracted to whatever they can find – there was once a sack of offal spilt at the traffic lights on Harare drive and Alpes Road on the way to the tip, so I guess there’s plenty of other pickings to attract them.

And where there’s vermin there are predators. Snakes, long-crested eagles and others. I know the incidents of cobra bites on dogs has gone way up over the past years as uncollected garbage in the suburbs attracts all manner of opportunists.

Zak sees off the local maribou storks

Zak sees off the local maribou storks

I have to admit the maribou stork is not the prettiest bird around but they are master pilots and I love to stop and watch them soar. So, in a way, rubbish can be a benefit but I do wish they’d move the tip somewhere else!

 





Farming

5 09 2016

Farming in Zimbabwe is pretty challenging but Zimbabweans are adept (some would say notorious) at “making a plan”. Let me give you an example.

led lampThat circled object in the photo above is a LED light mounted on the railing outside my office. It was temporary you must understand; a necessity of circumstance, the best I can do at that moment to provide some security lighting.

Last Tuesday (10 days ago at the time of writing) the electricity cables that supply my business and several properties in the area were stolen. I was getting into the shower as the power went off – I don’t live at my work but the house is on the same grid. It was 10.30 p.m. Of course I didn’t know at the time the cause of the power cut but the next day I received a SMS from the foreman saying the lines had been cut. I thought he meant broken as when a tree falls across a power line as it had been windy. No, he really did mean cut. I had a look when I got to work and was surprised to see the wire cables were made of copper. They were certainly old – all the line I’ve ever seen have been an aluminium alloy. There is a strong demand for scrap copper and once it’s been melted down there is little chance of being caught.

ZESA, the electricity supply utility, came and had a look and by the next day was on the job. I chatted to the foreman on the way out and he said not to worry, they’d have us back on-line that evening. I asked if they were going to replace the other copper line before it was also stolen. No, they weren’t. But he did think the thieves would be back for the rest. Apparently he found this funny. I thought I’d better look into buying a heavier duty generator as the one we had was only for standby situations and not suitable for long periods of use. I asked him how they’d stolen the live cable without getting electrocuted. Must have  been experts he opined. I didn’t add that I thought they were probably ZESA employees or certainly had been.

On Thursday I bought an 11kVA generator, big enough to run all the essential equipment; 3 borehole pumps, 2 irrigation pumps and security lights. It cost $5750 and is a prime power generator meaning it can be run continuously if necessary. There was not a huge choice in the range that I could afford and as I couldn’t wait for the bank transfer to go through I paid a cash deposit and the generator was delivered “first thing” on Friday which turned out to be 2 p.m. Power came back that evening as did the thieves and another 400m of cable was stolen. By Tuesday morning the generator already needed its first service – it had clocked up just over 50 hours and paid for itself. Seedlings really cannot run out of water.

On Monday it was evident that one of the borehole pumps was not running properly. I had changed it on Thursday from a 3 phase to single phase motor, so it could run on the old generator, and the control box was tripping the power supply off. Pumps use more power when pumping more water so once the pipe was full it would draw less and settle down. The pipe (all 400m or more of it) should have been staying full but it seemed that none of the non-return valves that should have prevented the back flow were working. So my landlord set about replacing them.

I engaged the services of an electrician to install the change-over switches to allow us to switch between the generator supply and the ZESA mains supply. Normally I would have tackled this as it’s well within my understanding of electrical wiring but he was in the area so I thought I’d take the easier route. It was just as well that I didn’t feel like doing it as he spotted a major problem in the switch box that would have ruined the generator. The generator ran all weekend while we set about trying to solve why the one borehole kept switching off. By Monday I’d had enough and went to the irrigation supplier who told me that it was a voltage problem. My thought was that it was just too sophisticated for Zimbabwean conditions so I bought a basic one that just ran the pump with no power checking. A risk but I was fed up with the tinkering.

Tuesday and the linemen were back again and working quickly they were finished by Wednesday evening. I have an important (politically speaking) neighbour who could not possibly be inconvenienced. That morning I’d been to the local ZESA office to see what I could do about getting the transformer connected and was fully prepared to pay an “incentive”. I was brushed off with “we will get to you”. The next morning they were working on the transformer but it was not by my efforts. My landlord’s son had made contact with the “correct” person and paid him $100. The next day we were finally back on the grid and the generator could take a rest having used some 200 litres of diesel. One phase was not working but we’d become adept at moving wires on the switchboard to deal with that sort of inconvenience.

It had taken 10 days to get the power back and I’d learned a lot more than I’d ever intended to about electrical wiring. I’d only got one shock and no equipment had burned out. One has to be adaptable to farm in Zimbabwe.

 





Ballet

2 08 2016

There are consequences of an economy in a tailspin. One of the first sectors to feel the pinch is the arts and dance is no exception.

bb8

Symmetry

As a trustee of the Dance Trust of Zimbabwe I am all too aware of the impact of the imploding economy on our ability to remain viable. Two weeks ago at a board meeting I expressed concern that I had bought 10% of the tickets (8) for the gala performance of the upcoming Ballet Bouquet dance show.

Synchronicity

Synchronicity

The Ballet Bouquet is the idea of Cape Town City Ballet choreographer Robin van Wyk. In the CTCB off-season (winter) he stages ballets in the smaller cities in the sub-region using dancers of all ages and capabilities. Senior dancers from the CTCB help bring a bit of glamour!

The fairy princess from the Nutcracker

The fairy princess from the Nutcracker

Robin came up to Harare to choreograph the pieces and then local teachers rehearsed the dancers until last week when Robin returned with the senior dancers and saw to it that the locals were up to his demanding standard.

The show consisted of a 45 minute adaptation of the Nutcracker and then after the interval there were several pieces from other well-known ballets. Yes, the Nutcracker is traditionally a Christmas ballet but in this case the theme was “Christmas in July” and the 450 orphans and disadvantaged children who attended the dress rehearsal each received a small gift.

Principal CTCB ballerina Angela Hanford shows how it's done!

Principal CTCB ballerina Angela Hanford shows how it’s done!

Six shows were staged over 4 days and with full houses for 4 shows and some 80% capacity for the other two the Dance Trust of Zimbabwe can survive for a little longer.





Polo

19 07 2016

poloponyThere I was, this last Sunday, photographing polo whilst Zimbabwe “burned”. To be sure it most certainly was not the polo of Jilly Cooper novels; helicopters, luxury cars and champagne were not evident and I saw ponies leaving the venue in plain old farmers’ trucks open to the weather.

The polo grounds just outside Harare are, like the rest of the country, not up to their former glory and I do have to wonder how they keep going. The venue is hired out to social events at other times of the year but the grounds are still up to hosting an international event as was happening on Sunday. How do they do it? There was no entrance fee and it was not well advertised on the social media. But for just over an hour that afternoon we could forget about the “imminent collapse” of the country and watch a game that most of the people I chatted to knew little about.

The match was billed as an international between Zimbabwe and South Africa. Nobody I chatted to knew if it was THE South African team. They didn’t look very good and the Zimbabwe team dominated them. It was bitterly cold but I guess the ponies didn’t mind.