The cost of doing business

13 04 2017

A whorl of cosmos

The rains are over for this season and the cosmos (Cosmos bipinnatus) is fading, still attractive but not as flamboyant as 3 weeks ago. We had good rains for once; 1020mm at the nursery which is probably not a record but certainly substantial. The cosmos was just as showy as ever – it doesn’t seem to mind if it’s a drought year or not.

The government press has predictably predicted a “bumper” harvest but that is far from certain as it will be at least another month or more before the crops are in and there is a lot more to farming than a good rainy season. The fall army worm also made an appearance this year. New to Zimbabwe it has a voracious appetite for maize and is difficult to control once the crop gets large so the small scale farmers are likely to have had a hard time.

The current financial crisis continues to deepen. US dollars (cash) are commanding a premium discount with some outlets offering up to 20% off for the greenbacks. Even the much maligned bond notes are becoming scarce but I have yet to get a discount for using them instead of a debit card.

Two weeks ago I finally received a large outstanding payment for a contract of gum trees that we did last year. Normally I would spend it on raw material – the coir pith we favour for propagating seedlings comes from India and is bizarrely about 60% of the cost of the local milled pine bark medium. It’s also reliable quality and we have yet to experience any significant problems with it. Not something we can say for the local product.

I got hold of the business manager at one of the banks I deal with and asked him what the chances were of getting money out to pay for a container of coir pith; all of US$9600 for 24 tonnes delivered to Beira docks in Mozambique. He was direct (I appreciate directness).

“Do you export?” he asked.

“No’

“Have you been depositing US dollars cash into your account?”

Was this a serious question? “No I haven’t”. I was tempted to add “you weren’t expecting me to say yes were you?” but I remained quiet.

“Then no. If you bring us the cash we will make the application to the Reserve Bank”.

Hmm, like anyone trusts them. He went onto assure me that if the request was refused I would get my cash back in US dollars, not bond notes, and that they’d never had an application for a request of this nature turned down.

I should point out that I have never had, to my knowledge, anything but US dollars deposited into my account and here I was being told that in fact the bank did not believe that. It says at the top of my statement that it is a US dollar account – but it’s only useful in Zimbabwe.

When the Reserve Bank announced last year that it was introducing the now notorious bond notes, with a value equivalent to the US dollar, in order to alleviate the cash shortage (true, a lot of cash had disappeared from circulation) the populace panicked. Rumours that it was an attempt to re-introduce the defunct Zimbabwe dollar flourished in the fertile rumour environment and a run on the banks began. People slept on the pavements for cash withdrawals that progressively dwindled to a paltry $30 or less. Yesterday at another of the banks that I use there were people sleeping on the pavement but now it’s for bond notes. Yes, there has been a massive switch to electronic money but some things still require cash. Schools in rural areas, which are cheaper, don’t have bank accounts and unscrupulous landlords demand cash.

The amount of bond notes issued is pitifully small, some $10m to start with and then another 30m or so. That they have been issued entirely in $2 and $5 denominations is telling – it was never intended to do much. $10 and $20 would have had far more impact. Initially the Reserve Bank stated that the bond notes were guaranteed by a loan of $200m from the Afrexim bank in Egypt, but this has been nearly impossible to ascertain. $200 million in a GDP of some $11 bn is not going to do much (see this Forbes article)  and anyway, if all that was needed was cash why not just buy it from the USA? We all know the Zimbabwe government is broke so it cannot buy cash. However what could be easier than adding a few zeros to electronic money? Electronic money is not based on anything which is why the bank manager I was talking to wanted to know if I could pay in US cash for the import of raw material. He wanted to know that if his bank were to deplete its precious nostro account (held outside the country) was being backed by real crispies (well, once upon a time they were crisp – long ago) and not some figment of a government official’s imagination. So where does that leave me?

Last Thursday there was a workshop at the Tobacco Research Board (TRB) near the airport. They were promoting the growing of vegetable seedlings. Not much to do with tobacco research to be sure but the seedlings of both crops can be grown in polystyrene trays floating on shallow ponds in which fertilizer has been dissolved. The TRB manufactures the trays, has a local company make up the fertilizer solution and is in a joint venture to manufacture the pine bark based medium in which the seedlings are grown. So they are looking to expand their market. I was concerned that I was going to have a lot of competition for my business. It was time to check out the potential competition and I was also curious to see what the TRB, once a world-renowned research organization, had been doing on vegetable seedling research.

I was not over-awed but I had to admit that their seedling tray quality had improved since I last bought any. The presentations were not very impressive and their idea of seedling quality was lacking some fundamental concepts. Their growing medium appeared to be reasonable quality but was expensive but they were willing to take any sort of money, cash or electronic. I will have to try some.

Logic dictates that if the medium is acceptable that I buy it in bulk with currency that I can only use within the country i.e. my locally held accounts even though it’s relatively expensive. If however the quality is poor then I will have to look at sourcing “real” dollars (anything is possible in Zimbabwe) and getting in the coir pith medium from India that I trust. Quite what I’ll spend my local money on then I really don’t know.

Next Tuesday, 18th April, is our independence day. Two weeks ago, as is customary, I received a letter of request from the local ZANU-PF (ruling party) office asking for donations in “cash or kind” for the celebrations they were going to host where “800” people were expected. It was shoved into the top left drawer of my desk – they would have to ask in person. In the past I have fought with them over this with arguments such as; “Why don’t you go into the shopping centres and ask for donations there?” but they know the white farmers feel vulnerable and are soft targets, so yes I inevitable buckle and donate.

I was driving back from the gym yesterday after lunch when the inevitable call came – they were at my business and what was I going to donate? It certainly was NOT going to be cash so they accepted $100 through mobile banking. I cursed myself for being weak then just consoled myself with the thought that they’d got the least value money option available. It was a cost of staying in business in Zimbabwe.

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