Zimbabwe’s financial system is living on borrowed time – and borrowed money



File 20171031 18730 lzg8n8.jpg?ixlib=rb 1.1
An illegal money changer holds bond notes outside a bank in Zimbabwe’s capital Harare.
Reuters/Philimon Bulawayo

Roger Southall, University of the Witwatersrand

Zimbabwe’s financial system increasingly resembles a house of cards. Were one card to give way – for instance, if South Africa’s power utility, Eskom, were to have the temerity to suggest that Zimbabwe actually pay for the electricity that it’s supplying the country – the entire edifice would collapse.

To put it another way, the government is bust. It is again printing money to cover its spiralling costs, and inflation is rising. And given that there’s an election looming in 2018, Zimbabwe’s ruling party, ZANU-PF doesn’t want to cut-back. Far from it, it wants to carry on spending, as fast as it can.

The rot goes back to the early 2000’s. ZANU-PF profligacy had been fuelled by acontinuous cycle of simply printing more money, and resultant runaway inflation. Mega-inflation meant that ordinary people lost their pensions and whatever savings they had, as the Zimbabwe dollar lost its value and people resorted to barter or the use of other currencies.

Ultimately, the government faced no choice but to accept reality. In 2008 it scrapped the Zimbabwe dollar in favour of a basket of other currencies, although within a short time, this meant in effect the reign of the US dollar.

“Dollarisation” allowed for the pursuit of more rational policies by the coalition Government of National Unity which followed the disputed 2008 election. However, its control of the electoral machinery ensured that ZANU-PF won a resounding victory in the 2013 election. Within a short space of time it returned to its familiar policy mix of profligacy, corruption and populist economics.

Yet ZANU-PF faced major problems. Above all, “dollarisation” meant that the cost of Zimbabwe’s exports on international markets was high. Worse, the dramatic collapse in agricultural production since the early 2000s (following the appropriation of white farms) alongside the decimation of the country’s manufacturing industries meant that there was relatively little to export anyway. Tobacco production has recovered a little, but the quality is less than it used to be, so returns are relatively less.

Meanwhile government insistence that mines should be 51% Zimbabwean owned has done nothing to entice inward investment or boost exports.

In short, the capacity of the economy to earn US dollars by selling goods externally has fallen dramatically, and the supply of money circulating within the country has dried up. Unemployment stands at around 90%.

President Robert Mugabe’s latest response has been to replace finance minister Patrick Chinamasa, who had been warning of the structure’s fragility in ever more urgent tones. The new finance minister is Ignatius Chombo, a party loyalist, who will brook no talk of any need for structural reform.

The bond notes

Faced by a looming crisis, the ZANU-PF government has resorted to three key strategies.

One has been the issue of “bond notes” (of different denominations) by the Reserve Bank of Zimbabwe. Officially, they’re designed to swell the amount of money in circulation within the country. The problem is that apart from having no value outside the country, nobody trusts them as they have been issued by a ZANU-PF government, and it was this government that presided over the hyperinflation.

ZANU-PF’s announcement that it was issuing bond notes was met with a run on the banks as depositors sought to withdraw dollars as fast as they could. Their assumption was that this was a government ploy to reintroduce the Zimbabwean dollar. The Reserve Bank of Zimbabwe responded by limiting the amount of dollars individuals could withdraw.

People are reluctant to use the bond notes. But they’re still sometimes forced to accept them because of the sheer shortage of “real” money. As a result when they can, they rush off to the local bus station where they can sell them for dollars to currency traders – albeit illegally.

The second strategy has been the rapid expansion of country’s ability to manage electronic transactions. Its aim has been to expand the amount of money in circulation without using up “real” dollars.

Accordingly, government employees are now largely paid electronically Similarly, government employees (and everyone else) now pay nearly all their bills within the country electronically.

And Zimbabweans are rarely able to convert the notional sums of dollars they hold in the bank into real cash – unless they make use of the currency traders in illegal transactions.

Meanwhile, with the rate of inflation continuing to rise combined with the widespread lack of faith in the banks, many Zimbabweans spend their bank balances on consumer goods as quickly as possible rather than attempting to “save”. After all, if times get hard, you won’t be able to get rid of your bond notes, but you may be able to sell your fridge.

Fanciful financial system

But it’s the third strategy which the government has pursued which is really fuelling a fanciful financial system.

Since 2013, government expenditure has steadily increased year by year, despite the country earning very little internationally. The ZANU-PF government may have hoped to fund this by its old trick of literally printing money, that is, by expanding the supply of bond notes.

But such was the negative popular sentiment that the Reserve Bank of Zimbabwe seems to have restricted their issue. Supposedly the issue of bond notes is backed by a USD$200 loan by the Afreximbank, but no-one really knows how many have been issued because the central bank provides no information.

What the government has done instead is to fund its rising costs by issuing treasury bills (whereby the government touts for loans on the capital market against promises of later redemption). No-one in their right mind would want to buy them, but Zimbabwe’s banks today have little option. As inward investment into the country has dried up to a trickle, there is little else for them to spend their money on, and the interest rates that the government promises to pay are, at face value, attractively high.

The coalition government of national unity recorded budget surpluses for three of the four full years in which the opposition controlled the Treasury. For its part, the ZANU-PF government recorded deficits of USD$186 million and USD$125 million in 2014 and 2015. Recently, the then finance minister Chinamasa projected a deficit of USD$1.41 billion for 2017. As of June 30, 2017, there were USD$2.5 billion worth of Treasury bills on issue.

The ConversationIn other words, the spending will continue. Zimbabwe’s financial system is living on borrowed time and borrowed money. It will again end in financial ruin, as it did in 2008. But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to “eat”.

Roger Southall, Professor of Sociology, University of the Witwatersrand

This article was originally published on The Conversation. Read the original article.

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It may not be beautiful but the new ten dollar note is pretty secure


Tom Spurling, Swinburne University of Technology and David Solomon, University of Melbourne

You might notice a new blue and gold addition to your wallet in the next few weeks as the Reserve Bank of Australia releases the new A$10 note into circulation. The new series of Australian banknotes are not a designer’s dream but they are the strongest yet in terms of preventing counterfeiting.

The first of its kind polymer note was introduced by the Reserve Bank of Australia in July 1992. This A$5 banknote was arguably the most secure banknote in circulation anywhere in the world.

But in the intervening 25 years banknote security technology, for both polymer and paper banknotes, has improved and Australia’s first polymer notes were no longer world leading. These new notes take us back to being a world leader in this technology or at least equal to the new £10 “Jane Austin” banknote released recently by the Bank of England.


Read more: Our punk, jarring five dollar note: so bad it’s good or just bad?


The next new banknote to be released will be the A$50, planned for 2018 and the A$20 and A$100 in later years. The new A$50 banknote will be particularly important since, in 2016, nearly 84% of our counterfeit notes are of that denomination.

The rate of counterfeit notes is usually quoted as the number of counterfeits per million notes in circulation (ppm). Issuing authorities usually like the number to be under 50ppm.

Canada had the highest rate of counterfeiting before adopting the polymer note, it reached a peak of 470ppm in 2004 and stayed high until the release of their polymer banknotes in 2011. Their rate is now around 10ppm.

In contrast to this, the Australian rate rose to about 15ppm towards the end of the first decimal paper money series but dropped dramatically to 1 or 2ppm when the polymer notes were introduced. The rate rose to as high as 25ppm in 2015.

There are a number of reasons for this. Computing and printing equipment has become more sophisticated and cheaper. Quality printing on polymer is now possible with modern printing and copying equipment.

Also counterfeiters need only simulate a banknote, not reproduce it exactly, to fool us. In 2016 31,682 counterfeits were used before they were detected.

However not all fakes go unnoticed. For example, the “waxy” feeling of a A$10 banknote in 1966 failed to fool a milk bar owner in Ashburton and the forgers were apprehended within a few hours.



Reserve Bank of Australia/The Conversation

The new banknotes retain all of the security features of the first series of polymer banknotes, but with some new additions.

The A$10 note is still printed on the same polymer material, has a clear window and has micro-printed verses from the poems of Banjo Paterson and Mary Gilmore. All polymer banknotes internationally have these two features as neither can be reproduced on paper copying machines.

Both the new A$5 and A$10 banknotes include a top to bottom clear area with a number of devices that change colour when moved or when exposed to different light sources. These are called “optically variable devices”.

These are similar to the original 1988 A$10 commemorative banknote that had a diffraction grating, fine metal lines that when exposed to the light change colour, depicting Captain Cook. The devices in the new banknotes are like this but use more robust technology.

The new notes also have a tactile feature to assist vision impaired users. The A$5 note has one raised dot on the top left hand area and another on the bottom central area. The A$10 banknote has two raised dots. These first appeared on the Canadian polymer banknotes in 2011 and are also on the new Bank of England notes.

Another new feature on both the A$5 and A$10 banknotes is that the serial number and the year of printing fluoresce under UV light. This is quite common technology because its used in paper notes as well.

Polymer notes started in Australia

One of the reasons why the currency of other countries has become as secure as ours is the commercial and technical success of the company that produces the polymer substrate used in the notes.

In the early 1990s the Belgium chemical company, Union Chimique Belge (UCB) built a plant in Craigieburn, near Melbourne, to manufacture the polymer substrate for the new Australian banknotes. This was the first plant dedicated to producing polymer banknote substrate.

In 1996 the RBA and UCB established a joint venture, Securency International, to market the technology internationally. This venture was successful and the many countries in the Asia-Pacific region adopted the new technology.

Some of the success of the company was marred by illegal conduct, with the director of regional sales for Africa, Peter Chapman, jailed for bribery in the UK.

UCB sold its share of Securency to the UK company, Innovia Films, in 2004. In 2013, Innovia acquired the RBA’s 50% share in the business and renamed it Innovia Security.

The large Canadian packaging company, CCL Industries acquired Innovia Security in February 2017. It merged with the Banknote Corporation of America to form CCL Secure. By the end of 2017 this company will have produced more than 55 billion polymer notes in 80 denominations and and in 24 countries.

The ConversationThis latest series of Australian polymer banknotes will place us once again at the forefront of banknote security. But continuing research, development and new features will still be required to keep us there.

Tom Spurling, Professor of Innovation Studies, Swinburne University of Technology and David Solomon, Professorial Fellow in Engineering, University of Melbourne

This article was originally published on The Conversation. Read the original article.

5 Years After Quake, What Does Haiti Have to Show for $13 Billion in Aid?


TIME

Americans texted tens of millions of dollars in donations and governments gave billions, but five years after an earthquake left corpses and rubble piled across Haiti, 85,000 people still live in crude displacement camps and many more in deplorable conditions.

The disconnect between the massive amount of private and public aid and the poverty, disease and homelessness that still plague the country raises a question that critics say is too difficult to answer: Where did all that money go?

In Coralia this week, father of two Serafin Jean Rose, 33, said he has benefited from the American dollars that have poured in since Jan. 11, 2010…

Read the rest of the story from our partners at NBC News

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Australian Politics: 17 July 2013


The asylum seeker controversy in Australia is deepening, with four more deaths after another tragedy at sea last night. There is yet another boat in distress right now as well. Compassion would seem to be much in need from where I sit, yet most Australians seem to have very little when it comes to the plight of refugees and/or asylum seekers.

Still, an election can’t be too far away as the various parties begin the usual pledges to spend money on this and that – certainly infrastructure needs are great in this country.

Meanwhile Kevin Rudd has held a community cabinet meeting overnight.

Facebook: On the Decline


The link below is to an article that suggests Facebook is on the decline. However, given the money it is still making it is hardly a concern to the company yet.

For more visit:
http://www.guardian.co.uk/technology/2013/apr/28/facebook-loses-users-biggest-markets

USA: Georgia – Atlanta


The Not So Clever Bank Robber is Captured

The following article reports on the try hard bank robber in the USA who tried to rob a bank and failed. He returned shortly afterwards to withdraw money to pay the cab fare (his getaway car) and was arrested.

For more, visit:
http://www.neatorama.com/2012/02/29/bank-robber-gets-caught-when-he-goes-back-inside-the-bank-to-withdraw-money-for-cab-fare/

Plinky Prompt: What Non Profit Organizations Do You Support? Would You Ever Start Your Own?


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I don’t have any non profit organizations that I support on a regular basis. I do support various non profit organizations from time to time, but it tends to be a bit all over the shop.

I have supported such environmental organizations as Bush Heritage Australia and WWF, among others. I have also supported Compassion and other similar organizations from time to time, such as when the appeal went out for assistance during the tsunami crisis on Boxing Day a few years ago.

I do have an interest, should I have access to any money, to start a foundation-type organization for diabetes research and support. The reason for this interest is that a dear friend died a few years ago who suffered badly from diabetes.

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India Briefs


Recent Incidents of Persecution

Karnataka, India, April 15 (CDN) — Police on April 10 arrested a pastor and other Christians of the New India Church in Mysore after some 25 Hindu extremists from the Sreeram Sena attacked their Sunday service, accusing them of forcible conversions, reported the Mathrubhumi daily. Pastor Vinod Chacko was leading the service when the Hindu nationalists barged into the church, stopped the prayer service and complained to police of alleged forcible conversions. The Global Council of Indian Christians reported that the extremists along with police detained the worshippers inside the church building, including 20 women and 10 children, taking down personal details about them and asking them whether they were paid money or otherwise lured to attend. Police also seized vehicles belonging to the church and those attending the service. Police charged Pastor Chacko, his wife Asha and others identified only as Sabu, Simon and Sayazu under section 295A of the Indian Penal Code with “deliberate and malicious acts intended to outrage religious feelings.”

New Delhi – A mob of about 150 Hindu extremists on April 9 attacked a Christian worship meeting in Bhajanpura, East Delhi, beating Christians with clubs and stones, including women and children. Pastor Solomon King told Compass that the Assembly of God church organized an open-air “Festival of Deliverance” meeting at which he was speaking; there were about 150 people in the arena when he arrived with 40 choir members. After the meeting began at about 6 p.m., some present suddenly shouted “Jai Shri Ram [Praise Lord Ram]” and started beating the Christians. Two Christians identified only as Prabhu and Abhisek sustained head injuries and received hospital treatment. Pastor King, his wife and other Christians also suffered bruises. The intolerant Hindus also destroyed furniture, a sound system, a generator and some Christians’ vehicle. The Christians had received permission from government officials to conduct the worship meeting, and five police officers were on duty to protect it; the Hindu extremists also severely beat them. The attack lasted for about an hour before police reinforcements arrived, and the extremists fled. Police were able to arrest two of the assailants.

Madhya Pradesh – An enraged mob of Hindu extremists on April 7 stormed into the prayer meeting of a Christian Assembly house church shouting anti-Christian slogans and filed a police complaint of forceful conversion against those present in Sagar. The Hindu extremists accused Pastor Joy Thomas Philip of forceful conversion, Pastor C.P. Mathew of Bhopal told Compass. Police arrived and took Pastor Philip and three other Christians into custody for questioning but claimed it was a protective measure. After area Christian leaders’ intervention, the Christians were released on bail on April 9.

Karnataka – Mulki Circle police officials on April 4 forcibly took church documents from Hebron Assembly Church in Mulki and told the pastor not to allow any Hindus to enter. The Global Council of Indian Christians reported that officials identified only as Inspector Shivaprakash and Sub-Inspector Neelakanta, along with five police officers, verbally abused Pastor I.D. Prasanna and harshly denigrated church activities. Police officials questioned Pastor Prasanna for three hours, telling him what church activities he can and cannot undertake, and threatening to close the church if he disobeyed. They also ordered the pastor to give detailed information about the families that attended the church service.

Karnataka – Police in Shimago on April 3 detained Pastor Abraham K.G. and a Christian identified only as Eerappa for their faith in Christ. The Global Council of Indian Christians (GCIC) reported that Hindu extremists led by area Bajrang Dal member Subbraya Shetty interrupted the worship meeting of the Jehovah Nizzi church and warned them to stop meeting. The extremists had been harassing the pastor since March 27, reported the GCIC. As the April 3 service started at about 10:30 a.m., a sub-inspector from the Hosanagara police station arrived in a Jeep with three other police officers to make the arrests. When the Christians asked about the reasons, the officials said without basis that the Christians were using abusive language. Later that evening, police released the Christians without charges after taking a statement from them pledging that they would conduct no future worship meetings – and that they should leave the area.

Report from Compass Direct News
http://www.compassdirect.org