Friday, 14 June 2019
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Please turn your images onIssue 23



What's the only thing worse than 10 hours of no electricity? More than 10 hours of no power. ZESA has announced it will ramp up loadshedding to Stage 2 but neglected to say exactly what that means. According to our ever reliable Brew math, Stage 2 should mean double of Stage 1 and double translates to 20 hours of no electricity. That leaves only a 4 hour window to read the Brew... Make the most of it 😉


In today's Brew:
• Much ado about not much.
• Another fuel price hike
• Our first sponsored post. Sponsored by Fincheck (Pvt) Ltd.


MARKETS



Please turn your images on PROPLASTICS 37.68c

+17.75%


Please turn your images on FIRST CAPITAL BANK 9.20c

+15.00%



Please turn your images on ----- ----

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Please turn your images on GOLD 1,356.91

+1.32%


Please turn your images on BRENT CRUDE US$61.51

+0.33%



• Zimbabwe Stock Exchange figures are as of Thursday 13 June. It appears there were no stocks trading in the negative or the Zimbabwe Stock Exchange just won't say.
•Crude Oil and Gold Prices are based on world market figures.
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QUOTE OF THE DAY

Opportunity is missed by most people because it is dressed in overalls and looks like work. - Thomas Edison



ECONOMY


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WHAT'S IT WORTH ? 😕


Amidst run-away inflation, currency instability and continually deteriorating living standards, much has been made of the country's newly attained budget surplus. It has been publicised as a significant economic victory or in the very least a significant step in the right direction. Treasury further asserts that it is proof of fiscal discipline.

We can't say whether that is fact or not but we can definitely contextualise this budget surplus. What it is, how it came to be and why it is apparently quite important.

What Exactly Is It?
A budget surplus is simply income left over after all expenses are paid. In other words, a situation where tax revenues and other government income like from profitable parastatals (if ever such a thing existed) outweighs government's expenses like civil servant salaries and other public service projects.

Budget surpluses are often expressed as a percentage of the country's GDP. A higher percentage means a greater surplus. They are also pretty rare with no more than 30 countries having surpluses as of 2017. That puts Zimbabwe in a pretty elite league joining the likes of Tuvalu, Palau and Kiribati... Yes those are all real countries but no, it's not really an elite league.

How It's Been Made
• Austerity - The plan was to increase tax revenues through the IMT Tax whilst also cutting government spending supposedly by lowering wages or even retrenching some workers.

Sure as nothing is as certain as death and taxes, the IMT tax came which increased government revenue. The situation concerning cuts in government spending is a bit less straightforward as there is actually more pointing towards increases in spending like the 'cost of living adjustments' and the recently introduced transport subsidy. That then means that the tax accounted for much of the budget surplus.

• Inflation - Just as inflation inflates prices, in the current climate it can inflate tax revenue. The IMT Tax is charged as 2% on any electronic transaction and as prices increase, the value of transactions also rises. Thus tax revenue rises with inflation. The budget cannot be adjusted daily for inflation so as long as it is not adjusted, all extra earnings from inflation count as surplus.

• Niggardliness- defined as an excessive frugality bordering on simple neglect of essential expenses or simply put, stinginess. In the time that the surplus has accumulated, a number of public services have gone without money. Healthcare is a prime example as drug shortages have plagued this period of 'budget surplus' with apparent unavailability of funds hurting service provision.

The question then is, how can there be a budget surplus whilst essential services go unfinanced? Is it the sort of surplus attained from sacrificing individuals' well-being? Ndiwo ka hu 'niggardliness hwacho.'

What's It For?
Typically, a budget surplus is used to pay off debts or employ targeted government spending to stimulate the economy. In the existence of socio-economic problems and general poverty, the government would be expected to use the surplus funds to improve the lives of its citizens.

Indications are that the country is taking on even more debt and the only spending of significance is towards subsidisation in a bid to cushion citizens from the harsh economy. Poverty levels are even higher and public service provision keeps getting worse.

It is almost as if there is no actual surplus or it is so paltry, it's just enough to pay for Zupco buses.

Takeway
For those who crafted the budget the hype was kind of justified because this is the first time in a while that treasury is reporting a budget surplus. Linking it to fiscal discipline would go even further to endorse the work the Finance Ministry has been doing to revive the economy.

Unfortunately, the surplus at least thus far seemingly has not been directed towards economic revival or at least public service provision. The implied fiscal discipline is arguable at best so what exactly has the surplus been good for?

What it's really for... hope and flowery headlines. If a surplus is indeed attainable there is a hope and desire for more economically effective surpluses in the future. Otherwise, much ado about not much to the average Zimbabwean who funded the surplus anyway.
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ENERGY


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FUEL PRICE HIKE AGAIN

Fuel prices have risen again. By now the trend is pretty clear, as long as the US$/RTGS$ exchange rate is getting worse, fuel prices will rise.

This particular increase was a little different though as it came hot on the heels of an increase in the ethanol blending ratio which is actually supposed to make petrol cheaper. Some have attributed this oddity to an increase in ethanol prices. If that is the case, it defies logic how increasing the blending ratio would be in any way beneficial if it ultimately results in a price increase.

Conspiracists are already whispering of suspicions of under-the-table dealings between the regulator and ethanol producer Green Fuel but the more likely cause of this increase in blending ratio and subsequent fuel price increase is much less sinister but a lot more worrying.

What Could It Be?→ restricted funds for subsidised fuel supply.

The balancing act between liberalisation and stability is proving to be a pretty costly challenge. A constant supply of foreign currency is needed to fund the current fuel price which is well below what it could be if fuel suppliers sourced forex at prevailing rates. The problem is, funds are simply not in constant supply.

In the moment, the best solution was to increase ethanol blending ratios which lowers the amount of fuel imported and to increase the level of exchange rate liberalisation which leaves fuel suppliers still getting forex at a subsidised rate but not so much as before.

Outlook
Seeing as fuel is still subsidised and government is almost fortnightly cutting on this subsidisation, fuel prices will not be stable at least in the near future. It is almost as if government is employing a 'baby steps' approach to the ultimate removal of the subsidy. Good on them for averting a market shock and also giving the market reaction and planning time.

Above all else, it will be a slow and increasingly painful squeeze.


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SPONSORED


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DEBT RECOVERY


Are debt collectors the most efficient option for a book with a large number of debtors? The thicker the book, the more agents required. Why not go digital?

By using software, the debt collection process that today's sponsor Fincheck undertakes significantly reduces lead times and caters for efficient and consistent communication with debtors. STIMA (DMS) Debtors Management System has proven to be a great innovation, with a high success rate with both consumer and corporate collections.

Fincheck also boasts of a team of specially trained debt collectors with years of experience at efficiently handling every stage in the debt recovery process.

Lawyers are good for a lot of things but they aren't trained for debt recovery. Trust the team whose primary job simply is recovering debt.

Fincheck also provides tracing services and locates the whereabouts of those who abscond with your money. Engage with the team on ccd@fincheckzim.com


*For more information on Sponsored posts contact finsbrew@fincheckzim.com
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WHAT ELSE IS BREWING?


• Forex demand not that high – RBZ. 👀 Strictly speaking, high or low really is a matter of perspective.
• Zimbabwe to clear African Development Bank US$605 million debt... Somehow.
• Government to establish Gold Centres in a move to reduce gold leakages.
• ZMF and UK firm secure $100mln partnership.
• Zimbabwe demands right to sell $300m of ivory to fund game reserves.
• Air Zimbabwe seeks permission to auction old planes.
• Computer giant Epson comes to Zimbabwe.
• Country runs out of ARVs as it fails to unlock US$400 million from Global Fund.
• International Labaour Organisation lists Zim in global labour bad company.
• ZRP to change name to Zimbabwe Police Service. New name, better service provision...Hopefully. 👀
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BREW'S WORLD FOCUS


• South Africa's manufacturing jumps to best in over 2 years as power woes ease.
• South Africa's retail sales rise reflects stronger second quarter.
• Fix SA: 5 things SA must do and when to do them to get the country back on track.
• US budget gap balloons to $739 billion despite tariff revenue.
• Trump is threatening sanctions on Germany over its Russian gas pipeline, opening a new front in the trade war that the Kremlin calls 'blackmail'
• How Mexico and Canada are trying to bypass Donald Trump.
• Brazil's embargo on beef exports to China lifted.
• Oil prices spike by 4 percent after Gulf tanker attacks.
• Gold gains as US$ eases.
• 5 dangerous workplace habits that drain productivity.
• Global Warming morphs into the Solar Minimum.
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