By Tawanda Musarurwa

HARARE – Zimbabwe’s Credit Reference Bureau (CRB) is set to be fully operational by the end of next month, an official has said.

The chief bank examiner at the Reserve Bank of Zimbabwe Mr Ruzayi Chiviri said a Czech firm, Creditinfo, that was engaged to set up the CRB’s soft infrastructure had so far made significant strides.

The central bank engaged Creditinfo to set up the coun-try's CRB at a cost of $1, 8 million.

“We expect the Credit Refer-ence Bureau to online by 31 July. We have been able to

procure the soft infrastructure to run the Credit Registry.

When we engaged them (Cred-itinfo) they came to inspect

the hardware at the Reserve Bank of Zimbabwe and they

News Update as @ 1530 hours, Tuesday 14 June 2016

Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

Credit Reference Bureau to go online on July 31

were satisfied. And we signed a contract with them on April 14, 2016.

“Subsequent to that we were then supposed to define the data that we should collect from industry and the banking sector.

“We have had several consul-tative meetings with banking institutions in order to make sure they understand because the users of the system are the banking institutions and other credit providers and they have indicated to us to the sort of reports that they want to see coming from the system

“Creditinfo has now used that information to come up with the templates in the system that will be able to gener-ate the reports. They have indicated that they will give us a customised version of the system on June 16 (Thursday), and we will run a test on the same day,” said Mr Chiviri.

According to the World Bank,

credit registries generally developed to support the State’s role as a supervisor of financial institutions.

Experts says the bureau should enhance the verifica-tion process of borrowers, enabling bankers to assess credit risk and reduce the level of non-performing loans (NPLs) in the banking sector.

And it will also allow lenders to determine how much and at what rates to lend, as well as promote transparency in the economy to the extent of greater sharing of information, making financial institutions aware of their customers' financial exposures.

Significant progress in the development of the CRB comes as the Banking Act has been amended to provide backing for its establishment.

“We sought to finalise the amendments to the Banking Act, which provides the legal backing to provide for the

setting up of the Credit Refer-ence Bureau. The law is now in place. We have a banking amendment Act No. 12 of 2015 which was gazetted a few weeks ago,” he added.

RBZ to licence private credit bureaus

Mr Chiviri said with the CRB coming on board, the RBZ will also establish an internal unit that will licence and monitor private credit bureaus.

“The technical assistance mis-sion from the World Bank shall come back in July to assist us because as part of the legal framework we must work with the private credit bureaus that are already operating in our market.

“The RBZ will have a unit that will licence them, so we need to do an assessment of the operations of the private bureaus and prescribe the standards which they should follow and we need them to scale up their operations.”●

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HARARE –The Government on Monday gave its department, parastatals and local authorities a two-week deadline to set up mechanisms to pay for goods and services in other currencies that are within the multi-currency regime, other than the United States dollar.

The ultimatum, part of a cocktail of measures that have already been introduced in light of cash shortages the country is expe-riencing, is aimed at reducing pressure on the demand for US dollars which are now in short supply.

Zimbabwe adopted use of mul-

ti-currencies in 2009, a basket that includes nine currencies among the US dollar, South African Rand, Botswana Pula, Chinese Yuan and Japanese Yen.

In the past six years, the green-back has however gained traction as the major currency in use in the country, accounting for over 95 percent of transactions, while the Rand, used in the earlier stages, lost its glitter as it weak-ened against the US dollar.

Cash shortages that have gripped the economy for the better part of the first half of this year have forced the Government to intro-duce measures aimed at resur-

recting the multi-currency system. Finance and Economic Develop-ment permanent secretary Willard Manungo said in a statement directed to heads of Government ministries that institutions and departments were expected to have adopted the new payment mechanism system by June 30.

“Government ministries, depart-ments, local authorities and parastatals are key players in the adoption of use of multi-curren-cies given the extent to which they transact with the public. In this respect, it is critical that such entities also adopt measures that facilitate restoration and

promotion of the multi-currency system,” Mr Manungo said in a circular seen by New Ziana.

“Accounting officers are there-fore required to urgently arrange for departments and institutions under their purview to embrace application of the multi-currency arrangement in payment transac-tions with the public.” The direc-tive follows complaints that some Government agencies have been rejecting payment in Rands.

In terms of the order, the depart-ments are expected to introduce a multi-currency pricing structure that will also include the bond notes. - New Ziana.●

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Two-week deadline for Govt departments on alternative currencies

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By Funny Hudzerema

HARARE - The country is still facing some challenges in terms of the ease of doing business reforms despite having recorded some improvement, an official has said.

The Deputy Chief Secretary to the President and Cabinet Dr Ray Ndhlukula said indications from some technical groups addressing a number of key reform areas showed that there were still challenges with the ease of doing business.

He was speaking at the ‘Second 100 Day Improving the Ease of Doing Business Environment Workshop’

“What we have noticed from other technical groups is that there are challenges. The construction industry, ZimTrade, the Zimbabwe Transport Organisation have been highlighting several challenges they are facing. I shall be co-or-dinating meetings to ensure that the thematic groups dissolve these challenges. They have indi-cated that some of the challenges they are facing are emanating from Government itself.

“The institutions indicated that too many Government agencies are demanding too much money from them to operate their businesses. For example for one to be a trans-porter you need to register with at least 10 Government departments but for us to improve the ease of doing business we need to have one agent per sector,” he said.

ZimTrade chief executive officer Ms Sithembile Pilime highlighted some of the challenges her organ-isation is facing.

“As ZimTrade we work with man-ufacturers of goods and exporters

the challenge they are facing is in moving their goods starting from importing of raw materials, spare parts of machinery and many others to manufacture the goods meant for export up to exporting the goods outside our boarders. We are land locking our self and this really needs to be addressed,” she said.

She added that the other chal-lenge which exporters were fac-ing, was the imposition of stiffer penalties on local transporters, which has resulted in delays in the movement of goods meant for export.”●

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‘Challenges still persist in improving business climate’

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BH24 Reporter

HARARE -Preparations for the 2017 tobacco planting season have started with 217 740 grammes of flue-cured seed having been sold to date, the latest Tobacco Industry and Marketing Board statistics has revealed.

TIMB statics as at 10 June show that there is a decrease in seed sales this year by 47 percent compared to last year. A total of 416 570 grammes of flue cured tobacco seed were sold dur-ing the corresponding period.

According to TIMB, the amount of seed that has been bought this year is equivalent to 36 290 hec-tares which is a decrease from 69 428 hectares for the same period last year.

TIMB communications man-ager Mr Isheunesu Moyo said farmers who are doing irri-

gated crop have purchased the seed.

“Farmers who are doing irri-gated crop are the ones who have purchased seed and the majority of those doing dry-land crop are stil l to buy the seed. Final day for purchas-ing of seed is September 15,” he said.

Seed beds for wholly irri-gated tobacco should be started on June 1 while semi irrigated tobacco should be established between June 15 and July 1.

TIMB encouraged farmers to do float seedling method when preparing for their seed beds. Mr Moyo said float seedling had many advantages over conventional seedling method.

“Although a significant num-ber of farmers prefer to stick to the conventional seedling method, the float seedling

method has many advantages over the conventional seed-ling method.

“These advantages include a five times reduction in seed bed area, easier transplan-tation, less chemicals, water and fertil isers required, pro-duction of superior and more uniform and drought tolerant seedlings,” he said.

Mr Moyo said float seedlings take longer to wilt compared to conventionally produced seedlings.

“Float seedlings take longer to wilt compared to conven-tionally produced seedlings, have improved survival and early growth of transplanted seedlings with unused pulled seedlings being able to be inserted back in the trays and refloated without con-sequences of later planting,” he said.

●

Preparations for 2017 tobacco planting season begin

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HARARE -The Zimbabwe Stock Exchange mainstream industrial index extended yesterday’s losses by drop-ping a further 0.11 to close at 95.08 as beverages giant Delta continued to slide.

Delta lost $0, 0095 to settle

at $0, 5200 and SeedCo traded unchanged at $0, 5500.

On the upside, giant insurer Old Mutual gained $0, 0324 to $2, 3001 while CBZ was up $0, 0099 to trade at $0, 1099.

The mining index was flat at 26.24 as Bindura, Falgold, Hwange and RioZim remained unchanged on previous price levels at $0,0120, $0,0050, $0,0300 and $0,1700 in that order

- BH24 Reporter ●

Industrials extend losses

14 ZsE

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MovERs CHANGE TodAy PRICE UsC sHAKERs CHANGE TodAy PRICE UsC

CBZ 9.90 10.99 DELTA -1.79 52.00

OLD MUTUAL 1.42 230.01

INdEx PREvIoUs TodAy MovE CHANGE

INDUSTRIAL 95.19 95.08 -0.11 points -0.12%

MINING 26.24 26.24 +0.00 POINTS +0.00%

17 ZsE TABlEs

ZsE

INdICEs

stock Exchange

Previous

today

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20 dIARy oF EvENTs

The black arrow indicate level of load shedding across the country.

PowER GENERATIoN sTATs

Gen Station

13 June 2016

Energy

(Megawatts)

Hwange 592 MW

Kariba 682 MW

Harare 30 MW

Munyati 19 MW

Bulawayo 24 MW

Imports 0 - 400 MW

Total 1505 Mw

15 JUNE 2016 -- Rainbow Tourism Group 7th Annual General Meeting; Time: Jacaranda Rooms 2 and 3 at the Rainbow Tourism Hotel and Conference Centre, 1 Pennefather Avenue, samora Machel Avenue west, Harare; Time: 1200 hours...

16 JUNE 2016 -- RioZim 60th Annual General Meeting; Place: No. 1 Kenilworth Road, Highlands, Harare; Time: 10.30 hours...

22 JUNE 2016 -- Zimre Holdings limited 18th Annual General Meeting; Place: NICoZdIAMoNd Auditorium, 7th Floor Insur-ance Centre, 30 samora Machel Avenue, Harare; Time: 1430 hours...

22 JUNE 2016 -- GB Holdings limited Annual General Meeting; Place: Cernol Chemicals Boardroom, 111 dagenham Road, wil-lowvale, Harare; Time: 11.30 hours...

23 JUNE 2016 -- Zimpapers 89th Annual General Meeting; Place: Zimpapers ltd Boardroom, sixth Floor Herald House, Cnr. G. silundika/sam Nujoma street, Harare; Time: 1200hrs…

24 JUNE 2016 -- dawn Properties Annual General Meeting; Place: Great Indaba Room, at the Monomotapa Hotel, 54 Parklane, Harare on Friday; Time: 10:00 hours...

THE BH24 dIARy

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JoHANNEsBURG - South Africa's rand steadied early on Tuesday, before the release of current account data later in the day and a Federal Reserve monetary policy meeting this week.

At 0648 GMT, the rand traded at 15,1725 per US dollar, largely unchanged from its New York close on Monday.

"ZAR is likely to be vulner-able to foreign sentiment going into US Fed meeting tomorrow, although large surprise on South African

current account data today may provide some momen-tum," NKC African Econom-ics said in a note.

Uncertainty over this week's Fed meeting has weighed on markets, though the US central bank is widely expected to leave rates unchanged after the much weaker-than-expected May nonfarm payrolls report.

The central bank is due to release first-quarter cur-rent account data at 0800 GMT. The deficit widened in the fourth quarter to 5,1 percent of gross domestic product; an unexpectedly large swing either way could move the rand as well.

Stocks were set to open lower at 0700 GMT, with the JSE securities exchange's Top-40 futures index down 0.52 percent.

In fixed income, yield for the benchmark instrument due in 2026 added 1.5 basis points to 9,13 percent.

. - Reuters●

22

SA current account deficit widens in Q1Rand steady, focus on current account data

REGIoNAl NEws

PREToRIA - South Afri-ca's current account deficit widened in the first quarter of 2016 as exports slumped despite a recovery in the global prices of commod-ities and a weaker rand, the central bank said on Tuesday.

The current account deficit widened to 5 percent of gross domestic product in the first quarter from a revised shortfall of 4,6 per-cent in the final quarter of 2015, the central bank said on Tuesday.

Economists surveyed by Reuters had expected a 4,25 percent gap For the first quarter.

South Africa's rand extended losses against the dollar after the current account data, weakening as much as 1,3 percent to 15,3700 per dollar.

Agriculture, mining and manufacturing led the slowdown in output as a widespread drought and subdued demand for

commodities weighed on the productive side of the economy.

"The (commodity) prices of course were not juicy, although they were propped up a bit in rand terms with the exchange rate being relatively weak," said head of economic reviews and statistics at the central bank Johan van den Heever.

Exports slumped during the quarter, resulting in a trade deficit of 38 bill ion rand, ($2,5 bill ion) compared with a revised 41 bill ion rand gap in the fourth quarter, the Reserve Bank said in its June quarterly bulletin - Reuters●

Oil extended declines from the lowest close in more than a week amid signs that crude near $50 is triggering resumption of dril l ing in the US and Canada.

Bottom of Form

Futures lost as much as 1,7 percent in New York after falling 4,6 percent the previous three sessions. Rigs targeting oil in the US and Canada rose as Amer-ican production gained in the week through June 3 for the first time since March. The global market will be almost balanced next year as demand continues to rise faster than output, while the current oversupply is much smaller than previously thought, the International Energy Agency said.

Oil has surged more than 80 percent from a 12-year low in February as the global glut is trimmed by disruptions and a slide in US output, which is under pressure from the Organisation of Petro-leum Exporting Countries’ policy of pumping without limits.

OPEC predicted the mar-ket will be more balanced the second half of this year as demand rises and rival supplies falter, according to a monthly report released Monday.

“While US production has been consistently declin-ing, there is the risk now that prices have reached a level where companies are happy to put dril l rigs back to work,” Angus Nicholson, a markets analyst in Melbourne at IG Ltd., said by phone. “We could start seeing output climbing again in a month or two.”

West Texas Intermediate for July delivery fell as much as 81 cents to $48,07 a barrel on the New York Mercantile Exchange and was at $48,08 at 9:21 a.m. London time. The contract lost 19 cents to $48,88 on Monday, the low-est close since June 3. Total volume traded was about 28 percent below the 100-day average.

Us stockpiles

Brent for August settlement slid as much as 78 cents, or 1,6 percent, to $49,57 a bar-rel on the London-based ICE Futures Europe exchange.

The contract lost 19 cents to $50,35 on Monday. The global benchmark traded at a premium of 86 cents to WTI for August.

US drillers boosted the rig count for a second week to 328 through June 10, according to data from Baker Hughes Inc. on Friday. Active oil rigs in Canada rose by 12 to 68, the highest since the week of March 11, accord-ing to Canada Association of Oilwell Drill ing Contractors. Machines in Alberta rose to 43 from 36 machines in the previous week.

The oil surplus in the first half of this year is about 40 percent smaller than estimated a month ago, as consumption proves stronger than expected while dis-ruptions reduce supply, the IEA said Tuesday. Stil l, the “enormous inventory over-hang” that accumulated dur-ing years of oversupply will l imit any significant increase in prices, it said.

- Bloomberg●

23

oil extends decline as $50 crude seen spurring drilling in Us

INTERNATIoNAl NEws

Microsoft Corp. has enough cash to buy LinkedIn Corp. four times over. So why is it taking out a big loan to pay for its latest purchase?

Maybe because it’ll lower the technology giant’s tax

bill.

Microsoft will avoid having to pay a 35 percent tax rate to repatriate cash from overseas accounts. While it’s true that Microsoft has more than $100 billion in cash and cash equiv-alents, most of it is parked offshore. Bringing home any of it to fund the proposed $26,2 billion purchase, announced on Monday, would generate a tax bill.

That’s not the only benefit of borrowing. The company could also deduct interest payments, thus lowering its future US tax bill. So by financing the bulk of its purchase with debt, Microsoft could legally sidestep roughly $9 billion in US taxes this year, and save millions more in the years to come by using interest deductions to

reduce its taxable income.

“It’s an odd world where a company is awash in cash and chooses to make the acquisition with debts because they don’t want to pay tax,” said Robert McIntyre, executive director of Citizens for Tax Justice.

The company plans to finance the acquisition “primarily with new debt,” Microsoft’s chief financial officer, Amy Hood, said during a conference call on Monday announcing the deal, without specifying an exact amount it expects to borrow. A Microsoft spokesman didn’t immediately respond to a request for comment.

Companies are always decid-ing how to finance themselves and prefer debt when rates are exceedingly low, as they are now. With its latest plan, Microsoft joins a procession of cash-rich US companies that have in recent years relied on leverage to sidestep US taxes. In 2015, Apple, with more than $180 billion overseas, borrowed $6,5 billion to pay shareholders

a dividend.

Many chief executive officers and business analysts say the strategy amounts to both good corporate governance and common sense. Apple CEO Tim Cook famously said last year that it was “crap” to criticize his company for borrowing at low rates to avoid paying 40 percent in combined federal and local taxes.

Avoiding Taxes

But financing the LinkedIn purchase with debt could leave Microsoft in a spot -- rich abroad and strapped in the US. On Monday, Moody’s Investors Service placed Microsoft’s Aaa senior unsecured rating under review for downgrade, citing the company’s debt and over-seas cash hoard as factors.

Microsoft is already committed to pay the final $10 billion of a $40 billion share buyback program this year. But the company has only $3 billion in cash in the US and would likely have to borrow to pay for the

buyback, said Richard J. Lane, a senior analyst for Moody’s. The decision to add another $20 billion plus of debt to buy LinkedIn could "contribute to ratings pressure,” Lane said.

With 97 percent of its cash overseas, “Microsoft’s ability to support its existing capital allocation program without further debt is limited,” the Moody’s report noted. S&P Global Ratings, by contrast, affirmed Microsoft’s AAA rating on Monday.

‘Tax-Free Repatriation’

Microsoft’s borrowing plan is another example of the way the US tax code encourages corporations to use bookkeep-ing maneuvers to avoid taxes, representatives for tax fairness groups and other tax experts said Monday.

Under the current tax policy, Microsoft’s borrowing was tan-tamount to “a tax-free repatri-ation,” said Edward Kleinbard, a tax expert and professor of law and business at University of

24 analysis24 ANAlysIs

why Microsoft, with $100 billion, wants a loan for linkedIn

Southern California.

“The offshore money contin-ues to sit, invested in portfolio assets, earning a rate of return -- and the new borrowing then incurs an income expense, so the two offset each other,” said Kleinbard, a former chief of staff for the congressional Joint Committee on Taxation.

“It means a somewhat bloated balance sheet, but that cos-metic blemish is a lot less costly than writing out a big check to the Treasury.”

Glaring Idiosyncrasy

Such convoluted accounting measures are the result of a glaring idiosyncrasy in the US corporate tax code: The US taxes its multinationals on prof-its earned anywhere around the globe, but only after the money is brought home.

That might explain why com-panies with big offshore stores find it difficult to use their cash. By contrast, almost every other government exempts foreign profits from taxes at home.

These tax rules have prompted US-based corporations to hoard more than $2 trillion in earn-ings in their foreign subsidiar-ies, according to a Bloomberg analysis, an amount that would result in a tax bill of more than $600 billion if it were returned home.

Adding to the counterintui-tive nature of borrowing by cash-rich corporations is this: Although the untaxed money is technically controlled by the foreign subsidiaries of US multinationals, much of it is held in US banks and invest-ment accounts. In Microsoft’s most recent quarterly report, the company reported $102,8 billion in untaxed profits con-trolled by its offshore subsidi-aries, 81 percent of which was held in US government securi-ties.

Bottom of Form

From the time President Barack Obama took office in 2009 through the end of 2015, the cash hoards held by US mul-tinationals roughly doubled to $2,4 trillion, according to a

study of corporate filings by Citizens for Tax Justice. Pfizer reported more than $193 billion in unrepatriated profits at the end of 2015. Apple had more than $200 billion; General Electric: $104 billion, Google: $58 billion and Goldman Sachs: $28 billion.

Many US multinationals, par-ticularly in the technology and pharmaceutical industries, have been lobbying federal officials for years to enact a so-called “repatriation holiday,” allowing them to bring money home at a rate far below the 35 percent corporate tax. A lower rate would allow them to return the money and use it to hire and invest in the US, the companies have asserted.

That’s not what happened in 2005, when Congress and the Bush administration temporarily lowered the tax rate on repat-riated corporate profits to 5,25 percent from 35 percent. More than 800 companies availed themselves of the program, bringing home $300 billion. But 92 percent of that money was used for share buybacks and

executive bonuses, according to a subsequent study by the National Bureau of Economic Research, and some of the companies that reaped the big-gest tax savings actually closed plants and laid off tens of thou-sands of workers in the US.

divided lawmakers

With Congress deeply divided and with a contentious pres-idential race under way, the prospects of any major tax code changes this year are minus-cule, according to tax experts. By borrowing to pay for its LinkedIn purchase, Microsoft preserves its option to take advantage of any repatria-tion tax breaks that might be enacted by the next Congress and president.

“I believe they are betting that there will be a better way to get the earnings home in the future under most plausible expected tax reforms,” said Kimberly Clausing, an econom-ics professor at Reed College who has written extensively about offshore corporate policy. – Bloomberg●

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