By Tawanda Musarurwa

HARARE – The International Monetary Fund (IMF) appears to have shifted positions ahead of the completion of an ongoing third review of Zimbabwe’s Staff Monitoring Programme after it raised ‘new’ concerns about current reforms.

IMF resident representa-tive in Zimbabwe Mr Chris-tian Beddies told a special meeting with the Parliamen-tary Portfolio Committee on Budget and Finance that they had concerns with the broader implications of the role of the Zimbabwe Asset Management Corporation (ZAMCO). Mr Beddies appeared before

the committee together with visiting IMF head of delega-tion Mr Dominique Fanezzi.

He said the IMF was con-cerned that the debts being accrued by ZAMCO would become a “liability to the State.”

“From a point of view of the ZAMCO operation, the latest monetary policy review by the governor of the Reserve Bank they are taking over about half a bill ion worth of debt from the commercial banks, which strengthened the balance sheets of the commercial banks.

“But much of this debt being held by ZAMCO is being held on corporations which are essentially insolvent. If you look at the list of companies, Cottco, CSC....these private sector and state-controlled

News Update as @ 1530 hours, Wednesday 02 March 2016

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IMF shifting gears on Zimbabwe?

Mr Christian Beddies

companies are essentially insolvent and I am deeply concerned that the Govern-ment is taking over debt which could eventually become a liability to the State,” said Mr Beddies this morning.

“And I think that the liabili-ties taken over by the State on the domestic market in the last two years, you have your $1,7 bill ion worth of debt from the RBZ which will be assumed by the Ministry of Finance, you have the half a bill ion dollars, and Gov-ernment tells us it ’s going to be $800 million worth of debt in ZAMCO, which should technically be a liability to the State.”

As at the close of 2015, ZAMCO had acquired and restructured NPLs worth $357 million, the main focus being on distressed compa-nies in critical sectors such as mining, agro-processing and manufacturing, which Government believes have

good prospects of being turned around.

The restructuring has involved extending the loan repayment period, grace periods for capital repayment as well as reducing interest rates and in some cases the conversion of debt to equity.

The ‘new’ reservations by the IMF appear to contradict its observations on ZAMCO fol-lowing the second review of the staff-monitored program last October.

At the time the multilat-eral financier said:“ZAMCO, which is now functional, has begun acquiring eligible NPLs, financed by long-term government securities. This should help restore financial sector viability by strength-ening banks’ balance sheets and providing them with much needed liquidity...The work of ZAMCO is being com-plemented by the recently introduced credit registry and reference system. To cement financial stability and

reinforce confidence, NPLs need to decline further. The authorities expect that their multipronged approach will further reduce NPLs to 5 per-cent by end – 2016.”

Mr Beddies also told the Parliamentary Portfolio Com-mittee that the issuance of treasury bills was increas-ingly becoming a major concern.

“You have a budget deficit in 2014 of $1 bill ion, you have a budget deficit in 2015 of nearly $1,5 bill ion. Much of this debt is financed with treasury bills and we do not know what the stock of treasury bills are at this juncture.

But the treasury bill issue is a major emerging factor, interest on treasury bills this year will be a quarter of a bill ion dollars. It’s a major item in the budget now

“You can’t afford to have these treasury bills as a semi-permanent domestic

debt element, and I am con-cerned about that,” he said.

He also said proposed labour law reforms were yet to take off, while clarifications on the indigenisation policy were ‘superficial’.

Following the completion of the second review last year, Mr Fanizza said if Zimbabwe succeeded in the third review, it would get a three-year credible reform programme, raising optimism that the country’s economic fortunes were based on the successful completion of the SMP as it will pave way for the country to pay off its $1,8 bill ion arrears to three preferred creditors, as agreed during the Lima meetings last year.

Mr Fanezzi told the commit-tee that the SMP is just an initial step to shows that the country could implement some reforms that were required for a “real pro-gramme with the fund.”●

2 NEWs

BH243

By Funny Hudzerema

HARARE – Areas that have been put under maize pro-duction for the 2015/2016 season have declined sharply compared to the last season statics from the Zimbabwe Farmers Union show.

ZFU said maize production for this season has been mainly affected by low rainfall and dry spells which hit the country during the season.

“There seems to be a sig-nificant decline in the area

placed under maize espe-cially in the 2015/2016 sea-son with Matebeleland South having the least area.

“Midlands and the Masho-naland provinces have the biggest area although it is below the area covered in the previous seasons,” said ZFU.

This year a total of 40 000 hectares was placed under maize production in Masvingo compared to 18 000 hectares planted the same period last season, while in Midlands 14

000 hectares were placed under maize production compared to 27 000 hectares the prior year.

ZFU also said all provinces received below normal rain-fall and the general maize condition is poor, 75 percent-age of the crop is write off in Masvingo while in Matebe-leland South 65 percent has been written off.

Mashonaland West which is well known for produc-ing highest yields of maize has reduced its hectarage

11 000 hectares than 22 thousand hectares during the 2014/2015 season.

Statistics from ZFU indicated that land which is placed under maize production is declining every season this means maize production is declining.

Currently Government is importing maize to supply the required maize to feed the nation with 700 000 met-ric tonnes needed.

. ●

4 NEWs

2015/2016 maize hecterage declines

BH245

BH24 Reporter

HARARE - The Ministry of Youth Indigenisation and Economic Empowerment in partnership with the Zim-babwe National Chamber of Commerce (ZNCC) last week launched the Youth Entrepre-neurship Desk which is aimed at assisting youths to open business and new markets and improve youths partic-ipation towards economic development.

The desk will also be used as a platform to assist youths with innovative ways of rais-ing capital to finance their business ideas.

This is part of the youth empowerment strategy which was launched by Govern-ment late last year aiming to empower youths and inden-tifying specific needs for the youths across the country.

ZNCC chief executive officer Mr Christopher Mugaga said

the objectives of the Youth Entrepreneurship Desk are to reduce unemployment, assist youths in formalising their small businesses, to create international markets for them, to advocate and lobby for young entrepreneurship and to mentor them.

Youth, Indigenisation and Economic Empowerment

Minister Patrick Zhuwao said the platform will go a long way in assisting youths with entrepreneurship and finance sourcing skills.

“Young people should not wait for the youth fund in order to get money to kick starts their business ideas because right now the fund does not have money.

“Youths should learn to pack-age and present their busi-ness ideas in a way that will attract funding from success-ful business people across the country,” he said.

He added that youths should learn to create partner-ships to start their business because owning 100 percent shares of a company is not realistic if one does not have enough capacity to raise the needed capital.

“I don’t know who said to be successful one has to own 100 percent shares, most stock exchange listed compa-nies are controlled by people who sit on 5 to 7 percent shares,” he said.

Youths in business also complained about the non compliance of companies who are failing to honour the youth quota which entails 25 percent of all companies to accord them to the youth.●

6 NEWs

Youth Entrepreneurship Desk launched

BH247

BH24 Reporter

HARARE –The training of tobacco farmers courtesy of the Empowerment Trust fund is set to commence in May and is expected to benefit 150 farmers annually.

The training which is being sponsored by BAT and the Government, is aimed at improving tobacco production and quality and will be car-ried out in Mount Darwin.

Speaking during a recent breakfast meeting to announce the commencement dates for the training BAT project manager Mr Vimbai Makumbe said the project is set start in May this year targeting 150 students as a feasibility study.

“We are going to enrol 150 tobacco growers annually and we are targeting to empower youth and women in the tobacco business.

“This programme is more

aimed at creating entrepre-neurs which will assist other tobacco farmers in their areas and they will also work as experts,” he said.

He added that the tobacco courses will be registered with the Bindura University of Science Education and the certificates and diplomas will be issued by the university.

The program is part of BAT’s

compliance with Indigenisa-tion and Economic Empower-ment Act.

In his remarks during the same event BAT Technical Empowerment Trust secre-tary Mr Stephen Nyabadza said the trust holds 10, 76 percent of BAT Zimbabwe which translates to 2, 2 million ordinary shares in the country’s largest cigarette manufacturer.●

8 NEWs

Tobacco Empowerment Trust fund to commence in May

BH249

HARARE - The mainstream industrial index retreated 0.84 to settle at 98.94, bucking gains since the

beginning of this week.

Cigarettes producer BAT lost a signif icant $0,3917

to trade at $11,0462, while Natfoods eased $0,1000 to close at $2,4500 and seed manufacturer SeedCo sl ipped

$0,0225 to $0,8000.

Simbisa was $0,0039 weaker at $0,1311.

There were no trades in the positive territory, while activity was l imited to four-teen counters.

The mining index was flat at 19.14 as Bindura, Fal-gold, Hwange and RioZim all maintained previous price levels at $0,0095, $0,0050, $0,0300 and $0,1040 respectively

- BH24 Reporter ●

ZsE10

Industrials fall into the red

BH2411

MovERs CHANGE ToDAY PRICE UsC sHAKERs CHANGE ToDAY PRICE UsC

NATFOODS -3.92 245.00

BAT -3.42 1,104.62

SIMBISA -2.88 13.11

SeedCo -2.73 80.00

INDEx PREvIoUs ToDAY MovE CHANGE

INDUSTRIAL 99.78 98.94 -0.84 pointS -0.84%

MINING 19.14 19.14 +0.00 POINTS +0.00%

12 ZsE TABlEs

ZsE

INDICEs

stock Exchange

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13 DIARY oF EvENTs

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

PoWER GENERATIoN sTATs

Gen Station

02 March 2016

Energy

(Megawatts)

Hwange 271 MW

Kariba 451 MW

Harare 30 MW

Munyati 33 MW

Bulawayo 0 MW

Imports 0 - 450 MW

Total 1122 MW

• Thursday24March2016-AnnualGeneralMeetingofWilldaleLimited;Place:Boardroom,WilldaleAdministrationBlock,19.5kmpegLomagundiRoad,MountHampden;Time:1100hours...

THE BH24 DIARY

JoHANNEsBURG - - South Africa's rand steadied against the dollar in early trade on Wednesday as risk appetite returned after gains in oil prices and a batch of positive economic data calmed fears of a global eco-nomic slowdown.

At 0710 GMT, the rand traded at 15,5705 versus the dollar, 0,13 percent firmer from Tuesday's New York of 15,5900.

"Rand gains have come on reduced global fears over an economic downturn and reduced local fears over pol-itics," Rand Merchant Bank currency analyst John Cairns said in a note.

"Globally it has been risk-on," he added.

Since Monday, the rand has recovered after Pres-ident Jacob Zuma said he supported Finance Minister Pravin Gordhan, following reports of a fallout between the two on Friday that sent the currency to its biggest daily loss since 2011.

In fixed income, and the yield for the benchmark instrument due in 2026 down 7.5 basis points to 9,275 percent.

On the stock market, the

Top-40 index was up 0,9 percent while the broader all-share rose 0,6 percent in early trade.

Shares in South Africa's fourth-largest lender Ned-

bank were up 1,5 percent after it reported an 8,5 percent rise in annual profit, meeting estimates, as growth in fee income offset muted growth in lending.- Reuters●

REGIoNAl NEWs 14

Rand steady on global risk appetitie, stocks rise

Oil closed at a two-month high in New York as global equities rallied and OPEC crude production dropped from a record.

West Texas Intermediate crude rose 1,9 percent. Stocks advanced on optimism central banks from Asia to Europe will follow China’s in adding to stimulus, while data suggests that Ameri-can consumers can power the world’s largest economy. Iraq and Nigeria led produc-tion declines in the Organi-sation of Petroleum Export-ing Countries last month, a Bloomberg survey showed.

"The market continues to push higher after China low-ered reserve requirements," said Gene McGill ian, a senior analyst and broker at Tra-dition Energy in Stamford, Connecticut.

"We’re up on bullish expecta-tions. There’s a feeling that either non-US producers will agree to a cut or that low prices will eventually have a big effect on US production."

Oil has slipped about 7 per-

cent this year and averaged less than $32 a barrel during the past two months, the longest stretch below that level in more than 12 years. OPEC output slid by 79 000 barrels to 33,06 million bar-rels a day in February.

WTI for April delivery rose 65 cents to $34,40 a barrel on the New York Mercantile Exchange. It was the high-est settlement since Jan. 5. Futures touched $34,76, the highest intraday level since Jan. 28. Total volume traded was 12 percent above the 100-day average at 4:38 p.m.

Futures retreated after the settlement when the Ameri-can Petroleum Institute was said to report US crude sup-plies rose 9,9 million barrels last week. WTI traded at $33,84 at 4:39 pm.

Market stimulus

Brent for May settlement increased 24 cents, or 0,7 percent, to $36,81 a barrel on the London-based ICE Futures Europe exchange. It was the highest close since

Jan. 4. The global benchmark crude ended the session at an 66-cent premium to May WTI.

Prices climbed after China’s central bank cut its reserve requirement ratio by 0,5 percent on Monday, free-ing up the amount of cash the nation’s banks can lend in an effort to stimulate demand. China is the biggest crude-consuming country after the US.

US crude stockpiles prob-ably increased 3,4 million barrels from an 86-year high last week, according to a Bloomberg survey before an Energy Information Admin-istration report Wednesday. The agency is projected to report that supplies of gas-oline and distil late fuel, a category that includes diesel and heating oil, dropped.

Ample Inventories

"WTI is attracting a bid despite expectations for a further build in US inven-tories," said Tim Evans, an energy analyst at Citi Futures Perspective in New

York. "The price action suggests that a bottom is in place. The market move itself acts as positive rein-forcement."

US crude stockpiles grew to 507,6 million barrels in the week ended Feb. 19, the most since 1930, EIA data show. Supplies at Cushing, Oklahoma, the biggest US oil-storage hub and delivery point for WTI traded in New York, rose to a record 65,1 million barrels during the period.

"Inventories are going to continue to go up for a month or so, which will be a headwind for the market," said Rob Haworth, a sen-ior investment strategist in Seattle at US Bank Wealth Management, which oversees $128 bill ion of assets.

"It looks like we’re no longer in danger of taking a dive to the low $20s, but that doesn’t necessarily mean that we’re heading for a big rally."

.-Bloomberg●

INTERNATIoNAl NEWs 15

Oilclosesattwo-monthhighasequitiesrise,OPECoutputslips

By Nawar Alsaadi

What if I told you that there was a period in history where oil demand declined by 5 mil-lion barrels per day and non-OPEC supply increased by 5 million barrels per day, yet oil price rallied more than 50 percent? Would you believe me? If your answer is yes, then you guessed right.

This was the period from 1979 to 1985; it was a period during which global oil demand declined from over 61 million barrels to 56 million barrels and non-OPEC supply increased from 32 million barrels to 37 million barrels. Yet prices rallied from $17 a barrel in 1979 to $26 a barrel in 1985, while reaching as high as $35 in 1981.

This il logical world of rising prices, collapsing demand and expanding non-OPEC supply was made possible by a 15,5 million barrels reduction in OPEC’s supply between 1979 and 1985 as

OPEC cut production from 30,5 million barrels in pro-duction in 1979 to 15 million barrels in 1985, and most of that reduction was voluntary.

The maintenance of this artificially high price band by OPEC (at the expense of its production) led the oil majors to increase their capex from $24 bill ion in 1979 to as high as $44 bil-lion by 1982, which naturally resulted in a dril l ing explo-sion with annual O&G wells dril led increasing from 66 000 in 1979 to a peak of 107 000 in 1984. This investment and drill ing frenzy lead to more than a doubling in the Finding and Development (F&D) costs from $5 per bar-rel in 1979 to around $12 by the mid-1980s.

The increase in the F&D cost during that time was not the result of resource scarcity, or extraction complexity, it was the product of a sub-stantial inflation in service costs due to an unexpected surge in activity caused by

manipulated prices. Once OPEC ceased manipulating the market, prices quickly reverted back to their pre-manipulation economic equilibrium level in the mid-teens, while F&D costs set-tled back into the $5 a barrel range.

This unfortunate price manipulation episode by OPEC led to the creation of substantial overcapacity in the petroleum industry as it brought forward and accel-erated the development of unneeded oil resources, it greatly reduced demand, and it created significant excess capacity within OPEC itself. It took the world until 1991 to achieve the same level of oil demand reached in 1979, then from 1991 it took the world a decade and a half of demand growth and the emergence of China in the early 2000s, to exhaust all that non-OPEC excess capac-ity and OPEC spare capacity that was created during the 1979 to 1985 timeframe.

The birth of a new bull mar-ket

The 1979-1985 oil bull mar-ket is what a manipulated market looks like, and this market has no resemblance to the bull market that preceded the current price collapse. Unlike the early 80s price surge, oil prices were not manipulated higher in the early 2000s, but rose due to natural supply and demand forces.

In 2005 oil prices averaged $54 per barrel, a near dou-bling from the $28 per barrel at the start of the decade. 2005 is often mentioned as the official start of the 2000s raging oil bull market that lasted for almost ten years, except for a brief interrup-tion following the financial crisis.

Between the years 2000 and 2005 OPEC increased its crude and NGL production by 4 million barrels per day, inching up total production from 30,7 million to 34,8

16 analysis16 ANAlYsIs

Why oil booms and busts happen

17 analysis17 ANAlYsIs

million barrels, however this was insufficient to meet the over 7 million barrels per day growth in global demand growth during this period, with OPEC excess capac-ity virtually eliminated, the additional increase in supply had to come from non-OPEC sources.

However, after rising from 46 million bpd to 49 million bpd (all l iquids) from 2000 to 2004; non-OPEC supply stalled at around 49 million bpd for 3 years from 2004 to 2006, before finally crossing into the 50 million bpd mark in 2007. The pressure on non-OPEC to increase pro-duction could only translate into a sizable increase in prices, which in turn encour-aged the industry to signif-icantly increase its capex spending.

World supply hits a wall … Us supply to the rescue

Yet, as prices exploded higher and capex spend-ing hit record after record, something curious happened:

Non-OPEC all l iquids supply (ex-US) ground almost to a halt, after crossing 43,4 million bpd barrels in 2007, non-OPEC (ex-US) all l iquids supply increased by a measly 1,5 million bpd over a 7 years period, a period during which demand increased by over 6,6 million bpd.

As a matter of fact, between 2010 and 2014 non-OPEC (ex-U.S.) supply did not grow at all as it averaged around 44.5 million bpd for five years, while demand increased by 4,1 million bpd during this time. OPEC did marginally better than non-OPEC supply (ex-US), OPEC production stagnated at 34,6 million bpd from 2007 to 2010, before increasing to 36,6 million bpd by 2014, or increasing by 2 million bpd from 2007 to 2014 (OPEC did cut supply in late 2008 and 2009 in response to the financial crises).

Powered by the shale rev-olution, US supply was a different story, from 2010

to 2014 US all l iquids supply grew by 4,2 million bpd, thus meeting the totality of global demand growth in the 5 years preceding the current crisis. Eventually, the strong increase in shale production combined with the resumption of growth in OPEC production led to prices collapsing by late 2014.

so very different, so very the same

This brief oil market history il lustrates the substantial difference between what transpired in 1979-1985 and what happened between 2005 and 2014.

While the 1980s oil bull mar-ket was an unquestionably manipulated market that was bound to collapse at some point, the 2000s oil bull market was mostly driven by market fundamentals.

The resolution to the last oil bull market was delivered by market forces as high prices unleashed new sources of supply, namely US shale

oil. This was different from the 1986 oil price collapse which was triggered by OPEC ceasing its doomed effort to artificially inflate oil prices.

Yet, OPEC hands are not completely clean in this price collapse episode. The oil price collapse of 2014 was compounded in 2015 by the arrival of geopolit-ically restricted oil from several OPEC countries. Iraq increased its production by 650 000 bpd in 2015.

This supply should have been added to the market many years ago, but due to dec-ades of turmoil, this oil only made it to the market last year. Saudi Arabia’s decision to bring in some of its spare capacity to the market (450 000 bpd production increase) last year also added to the oversupply situation that was created by market forces.

Additionally, politically restricted oil from Iran is being introduced to the mar-ket in 2016 - oilprice.com● , To be Continued ....