Items filtered by date: Wednesday, 01 November 2017

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.

In 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.

Published in Economy
Wednesday, 01 November 2017 09:37

Zimbabwe: Econet Grows Revenue, Profits

Econet has released its results for the half year ended August, 31, 2017 showing significant growth in both revenue and profits. Revenue for the period was up by 17 percent to $353 million while profit was up 228 percent to $49 million from $14,9 million prior year comparative.

The company's Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) rose by 31 percent to $139 million from $106 million recorded in the same period last year.

The results also reflects the reduction in the group's finance costs following its $130 million capital raise which was used to pay off its foreign debts. Econet managed to reduce its finance costs during the reported period by $ 10,7 million after repaying its US dollar debt with the funds raised from its Rights Offer, which was concluded earlier in the year. In the first half of 2016, the company paid $15,2 million in finance costs. Chief Executive Officer, Douglas Mboweni attributed the strong performance to continued innovation within the business with non-voice products increasing their contribution.

"Our focus is to use technology to transform, in a deep, meaningful and fundamental way, how our customers transact and do business, and to provide convenience through technology," said Mr Mboweni.

"In line with our TMT strategy, we recently launched Kwesé TV in Zimbabwe, in partnership with Econet Media Limited. We are encouraged by the employment opportunities and new skills that have been created in our country as a result," Mr Mboweni said. Data, Ecocash and other non-voice products now constitute 63 percent of the company's total revenues. Consistent with the rapid growth in data usage and increased smartphone penetration, data revenue grew by 9 percent, from $52,8 million to $63,4 million during the period under review. Mobile financial transacting service EcoCash's revenues rose by 45 percent, from $39,2 million to $57,1 million. Commenting on the results, Econet Wireless Zimbabwe's Finance Director Roy Chimanikire said the company continued to grow shareholder value in a difficult operating environment.

"Our results demonstrate diligent execution of our strategy. Our key message has been that we are growing the non-voice elements of our business. The trends that we are seeing are very encouraging. As we continue to evolve into a fully converged TMT business, we see our business changing in the depth and quality of its revenue streams and its return potential. We are well positioned to take advantage of the opportunities that are available to us in this market," said Mr Chimanikire.

"Our Rights Offer, which raised $130 million to settle all our United States Dollar debt, enabled us to avert a potentially disastrous situation for the business, had we defaulted on our debt obligations," he said. Commenting on the business outlook, Mr Mboweni said the future looked bright.

"Going into the future, we will continue to strive to deliver more value to our customers through tailor made product offers, as well as market segmentation and product bundling across all the three pillars of our TMT model. In view of the current cash shortages, and the growing use of digital financial transactions, our solutions are now a preferred mode of transacting, and we are working on further scaling up our mobile transacting and banking systems to accommodate increased demand," said Mr Mboweni.

 

- The Herald Zimbabwe

Published in Business

Russia has signed a deal to build two nuclear power plants in Nigeria, as Africa's largest economy seeks to end its energy crisis.

Russian state-owned company Rosatom will build one in the south, the other in the centre, sources at the Nigeria Atomic Energy Commission told the BBC. The deal's exact worth is unknown, although some reports suggest it is likely in the region of $20bn (£15bn).

It is one of a number that Rosatom has been eyeing on the continent. The company is also involved in discussions in Ghana and South Africa. An initial agreement with the latter to build a plant was ruled unlawful in a South African court earlier this year.

The deal in Nigeria was reached after a long period of negotiation, with the two countries signing their first intergovernmental nuclear co-operation agreement in 2009. Nigeria hopes the plants, which will initially be operated by Rosatom before they are handed over, will help deal with the country's energy deficit.

According to World Bank figures , more than 40% of the country was without mains electricity in 2014. Nigeria is one of Africa's largest oil producers, but much of its oil wealth has been squandered over the years.

Corruption at all levels has left the country out of pocket , and producing a fraction of the energy its 180 million citizens need.

Construction of the new power plants is expected to begin in the next two years.

 

- BBC

Published in Engineering
Wednesday, 01 November 2017 07:19

Is drinking wine really good for your heart?

As the weekend approaches, people are opening wine bottles in bars and restaurants and homes around the world, ready to kick back and relax.

This relationship with wine has a long history. The oldest known winery, dating back to 4100 B.C, was discovered in 2010 by archeologists in an Armenian cave. Wine was used in ceremonies by the Egyptians, traded by the Phoenicians, honoured by the Greek God Dionysus and the Roman God Bacchus. By 2014, humanity was consuming more than 24 million liters of wine every year globally. Now there is some fear that extreme weather events in western Europe during 2017 have reduced production substantially and prices of this high-demand commodity are set to rise.

So why is wine so popular? Aside from its flavours, and capacity to help people relax, wine has gained something of a reputation as a “healthy” alcohol — with researchers in the past noting associations between red wine drinking in France, and lower incidence of heart disease.

However, wine drinking is also known to increase risks of serious health issues, including liver cirrhosis, sudden cardiac death, alcoholic cardiomyopathies and cardiac rhythm disorders. Excessive consumption and chronic misuse of alcohol are risk factors contributing to an increase in global disease.

How does the average drinker know what to believe? And how much wine is safe? As medical researchers, we recently published an in-depth analysis of the anatomy of wine. This included analysis of the risks and benefits of consumption, comparisons with other alcoholic beverages and a discussion around wine’s much publicised health benefits.

Wine and heart disease

Modern scientific intrigue surrounding wine has grown immensely since the 1970s, when large, international studies first reported a link between light-to-moderate consumption of alcohol and lower rates of ischemic heart disease (IHD) occurrence and associated deaths. IHDs are a group of diseases characterised by a reduced blood flow to the heart, and account for significant deaths worldwide.

Similar results have been reported individually for wine, specifically red wine. This phenomenon was eventually coined “the French paradox” after Renaud and de Lorgeril, two scientists who became known for this work, observed a relatively low risk of IHD-associated mortality in red wine drinkers despite a consumption of a diet rich in saturated fat.

Does this mean red wine is good for the heart? This is a complex question and as yet there is no consensus on the answer. More than one factor needs to be considered in order to explain this situation. Drinking patterns, lifestyle characteristics and dietary intake are all important for individuals to obtain a healthy cardiovascular profile.

The Mediterranean diet has been put forward as one explanation. This diet emphasizes consumption of plant-based foods in addition to the moderate consumption of red wine and has been labelled as beneficial by scientific advisory committees.

In the Mediterranean diet, the low-consumption of saturated fat, emphasis on a healthy lifestyle, and more independently, alpha-linoleic acid (an essential fatty acid) and red wine, may allow this diet to confer the much researched cardio-protective benefits.

Cholesterol, inflamation, blood pressure

Red wine contains over 500 different chemical substances. One class, called “polyphenols,” has been widely investigated for imparting the apparent antioxidant and anti-inflammatory effects of red wine.

Alcohol and polyphenols are thought to have several positive health impacts. One is a contribution to an increase in HDL-cholesterol or “good cholestrol” and a decrease in LDL-oxidation or “bad cholesterol.” They also contribute to a decrease in inflammation. They are thought to increase insulin sensitivity. And they are understood to improve blood pressure.

There is no consistent pattern when wine is compared to beer and spirits. Some report wine’s superiority in a reduction from IHD and mortality. Others report it for beer and spirits. Others suggest there is no difference. This suggests that alcohol and polyphenols both contribute to explaining the French paradox, in addition to lifestyle factors.

Despite the beneficial effects of wine and alcohol consumption, drinking is still a potential risk-factor for atrial fibrillation, the most-common “rhythm alteration” of the heart.

How much should you drink?

In much of the research, adverse effects were increasingly observed with excessive or binge-consumption of wine, while low-to-moderate intakes lowered IHD and mortality risks.

In response, various governing bodies have come forth with guidelines for alcohol consumption. These follow similar patterns, but vary remarkably by country and source. And the definition of “one standard drink” used in each guideline is highly variable, and discrepant between country borders. This causes great confusion. Readers should be wary of this when interpreting alcohol consumption guidelines.

Most guidelines suggest a moderate consumption of no more than one or two alcoholic drinks per day. But is yours a 4 oz. or an 8 oz. glass? (Shutterstock)

The World Health Organization recommends low-risk alcohol consumption of no more than two standard drinks per day with at least two non-drinking days during the week. Here one standard drink is defined as 10 g of pure ethanol.

The American Heart Association recommends alcohol in moderation — less than or equal to one to two drinks per day for men and one drink per day for women. Here one drink is defined as 12 oz. of beer, 4 oz. of wine, 1.5 oz. of 80-proof spirits, or 1 oz. of 100-proof spirits.

The Dietary Guidelines for Americans 2015 – 2020 developed by the United States Department of Agriculture recommends a moderate consumption of alcohol. This equates to up to two standard drinks per day for men and one for women. Here, one standard drink is defined as 14 g of pure ethanol.

The Canadian Centre for Addiction and Mental Health guidelines recommend low-risk alcohol consumption — up to three drinks per day for men and two for women. One drink is defined as 12 oz. of 5 per cent beer, 5 oz. of 12 per cent wine, and 1.5 oz. of 40 per cent spirits.

Future research opportunities

Observational data around alcohol consumption and heart health suggests that a light-to-moderate intake, in regular amounts, appears to be healthy. However, when mathematical models have been applied to determine causation (an approach known as Mendelian randomization) the results have been mixed.

Some studies have found light-to-moderate drinking beneficial, while others have reported long-term alcohol consumption to be harmful for the heart.

For doctors, it is quite clear what to recommend to patients when it comes to diet, exercise and smoking. Given the inconsistencies in the findings relating to alcohol, and wine specifically, recommendations for consumption are less obvious.

For wine drinkers too, definitive answers on wine and health remain elusive. There is, however, immense research potential in this area for the future. And as all the guidelines say, one or two glasses of red wine tonight will be just fine.

 

Adrian Baranchuk, Professor of Medicine, Queen's University, Ontario; Bryce Alexander, Medical Student, Queen's University, Ontario, and Sohaib Haseeb, Student, Queen's University, Ontario

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

Published in Opinion & Analysis

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