May 17, 2007

Cabinet grants indigenisation bill / Country's hyperinflation at 3713.9 Percent / Government plans to rescue textile industry

Cabinet has approved the draft National Indigenisation and Empowerment Bill, which seeks to ensure that 51 percent of the economy is controlled by indigenous Zimbabweans, and will now be presented to Parliament. The Bill provides for various measures that accelerate the implementation of the indigenisation and empowerment agenda. The Bill will now be tabled in Parliament for consideration. According to the Minister of State for Indigenisation and Empowerment, Munyaradzi Paul Mangwana, the Bill provided measures that the Government would use for promoting further indigenisation of the economy and empowerment of people and achieve at least 51 percent indigenous shareholding in the economy. The Bill would also see the establishment of a National Indigenisation and Empowerment Fund and the creation of a National Indigenisation and Empowerment Board and the National Investment Trust of Zimbabwe. It would also provide for the National Indigenisation and Empowerment Charter that would ensure ethical business conduct. Furterhmore, as the minister emphasised, the charter would fight against overpricing and provide for the withdrawal of funds to businesses flouting price regulations. “The overall objective of these programmes is to enable black indigenous Zimbabweans to be in control of the economy," he added.
The cabinet approved the bill just before it got officially known that the country’s inflation rate had climbed to a record 3713,9% in April as food and energy costs rose. The Central Statistical Office (CSO) said that consumer prices jumped to this year-on-year level from 2200,2% in March. Month-on-month inflation increased to 100,7% last month from 50,5% in March. "This is a classic case of hyperinflation, and it shows we are going downhill. There is no visible sign that the government has the capacity to end this crisis," consultant economist John Robertson said.
Zimbabwe has now joined global case studies on hyper- inflation such as Argentina, where inflation peaked at 4923% in 1989, and Brazil which got to 2477% in 1993. The news of stratospheric inflation figures also came out as Zimbabwean central bank governor Gideon Gono suggested large-scale printing of money would continue despite the associated inflationary pressure and stern International Monetary Fund (IMF) warnings. The IMF said recently this would push inflation towards 6000% by year end. However, Gono said that he would continue printing money as he was operating under unique and difficult circumstances. Gono told MPs that central bank interventionist policy measures, which the IMF and many economists see as unorthodox, would go ahead as the state needed money to fund expenditure. "We offer no apology, we offer no remorse for our intervention in all spheres of the economy, when we do the unorthodox," Gono said. "We have to do the unorthodox, to go into those areas which traditional economics written before the Second World War see as unorthodox." Local economists say official statistics did not reflect real inflation figures as about a third of the consumer basket reflects price-controlled items and the consumption weights are outdated.
In the meantime it also got known that government would soon meet stakeholders in the textile industry to find lasting solutions on problems affecting the sector. The industry, which has been hard hit by the volatile economic climate has been lobbying for fresh incentives from the Government and the Reserve Bank of Zimbabwe and also access to more foreign currency. In an interview, the permanent secretary in the Ministry of Industry and International Trade, Retired Colonel Christian Katsande, confirmed that plans were afoot to rescue the industry. "The ministry will soon meet players in the industry so that we can get their views and try to solve them. We want to assure them that the responsible authorities in Government are aware of the challenges affecting the sector," he said. According to him, the Government was looking to inject capital in the form of low cost loans under the Distressed Companies Facility. The facility, which is administered by the Infrastructure Development Bank of Zimbabwe, seeks to rescue financially troubled companies with loans at concessionary interest rates of about 50 percent. Many firms in the sector have been reeling under production constraints in a development that has reduced capacity utilisation.
The textile industry is considered strategic to the economy as it contributes about 20 percent of the Gross Domestic Product, raking in millions of dollars in export receipts and creating thousands of jobs. However, some experts say the future of the sector would be bleak if stakeholders did not address the production crisis. (The Herald, Harare/Business Day, Johannesburg)

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