September 3, 2007

Zimbabwe in currency devaluation / H.J. Heinz oil firm stake overtaken by government

Zimbabwe has devalued its currency as part of its battle to tackle its deepening economic crisis. One US dollar now buys 30.000 Zimbabwe dollars on the official market, having previously earned 250 Zimbabwe dollars. However dealers said that on the illegal market, $1 was buying 250.000 of the Zimbabwean currency.
Latest figures put Zimbabwe's annual inflation at 7,634%. The International Monetary Fund (IMF) has warned it could reach 100.000% by the end of 2007. Finance minister Samuel Mumbengegwi unveiled the devaluation in a budget announcement. Other reforms included waiving taxes on some lower earners and increasing stamp and excise duties. The devaluation announcement was described as a "move in the right direction" by former head of the National Chamber of Commerce, Luxon Zembe. However he said that the gap between the official rate and the market rate needed to be narrowed.
In the meantime, government has taken over U.S food giant H.J Heinz's 49 percent stake in the African nation's leading cooking oil maker for $6.8 million and handed its management to a firm with ties to the state. Agro-processing company Cotton Company of Zimbabwe (Cottco), which was a state enterprise until its privatization in 1997, announced it had bought H.J Heinz's stake in Olivine Industries in a deal facilitated by a government-owned investment company. This is the first major deal involving the takeover of a firm following President Robert Mugabe's vow to give Zimbabweans greater control over foreign-owned assets. Mugabe's government has accused some businesses of halting production in a plot to undermine the inflation-ravaged economy. Zimbabwe's parliament is considering enacting a law that seeks to transfer majority ownership of businesses - including foreign-owned banks and mines - to locals. (Rts)

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