Banking sector safe: Gono
Friday, 20 January 2012 00:00
Golden Sibanda Senior Business Reporter
RESERVE Bank of Zimbabwe Governor Dr Gideon Gono has given assurances that the domestic financial sector is safe and sound despite facing numerous financial and economic challenges. Dr Gono made the remarks at the Confederation of Zimbabwe Industries economic seminar in Harare yesterday, pointing out that severe liquidity challenges were fertile ground for financial sector instability.
The central bank governor assured the nation that the sector was safe and sound with 96 percent in deposits, assets and market share reportedly in the hands of the strongest banks with troubled banks holding the balance.
"As of December 31, 2011 the strongest banks held 96 percent of the market share. They had 97,3 percent share of assets and 96,1 percent share of loans while troubled banks held 4,1 percent share of assets, 2,6 percent market of deposits and 3,84 percent loans. It is about values and not about the numbers," said Dr Gono.
"They (troubled banks) may not be systemically important when we do the evaluation. Looking at the current state of affairs, the sector is generally safe and sound inspite of a lot of constraints the sector is facing," he said.
But Dr Gono emphasised that the current situation was precarious in that neither the central bank nor Treasury had financial capacity to intervene in the event of a major liquidity crisis.
The central bank requires more than US$150 million to effectively perform its lender of last resort function and participate in financial intermediation by determining accommodation rates to influence interest rates.
An unnamed foreign financial institution has pledged more than US$100 million to Zimbabwe for purposes of reviving the apex bank's lender of last resort function and Dr Gono said this should be pursued without delay.
To alleviate liquidity constraints he proposed introduction of Government paper such as Treasury bills to unlock funds currently circulating outside the formal banking system and securitising the country's resources. The securitisation would entail setting structures to derive value out of assets such as minerals and housing stock.
[Not that I care about 'GDP growth', but Tony Hawkins is usually wrong, although he likes to claim he is right after the fact. - MrK]
Speaking at the same occasion, economist Professor Tony Hawkins dismissed Finance Minister Tendai Biti's economic growth projections for the current year, contained in his 2012 National Budget statement.
Professor Hawkins said the economy was highly likely to lose its growth momentum and expand, at most, by 5 percent while gross domestic product and inflation would increase by 7 percent and 9,3 percent respectively.
But in his Budget statement Minister Biti said the economy would expand by 9,4 percent driven by improved performance and agriculture and mining while inflation would close the year around 5 percent.
Government's move to protect fragile industries is seen pushing up prices and consequently putting pressure on inflation.
"I think they should have been smoking something when they made these projections," said Prof Hawkins.
The University of Zimbabwe professor of economics based his forecast on the fact that Zimbabwe was presently reliant on resource driven growth, which was likely to suffer as global mineral prices look set to take a dive.
He also pointed out that there was likelihood of reduced output from the agriculture sector this season in respect of major crops namely maize, tobacco, cotton and soya due to factors associated with weather and key inputs.
Output from the manufacturing sector is also seen at reduced levels due to expected increased competition from cheaper imports from South Africa with the rand seen losing ground against the US dollar.
Labels: CONFEDERATION OF ZIMBABWE INDUSTRIES, GIDEON GONO, RBZ, TENDAI BITI, TONY HAWKINS
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COMMENT - More neoliberal loonacy. Higher incomes are they key to economic growth. Business may like tax breaks, but they need customers. " A lower income tax structure can act as an effective economic growth stimulant for Zimbabwe as it drives up consumption demand in the economy according to analysts. " Well those analysts are wrong. Zimbabwe needs state spending, from taxes gained from it's raw materials. Giving tax breaks to the mining companies contributes nothing, in fact it takes money away from government, and is possibly put into foreign corporate bank accounts as well. The really short point of this article: big business wants to pay less money in taxes. The problem is - that comes at the cost of the development of the country, through reduced money for social services and infrastructure creation by government.
‘Lower taxes key to economic growth’
By Tawanda Musarurwa
A lower income tax structure can act as an effective economic growth stimulant for Zimbabwe as it drives up consumption demand in the economy
according to analysts. Data compiled by the
Confederation of Zimbabwe Industries, capacity utilisation levels in the majority of the country’s manufacturers has improved to between 40 to 50 percent, a minimal improvement as a result of the prevailing market illiquidity and lack of credit.
According to Chamber of Mines economic policy and investments manager Mr Joseph Mverecha, the low aggregate demand, low capacity utilisation and low wage equilibrium prevailing in the economy require stimulation at least by way of lower income tax.
"The multi-currency system prevailing precludes any monetary policy stimuli; hence only fiscal stimulus is presently deterministic. That stimulus implies the need for lower taxes to kick-start consumption demand in the economy.
[Translation, having multiple currencies doesn't allow them to tinker through low interest rates, so all we can do is lower taxes. Typical monotarist economic garbage. Raise people's incomes through works programs, building infrastructure, etc. Stimulate the economy by raising the demand for locally produced goods and services, and you'll also put a dent into unemployment. And if lack of credit is the problem - 1) Get economic sanctions lifted and 2) Reduce bank lending rates down from the 20 plus percent to something closer to the rate of inflation, which is under 10 percent. - MrK]
"Lower taxes imply higher disposable incomes and higher domestic demand, output and employment; they enhance business re-investment through retained earnings, particularly key for an economy facing constrained access to international credit lines, as well as improve the country’s competitiveness as the taxation regime is a critical determinant of investment.
[Lower taxes do not 'imply' higher disposable demand. Too few people are being taxed, therefore even the short term effect is going to be minimal. But the starving of the state of capital is much more serious. If they want to raise incomes - introduce a living wage; have every Zimbabwean citizen be a member of a union. - MrK]
"In addition, lower taxes imply a lower alternative cost of capital as enhanced cash flow confers critical leverage in debt financing negotiations," he said.
In the 2011 National Budget statement, Finance Minister Tendai Biti increased the tax-free threshold for individual rates of tax to a minimum of US$225.
This was something of a midrate proposed by CZI of US$175 and US$300 by the Zimbabwe National Chamber of Commerce prior to the announcement of the Budget.
Any lowering of the income tax band, however, is essentially dependent on the enhancement of Zimbabwe’s broader tax system, which is said to consist of structural inefficiencies as well as a multiplicity of concessions and exemptions that are prejudicing the economy of critical sources of revenue.
The Government is currently seeking to improve revenue contribution to the country’s Gross Domestic Product by plugging gaps via reviewing mining taxation and introduction of the Fiscalised Electronic Registers among other measures.
However, there has not been much discussion at Governmental level on the implementation of the residence basis of taxation, an International Monetary Fund proposition as part of its 2009 technical assistance programme to the inclusive Government.
In terms of this proposed income tax system, any person who is considered to be a Zimbabwean resident will be taxed on their worldwide income regardless of its source. Simultaneously, non-residents will be taxed on their Zimbabwean source income.
The residence basis of taxation has the advantage of broadening the tax base through capturing revenue generated worldwide by resident individuals and corporations.
Fiscal space is currently squeezed, and there has been a general call for the authorities to strengthening economy-wide taxation systems.
Mr Mverecha, however, contends that any reform of the corporate tax system should take account of sector-unique business conditions.
"The mining industry, for instance, is inherently capital intensive and taxation should ideally incorporate recapitalisation requirements, in particular as the industry has not recapitalise to any significant degree over the past decade.
"Taxation should be forward looking and proactive implying that authorities should be ready to give up a dollar today if that will give rise to a five dollar revenue inflow over the medium term.
"This is the principle underpinning investment and the call for an improved investment environment and improved doing business conditions in Zimbabwe.
"A growing economy is the clearest guarantee for increased revenue flows, and economies grow only in response to investment," he said.
Among other broader taxation strengthening measures, the Government is currently in the process of reforming the country’s income tax law, and according to indications from the Ministry of Finance, a draft Income Tax Bill will be presented to Parliament in the second half of 2011.
Labels: CONFEDERATION OF ZIMBABWE INDUSTRIES, NEOLIBERALISM, TAXATION
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CZI calls for lifting of sanctions
By: Our reporter
Posted: Thursday, July 29, 2010 10:15 pm
THE Confederation of Zimbabwe Industries (CZI) has called upon global businesses to join government in a collective call to remove illegal and ruinous sanctions imposed on the country by the United States, Britain and their allies in the West.
CZI president Joseph Kanyekanye said
the sanctions were innappropriate and could not advance democracy, as claimed by the imposing countries. Kanyekanye called for the government to re-engage with the European Union and to seek funding outside of Zimbabwe urgently in order to revive industry.
"In all CZI meetings we had with foreign ministers, ambassadors and multilateral institutions, we emphasised the need to separate politics from industry and other national issues," he said.
He praised Rio Tinto and its partners for investing in a 2,400-megawatt power station at the Sengwa coal fields and commended the government's drive to ensure that Zimbabwe benefited from the diamonds at Chiadzwa in Marange district.
The call comes as the EU is mulling removing their illegal sanctions on an individual by individual basis.
The bloc wants individuals who are on their sanctions list to make representations explaining why they should not be on that list.
The Zanu-PF party of President Mugabe has dismissed this new EU strategy as "ridiculous" saying the sanctions were imposed in a blanket way and should therefore be removed in the same manner.
Labels: CONFEDERATION OF ZIMBABWE INDUSTRIES, JOSEPH KANYEKANYE, SANCTIONS, ZDERA
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Biti attacks NGOs, NCA
TZG/MP reporters
Wed, 19 Aug 2009 07:19:00 +0000
THE
crisis in Zimbabwe has become
big industry for Non-Governmental Organisations, with some unscrupulous
NGOs fighting to derail the Constitution-making process, a the minister of finance said last week.
Tendai Biti, made this revelation during a breakfast business meeting in Mutare last week, adding that the Constitution-making process was not a private matter for NGOs. The breakfast was organised by the Confederation of Zimbabwe Industries in conjunction with Manicaland Publicity Association. Biti said this amid reports that
more than 2,500 NGOs are operating in Zimbabwe.
"The Constitution-making process is not a private matter for NGOs. It seems our crisis is a big industry for some NGOs," he said.
The National Constitution Assembly chairman, Dr Lovemore Madhuku, recently took a swipe at the MDC-T for allegedly differing with the NGOs on the Constitution-making process.
"We might have fought together, but that is not a licence to write a Constitution," Dr Madhuku recently said.
However, in a subtle, but apparent broadside to the National Constitution Assembly, Biti said: "If your organisation is 'constitution' something, then you are in trouble if the country has a new Constitution, if your organisation is 'crisis' something, then there is no business if there is no crisis in the country," he said.
Biti, who is also the secretary-general of the MDC-T, said the Constitution-making process was not a preserve for the Parliament, neither was it for the executive.
"Parliament or the executive don't make constitutions. We need a buy-in from the people of Zimbabwe; it is the people of Zimbabwe who write a Constitution," he said.
Biti, however, urged Zimbabweans to take part in the Constitution-making process, adding that it was a once in a lifetime opportunity, which should not be wasted.
"It is almost 10 years since we last tried to write our own Constitution and it might take us another 10 years if we lose this opportunity. We cannot afford to lose this opportunity," he said.
He said it was a healthy situation for Zimbabweans to be suspicious of the Government in Constitution-making process, as that would create a healthy debate in the process.
TZG/MP
Labels: CONFEDERATION OF ZIMBABWE INDUSTRIES, LOVEMORE MADHUKU, NEOCOLONIALISM, NGOs, TENDAI BITI
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