The Zimbabwean Dilemna

After an absence from writing and rather choosing to travel, l have taken time to take notes about all things economic. I asked myself why the Dollar has brought more problems for our nation than solutions. I also asked myself why industry has not turned around even with the little foreign direct investment coming into the country and also the different funds that have been setup to aid the entrepreneur. We have seen Youth Funds launched to aid the young businessman and we have seen countless mechanization initiatives being launched. Rather than debate the political nature of these projects and initiatives the gist is that somehow all these have been meant to grow our economy and see to it that we can talk about a better Zimbabwe that is hinged on a perpetual growth model. IMF reports all the way to World Bank publications do refer to Africa as the next growth frontier so it cannot be a sin to try equipping Africa for growth.

One interesting observation that l made in my travels was the issue of our road networks. According to the Zinara work has begun on US$ 206,6 million Plumtree to Mutare highway that is presently being rehabilitated by Infralink, a joint venture company between Zimbabwe National Road Administration (ZINARA) and Group Five (G5) International of South Africa has changed. However, the scope of works on the project has changed and will no longer be rehabilitation only but the new scope of work will now see the dualisation of the Bulawayo to Harare and Harare Bulawayo highway. There is a lot of importance in the success of this project which will provide an efficient transport link…

Zimbabwe is a land locked country and thus we do not have direct access to ports meaning all importers within this country pay a premium to land goods as opposed to countries with direct access to the seas. Unfortunately because landing goods through the skies is rather too expensive for a country such as ours the second and most viable option is the road network. It is open to debate but currently the cheapest mode of transport which is rail currently requires funding to become viable once again. NRZ general manager, Mike Karakadzai said the once vibrant parastatal needed about US$2 billion for its long-term rehabilitation of infrastructure. The company is facing the daunting task of improving its communication signals that are too old and need replacement. NRZ’s track system is also in disarray. At its peak in 1998, NRZ used to carry goods in excess of 18 million tonnes compared to 3,7 million tonnes carried in 2011. So this sad news it becomes more apparent why l am weighing more towards a road network being more viable for transportation of goods.

I will be quick to say that our local industry is far from being able to sustain our ever growing economy. To be quite frank and blunt Zimbabwe has become more of an import country loosely termed as a warehouse nation. With the facts at hand, l wish to write about our transport network. The quicker our government prioritizes the efficiency of our road network the quicker things may improve. A good road network will ensure better supply of both local and foreign goods. In addition this helps avoid artificial price increases due to scarcity of goods in the market. Industry has also turned to import most of its raw material as opposed to having a long supply chain of manufacturing all the way to retailing due to aging machinery and viability issues. This means our transport network becomes a backbone to industry efficiency. If government is to look at growth it has to come from strong infrastructural growth which means more roads, wider roads and smooth flowing traffic. This will ensure turn around on arrival of goods improves thus increasing turnover for our firms.

My second observation was the issue of being competitive. I have been privileged to have many informed discussions with a wide array of professionals who complain about the Chinese products that keep flooding our country and have led to the collapse of the motoring industry along with the clothing industry just to name a few. Contrary to popular belief l support the influx of these goods as the world has also followed suite. Just because the world has accepted these products does not mean to say l am happy about local industry collapsing. Rather l feel we should build our models into the Chinese system of trade. It is not even viable for us to build factories and try competing. No, rather my point is to say we should outsource some services to the Chinese. Most developed countries have outsourced industry to China and chosen to develop prototypes from their nations and ensure production is in China. The competitive advantage that China has is that is has a perpetual supply of man power and contrary to popular belief the Chinese earn less than Zimboz on a ratio scale of social classes.

Most Fortune500 firms have exported factory services to Asia and the host nations have then kept administration, advertising and distribution to their home countries. One financial report states that manufacturing in Zimbabwe may never be able to compete with the huge economies of scale that the Chinese bring to the table for certain products. However, to the extent that proximity to market is important, or where the products are uniquely Zimbabwean and require ongoing tweaking to satisfy customers, there will always be a place for local manufacturers. In addition, there is an opportunity for some existing manufacturers to focus on understanding local demand, designing appropriate products and outsourcing the manufacturing to the Chinese. These can be cheap locally branded cell phones and other electronic accessories designed specifically for the local market or anything the imagination and economic viability can conjure. So before my critics pounce on me l have presented a balanced view on the issue at hand.

My older brother in the diaspora is always keen to remind me that he earns his salary whereas us locals at home hustle our salaries. Just to decode his statement he is of the opinion that locally we are not at the production levels that would justify the salaries that we are earning. As much as most locals feel that they are being underpaid, the wage burden in the country unfortunately still cannot be supported by the levels of commerce taking place. Foreign nations pay well even from a minimum wage point of view when comparing to our country. However it is quite unfair for the work force locally to expect the same levels of remuneration with counterparts out there as we are certainly not pushing the volumes that are present elsewhere. Smaller countries than Zimbabwe are turning over more business than here and therefore it is not factual to say we are a small nation and thus can never reach high volumes. That is the reason why many firms keep retrenching, why many have gone into judicial administration as facilities from banks disappeared into the wage book instead of production and why eventually many firms have closed doors.

National pride is required to fix our nation with so much potential. One fine example l came across in my travels was that many people in South Africa are more than happy to buy original disks. This is not confined to local disks alone but even foreign. This is doing business just right which l wrote about in my earlier articles. The taxman is there to help build our schools, widen our roads, ensure we buy goods at the correct price and see to it that citizens are happy. However if we promote quasi-businesses which have no direct benefit to the economy (pirated enterprises) we are in trouble, these may include smugglers, pirates and tax evaders. We need a level of national pride that is happy to give back to the country that looks after it, a success level of commerce that is above board. Our standards need to improve locally; it is not about the Chinese or any other nations but us. If we tighten our standards the Chinese will bring better quality goods, this will allow for better competition as the playing field is leveled. A level playing field gives us a chance, but poor systems will hamper our initiatives.

I dream of a Zimbabwe where we can buy bread for the right price, where flying is affordable and not only because Air Zimbabwe just launched a promotion, where options are available when making purchases. I look forward to my banker calling me about my eligibility to access a vehicle loan and where a mortgage is available for me to purchase my dream home. We have a lot of puzzles to solve, the Zimbabwean dilemma, l choose to confront our short comings and not throw complaints irresponsibly. It is all about doing things right and right does not mean quick, growth is more like success which normally are earned!

The Investment Banker has many shapes

This article was originally published on the 11th of April 2013 in dECK Magazine www.deck-magazine.com and was written by one of our staff members Mr Banks

After a few episodes of watching the series Suits a lot of my friends wished they were Wall Street lawyers chasing big law deals and clients alike. Some of you will agree with me that one or two fictional shows have compelled an interest within you to pursue some form of organised career. I guess at certain intervals some of you have tried figuring out what it really takes to be an investment banker?

My answer would be to say, “a lot” and also “a few” ,plainly speaking. Good analytical skills and a good mathematical base are an added advantage but l would say image is everything just to add on!No one can in their right state of mind leave their hard earned dollars with a shady looking individual. Bankers are known for their selective taste for the better things in life. Tailored suits, flashy cars and of course a house in the Hamptons if one is up to speed with holiday real estate. Good selling skills are a must and this is where one has to be cultured. Cultured, meaning able to draw the attention of well to do individuals and possibly carry a conversation long enough to have them interested in hearing about whatever product you may be selling. This is a very powerful tool within the interpersonal skills realm as no investment banker ever makes it if they are not good with people.

A sad truth is many investors, stakeholders and individuals alike look to the larger markets for talent. Personally, l see that view as of no value, pretty much every graduate with a financial back ground can sweat it out in the field. Exposure is of high essence as the academic gap grows if one does not have adequate experience. Secondly as glamorous as the fields looks most of the calculations within systems have already been predetermined by actuaries and mathematical geniuses. Firms spend a considerable amount of seed capital buying algorithm systems that can process trades within the second generating small profits but however turning over a billion dollars a day and thereby increasing the rating of both the investment banker along with his firm.

Do not get me wrong, the investment banker does have a steady education, but even he or she,as an individual, does not have the muscle to do the job of the system. However, the education is there to justify the firm’s choice of path and investment. The human element is always required to run the state of affairs of any established entity, humans have not come to a point to trust machines to do everything (no conspiracy intended).

To make it in the investment banking world requires another essential ingredient. Honesty! Indeed a lot of investment bankers fell by the way side due to honesty issues around them.

In December 2008, Bernard Madoff revealed that the asset management arm of his firm, Bernard L. Madoff Investment Securities, was "just one big lie”. In what he described as a Ponzi scheme, it's estimated he took his investors for a cool $65 billion over the course of nearly two decades. And he didn't just con fat-cat billionaires and celebrities (such as Zsa Zsa Gabor, Kevin Bacon and Steven Spielberg); humbler individual investors, banks and even charities lost money in the scheme. The scheme wasn't revealed until Madoff himself confessed his crimes.

In March 2009, Madoff pled guilty to the charges against him, and he was sentenced to 150 years in prison the following June. One reason that Madoff was so successful was that he was a highly respected, well-established and esteemed financial expert -- his reputation was bolstered by the fact that he helped found the NASDAQ stock exchange and served a term as its chair. Furthermore, at the same time he was running his scheme, he was also running a legitimate business. He earned his investors' trust because whenever they requested a withdrawal, Madoff's investment company got their money to them promptly.

Unlike other Ponzi schemers, he didn't tempt investors with unbelievable returns. He reported moderate (albeit, suspiciously consistent) returns to his investor.

All is not sad within the investment profession as there are quite a number of success stories to come out of the field. Locally, Nigel Chanakira founded his financial services firm Kindgom before he hit 30. But while not vastly documented,Kingdom did face many challenges during it’s start up.

Institutional investors such as Old Mutual and the National Social Security Authority did not have the appetite to invest in his dream. But Chanakira was not the man to take no for an answer and through strategic alliances and commendable head hunting he surrounded himself with an inspired team to build what is today a financial empire known as Afrasia Kingdom.

To complement this local success, Tawanda Nyambirai, a lawyer by profession has been able to setup and grow TN Holdings Limited which is the parent company of TN Bank, TN Grill and TN Harlequin before the demerger of the group and subsequent re-listing of the units separately.

This rise, shows that even those not on the investment banker route have an opportunity to redefine their goals and possibly go the other route. Both individuals may have not been able to breakthrough to established entities but rather they braved up and took it upon themselves to establish what they have today.

In my opinion, it is very difficult to define what an investment banker is. There are many routes of specialisation that one can take. Others are in commodities, others in futures and other in speculative platforms such as even the weather. Many students grill themselves in every specialisation and often kill the passion out of their systems. This need not be the case though hard work towards an education cannot be substituted.

Locally, there is not a lot to talk about on the investment banking platform. Most banks deliver the service quietly as the masses are still not keen to join in. Another factor, is that in Zimbabwe, it is very expensive to even partake of the service as many institutions are still quite targeted. Unfortunately to add most locals are stuck on the pre dollarization interest rates which have compromised their opinion of real US dollar return.

Globally, economies believe in their systems, which is why when one bank coughs all the other may catch a cold. First world countries have systems so inter dependant that every citizen is somehow concerned about the running of investment banks as their life policies may be bench marked against them and so forth.

Referring back to my opening question of what it takes to be an investment banker, it really is true that there is a lot and a few (excuse the misplacement), that's involved when one looks at being an investment banker. Some charm their way all through to retirement in the field. Some will work their socks off to make it in the field. A contradictory conclusion indeed, but a conclusion all the same.

The Gold market at a glance

The world with all its diverse opportunities has a few avenues that determine the direction of most economies. Gold for one, in our opinion is the best hedging commodity which is being used by pension funds and now a growing appetite has risen from the major emerging markets. This is one metal that one can be able to diversify their wealth as it is a sure value keeper for investors and also its hedges against inflation and other economic shifts in the market.

This year performance on the gold market has not been attractive enough for investors who want to make quick and fast money, it has turned out to be a buy and hold product for the long-term investor. The Euro zone has been one of the most economically unstable markets and at times it has offered the motivation needed in the commodities market to push the price of gold up. The major highlight of the performance of gold was in the global financial crisis when prices of the commodity spiralled to new high levels and even after the crisis during the recovery process which is still taking place up until now. Gold once reached $2,000.00 per ounce in the market during its most bullish days. That’s the kind of motivation investors are looking for especially with how the Euro zone is looking at the moment one can just wait and see the kind of effect it might bring once the market gets out of hand. At the moment the smaller players in the Euro zone are providing tremors to the market opening up ground for a tsunami which has to be plugged before it gets out of hand like the global financial crisis. Greece took to the ground with mounting debt and with no reprieve in sight gold prices were on a significant rise up until a bailout package was unveiled to the nation with austerity measures which they were supposed to implement to curb the ballooning debt that they have. Cyprus is the latest of the countries in the Euro zone to be floored and a bailout package came to its aid as gold was showing signs of going over the slump and slumber that it was at. During the first days of the crisis it leapt from its comfort of $1,580.00 zone to the $1,600.00 zone up until the bailout package came to the rescue of the stock markets and investors had to dump gold and go back to the stocks. The policy to not let cash leave Cyprus for now has sent some jitters to the markets as there are possible leakages which might expose the country but as of now all seems to be in order with markets still gaining and the gold commodity falling to $1,567.00 per ounce.

Solutions have been tabled to help struggling countries but the rescue plans also have come at a cost which will also lead to a crisis because countries are now more and more into debt and their credit ratings have been on a downward spiral which is not good for the global economy as more and more types of risks are being attached to the markets. At the moment the smaller countries in Europe are the ones tumbling with suggestions that Ireland might be next in line and so this might mean the bigger economies will be shaking as these effects are more connected and they shift from one small country to the bigger ones, it happened in the global meltdown and what can prevent it from happening again with Europe being the player to watch. Austerity measures have had a huge effect on most economies receiving them and the more they are implemented in countries without other credible solutions than the austerity measures, economies will crack and this is the motivation that gold prices are waiting for. Unemployment is on the rise on a global scale with Europe’s rate rising at an alarming rate. Also growth for Europe this year has been pegged at zero percent and this might mean that it can also go down to a negative territory. Italy also has struggled mainly due to its politics which is now more of a game than business as at the moment there is  an impasse on the formation of the government. Asia also which has the fastest rising economies in the world is not much interested in investing in Europe due to the conditions that apply there as they claim that the economy is run by the Americans, Germany and Britain whereas it needs its space to do business at its will just like what it’s doing in Africa.

With all these factors gold is still the best hedge commodity against the risk that the economies now bear which will negatively affect the stock market and lead the world to a another crisis. Gold prices might be on a rise in the second half of the year as at the moment the stocks are the current money-makers but after the 2nd half we might be singing a different tune. Also with uncertainty in most economies gold is a good buy for the long-term investors as gains might not be seen now but in time it will shine bright. In time all that glitters will be Gold.

AN ARROGANT OPINION

Forget about the modern or medieval meaning, there is only one word which defines a bank!  What is a bank?  Bank simply means trust.

Can we trust in our banking systems? Are banks still banks?

Looking at the modern trend of financial intermediation it is a startling reality that banks are no longer symbols of trust but mechanisms of frauds, poor governance, regulation sidestepping and insider trading. This has given an impetus to the new banking revolution which is antagonistic to the values of trust.

Call it the heartbeat of the world financial systems, the Canary Wharf hosts some of the greatest financial scandals which have led analyst to question some of the banking practises prevailing in this generation. The LIBOR rigging scandal which was unearthed in 2012 shows that we can and must never again trust in banks or rather bank in banks. The LIBOR ties up almost all the financial systems in the world but a small quartet managed to manipulate it. These are the same people we entrust our investment and deposits with but can they be trusted any further. Fines were tagged to the offence but already the trust is gone and banks have overridden their purpose. Only now the regulatory authorities have seen the importance of coming up with proper conditions with regards to bank rates. http://www.reuters.com/article/2013/03/18/us-bis-libor-reform-idUSBRE92H06G20130318

Canary Wharf- LIBOR rigging was manufactured and perfected here  




In Zimbabwe people have been forced to use pillows and mattresses as bank accounts because of their trust which was abused in 2004 and repeated again in 2012. It is a ridicule to encourage Zimbabweans to place their money in the proper financial system because they have seen it all. Companies and individuals lost their funds as banks were placed under curatorship by the Reserve Bank. The systemic effect led to a near collapse of the banking sector and liquidity challenges were felt. In 2012, three Zimbabwean banks Genesis, Renaissance and Interfin were closed down leading to a situation where the depositor and the investor had to lose everything.

Investigations to the core of these closures point bad corporate governance, abuse of depositor funds and failure to meet regulatory requirements as the main causes. Shareholder influence was the main culprit to this predicament. Seriously a shareholder playing dirty with my money!!!!!!!!!!!

At first the banker is entrusted with depositor and investor funds but only repays through abuse. Should we then trust in banks when they abuse that same trust?

The Deutshe Bank has been rocked by a lot of fraud cases which has left Europe contemplating on how best to deal with bankers. This is just a tip to how modern banking is structured.

Corporate governance in banks is an issue which needs serious attention if we are to curb the ever growing unorthodox means of banking practises. Zimbabwe is one of the countries where lack of corporate governance has manifested some the amateurish ways of banking. The fact that one single shareholder at Renaissance Merchant Bank had the audacity to abuse depositor funds may just point to the fact that a lot may be going on behind the Boardrooms.

When a bank defies the state how best can it promise trust to the consumer. Standard Chartered paid heavy fines (327 million dollars)to the US regulators after making transactions with countries which were on the US sanction list. In clear act of defiance these transactions were wired through the United States.

That points to the fact that banks are only driven by the motivation to make profits and there is no concern as to how these profits come about.

What trust then should we place in banks?

Consumers are forced to trust because banks are not conventional robbers but rather intelligent ones where various dynamics are employed to abuse any single dollar in the name of profit maximisation.

Whenever consumers transact with banks the element of trust is now a thing of the past. Trust has been substituted with risk. Consumers risk their funds because they scepticism has taught them that tomorrow might report that a certain bank is closed.

Even the so called, ‘too big to fail’, banks in the United States and Europe are revelation to the fact that banks can never be trusted anymore. No one ever thought that a one hundred and fifty year old Lehman Brothers would ever come to its knees. In September 2007 clients besieged Northern Rock which was one of the biggest forces in Europe after getting the news that the bank was going under. Even when bank employees practise beyond their mandates it clearly shows that there is a lot of underhand dealings going on in our banking systems. Kweku Adoboli, a trader at UBS Bank single handedly exposed the bank to 12 billion pounds when his unit was only authorised to risk 100 million pounds. This shows the nature of human capital which is the driving force behind banks.

                                                     Kweku Adoboli

Can we trust the banks? Should we let banking hegemony prevail? Is banking the euphemism of robbery? All these questions need urgent attention if we are to see viable financial systems which bridge the surplus and deficit units.