News Update as @ 1530 hours, Friday 9 January 2015

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Government intervenes in fuel sector . . . just falls short of price controls

By Funny Hudzerema

Zimbabwe fuel prices should be signif-icantly lower than they currently are even when costs are added, the Minis-try of Energy and Power Development said today.

According to calculations by the Minis-try, pump prices for diesel and petrol locally should be $1,20 per litre and $1,32 per litre, respectively.

Currently fuel prices at local service stations are averaging $1,52 per litre for petrol and $1,38 per litre for diesel. And there has been an outcry from the motoring public over the non-reduction in local fuel prices despite a dip in Brent crude oil prices on the international market.

Said Minister of Energy and Power

Development Samuel Udenge this afternoon:

"Our own fuel prices have not gone down that much in tandem with crude oil prices but should however go down to levels that reflect crude oil prices having factored in all costs relevant to obtaining the refined products we

buy...Maximum pump prices allowable based on the pricing formula are - for June 2014 $1,56 per litre for diesel and $1,64 per litre for petrol. Using end of December 2014 prices results in prices of $1,20 for diesel and 41,32 for petrol per litre," he said.

Currently, pump prices are higher than those obtained using the December 2014 Fee-on-board (FOB) prices as companies claim that thay are dispos-ing of old stocks bought much earlier.

Minister Udenge said in order to protect the consumer and the supplier, his min-istry was ordering local service stations to ensure that pump prices lag behind by two weeks to that of FOB prices.

"Based on a number of factors includ-ing the imports throughput and con-

sumption figures, it would be fair to have price movement at the pump price lagging behind by two weeks to that of FOB prices. This should apply both ways, that is when prices go down and when prices go up. This mecha-nism will protect both the consumer and the supplier," he said.

"I am hoping to get co-operation from all players. As a Governemnt, the last thing we want to do would be to go back to price controls. We believe this is not necessary at the moment even though some countries in the region actually have price controls for fuels."

In 2014 the FOB prices at Beira were at $0, 88 per litre for diesel and $0,86 per litre for petrol and they have gone down to $0,57and $0,52 per litre respectively as at end of December 2014.

2 News

Botswana looking to enhance business ties with Zimbabwe

By Rumbidzayi Zinyuke

Botswana is looking to strengthen eco-nomic relations with Zimbabwe this year and has promised to bring poten-tial investors to participate in the Zim-babwe International Trade Fair (ZITF) to be held in April.

In an interview, Botswana’s ambassa-dor to Zimbabwe Kenny Kapinga said business relations between the two countries were normal but there was need to enhance economic ties that it could benefit both countries.

He said their objective this year was to bring a sizeable delegation to this year’s ZITF to increase business oppor-tunities for interested companies and individuals back home.

“The relationship between us (Bot-

swana) and Zimbabwe is good, it is normal. But it needs to be taken to a higher level. There are business peo-ple in Botswana that are interested in investing in Zimbabwe and I am work-ing on that so that by the next ZITF we bring a sizeable delegation of business people to ZITF to come and meet their counterparts here. That’s our objective for this year,” he said.

Botswana has not had smooth busi-ness relationship with Zimbabwe opt-ing out of two of the most high-profile events hosted by Zimbabwe last year.

More than 30 international buyers pulled out of the Sanganai/Hlanganani world tourism fair including Botswana which pulled out of the Expo amidst claims that the country is an Ebola hazard.

Zimbabwe Tourism Authority chief executive last year was quoted saying: “Our buyers from Botswana have with-drawn including the Botswana Tourism Board which has never missed any edi-tion of Sanganai.

It is because of these Ebola issues, they said they are withdrawing because they read an article saying Zimba-bwe is not serious about these Ebola issues,” he said

Ambassador Kapinga however refuted allegations that Botswana withdrew from the Sanganai/Hlanganani World Tourism Expo and the Zimbabwe Dia-mond Conference due to frosty rela-tions.

He said Botswana Tourism Organisa-tion already had prior engagements

with Germany and could not make it to Sanganai.

“There was no withdrawal, the Bot-swana Tourism Organisation has an annual schedule and every year, they allocate countries that they are focus-ing on in a particular year.

So last year unfortunately we were focusing on a country where we had a newly established mission, which is Germany. I can assure you that this year we will be there at Sanganai,” he added.

Botswana’s absence from the Zimba-bwe Diamond Mining Conference held in November last year was also con-spicuous casting a dark cloud on the indaba, considering that it is the world's largest diamond producer. •

But local pump prices have not reflected such a decline.

The minister said fuel dealers have been given a grace period of 14 weeks to finish their last stocks if any fuel priced before changing prices.

Brent crude oil prices have been vol-

atile since the Organisation of Petro-leum Exporting Countries (OPEC) heightened its policy of testing rival producers’ tolerance for lower prices during the second half of last year and in November, the body sought to out-price the US domestic shale production meeting by announcing plans not to reduce its output.

Meanwhile, Minister Udenge said the charges in fuel prices will affect imported fuels only not the local pro-duced due to the reduced supply of ethanol as result of heavy rains.

“The ethanol plant in Chiredzi has closed due to heavy rains and the sup-ply has been affect and this will not

allow E10 to be reduced in price but to cater for that government is looking for alternatives to create backups to avoid such problems,” he said.

Currently the country has a total of 30 registered fuel importers and 500 ser-vice stations which are in operation. •

By Tawanda Musarurwa

Zimbabwe's current trade imbalance may be attributed to trade mis-invoic-ing, which has prejudiced the country of $2,6 billion through illicit financial outflows between 2003 and 2012, a new report shows.

According to latest statistics from the Zimbabwe National Statistical Agency (ZimStats), Zimbabwe's trade deficit stood at $3 billion between January and November last year, which has been largely attributed to the economy's sustained overreliance on imports.

However, a new Global Financial Integ-rity (GFI) - a non-profit, research and advocacy organisation - study entitled Illicit Financial Flows from Develop-ing Countries: 2003-2012 shows that there are deeper issues to the trade imbalance than simply an over-reliance on imports as the country has been los-ing billons through import and export mis-invoicing.

GFI defines 'illicit financial outflow' as the gross amount of money or capital exiting a country illegally.

The report shows that between 2003 and 2012 Zimbabwe experienced import over-invoicing to the tune of $1,2 billion, while import under-invoic-ing stood at $1,5 billion.

During the same period, export over-invoicing stood at $7,5 billion, while export under-invoicing stood at $1,4 billion.

Total trade mis-invoicing outflows stood at $2,6 billion.

Economic analyst Ronald Chizenga says there is need for the Government to strengthen control systems at the country's borders.

"The huge figures involved could be pointing to limited capacity at the bor-ders in terms of customs officers who are able to detect intentional mis-in-voicing of our import and exports transactions. Hence more training in that respect would be required," he said.

The GFI report shows that Zimbabwe has on average been losing $267 mil-lion per each during the 10-year period under review. But in four of the 10

years, the country recorded nil illicit financial flows.

In 2003 the country recorded no illicit financial flows, which was replicated in 2008, 2011 and 2012.

The year 2004 saw Zimbabwe record-ing $306 million in illicit financial flows (both inflows and outflows), which increased to $354 million in 2005, and further to $1,7 billion in 2006, before

declining to $97 million in 2007.

In 2009, illicit financial flows stood at $111 million, which declined to $14 million in 2010.

Illicit financial outflows may have con-tributed to the present liquidity chal-lenges which are revealed in the lack of and high cost of capital and revenue underperformance. •

Zimbabwe loses $2,6 billion in trade mis-invoicing

3 News

BH24 Reporter

China has remained Zimbabwe’s larg-est flue-cured tobacco export mar-ket as latest figures from the Tobacco Industry Marketing Board show that the Asian country has received 48 mil-lion kgs of the golden leaf worth $402 million as at December 2014.

The tobacco was sold at an average price of $8,37 per kg.

This however is less than the 60,4 mil-lion kgs worth $475,6 million at $7,88 per kg exported to the same destina-tion last year.

According to TIMB, Belgium was the second biggest destination for the country’s tobacco taking up 29,74 mil-lion kgs worth $131,5 million at $4,42 up from 27,5 million kgs worth $137,4 million exported in 2013 at $5.

South Africa is still the biggest market in Africa taking up 13 million kgs of tobacco worth $52,1 million at $4,01 per kg in the period under review. In 2013, Zimbabwe exported 17,3 million kgs of tobacco worth $59 million at $3,40 per kg to South Africa.

Other top importers of the Zimba-

bwean golden leaf include United Arab Emirates which took over fourth spot from Sudan, taking up 9,2 million kgs worth $29,1 million at $3,16 up from 5,6 million kgs worth $15 million in 2013 at $2,68 per kg.

Russia also received 4,8 million kgs of tobacco worth $14,3 million by Decem-ber 2014 up from 3,4 million kgs worth $9,3 million during the same period in 2013.

Total exports for the year amounted to 135,5 million kgs worth $772,5 million sold at $4,57 per kg.

To date, about 88 167 growers have registered for 2015 season as com-pared to about 86 006 who had regis-tered by the same period last year.

Of this figure, 40 869 are communal farmers while 32 236 are A1 farmers. A2 and small scale communal farmers have 7 839 and 6 908 registered farm-ers respectively.

TIMB said a total of 16 400 new farm-ers had been recorded by January 2 2015 with 10 049 being communal farmers and 5 283 being A1 farmers.

Mashonaland West has the highest number of new growers at 5 798 fol-lowed by Mashonaland Central with 4 565 growers.

Mashonaland east has 2 910 new growers while Manicaland has 2 754, midlands 201, Masvingo 165 and Matabeleland has 7 new growers. •

3 News

China remains biggest market for Zim tobacco

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BH24

66 BH24

BH24

With the banking sector continuing to see banks closing due to liquidity chal-lenges, there is need for the Deposit Protection Corporation (DPC) to be more efficient.

And that entails that the Government should re-capitalise the Corporation in order to protect depositors when vul-nerable banks shut down.

This comes as Allied Bank yesterday surrendered its licence to the Reserve Bank of Zimbabwe after it failed to raise the minimum capital prescribed by the banking regulator.

The major concern now is for Allied Bank's depositors who have their mon-ies still trapped in the bank, especially at this time when people need their monies for school fees payment and other bills.

We have heard reports of some civil servants who have their recent bonuses trapped in the bank. And we don't anticipate that these individuals will get refunded anytime soon by the DPC.

The Deposit Protection Fund’s primary

function is to compensate depositors in full or in part for losses incurred in the event of insolvency of a contributory institution. It was created as a govern-ment policy in response to a growing need to moderate instability in the banking sector, as well as to protect the public against the worst consequences of bank failure.

In August last year DPC chief executive officer John Chikura expressed concern over the poor funding of the Corpora-tion, revealing that the it had about $12 million in its coffers.

This is clearly a figure insufficient to meet the needs of depositors in the event of bank closures, consider-ing that the list of weak banks were exposed to the tune of at least $50 mil-lion at the time.

And to make it worse, some ailing banks were not making contributions to the fund, throwing the DPC into fur-ther challenges.

Two weeks ago, the central bank applied to the high court for the liqui-dation of Interfin Bank Limited after it failed to find a potential investor while

it was under curatorship.

In 2013 the RBZ withdrew Trust Bank's licence, while In June last year Capital Bank also shut shop in 2014.

At present the DPC cannot cope with the these bank closures, considering that the Deposit Protection Fund has not been significantly funded.

But effective capitalisation of the DPC

will ensure that the corporation will be able to adequately cover depositors. It could also help to increase the cover-age limit from the current $500.

We are however not sure that the much-needed re-capitalisation of the corporation will come in time for the depositors of defunct financial institu-tions such as Allied Bank and Interfin Bank. •

8 BH24 COMMENT

Deposit Protection Corporation needs re-capitalisation

The equities market today further extended yesterday's gains, with the industrial index closing higher at 162.70 points after putting on 1.69 points (or 1.05 percent).

The gains were driven by positive trades in several heavyweight coun-ters.

Giant beverages producer Delta added a further 2 cents to trade at 106 cents, while OK Zimbabwe added a cent to 11 cents.

Another heavyweight Innscor was up 0.50 cents to 55.50 cents. Truworths gained 0.31 cents while Barclays and Powerspeed increased by 0.20 cents each to close at 2.70 cents and 1.80 cents respectively.

On the downside, Turnall was the only

loser, dropping 0.35 cents to a cent.

On a week-on-week basis, the indus-trial index moved up 0.13 points (or 0.08 percent).

The Mining index lost 2.70 points (or 4.07 percent) to close at 63.61 points after Bindura was offered lower

at 5.50 cents. Falgold, Hwange and RioZim were unchanged at 3 cents, 4.80 cents and 15 cents respectively.

Week-on-week, the mining index lost 9.00 points (or 12.39 percent)― BH24 Reporter •

9 ZSE REVIEW

Equities maintain positive momentum on widespread gains

REGIONAL NEWS 10

Kenya's Centum Investment Company said it had agreed to sell its 13.75 per-cent stake in regional insurance firm UAP Holdings to Anglo-South African financial services company Old Mutual.

The acquisition by Old Mutual is in line with its aim to expand in Sub-Saharan Africa, where it has spent 700 million rand ($60 million) of a 5 billion rand pro-gramme to acquire businesses, focusing on Ghana, Kenya and Nigeria.

Centum has investments in both listed and private firms and is diversifying into Kenya's fast-growing property sector,

while Kenyan-headquartered UAP Hold-ings is also present in Uganda, South Sudan, Rwanda and the Democratic

Republic of Congo.

Centum also said in its statement late on Thursday that Chris Kirubi, one of its directors and shareholder, had sep-arately agreed to sell another 9.58 per-cent stake in UAP to Old Mutual.

No financial details were disclosed for either stake sale.

Centum's shares were up 0.8 percent at 63.00 shillings on the Nairobi Securities Exchange at 0643 GMT. - Reuters •

Kenya's Centum says to sell insurance firm stake to Old Mutual

South Africa's rand, bonds firmer ahead of U.S. jobs dataSouth Africa's rand strengthened against the dollar early on Friday, while bond yields continued to fall as some investors pushed back the timing of an interest rate hike in the United States.

By 0618, the rand had firmed 0.03 per-cent to 11.5765 per dollar, shrugging off a dent in business confidence to move within range of its firmest level in 2015.

On Thursday, a local measure of busi-ness confidence slumped to its worst in

five months, driven lower by concerns over electricity shortages and a recur-rence of labour tensions.

The local unit, however, managed to shrug-off negative sentiment, taking advantage of an expected correction in the high-flying greenback to put gains this week past 1 percent.

Local bonds continued to firm up, with the yield on the benchmark govern-ment paper due in 2026 shedding 1

basis point to a fresh five-week low of 7.605 percent.

While global oil prices halted their recent slide, the cheaper price of crude could slow inflation in the United States and see interest rates there raised later than the predicted mid-2015 point.

"The relief rebound (in emerging mar-kets) has been linked to comments from Fed member Kocherlakota that the U.S. Fed should not hike rates this

year," ETM Analytics said in a morning note to clients.

The local currency does, however, face risks to its recent gains ahead of Friday's U.S. jobs report.

The data is expected to show that non-farm payrolls increased by 240,000 in December, which would mark the 11th consecutive month of job gains above 200,000, fuelling bets of an early rate hike. - Reuters •

11 DIARY OF EVENTS

The black arrow indicate level of load shedding across the country.

POWER GENERATION STATS

Gen Station

9 January 15

Energy

(Megawatts)

Hwange 442 MW

Kariba 614 MW

Harare 30 MW

Munyati 25MW

Bulawayo 22 MW

Imports 0 MW

Total 1 133 MW

12 January 2015 - CBZ Extraordinary General Meeting; Place: CBZ Wealth Management Centre, Pomona;

Time: 08:30am

THE BH24 DIARY

12 ZSE

ZSEMOVERS CHANGE TODAY PRICE USC SHAKERS CHANGE TODAY PRICE USC

TRUWORTHS 62.00 0.81 TURNALL -25.92 1.00

ARISTON 16.66 0.70

POWERSPEED 12.50 1.80

OK ZIMBABWE 10.00 11.00

BARCLAyS 8.00 2.70

DELTA 1.92 106.00

INNSCOR 0.90 55.50

IndicesINDEx PREVIOUS TODAY MOVE CHANGE

INDUSTRIAL 161.01 162.70 +1.69 POINTS +1.05%

MINING 66.31 63.61 -2.70 POINTS -4.07%

Stocks Exchange

13 AFRICA STOCKS

Botswana 8,664.65 -11.96 -0.14% 12July

Cote dIvoire 256.50 -1.58 -0.61% 02Jan

Egypt 8,942.65 +16.07 +0.18% 04Jan

Ghana 2,287.32 +26.30 +1.16% 02Jan

Kenya 5,117.43 +4.78 +0.09% 02Jan

Malawi 14,886.12 +0.00 +0.00% 02Jan

Mauritius 6,795.35 +24.31 +0.36% 31Dec

Morocco 9,643.19 +23.08 +0.24% 02Jan

Nigeria 34,657.15 -27.17 -0.08% 31Dec

Rwanda 143.39 +0.20 +0.14% 02Oct

Tanzania 2,602.19 -30.74 -1.17% 28Oct

Tunisia 4,624.39 -39.32 -0.84% 07Mar

Uganda 1,942.77 -12.69 -0.65% 10Dec

Zambia 6,160.66 +12.17 +0.20% 31Dec

Zimbabwe 162.57 -0.22 -0.14% 02Jan

African stock round up Commodity Prices

Name Price

Crude Oil 1,300.91 -0.21%

Spot Gold USD/oz 1,292.63 -0.26%

Spot Silver USD/oz 19.38 -0.46%

Spot Platinum USD/oz 1,421.25 -0.33%

Spot Palladium USD/oz 798.50 -0.64%

LME Copper USD/t 6,770 -0.18%

LME Aluminium USD/t 1,780 -1.17%

LME Nickel USD/t 18,230 -1.73%

LME Lead USD/t 2,095 -1.41%

Quote of the day — "NEv-Er, NEvEr, NEvEr, NEv-Er gIvE up." - Winston ChurChill Globalshareholder.com

14 INTERNATIONAL NEWS

Oil extended its rally amid speculation that the U.S. shale boom is slowing and will reduce a global glut that’s driven prices to the lowest in 5 1/2 years.

Futures rose as much as 1.7 percent in New york, trimming a seventh weekly decline. U.S. producers are bailing out of long-term contracts for drilling rigs as prices slide below $50 a barrel. The United Arab Emirates has no plans to reduce output no matter how low prices drop, according to yousef Al Otaiba, the nation’s ambassador to the U.S.

Oil is trading near the lowest levels since April 2009 amid concern a global supply surplus estimated by Qatar at 2 million barrels a day will persist this year. The Organization of Petroleum Exporting Countries is battling a U.S. shale boom by resisting production cuts, signaling it’s prepared to let prices fall to a level that slows the highest American output in more than three decades.

“Some U.S. producers may need to reconsider their investments because oil prices have now halved,” Ken Hasegawa, an energy trading man-ager at Newedge Group in Tokyo, said by phone today. “But it’s unclear if the declines are over.”

West Texas Intermediate for February delivery climbed as much as 82 cents to $49.61 a barrel in electronic trading on the New york Mercantile Exchange and was at $49.05 at 3:20 p.m. Sin-gapore time. The contract gained 14 cents to $48.79 yesterday. The volume of all futures traded was 28 percent above the 100-day average. Prices are down 6.9 percent this week.

U.S. Rigs

Brent for February settlement increased as much as 48 cents, or 0.9 percent, to $51.44 a barrel on the London-based

ICE Futures Europe exchange. The European benchmark crude traded at a premium of $1.99 to WTI, compared with $3.73 at the end of last week.

Helmerich & Payne Inc, the biggest rig operator in the U.S., said it had received early termination notices for four contracts, while Pioneer Energy Services Corp. said four rigs have been canceled early. Producers may cut short another 50 to 60 agreements, according to Andrew Cosgrove, an analyst at Bloomberg Intelligence.

Companies are paying to cancel rigs rather than keep drilling amid the col-lapse in oil prices. Contracts for the 190 rigs that on-land drillers were projected to add this year, known as newbuilds, have the highest risk of being termi-nated, Cosgrove said.

Record Production

U.S. output expanded to 9.14 million barrels a day through Dec. 12, accord-ing to the Energy Information Admin-istration. That’s the highest level in weekly data from the Energy Depart-ment’s statistical arm that started in January 1983.

The U.A.E. can sustain in the current

market condition for “a lot longer than people expect,” Al Otaiba, the ambas-sador, said in Washington yesterday. “This extra glut in the market is not coming from the OPEC members, so therefore why should the OPEC mem-bers have to cut their production?”

OPEC’s 12 members, which supply about 40 percent of the world’s oil, agreed on Nov. 27 to maintain their collective output quota at 30 million barrels a day. They’re next scheduled to meet on June 5.

Implied volatility for at-the-money options in the front-month WTI con-tract advanced to 60.2 percent this week, the highest level in more than three years, data compiled by Bloomb-erg show. It’s about 46 percent today, while Brent’s volatility is near 44 per-cent.

WTI may fall next week, according to a Bloomberg News survey. Twen-ty-two of 43 traders and analysts, or 51 percent, said future will decrease through Jan. 16, while 11 respondents predicted a gain. The survey has cor-rectly predicted the direction of futures 51 percent of time the since it began in April 2004. — Bloomberg •

Oil rises for third day amid signs U.S. shale boom is slowing

In an effort to lure reluctant financial institutions into the agriculture sector, over the last two years we brokered business relationships between a sam-ple of financial institutions and agricul-ture commodity

traders. Dubbed eMKambo Perishable Finance, the initiative is still ongoing across six urban food markets in Zim-babwe where high frequent trading is a key feature. An instructive set of expe-riences and lessons has emerged from this business model.

While the conventional, brick and mor-tar banking model has traditionally thrived on command and control, the informal agriculture market has shown the wisdom of replacing this mindset with influence and respect. The most important thing when working with traders and other value chain actors in informal agriculture markets is building relationships and trust.

Farmers and traders can only give you accurate information if they trust you. Financial institutions that want to sur-vive and thrive in the current network era should remove all structural barriers to learning fast.

Banks should realize learning has

become an essential part of doing agri-business not expecting people to just repay loans without banks making an effort to understand commodity cycles fully. The expansion of mobile technol-ogy implies financial institutions have to grapple with innovative disruption coming from all corners. Coincidentally, economic value is getting redistributed to creative agriculture value chain actors and then diffused through networks. Farmers and traders may not have solutions to the world’s challenges like recession or the collapse of banking as an industry.

However, their knowledge of their own cultural and socio-economic realities is paramount in the creation of sustaina-ble agriculture finance models. Without integrating the expertise of farmers, traders and other value chain actors, financial interventions in the agriculture sector are doomed to fall short of their full potential.

Unfortunately, it seems prioritizing insights from farmers and traders often runs into financial institutions’ institu-tional, systemic and power barriers. Looking back over the past two years

of eMKambo Perishable Finance mod-elling, Zimbabwean financial institutions continue to be unaware of business models and structures in the agriculture sector. They continue deluding them-selves into thinking that the agriculture sector is predictable.

Confusing beautiful models with messy reality is the main reason why the majority of banks have become victims of non-performing loans. As the cases below illustrate, leveraging behav-ioural and evolutionary economics will empower financial institutions with much clearer insights into the reality of agriculture markets.

They will also probably gain a better understanding of how to add value through cognitive issues such as crafting appropriate agribusiness finance mod-els. Very few financial institutions have grasped the complexity of agriculture production and marketing systems and how value migrates between farmers, traders and other market players.

A new set of skills is needed if financial institutions have to fully participate in fostering agricultural ecosystems that collaborate and compete based on agri-culture commodities.

15 aNalysis

Why financial institutions need behavioral economics

15 ANALYSIS

16 ANALYSIS

Case Study 1: Still waiting for a bank loan disbursement approved 5 months ago.

Why need a loan? For the past 10 years the business has been fruits and decide to specialize in onion five months ago. The fruit business was more lucrative because not much capital for restock-ing was required. Trading in a variety of commodities also provided a fallback position in the event one not perform well on the market. Like any other business, factors surrounding trading - space/premises, rentals included con-tribute to its success.

A hike in trading space rentals resulted in the owner changing the premises sensing increased burden to the busi-ness. The new trading space however is not suitable for trading more perishable commodities like fruits as it is exposed to sunlight during the greater part of the day. The new onion business does not require much value addition between farmer and trader thus profit margins are maximized through bulk buying and selling.

Since this new trading venture required more capital, the owner had to apply for a bank loan 5 months ago but she has not received yet the approved loan due to cash shortage experienced by banks. The business had applied for a

loan of $250 at a monthly interest rate of 10% and to be repaid over 3 months in 6 instalments. Using own capital, the business restocks 2 x 90kg bags at $40 per bag of onion bought from the farmers’ market. The stocks last two days during good business days and not more than 4 days when the business is low. A maximum of 30% profit margin is realised after every stock run down most of which goes towards payment of weekly rentals of $18.

Micro Financiers coming onboard

Left with no option due to delay in loan disbursement, the business owner had to try her luck with Micro Financiers and accessed a loan of $100 with condi-tions to repay $5 per day for 24 days. Despite quick disbursement and relaxed preconditions that only required one’s national identity number, passport size photo and proof of residence, this loan package proved to be a burden to the business and owner.

The package did not give room for the business to reinvest the loan due to very short repayment period and daily reduction of working capital going towards loan repayment. Pressure is also put on business as on a daily basis pressure mounts to make sure the daily repayment due is made. Stress and embarrassment is then passed to the

owner as he/she runs around to further borrow to repay daily rate in the event the business fails to make any sales on the day in question. The same pres-sure comes from Market Committees on a daily basis as Financiers report the defaulters and in most cases the com-mittees threaten the owner with losing the trading space for soiling the name of the market.

Case study 2: Financing Farmers through the Market - Loan Multi-plier Effect

This trader has been in agro produce trading for the past 25 years. Some call them ‘Makoronyera’, a derogatory term referring to traders at Mbare Musika as tricksters. But if these traders are what they are called, why then do farmers and other value chain actors continue to work with them? How do banks view this crop of business people? In November 2014, eMKambo facilitated a bank loan for the trader in question. This case study tried to track, to what extent a market loan goes on to support farmers.

The trading business first received a loan of $250 to be repaid over 3 months in 6 instalments. On a daily basis the business would purchase commodities worth at least $250 per day for the first 2 weeks, according to the owner’s

records. For the second forty night the loan amount was now buying commodi-ties worth $250 less principal ($41) loan repayment amount, leaving $208. For the third fortynight the business was now buying commodities worth $208 less $41 and so on. The table below shows summary tabulation of loan multiplier effect for the first cycle. Upon repayment of the first loan the trader qualified for the second, third and finally fourth rounds.

The above multiplier effect shows that on average, 490 farmers received US$250 from one trader in 12 months. A total loan injection of $210 750 (two hundred and ten thousand seven hundred and fifty United States dollars) bought com-modities worth $10 326 750 (ten million three hundred and twenty six thousand, seven hundred and fifty United States Dollars), five times the amount invested in the market supported farmers.

Behind these figures are commodities that behave differently at different times and call for tailor made loan packages. If this is not significant, what else is?

Case Study 3: Bank and Loan Pur-pose Defined from the Market

Traders and their businesses play a piv-otal role in supporting other agriculture value chain businesses. Having started

his trading business 5 years ago as a young man, this business owner chose unique commodities for a niche market - broccoli, green beans, peas, green/yellow pepper and carrots among oth-ers. The business supplies food chain stores, high income families and hotels in Kariba and Victoria Falls through his networks with other traders in those towns. At any given time the business trades in at least 5 and not more than 10 vegetable varieties.

According to the young entrepreneur trading in such a business is like a white collar job in the formal economy. The business requires one to be ‘smart’ in planning, relationship building, negoti-ations, business ethics, product knowl-edge and presentation. The fact that few people go for these products shows high demand in terms of acumenship. The trader shares intimate information with the farmers - cropping calendars and volumes needed by the market as well as market trends during trading period.

When do banking services become necessary?

According to this trader, banking ser-vices become necessary for him when he intends to save for assets that require large sums of money. After deciding to bank he does not make

unnecessary withdrawals. The work-ing capital in the business focuses on building up profits that are then saved in the asset account. The trader opened a bank account when he had plans to buy a residential stand. Once the amount he needed for a house reached sufficient levels, he withdrew all the money and bought a stand. To date, whatever busi-ness surplus generated goes towards purchasing building materials without passing through the bank.

Why not use banking services for working capital and business transactions?

High value crops needs the business to have ready cash at any given time, especially during supply shortages. Any hint or information on the availability of produce requires one to act promptly by either paying the producer via mobile phone or rushing to sources in person for payments.

Secondly, the perishable nature of the commodities demands fresh produce to be ordered on a daily basis and hence cash needs to be readily available to fulfil this purpose. The current capital/stock requirement for the business is between $800 to $1000 between one and two days.

Why applying for a loan?

The purpose of the loan is not just for the sake of business growth but to see something tangible come out of the business loan injection. According to the trader, now that he had started a housing construction project, the busi-ness needs to be boosted so that more income is realised towards purchase of building materials. The bank loan approved 5 months ago is yet to be dis-bursed.

Eyes on velocity of money and opportunity costs

Financial services should match the velocity (speed at which money changes hands) among value chain actors, for instance, between farmers, traders and transporters. Otherwise the cash misses the target and fails to meet needs. If you put $100 in the market, how many hands do you expect the money to change hands within the mar-ket in a given period?

In addition, benefits of saving money in the bank should be more than the opportunity cost of keeping it in trading business. Traders ask themselves: How much extra dollars do I get from spin-ning $100 in a day compared to keeping it in the bank? Financial institutions have try to figure out answers to some of these questions. - eMkambo •

17 ANALYSIS