News Update as @ 1530 hours, Wednesday 4 June 2014Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

By Tawanda Musarurwa

•.....but Malaysia, China offering bet-ter prices.

Belgium is currently the largest importer of Zimbabwean tobacco in the current marketing season, having purchased 6,2 million kilogrammes to the tune of $25,4 million, latest figures from the Tobacco Marketing Industry Board show.

In second place is South Africa, which has purchased 3,3 million kgs of tobacco worth $14,8 million, followed in close third by China which has purchased 3,2 million kgs of the golden leaf at a total value of $22 million.

Although China is in third place in terms of mass sold, it stands in second place in terms of value because it has been offer-ing the highest average price for a kilo-gramme of tobacco.

Amongst the top three, tobacco destined for the Chinese market has been sold at an average price of $6,92/kg, followed by South Africa's $4,42/kg and Belgium's $4,09/kg.

Malaysia has been offering the highest average price of $8,72/kg. There has been a change in position between the top two, with Belgium replacing South Africa, which had purchased over 9 mil-lion kgs of tobacco worth $29,2 million this time last year.

In total, 26,3 million kgs of tobacco valued at 108,2 million had been exported by the end of May. TIMB has confirmed that the contract floors have dominated sales this year, and that prices during this year's tobacco marketing season have been lower compared to 2013.

"The current average seasonal price has

remained stagnant at $3,18/kg for the past two weeks. Last year’s prices for both auction ($3,58/kg)and contract ($3,78/kg) were firmer than the current auction ($2,76/kg) and contract ($3,38/kg) prices.

"Contractors average daily throughput has declined from a record high of 3.5 million kg to the current 2 million kg per day. Auction floors continue to receive less deliveries per day compared to the same period last year," said TIMB. In terms of

total contract and auction floors sales to date, TIMB reports that 179,4 million kgs of tobacco to the value of $570 million has been sold by farmers.

The Government had set an initial target of 180 kgs for the current selling season.

With this target now most likely to be surpassed this should reflect well for the agricultural sector as tobacco accounts for 10,7 percent of Zimbabwe's Gross Domestic Product. •

Belgium continues to top tobacco exports

2 NEWS

BH24 Reporter

Zimbabwe’s leading reinsurance com-pany, Zimre Holdings Ltd's Gross Pre-mium Written (GPW) remained flat last year despite contribution by domestic operations improving over the period.

The group achieved GPW of $76,9 mil-lion in 2013, which is equivalent to that written in the previous year.

"The domestic operations contributed 57 percent of the GPW compared to 53 percent in 2012. Malawi, Mozambique and Zambia contributed 21 percent, 11 percent and 5 percent respectively, to the total GPW," said chairman Ben Kumalo.

Operating profit improved to $1,6 mil-lion from a loss of $2,2 million in 2012, mainly due to the favourable claims experience. Group reinsurance opera-tions adopted a deliberate strategy of writing only collectable and profitable business in order to improve liquidity and profitability.

Profit before tax declined by 40 percent from $4,4 million in 2012 to $2,7 mil-lion in 2013. The group achieved a total comprehensive income of $11 million in 2013, with $10,2 million of that com-

ing from its share of the revaluation of land in one of the group's key associate companies following the incorpora-tion in July 2012 of that land into the greater Harare Municipal boundaries. The land is being developed into high density residential facilities.

An review of the group's sectoral performance reflected mixed perfor-mances. For reinsurance, although the 2013 GPW for the sector at $37,4 million was 10 percent lower than the $41,4 million written in 2012, there a huge turnaround from an operating loss of $5 million recorded in the pre-vious year to a loss of $0,9 million in 2013. The sector contributed 49 per-cent of the total GPW achieved 2013.

For the Life and Health Reassurance sector, GPW grew by 21 percent from $4,2 million in 2012, to $5,1 million in 2013. An operating loss of $1,3 million was registered in 2013 mainly due to an increase in claims and an upward revision of the present value of the actuarial liabilities.

General Insurance's GPW at $39,2 million was 7 percent higher than the $36,7 million recorded in 2012. Oper-ating profit rose by over 100 percent from $1 million in 2012 to $2,1 million in 2013, reflecting the recovery in per-formance of mainly the Malawi opera-tion.

The group's property sector's total rev-enue rose 4 percent to $5,2 million in 2013 from 45 million in 2012. Operat-ing profit declined by 8 percent from 42,4 million in 2012 to $2,2 million in 2013 mainly due to the escalation in operating expenses. For the Insur-ance and Reinsurance Broking sector, the group said brokerage commission declined by 6 percent from $1,7 million in 2012 to $1,6 million in 2013. Man-agement expects an improved perfor-mance in the outlook period in view of ongoing capital raising and restructur-ing initiatives. •

ZIMRE's GPW remains flat in FY13

BH24

Building materials manufacturer Tur-nall Holdings has said it was crucial for Government to resuscitate operations at Shabanie Mashava Mines (SMM) to curb spiraling import costs of chrysotile asbestos fiber, its main input.

Shabanie Mashava Mines, located in Zvishavane in the Midlands Province, ceased operations over four years ago in part due to ownership wrangles between the state and former owner businessman Mutumwa Mawere.

The closure of the mines, which were the main source of chrysotile fibre in Zimbabwe, has affected industries that depended heavily on the fibre, an ingredient in the manufacture of asbes-tos sheets and other products.

Turnall’s managing director John Jere said continued closure of SMM would result in needless loss of resources that could be used locally.

“At peak Turnall and Zimbabwe would only consume about 5 to 7 percent

of what the mine was producing, so I am talking of 93 percent of what we produced in Zimbabwe was exported, therefore you are talking of big monies, you are talking of a whole industry that we should do everything possible to resuscitate,” he said.

“We are now importing as Turnall as a result of that and for the last three and half to four years we have spent about $22 million on imports which money could have gone to our own local industry.”

He said imports were being brought in from Brazil and Russia.

Turnall, is a subsidiary of the FBC Hold-ings Group, and the company’s two manufacturing plants in Harare and Bulawayo have an annual production capacity of 120 000 tonnes.

It has two divisions namely Turnall Pip-ing Products and Turnall Building Prod-ucts which produce ridges, roof tiles, ceiling boards and pipes.

The company has since last year been investing in new plant equipment as part of a repositioning exercise. — New Ziana •

4 NEWS

Turnall decries continued closure of SMM

Mr. Mawere

By Tawanda Musarurwa

Zimbabwe's Investment One Stop Shop will succeed to the extent that it is capacitated with all information required by a potential investor, an offi-cial has said.

Founder and Vice Chancellor of the Women’s University in Africa Profes-sor Hope Sadza called upon the Zim-babwe Revenue Authority to make unclassified information available to researchers and students in institutions of higher learning.

Prof Sadza, who sits on several com-panies' boards, said one of the factors that has been hindering the success-ful implementation of the Zimbabwe Investment Authority's One Stop Shop was the lack of adequate relevant infor-mation.

"Facilitating institutions need to set up One-Stop Shop facilities for potential investors. "We have talked about it in Zimbabwe, Zimra has talked about it. Where is this One Stop Shop? What we need to know is that when an investor goes there, information must be readily available," she said.

"Academia need to research more on

the area to increase the body of knowl-edge and increase literature in the area of customs and trade facilitation."

She was speaking at the inaugural World Customs Organisation - East and Southern Africa regional research con-ference that is being hosted by Zimra.

The WCO is an umbrella body for cus-toms administrations which seeks to strengthen capacity of its member administrations to use customs man-agement as an effective tool for eco-

nomic development.

She claimed that there was a tendency of "withholding of official data by facil-itating Institutions from researchers" and a general lack of knowledge of the formal communication channels to be followed resulting in a lack of exchange of ideas between academia and cus-toms and trade facilitation institutions.

Prof Sadza, who is also the chairper-son of the Zimbabwe Universities Vice Chancellors’ Association, said the coun-try's 16 universities were prepared to work with Zimra to carry out research on customs, trade facilitation and socio-economic development.

Speaking at the event Zimra acting commissioner general of the Anna Mutombodzi said the authority was taking steps to engage the academia. "The Bachelor of Commerce degree in Fiscal Studies, and a masters compo-nent, were introduced in partnership with the National University of Science and Technology (NUST).

"We will continue to partner with and engage other universities in our quest to broaden the knowledge base and build capacity in the Customs and Tax fraternity," she said. •

5 NEWS

'ZIA One Stop Shop requires academia input'

Prof Sadza

The Tobacco Industry and Marketing Board (TIMB) on Tuesday said it will in June begin disbursing a $200 000 revolving fund that will empower farm-ers to construct new rocket bans for curing tobacco.

The new bans imitated from Malawi will use half the firewood farmers are using at the moment to cure tobacco. TIMB chairperson Monica Chinamasa told New Ziana the rocket bans will go a long way in reducing deforestation.

“We have a $200 000 revolving fund to enable farmers to construct rocket bans. The fund will be rolled out in June and all farmers countrywide will

benefit,” she said. She said communal farmers are using substandard and makeshift bans, and that is affecting the quality of tobacco being brought for sale.

At the close of the 2012/13 market-

ing season, 166.5 million kilograms of tobacco had been sold at an average price of US$3.70 per kilogram, realiz-ing US$616.1 million in sales. TIMB has since said it expects 10 percent more tobacco to be sold this year.

Government set this year’s output at 170 million kgs after many farmers turned to tobacco abandoning other cash crops which do not have attractive producer prices. Since the adoption of multiple foreign currencies the tobacco industry has become one of the fastest to recover from the economic melt-down of the past decade.

The sector has been on a rebound as 103 941 farmers registered to sell tobacco this season. Many farmers have been shifting to tobacco due to the favourable prices. Tobacco is one of

Zimbabwe’s major agricultural exports, accounting for 10, 7 percent of gross domestic product.

Export destinations for Zimbabwean tobacco include Belgium, United Arab Emirates, China, Sudan, Hong Kong, Indonesia, Philippines, United King-dom, Spain, New Zealand, Montenegro and Russia.

Tobacco is expected to show a further increase for the fourth successive year, this bods well for Zimbabwe’s economy which is expected to grow by 6, 3 per-cent this year driven mainly by mining and agricultural sector.

The agricultural sector is expected to grow by 9 percent and this growth is expected to be driven largely by the tobacco sector. - New Ziana •

AGRICULTURE6

TIMB disburses $200k revolving fund for rocket bans

BH24

By Thupeyo Muleya

South Africa has scrapped the payment of admission of guilt fines by migrants who overstay in that country, with those found to have exceeded their welcome facing bans of between 12 months and five years.

According to a circular addressed to all pro-vincial, district and port operations manag-ers signed by the Deputy Director General Responsible for Immigration Services Mr Jacky McKay, the new system became effective from last week. The letter has since been pasted on all the immigration counters at Beitbridge Border Post and is

cited as immigration directive number 9 of 2014. “Section 50(1) fines (Overstayer)-de-partures... in terms of the new act, finan-cial administrative fines for overstayers will cease and be replaced with the following criteria as reflected in regulation number 27 (3) of the new regulations.

“Those who overstay for less than 30 days (first offence in 24 months period) shall be declared undesirable for a period of 12 months and those who repeat a simi-lar offence in 24 months shall be declared undesirable for a period of 24 months. “Further, those who overstay for 30 days or more to be declared undesirable for a

period of 5 years,” read part of the notice. The department said that changes to the operating system had been requested, add-ing that supervisors dealing with the system were responsible for the finalisation of the "overstay alerts hits".

“As an interim arrangement from 26 May 2014 onwards, the following procedures should be followed when alerts are expe-rienced (a) when new overstay (26 May 2014) is indicated the person will be treated as undesirable person as per above criteria and be declare as such using form 19(DHA-46)," said Mr McKay. "(b) If the hit is still indicated as a fine with rand value on the

Movement Control System, the hit must be finalised as a false hit and the declaration (undesirable) comment should be added where applicable.” Mr McKay said admin-istrative fines issued prior to May 26 would continue, adding that officials should con-tinue finalising the amounts as normal by collecting the payments required to keep the evidence in all cases.

Prior to the new arrangement, those travel-lers charged for overstaying in South Africa were fined R1000 which was payable at the port of entry or at the South African embas-sies in their respective countries. •

8 NEWS

SA gets tough on overstayers

Over 7000 tonnes of grain delivered to GMBOver 7000 tonnes of maize have so far been delivered to the Grain Market-ing Board (GMB) by farmers since the beginning of the grain marketing sea-son, a Cabinet Minister has said.

Agriculture Mechanization and Irriga-tion minister Joseph Made told New Ziana that during the same period last year only 1 600 tonnes had been deliv-ered. In the 2014 national budget, the Government projected maize output at 1. 3 million tonnes for the 2013/2014

cropping season. Maize output is pro-jected to be higher than previous sea-sons following a good rain season as well as availability of funding from both Government and private sector.

“So far the GMB is standing roughly at 7 616 tonnes compared to only 1 600 tonnes delivered at the same time last year,” he said. “The season is pleasing and this is owed to fund-ing from the Finance Ministry, support from the Presidential input scheme and

good rains received.” Made said farm-ers should continue selling maize and only at stipulated prices. “The Govern-ment has directed that buyers of grain purchase a tonne of maize at $390. Those paying below gazetted prices are warned.

“The Ministry of Finance has already released money, hence I urge farm-ers to continue delivering grain to the GMB,” he added. He, however, said Government would not allow Geneti-

cally Modified Organisms (GMOs) into the country. “I want to emphasize that Zimbabwe would rather work on irrigation development, financing the agriculture sector and mechanization to increase its yields than introducing GMOs,” Made said.

This year the economy is projected to record strong growth of about 6.1 per-cent, anchored in part on strong recov-ery in the agriculture sector. — New Ziana •

Heavyweight counters continue to drive the equities market's improved momentum.

Following trades today, the Industrials Index added 0.50 points (or 0.28 per-

cent) to close at 176.63 points.

Conglomerate Innscor pushed up 0.70 cents to 72.70 cents, while OK Zim-babwe inched up 0.10 cents to 18.10 cents.

Giant telecoms Econet was up 0.99 cents to trade at 68.02 cents.

Also gaining was cement manufacturer PPC, which went up 3 cents to 213 cents, and AFDIS which advanced 2 cents to settle at 32 cents and

On the downside, Delta slipped 0.31 cents to 116.99 cents, while Colcom eased 0.30 cents to trade at 22 cents.

The Mining Index continued on a top-sy-turvy trend, today gaining 0.18 points (or 0.54 percent) to close at 33.72 points after Bindura added 0.02 cents to trade at 2.22 cents.

Falgold, Hwange and Riozim all main-tained previous trading levels.

— BH24 Reporter •

9 ZSE REVIEW

Equities market continues on the up

All things being equal, a bank effec-tively functions by customer deposits in return for paying customers an annual interest payment.

When a critical mass has been achieved, the bank uses the majority of these deposits to lend to other cus-tomers for an assortment of loans, and at the end of the day (or month, or year...or whatever the case may be, the variance between the two interest rates is the profit margin for the bank.

Anything else is sub-economics.

And the latter is exactly what we are witnessing in Zimbabwe, sim-ply because banks are disinclined to offer attractive, or at least reasonable interest rates for depositors.

One of the main reasons why peo-ple deposit their monies into banks is to get a fair 'profit' after a specific amount of time.

But in Zimbabwe chances are the depositor will suffer a 'loss'.

This is because not only do local banks not offer a reasonable inter-est rate on depositor' funds, but they

actually charge the depositor signifi-cant amounts to keep their money in their vaults.

Now, it is fair to say that no reason-ably rationalising human being would seriously consider losing a portion of their hard-earned money for the sake of keeping it in a bank.

It may sound like lightheartedness, but in truth Zimbabweans are keep-ing their dollars under their pillows.

According to a survey carried out by Industrial Psychology Consultants (Pvt) Ltd recently on the public's confidence in the local banking sec-tor, 10,5 percent commented on the unfavourable bank charges, including low interest rates on their savings.

They said that this discouraged them

from saving as there was no signifi-cant difference. Clearly this is an area that banks need to really consider restructuring in their strategies.

Interestingly too, 13 percent of the respondents also showed disgrun-tlement over the issue of loans and mortgages.

These bank customers highlighted that either their banks do not offer loans or on those that do, the interest rates and other charges are too high.

So, two issues here: the banks are offering low interest rates on deposits and high interest rates on loans.

It is only normal. Because if local depositors are not putting their mon-ies in the local banking system, then the banks are forced to look for fund-

ing offshore, where they obviously get it at a premium due to the coun-try's high risk-rating.

Clearly banks are stuck in a vicious circle that hurts the individuals, the wider economy and the banks them-selves.

The solution appears so simple it hurts: "If these guys (local banks) are getting lines of credit coming in at 10 percent or 11 percent wouldn't it be logical to give local depositors, say, 8 percent interest.

This way they will come and deposit the money, which will then come to us cheap yet it is local," said Confed-eration of Zimbabwe Industries past president Callisto Jokonya told an RBZ official recently. •

10 BH24 COMMENT

Have Zimbabwean banks lost purpose?

The latest round of talks aimed at end-ing a five-month strike in South Afri-ca's platinum mines "went well", the president of the striking Association of Mineworkers and Construction Union (AMCU) said on Wednesday, while a newspaper reported the union had agreed to a government wage proposal.

"The meeting went well. The talks are ongoing," AMCU leader Joseph Mathun-jwa told Reuters.

Separately, the Business Report news-paper said AMCU had accepted a gov-ernment-mediated proposal of a wage hike slightly less than their "living wage" demand of R12 500 a month to be achieved in four years.

The paper cited an unnamed source close to the government negotiating team.

New mining minister Ngoako Ramatl-hodi's task team charged with resolving the longest strike in South African min-ing history met AMCU's leadership on Tuesday. It is due to sit down with the management of the three major plati-num firms today.

Strike-hit Impala Platinum spokesper-son Johan Theron said the companies

were ready to respond to the govern-ment recommendations but did not pro-vide any details.

About 70 000 AMCU members downed tools in January at Impala, Anglo Ameri-can Platinum and Lonmin in a strike that has hit 40% of global production of the precious metal used for emissions-cap-ping catalytic converters in automobiles.

Ramatlhodi has been praised by the hardline union for his readiness to

resolve the strike in his first week in office after numerous rounds of talks fell apart. The union is demanding R12 500 a month as basic minimum wage to be achieved in four years.

The companies have offered pay increases of up to 10%, which would raise the overall minimum pay package to R12 500 rand by July 2017, although this includes cash allowances for neces-sities such as housing.— Reuters •

11 REGIONAL NEWS

Latest platinum strike talks 'went well' – union

12 DIARY OF EVENTS

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

POWER GENERATION STATSGen Station

4 June 2014

Energy

(Megawatts)

Hwange 699 MW

Kariba 750 MW

Harare 35 MW

Munyati 18 MW

Bulawayo 20 MW

Imports 30 MW

Total 1552 MW

5 June 2014 – Indigenisation Policy Dialogue Place: SAPES Seminar Room, 4 Deary Avenue Bel-gravia, Harare, Time : 5pm-7pm

11 June - Rainbow Tourism Group 15th Annual General Meeting of the Shareholders, Place: Jacaranda Rooms 2 and 3 at the Rainbow Towers Hotel and Conference Centre, 1 Pennefather Avenue, Harare, Time: 12:00

13 June 2014 - Securities and Exchange Com-mission of Zimbabwe 2nd Shareholders Forum

& Responsible Investing in Zimbabwe Confer-ence 2014 Place : Cresta Lodge, Harare, Time : 8am -2pm

26 June - Masimba Holdings Limited Thir-ty-Ninth Annual General Meeting of Members for the period ended 31 December 2013, Place: 44 Tilbury Road, Willowvale, Harare, Zimbabwe, Time: 12:00

THE BH24 DIARY

BH24

14 ZSE

ZSEMOvERS CHANGE ToDAY PRIcE USc SHAKERS CHANGE ToDAY PRIcE USc

AFDIS 6.67% 32.00 COLCOM -1.35% 22.00

NICOZDIAMOND 4.17% 1.25 DELTA -0.26% 116.99

ECONET 1.48% 68.02

PPC 1.43% 213.00

INNSCOR 0.97% 72.70

BNC 0.91% 2.22

OK ZIMBABWE 0.56% 18.10

CFI 0.45% 2.22

CBZ 0.07% 15.00

Indices

INDEx PREvIOUS ToDAY MOvE CHANGE

INDUSTRIAL 173.46 174.06 +0.60 POINTS +0.35%

MINING 29.39 33.89 +4.50 POINTS +15.31%

Stocks Exchange

15 AFRICA STOCkS

Botswana 8,664.65 -11.96 -0.14% 12July

Cote dIvoire 246.37 +2.18 +0.89% 07Mar

Egypt 7,949.60 -75.68 -0.94% 06Mar

Ghana 2,324.35 +5.23 +0.23% 02June

Kenya 4,881.56 -13.57 -0.28% 30May

Malawi 12,662.47 +0.00 +0.00% 07Mar

Mauritius 2,074.51 -3.51 -0.17% 07Mar

Morocco 9,544.10 +21.01 +0.22% 07Mar

Nigeria 41,502.00 +27.60 +0.07% 02June

Rwanda 131.27 +0.00 +0.00% 24Oct

Tanzania 2,018.97 +25.40 +1.27% 07Mar

Tunisia 4,624.39 -39.32 -0.84% 07Mar

Uganda 1,503.90 +0.81 +0.05% 10Sep

Zambia 4,242.74 +14.95 +0.35% 10April

Zimbabwe 174.91 +0.02 +0.01% 02June

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 —"The meriT in acTion lies in finishing iT To The end." - genghis Khan

Globalshareholder.com

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16 INTERNATIONAL NEWS

Philippines eyes $1bn revenues from proposed new mining law

The Philippine government expects to double its annual returns from min-ing to as much as US$1 billion under a revenue-sharing scheme approved Monday that will see the government taking 55% of the industry's net reve-nues or 10% of gross revenue, which-ever is higher.

According to Manila Standard Today, the government panel —the Min-ing Industry Coordinating Council (MICC)— will present the proposal to President Benigno Aquino this week for approval before submitting it to Con-gress. Mining taxes in the archipelago is a problematic issue that has delayed development of the country's vast min-eral resources, worth around US$850 billion according to the Mines and

Geosciences Bureau (MGB) estimates. The proposed ruling has the country's biggest industry group up in arms, as miners believe that increasing the tax would kill the industry.

But MGB chief Leo Jasareno disagrees. He told ABS-CBN News that the pro-posed bill will make the Philippine min-ing industry “more competitive and more relevant to the country’s econ-omy.” The tax hike will raise mining companies payments to the govern-ment by at least 50%. Currently, min-ers operating under the mineral pro-duction sharing agreement specified in the Philippine Mining Act of 1995 only pay 2% of their gross revenues to gov-ernment. Slippery slope In July 2012 Philippine president Benigno Aquino

signed an executive order halting the issuing of mining licences while the country updates the sector's outdated legal framework. The order established a Mining Industry Coordinating Coun-cil to oversee the sector and banned mining from some 78 areas considered sensitive ecosystems, crucial to farm-ing or tourism or unsuitable for other reasons.

After the decree and in anticipation of the new law, foreign investment in the country’s resources sector plummeted.

Never that high to begin with, invest-ment in the island nation now attracts less than $500 million worth of mining investment, down from nearly $1 bil-lion in 2010 according to government data. The archipelago is rich in copper, gold, silver and chromium and at the moment produces more than 10% of the world's nickel, but minerals make up only 8% of its exports.

The situation is not likely to improve any time soon — The Fraser Institute’s latest annual global survey of mining executives ranked the Philippines as one of the worse places for investors, behind only Kyrgyzstan and Venezuela. — Mining.com •

By Chirstopher Lawton

• In a beer garden in Aschaffen-burg, east of Frankfurt, the back of the menu reads: “Zum bezahlen nehmen wir Geld – kein Plastik!” Rough translation: “Cash only, no plastic.”

Cash remains the most popular means of payment in Germany, representing 53% of turnover in 2011, according to a study by the central bank, Deutsche Bundesbank.

The country has among the fewest

card transactions per person in the European Union – 18th of the 27 mem-bers in a 2012 European Central Bank study, below Latvia and Slovenia and barely ahead of Malta. Swedes, at the

top, averaged 230 card payments a year, Germans – 39.

Many German restaurants, bars and cafés deal only in cash. Even where

Germans could use debit cards, they often prefer cash. Last year, when the European Union considered getting rid of the one and two cent coins to cut costs, Germans objected for fear that retailers would round up their prices.

The love affair with cash has roots in the ruinous wars and inflation of the 20th century. The same economic cau-tion that leads Germans to save 10% of their annual disposable income also draws them towards cash.

Concerns about privacy dating to the Nazi and East German dictatorships make the anonymity of cash attractive. And bailing out some of their heavily indebted eurozone neighbours has only solidified the mentality for many Ger-mans: relying on cash is the best way to maintain a good overview of one’s

17 ANALYSIS

Letter from Germany: Where cash is still king for payments

finances.

But there are signs among some Ger-mans, especially younger ones, that the cash addiction is waning. Maik Wolf, 34, a professor in Berlin, pays for everything with credit cards – with the exception of groceries, because Aldi does not accept credit cards. He has been lobbying his favourite wine shop to take credit cards.

“Honestly, I am just way too lazy to go to an ATM to withdraw money. It’s out of the way. Then I have to carry it around, and I could lose it,” Wolf says.

Cash represented 54.4% of the €390 billion in point-of-sale retail purchases in Germany in 2013, down 1.2% from a year earlier, according to EHI Retail Institute, a trade-sponsored research group.

By 2018, the share is due to sink to below 50%, making way for debit and credit cards, the institute predicts. Germans are also carrying less cash in their wallets and purses, €103 on aver-age in 2011, down €15 since 2008, the Deutsche Bundesbank study says.

A turning point came about 10 years ago, when Germany’s largest discount

supermarket chains, Lidl and Aldi, decided to accept debit cards. Demo-graphics also play a factor, as younger Germans are more comfortable with modern forms of payment. In April, the EU parliament passed a measure

to cap fees on credit and debit cards, which, if approved by member states, could lead to more card use.

Payment giants are also working hard to change German behaviour. Amer-ican Express launched a credit card

combined with a popular reward sys-tem at the end of 2012 to encourage Germans to get swiping.

Last summer, MasterCard helped to promote an independent study in Germany suggesting that the costs of cash, including production and security, amounted to €150 per German per year.

A shift away from cash in Europe’s larg-est economy could translate into big savings for Europe, according to the European Central Bank.

That is because in countries where enough of the shoppers use cards and other electronic retail payments, costs for the retail payment services as a percentage of gross domestic product become lower.

“It is a considerable, yet largely invisi-ble, operational cost for the economic machinery,” totalling €130 billion a year for the EU, the ECB said in April.

In the EU as a whole, cash payments still have on average the lowest unit costs per transaction, but economics of scale dictate that there comes a tipping point where debit card payments will be cheaper. - Financial News •

18 ANALYSIS