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DISTRIBUTED BY veritas E-mail: veritas@mango.zw Website: makes every effort to ensure the provision of reliable information, but cannot take legal responsibility for information supplied. National Assembly, 4th June 2020 MINISTERIAL STATEMENTCOVID-19 PANDEMIC, PRICE INCREASES AND AVAILABILITY OF CASHTHE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): Madam Speaker, thank you very much for the opportunity to address the august House on an issue which was raised by Hon. Nyabani of Rushinga Constituency regarding how we are responding from an economic point of view in terms of the COVID-19 pandemic, and how we are dealing with the rampant price increases and how we are attempting to make more cash available. Madam Speaker, I think it is fair to say that the world - as Zimbabwe and all nations face an existential crisis in the sense of trying to save lives, but in the sense of trying to save economies and livelihoods. Both of those issues are facing an existential crisis and we are doing our best to deal with it. Our approach as you know is a two pronged strategy in the main, has been to save lives in the sense of focusing on prevention and we have spent our budget on that. Secondly is to save livelihoods, to stimulate our economies so that we can carry on our path of supporting productivity. We had agreed on that roadmap during the 2020 Budget. We said year 2020 is a year of productivity, job creation and trying to improve competitiveness and investment that comes with it, but all that has suffered from the COVID-19 shock. Madam Speaker, that was not the first shock. The first shock was the climate change shock of Cyclone Idai and the drought. We thought we had seen enough and there was the effect on electricity and now comes the COVID-19 crisis. We have had quite a battering as an economy, unlike most economies. What you will see as the case globally is a decline in economic growth in 2020, lower than the expected 3% that were projected. The channels of transmission of this slow down Madam Speaker are various. First of all, it is through the tourism sector. Members of the august House will agree with me that the sector has suffered the most. There are no tourists. Planes are not flying, the industry is virtually shut down. So there is need to support it. Secondly, it is the manufacturing sector, in the sense of the impact on global supply chain because China is the factory to the world - even the drugs that purportedly come from India actually originate from China and India puts them together. It is the factory to the world. When the pandemic started, that immediately caused the global supply chain to slow down significantly. Also the global economy including China and others are the destination for our exports, especially hard commodities in the mining sector. Those also will be impacted and we have seen a slowdown in demand and a fall in prices. That again will impact our mining sector and other related sectors, but I must say that there is a bit of a silver lining on the tobacco sector. We have seen firmer prices averaging just over $2 a kilogramme compared to about $1. 75 same time last year and better deliveries but we have to also weigh the impact of a more decentralised tobacco buying system that we have put in place this year. May be that is a silver lining from COVID.So there is an upside there, but equally there is another upside or silver lining from global oil prices which have been declining much due to fall in demand and also the unavailability of storage capacity. There was a moment when producers of oil will pay you to take the oil away. It is a very interesting situation. I have never seen negative prices in my life. In my previous life, I used to teach these things on derivatives and oil futures, but I have never seen negative oil futures. Only COVID-19 can bring us such, but there we are. Net oil importers or petrol importers such as Zimbabwe obviously benefit from this kind of situation. Madam Speaker, were it not for the low global oil prices we would have seen higher domestic fuel prices in domestic currency due to the weaknesses in the currency, but this has not been the case. This has not been as rampant. The SME sector – our informal sector has been affected Madam Speaker. Naturally we have to do something about that. Equally the agriculture sector is linked to other sectors but I am pleased that those who are involved in the winter wheat programme have been forging ahead. It is pleasing to see that they are planting as fast as they can, and that farmers are signing up to the programme. It is not surprising therefore that our stimulus package of $18 billion is focusing on these various channels of transmission of the crisis such as the $3. 2 billion we have set aside for the winter wheat programme and about $2. 9 billion set aside for the summer Presidential Input Scheme Programme, both of which will now be more productivity oriented in terms of what we are trying to do to raise productivity and push the economy so that it recovers. The programmes such as the pfumvunza system in terms of the small scale farmers are being promoted and equally for those who are commercially oriented, they need to pursue agricultural methods that are climate-proofed. We need to see some irrigation schemes supporting that productivity before we extend any loans to those type of farmers. Turning to the mining sector, we have set aside a billion dollar facility that will support the sector, especially the gold sector which is export oriented. Here we are looking at raising resources from abroad so that we can extend them in US dollar terms because we know that this is a US dollar export industry. For the SME sector, we have set aside ZW$500 million again in the form of facility to support this sector. For the tourism sector, we have set aside another ZW$500 million to support the sector. For industry in general, we have above ZW$2 billion to support the sector. I must say that those kinds of facilities are in the form of guarantees, not a direct facility from Government but a guarantee to banks. Banks are more comfortable to extend working capital to the companies in the various sectors because that is what companies will be having trouble in terms of accessing working capital. We stand ready to support them. We have made good progress in agreeing on the terms with the Bankers’ Association as late as yesterday, we met them to finalise and fine tune the amounts before the guarantee is finalised.However, I must hasten to say on the agricultural sector support there has been movement already. We know that about $1.8 billion has already been extended to farmers who have signed up to the winter wheat programme. Again focusing on saving livelihoods is focusing on cash transfers, our target to the one million households who need support. So far our data base has taken us to about 200 000 households and the Ministry of Social Welfare would build this data base because they have to verify that whoever is in that database really qualifies as being vulnerable. So that process of verification takes a bit of time but we will get there. We are determined that every one of those individuals receive their $300 per month that we have promised and there is a budget set aside for this. We know that there is a sizeable portion of beneficiaries who are real SMEs and not just merely heads of households. In brief, that is our stimulus package as we respond to COVID 19 – it amounts to about 9% of the gross domestic product and we are determined to make sure that it works.We have not forgotten that we needed to also improve access to certain key imported goods – we have relaxed import duties on these. Corporates have been generous in making donations to the Government task force. We are making sure that they get tax rebates. I know ZIMRA has already given rebates in the last couple of months to the tune of half a billion dollars to such corporates. I mentioned earlier on about the facilities that banks are accessing from the central bank on the back of a guarantee from Treasury then for on lending to farmers and other businesses. We are making sure that this facility has an affordable interest rate. The lending rate should not be more than 20% and this is commendable that we have been able to reduce the cost of capital. I am sure you are wondering how some of these resources are being sourced. Of course, we are reprioritising budgets and making sure that we speak to our partners who have been very generous. So far they have pledged almost US$150 million equivalent which is coming into the economy. They have been very helpful - all the bilateral and multi-lateral have come on board; World Bank, African Development Bank and other global funds. Bilateral partners include EU, US, UK, Japan, Sweden, China and these have been generous. We are very pleased with this support. We are also aware that local authorities have been having challenges in collecting their dues because businesses were closed or there was economic slowdown. We stand ready to support them. One area that we have focussed on is one of water provision – whether it is water treatment resources; we have been able to extend those through IDC to Chemplex for them to clean our water in the capital city – Harare and Bulawayo being the big cities. In Bulawayo, we have invested a lot in boreholes. We have good value for money in Bulawayo. For the $10.6 million that we extended for borehole drilling in the Nyamandlovu Aquifer, we have managed to raise raw water output from three million mega litres per day to 10 million and this is remarkable. The efficiency is just amazing. We will also drill more boreholes on both sides of the aquifer because they are lucrative for water outputs.We have very smart engineers there. They are really impressive. Initially I knew that there was a very big bill for the Minister of Finance to meet in terms of getting water out of Insiza Dam but they came along and said let us just fix a few valves. I know that alone will more than double the water output from that dam because it is just in terms of fixing valves and not investing the sort of money we thought was needed.Finally on this package, we also want to give an impetus on foreign direct investment and so we are launching this Victoria Falls stock/securities exchange. The idea is that this exchange will sit below the Zimbabwe Stock Exchange as a subsidiary and companies operating under this exchange will be able to bring in their foreign currency and invest in our economy. We are targeting foreign companies so that we re-drive the mantra that ‘Zimbabwe is open for business’. We are just finalising the rules and those should be published shortly. I now turn to the issue of inflation specifically because Hon. Nyabani was very specific about prices and inflation. I would like to zoom in on that. Inflation has been very high. What happened is that just before COVID 19, businesses went to typical speculative mode which is, if you expect demand to fall and you are a retailer in business; you are expecting a lock down and it is announced – the first thing that you do is to raise prices because you know that for a while you will not be selling much and that is what unfortunately happened. We had that COVID impact on prices which has not been helpful at all. Secondly at the same moment, the parallel market started moving up and again as usual. There is that high correlation between the parallel market and our pricing system in the retail sector which kicked in and prices again shot up. It was because of these two reasons that you saw a sharp increase in inflation. As a mitigatory measure, we spoke to industry and we asked for a price moratorium. We had a handshake but they have not been able to follow through. Perhaps they have got their own pressures. I still urge that if we could have another handshake, it would be helpful and assist Zimbabweans to have this price moratorium while we go through this difficult time.On the currency front, I think it is fair to say that part of the reason for the movement in the parallel market which is linked to pricing is through to the regulatory environment. I really commend the central bank for what they have been doing in trying to deal with the illicit behaviour that you see in the financial sector especially in the usage of mobile money platforms, or rather the abuse of mobile money platforms. They have been very tough and I think that has been very helpful indeed working with the financial intelligence unit. It is important that there should be regulation of mobile money platforms. Our regulation environment like elsewhere in the world was never geared up to manage mobile banking platforms. We were very good at managing banking institutions and the moment you have a banking platform led by an NMO or network operator, what tends to happen is that central banks are kind of left in a limbo. They do not know how to regulate because they only know how to regulate banks. They end up creating a trust account to manage that gap between the network operator and the banking sector and that is when you are able to keep your tabs on them. We have got that kind of situation in Zimbabwe and Kenya where the telecoms companies are the leaders. In our case it is Telecel, NetOne and Econet. In other countries such as Nigeria and South Africa, the mobile banking systems are bank led, which means that the central bank has a better handle on the regulations. Here in Zimbabwe, we have to play catch up in our regulatory environment. We hope that at some point we will bring in some new rules to fine-tune the regulatory environment so that we can bring sanity to the use of our mobile banking platform which has been very helpful in this cash shortage situation. We have this challenge that the regulation is unable to keep tabs of what is going on in the face of a currency volatility situation.I can assure you that we are committed to fiscal discipline. One thing that we do not want is what happened in the past where physical indiscipline was leading to inflation. High budget deficit which has been accumulating over years then end up resulting in issuance of excessive treasury bills which are then monetised in the financial sector and then that leads to growth in money supply and puts pressure on the exchange rate and inflation. So that is a thing of the past. We want to make sure that we keep our budget deficit under control and also as you know we have also made sure that we stop using the RBZ window. The whole of 2019, we have not used the RBZ overdraft window. We are staying far away from it and we want to live within our means and do some borrowings where we can but even the borrowings are well managed. I can assure you of that; so we are making sure that on the physical front we are not the problem. On the monetary front, we have noted the drop in the growth of what we call high powered money or M-zero in the first quarter of the year and that is positive. It means that growth in money supply can be managed successfully. We want to make sure that stays like that and it does not add to the volatility in the weakness in the parallel market, in the exchange rate which then feeds to inflation which is the subject of our discussion. I think it is always worth emphasising that in the medium to long term it is always productivity and import substitution so that we can put less pressure on the currency by producing more and exporting more and raising our productivity so that we can grow our economy. You will find that our stimulus package is focusing on that and dovetails with what we pronounced in the budget for 2020.Then specifically on cash shortages, what we have done is to continue to supply more cash into the economy. Recently, we introduced the ZW$10 note and then we will soon introduce the ZW$20 note. The target pronounced by the RBZ is ZW$600 million worth of cash into the system. The way we are doing it is responsible. Basically, banks are buying this cash. We are swapping RTGs balances for cash so that we do not increase the amount of money supply in the economy because increasing that money supply due to the cash injection will certainly lead to inflation and we do not want that. We want to ensure we keep managing this cash injection programme. The one thing that we know continuous to be a pain is the issue of the cash-in cash-out premiums that ordinary citizens continue to face but that obviously has to do with cash shortage. I will say the entrepreneurship of those agents who are involved in this business, the level of entrepreneurship which has not been helpful and supportive of our ordinary citizens, we want to increase the quality of regulation as well around these agents and the central bank has been doing that. So we are doing our best to make sure we get back on the path of productivity. We grow the economy again but also make sure that we take advantage of other opportunities that the COVID-19 crisis has unleashed. I have never seen this kind of focus on the health sector and health sector facilities. It is just amazing. We have all become mini-ministers of health, the entire Cabinet. I am joking I hope my colleagues will understand. We are all onto some health something. I go and tour Wilkins Hospital, Ekusileni, Mpilo and even went into a testing laboratory. Ordinarily, I would not have gone there but it is only because of that crisis that you see what needs to be done such as upgrading of these facilities and we are all making sure that we are upgrading them. That is positive; you can imagine the companies that are involved in upgrading these facilities. Suddenly they have more business, so there is an opportunity that we should see and explore as we deal with the pandemic. Just look at what the universities have done – they are now making sanitisers and masks. I have seen them myself. Today I just forgot to put it on, the blue one made from the University of Zimbabwe and it is amazing that we have all this potential. The schools are also included. I was listening carefully earlier on whether schools are opening or not, our high schools are making sanitisers and masks. This is remarkable because the Fashion and Fabrics Department suddenly saw an opportunity and got everyone into a mind of productivity, and that is very positive for the country. On that note, I thank you Madam Speaker Ma’am and thank you colleagues for listening.[After the above statement MPs were given an opportunity to seek clarification from the Minister.The Minister's responses to two rounds of requests for clarification are set out below. Veritas.]HON. PROF. M. NCUBE: Mr. Speaker Sir, thank you for the questions from the Hon. Members. I really thank them for their contributions, questions and requests for clarification. Basically, looking at the first intervention regarding the assistance to local authorities, where there is a feeling that from time to time we see big bills and large invoices, quotations and requests for budgets; what are we doing to make sure that we do not end up falling into the trap of paying for exorbitant services and demands? Actually, we do check these demands and requests to make sure that we do the right value for money audits and make sure that there is sufficient competitive bidding process to make sure that we get value for money.We become even more thorough now, having realised that this is quite rampant and we try to make sure that it does not happen. I gave examples of certain quotations for budgets on infrastructure development and we had to request further services with the engineer who was able to help us bring down the bills which would otherwise have been paid had we not sought these services. So, we remain vigilant, I can assure you Mr. Speaker Sir and Hon. Members.On the Zimswitch Instant Payment Interchange Technology (ZIPIT), here we are putting new limits and trying to curb the abuse of these large limits in the past, we have made them smaller to curb the abuse and their use in the parallel market. These smart people will not circumvent these new rules and still carry on with their activities. While we remain vigilant, we will try our best to make sure that it does not happen. You can imagine that someone could have different accounts under different names, small ones indeed but when we add them up, they come to something larger. So, again we have to look out for this and make sure that we minimise this kind of abuse. Of course, the Hon. Member was very strong that, we should arrest these people, I agree with that. Let us make sure that the law and the enforcement is tougher. We will make sure that this is the case. This is also the simple point raised by Hon. Nyabani that the law must take its course. I agree with this enforcement, it is very critical to make sure that there is discipline in the market.Why do we still have queues with new money pouring into the economy? It is still not enough. At the moment, our cash in circulation is about 4% of Gross Domestic Product. In other economies and in the region, it is about 10%, or even below half. So, it will take us a while to get up there. You know with Zimbabwe, the moment you announce that I am going to bring in a lot of cash and do this, the rates start misbehaving and people take positions. So, sometimes we have to send a kind of mute message in terms of what we are trying to do just to manage expectations about excess liquidity getting into circulation and into the economy. We will get there, our target is still the 10% of cash in circulation as the percentage of GDP but it needs to be gradual and we need to do it prudently using this swap method between RTGS liquidity and cash. Let me turn to the issue of tobacco farmers, which has been eloquently articulated by two Hon. Members who feel that tobacco farmers are being prejudiced. They are at the moment on this 50:50 rule, 50% foreign currency and 50% local currency. The exchange rate on the foreign currency is 25and it is fixed, they are feeling that they are being prejudiced and the request that we move and make sure that there is some kind of incentive to make sure that these farmers feel it is worthwhile to go back into tobacco farming. All I can say is that I have listened and as Government we are listening but that is the rule at the moment, we have a fixed exchange rate of 25 and it is a 50:50 rule, but we have listened to this plea, we are not deaf at all. If I may remind you on what happened last year, the Members of the House said Minister there is a problem on Tabacco floors, when where you last there. So I said I am going to go, they said the two percent tax is hurting farmers. So the following day I went there and I confirmed that and we instantly removed the 2 percent tax for the tobacco farmers. Again,1 I have listened to this and I will make the necessary engagements with the Central bank and within Government consultations and see where anything can be done. I want to refer to Hon. Nyabani’s question on arresting these illegal traders which I agree with. There is a very clear proposal from one Hon. Moyo who is urging the adoption of the multi-currency system. I just want to say it is a proposal and proposals are what they are, they are proposals but let me remind you - in the past, I think we thought we had a multi currency system which excluded domestic currency; that is not true. The truth is from 2009, we had a domestic currency called RTGs, what happened back then is we were able to sell confidence. We all agreed that RTGS balances are in exchange rate of 1:1 to the US dollars. So we had always had a domestic currency since 2009. Now, we have it as well, I hope with that proposal he is not suggesting that the Zimbabwean dollar need to exit, it cannot. You cannot afford to have hard currency only and no domestic currency. No economy can develop without a domestic currency, you need that. Through you Hon. Speaker but I have to address my colleague just for a meeting. Hon. Moyo if you will allow me to deviate from the rules. You cannot have a situation where your macro-economic walks on one leg, on fiscal policy only and there is monetary policy. The moment you go back to hard currency, you have to scrap monetary policy. Your Central Bank is not run from Harare it is run from elsewhere, by those whose currency you are using and you have no control over the value of that currency. Suddenly you lose competitiveness and we lost so much competitiveness during the use of the US dollar in the main although we had RTGs balances that we were also using to a point where I recall that we had to introduce import duties so that we do not get too many goods, especially from South Africa and we were de-industrialising. We had to do that to protect our industry, why, because our currency was not competitive. The reference currency was not competitive. What has happened Mr. Speaker Sir, in the last 12 months, I challenge you, I challenge all Hon. Members, it is not even a challenge, I encourage Hon. Members through you Mr. Speaker Sir, just go to any one shop and ask the manager, how many new products are on the shelves which all have come in, in the last 12 months. I did that, I counted 40 new products. So we are doing import substitution and that is the impact of the domestic currency. When you have a weak domestic currency, what it does is it encourages import substitution because it makes imports more expensive; that is a positive thing. For those companies that are exporting, they get more in domestic currency and that is what redefines competitiveness. So you find that export growth is more positive, you just can increase in export growth and then also companies can also import substitute. I just want to say to my colleague Hon. Moyo that you need a domestic currency which is weaker than the US dollar, but it must be stable. So our debate really is about currency stability and not about whether it should be there or not. It is there, we should keep it, we have always had it, but we did not recognise it. I can go into that history since 2009 and explain at some point in the future, so keep the Zimbabwe dollar but let us stabilize it and that is what we are doing as Government. Hon. Nduna asked about the roller meal subsidy. I am quite aware of the challenges that the subsidy has presented that we need to improve targeting. We are aware of that as Government, some of the beneficiaries should not be benefiting. I am also aware that some of the roller meal is finding its way across the borders and it is leaking, they are enough smart Zimbabweans who find ways to make money from this subsidized roller meal. He refers specifically to a contract with GMAZ - we are in discussions; contracts get negotiated and renegotiated, and we are doing exactly that. We work very well with the suppliers of maize and we are working on that, we will get there. Of course the availability of roller meal has also been impacted by the availability of maize in the first place and that is also a challenge, we have been importing. We cannot import fast enough, COVID made it harder. We also noticed that the prices in South Africa started falling, which is where most of the maize was coming from. If you look at the futures markets on the South Africa Futures Exchange prices started declining. Initially we were averaging $350 per metric tonne and noticed that in the market in South Africa, prices are dropping to below $300 per metric tonne. Naturally you have to renegotiate and that process takes time, you lose supply of maize. So that is what has been partly bedeviling the availability of roller meal, we will get there. We are pleased that the local purchases are increasing and local farmers are beginning to deliver at GMB and they have received this early delivery incentive of 30% and we hear that there is some joy. We hope that they can do it faster. Hon. Nduna also referred to the issue of devolution funds which are being spent on health institutions. I agree with him and thank you for applauding us, we have determined that we really upgrade our health institutions and try to meet that Abuja target but we will also expedite the release of these funds. He also talked about the use of these funds for upgrading water infrastructure, pipes ignition in Chegutu. Again, that is an area of focus for us. We have said that these devolution funds this year, we should target water infrastructure and health infrastructure and agree with him that it is making a difference. Let us all make a difference. There was reference to gold incentive and the formula which now has been changed from 55/45 to 70/30, so 70% hard currency and this I agree, will stimulate the gold deliveries to the producers even further rather than supporting the middlemen, it is usually men so I will stick to middlemen. On food for work, this is an urgent matter that I know Ministry of Labour and Social Welfare is ceased with to make sure that that programme begins to work and work properly. Young men need to exercise, better still if they are doing it for free food building the roads or whatever they have to do in their communities, this is a good thing and I will pass the message on, but also make sure that there is robust debate on how to accelerate this food for work programme. The idea of setting aside 5% of gold receipts to finance education and e-learning, all those are interesting ideas, of ringfencing resources to target a specific issue. I think it is fair to say that we now have a digital divide caused by COVID-19 as far as the education sector is concerned. The private schools can afford e-learning facilities and so forth and those in the poorer schools, mainly Government or other schools cannot. So we have that digital divide now and that needs to be closed – we recognise that closing that is key. I listened very keenly to the debate about opening of schools and I will not make a contribution – I am here to listen from the Government side.We are trying and as you know, we have now launched radio programmes. Those of you who are my age or older – we grew up on radio lessons which I enjoyed thoroughly. I remember we even did a book on King Solomon’s Mines and when I think about it, I even hear the voice – it was so soothing. It was done by an expert and the theatrics in terms of sounds in the background were most amusing and captivating. I remember everything about those radio lessons much more than I did from the ordinary books at that age. So, we are trying our best but we know that the digital divide is an issue that we need to deal with.Then from Hon. Gandawa who spoke about why are we not mopping up excess liquidity. I agree with him that the Central Bank is working on a corporate bond issuance programme so that they can target those with excess liquidity and issue bonds that are attractive. I think often the issue is, are the yields attractive enough for those with excess liquidity and that is what needs to be cracked. I know that they are working on it – these targeted corporate bonds are key to mopping up that liquidity that is how it is done. I think that we will succeed. I will stop here and thank you Mr. Speaker.… HON. PRO. M. NCUBE: Thank you Hon. Speaker. I also thank the Hon. Members for the comments and questions. I think it is good that I needed to be patient because they are raising very good questions and I appreciate that I held back a bit. Thank you for stopping me as well. I wanted to jump at it.Firstly, I would like to address the Hon Member who spoke about the sky rocketing prices. This madness that we are seeing in the price increases on a daily basis and also the parallel market going up; what I would like to say is that we are trying to arrest these price increases and we are also trying to investigate those who are doing that. Furthermore, we are seeing to it that the money changers are arrested and those using mobile platforms are arrested and made to pay fines. That is what the RBZ is doing. We are really trying but it is not easy because if people are used to doing something, it is not easy to stop them. We are however really trying. I am sure you have also noticed that every time we arrest people and we close their accounts, the rate goes down and that shows that there is something not right that they are doing. That is what we are trying to investigate.Another Hon. Member enquired about who is funding command agriculture and we are noticing that the price of inputs has gone up and farmers have been shocked by the high input prices which are squeezing their profit margins. This is the second time that I have heard that farmers are not happy about this. I must admit that personally, I was not quite aware as you know the agriculture programme is run as a project among several departments and Finance tries to ensure finances are available, then agriculture and now we have the banks.THE TEMPORARY SPEAKER: Hon. Minister, maybe if I could add one other point that maybe you left out. It is the issue of interest being charged by the banks on the money that will have been borrowed.HON. PROF. M. NCUBE: Thank you Hon Speaker for adding that. On interest we had agreed with the banks that the interest should be kept. There is actually a rule that we put in place. I shall certainly follow up on that with the Central Bank just to make sure that the rule is enforced. I do not know what is going on there but I think on the cost of inputs, generally this should have been revealed upfront to farmers. One can understand of course we are in an inflationary environment. Maybe it is not easy to reveal all the costs and declare them upfront contractually but it then comes as a surprise later and then the margins are squeezed when you compare the producer price, the buying price compared to the price of these inputs. This is something that we need to fix. I will engage my colleague the Minister of Agriculture, Hon. Shiri, the Central Bank and the banks that are involved to see what can be done to assist the farmers. We do not want to be importing maize. The maize is here and if we do not solve this problem, farmers will be forced to side market and we will not get maize into GMB. It will then impact our strategic reserves building ability and that is not a desirable situation. We do not want that so I really appreciate the Hon. Member for raising that issue. Hon. Misihairabwi-Mushonga raised the issue around the rate that we announced a managed float but because of Covid-19, we then fixed a rate. This is causing a lot of arbitrage especially in the fuel sector and some of the fuel is found in the parallel market. There is a parallel market for fuel as opposed to the other currency. We are aware of this arbitrage. The issue of the fixed rate is a transitory issue as we try to deal with Covid-19 and its impact on the country’s liabilities. We will deal with it in the fullest of time once we feel we are out of the Covid-19 red zone. The Hon. Member also talked about why not even introduce the medical insurance and hard currency and companies allowed, why not do so for individuals including car insurance. You see, we have to be careful about how we balance the use of this hard currency as well. It is very important that we should promote domestic currency. The reason is that 80% of Zimbabweans do not really have direct access to foreign currency in USD, it is only about 20%. Yes, some of that 80% receive remittances from abroad in hard currency but this is survivalist receipts just to keep them above water but really in principle 80% of Zimbabweans do not have hard currency. We always need a domestic currency which has to be promoted. So we have to strike a balance every time to make sure we do not undermine the domestic currency as well. She also raised a very interesting idea which I was salivating on as a tax collector. It does not mean I will do something about it but I was salivating nonetheless, which is that we should be charging VAT on this exorbitant testing cost and expenses cost like $75 for a PCR test. It is very high and maybe we should be collecting taxes from it but look, it is a proposal, it does not mean I will rush and do it but I was salivating indeed. Then she also mentioned that we seem to have suspended PRAZ, no we have not. We still have PRAZ. We said that because of the need to procure urgently, quickly and so forth, we needed an expedited process. Really this is about having an expedited process because we want to procure quickly. We have not suspended PRAZ at all. It is there and in force, and it is supposed to do its job to make sure that we curb corruption.She also talked about other opportunities for raising resources from the e-learning activities from private schools that are charging US$1 600 per semester. I am listening carefully to all these opportunities and that some mobile companies are now even selling mobile airtime and fuel in USD. All these are opportunities for raising revenue. Again, I am listening very carefully to those suggestions and I will evaluate that. I move on to Hon. Matambanadzo who asked about the licencing of other gold buyers other than Fidelity who may even be offering higher prices per ounce of gold than Fidelity and therefore, might actually squeeze out Fidelity which is our own Government entity. I will look into this issue. The way you articulated it also got me thinking and I will certainly look into it and see if indeed there is a danger but you could find that some of these entities are actually licenced by Fidelity in the first place so they ought to deliver to Fidelity because Fidelity is basically the sole buyer of gold. I am not so sure how then this pricing is determined but I will investigate and find out to make sure that Fidelity is supported and we maximise gold deliveries for the generation of foreign currency which is much needed. Another Hon. Member raised questions on the winter wheat programme. They were very specific and said how much has been disbursed so far. We have disbursed Z$1,8 million and we have another Z$1,2 million or so to go but that is what we have so far done. We are also aware that there is a limited time-bound programme for winter wheat. If you go beyond that, then you are too late. It is important to disburse faster and also to make sure that the farmers register faster as well to access resources.On Bulawayo, where the Hon. Toffa mentioned that we made a comment when we visited Bulawayo, I did say or one of us did say that Bulawayo has no water crisis. No, we never made such a comment. We said that Bulawayo’s water crisis can be solved if we apply our minds and employ good strategies. In fact, that kind of thinking was what made us believe that we do not necessarily have to declare water disaster but for us to just get on with the job of fixing Bulawayo water crisis and we are doing it. I have said that the water production has gone up from 3 million to 10 million mega litres in one shot, just out of the 15 or so boreholes that we have drilled and we are going to drill some more.I also mentioned the raw supply of water that has increased from the Insiza Dam just by fixing a valve. It is those engineering mechanical things that we need to do and you find that in Bulawayo, if we do everything that is possible to do very quickly, in the next few months Bulawayo will have a water supply for the next one year without trouble at all. So, we felt that declaring a water disaster might be a bit premature. We know there is a crisis but let us get on and do it than to cry foul. That is the spirit about that.Another Hon. Member asked about whether the Covid-19 prevention and response mechanism is not derailing the programmes that we set about doing in the budget. Is there no risk of abandoning our projects? I would say yes indeed, the Covid-19 crisis put pressure on our roadmap as enunciated in the budget but we are determined to get back and also determined that whatever we are doing for Covid-19 does not just address Covid-19 but problems in general. If we think about what we are doing in the health sector which is really that we have accelerated the health sector intervention and gotten our hospitals to scratch to deal with the Covid-19 crisis, but we were going to deal with it anyway but at a slower pace. That is what it has done shifting resources in that way in terms of speed but we are determined to get back to our programme. We do not wish to abandon some of these infrastructure programmes, be they for dams or roads. We will make sure that we will try to get focused on those. The Hon. Member also did argue very eloquently that we must always be very careful about yearning wanton use of the hard currency of the USD all the time because it kills competitiveness and we should be learning from our neighbours Zambia and Mozambique where their currencies are coveted and are loved by the users. If you have got USD and you want to use domestic currency, you go to a Bureau-de-change and change. It should be like that here and that is what we would like to do but I guess it takes time for people to appreciate their own currency. We are alive to that and we will keep on promoting and supporting our currency but also making sure that it is stable. It is easier to love something like that when it is stable and can preserve value. So we are working on it. We are aware that 80% of Zimbabweans do not have access to US dollars, so we need a domestic currency and we are determined to stabilise it. The Hon. Member mentioned the issue of salaries that have been eroded by inflation, it is an issue we are aware of. Again, we know that we are getting into that time of the year when most employers need to do something about cushioning employees, we know that we will get into that season to try to ameliorate the erosion of salaries by inflation. One Hon. Member mentioned that the use of free funds may be causing some of the problems we are facing. When you go into the shops and pay in US dollars, you do not get your till-slip in US dollars, it is in RTGS and then you wonder if the US dollars are being banked. I also wonder too, I have become alive to that problem. I went shopping and I thought the same thing happened to me, so I am going to deal with it to make sure that we close that hole. I agree with him that we need to close those loopholes.However, I must say this, when we allowed for the use of free funds, it was to deal with a problem that we could see arising due to COVID in order to give citizens flexibility to use their free funds knowing that we do not have enough cash in circulation. What it does is help us manage money supply growth because you can shove in more Zimbabwean dollars and then we have this perception that they are printing money again and then money supply is going when in fact it is not. If you allow people to use what they already have in their pockets, under their pillows and in their bank accounts, in US dollars, it manages money supply because already that money is in circulation. That is what we have been trying to balance and manage when we allowed for the use of free funds. However, it also creates other challenges and we need to close the loopholes.The question from Hon. Zhou was not a real question, it was a well-articulated speech. I thank you for your words; you said I should come to Parliament more often; ndicharamba ndichingouya, ndigouya – [Laughter.] – I will come more and more often. However, your words were on point. You mentioned that we have all these economic challenges; we recognise that and that is what we are talking about, it is about those challenges. We will do our best to help our people and our economy. You mentioned inflation and the issue of salaries which have been eroded because prices have gone up, we will continue working for our people and keep discussing about lasting solution for dealing with the economic challenges. I thank you Hon. Member.The other Hon. Member asked about drilling machines and so on. Yes, there is a programme for acquiring drilling machines that will go one kilometer for ZINWA. You asked me specifically but I will have to consult my colleagues in the right ministry on this one in terms of the stock of their machines. However, I can tell you that I think our work speaks for us, we are working very hard to make sure that we can drill as many boreholes as possible right across the country. In rural areas and in cities, we are capacitating ZINWA as well as DDF to do exactly that. In terms of the number, I would like to check and then come back to the Hon. Member.Another Hon. Member asked about the support from the IMF, what is happening to the arrears clearance programme, where are we? That is an ongoing conversation with the international financial institutions. We are pushing hard to make sure that at least during this troubling time of Covid, we are able to make progress in terms of arrears clearance. We have two options as I have explained previously in the past. One option is to talk to the creditors themselves about debt forgiveness and even giving us bridge loans and facilities to clear the arrears and then move on to the second phase and restructure the bilateral debt with the bilateral partners. That is one approach and we are looking at that. We are also considering Plan ‘B’ which is that, we seek a facility from a friendly lender and we just borrow basically in order to meet the gap for what we owe to the African Development Bank (AFDB) and the World Bank. It is a lot of money but I think we have to bite the bullet at some point to borrow that money so that we can bridge that gap and be able to clear the arrears for the AFDB and the World Bank who are the preferred creditors; I am using some technical language here. However, if we do not clear them, it is not easy to borrow money, for any bank to borrow money so we need to clear these preferred creditors first. You know what, this is a year we have just been reeling in drought and we are now in COVID, imagine if your Minister of Finance told you that ‘I have just borrowed $500 million and I am going to use it for a bridge loan to clear the loan of bank from which we borrowed so many billion dollars. Borrowing money to pay off when people are hungry, they need medicine and when COVID is upon us. Those are the choices, so you will find that on Plan ‘B’, I have held back and pushed Plan ‘A’ a lot more because I know that the messaging will not work. It would not be the right thing to do, to borrow money to pay off people instead of feeding people Hon. Speaker Sir.Another Hon. Member asked about, I think it was the last one on the list, he asked about the money changers and doing something about it. I guess this is a question which is very vibrant in the House, it has been asked in different ways. We are dealing with it; the other day I was very pleased when I saw that the Central Bank had acted on this young man who was flashing his new Zimbabwean dollars and he was brought to book to make sure that this kind of thing does not happen. It is not encouraged that this should happen and also what they are doing in clamping down on other errant behaviour, we need more of it. The Financial Intelligent Units have become more active of late and that is pleasing in terms of dealing with this kind of behaviour. On the Old Mutual implied rate, the Hon. Member read out what this means; what happens with that rate is – basically you compare the price at which Old Mutual is trading on the Zimbabwe Stock Exchange with the way it is trading in London for example and use some fancy models, finance and economics. Then those two prices somehow are meant to reflect the rate at which a currency ought to move in either direction, up or down - in our case it has been down. They also try to use that to predict where inflation should be in the future of our country. I am fully aware of that methodology. Let me say two points about it; first as a former academic, the methodology is flawed, severely flawed. However, if people believe it, then they act on it, they do not have to know that it is flawed, they just have to believe it. It is called herd behaviour, they all herd to what they say and say ‘it must be alright.’ However, the methodology is actually flawed because the way a currency moves; I am sorry I have to do one second of this so that you understand where I am coming from – the way a currency moves in the short term is what we call the interest parity theorem, which says that the movement of currency will be determined by the differences in the interest rates in one country compared to another country. So, they have taken that and extended it and applied it to shares. The methodology is completely flawed. So, that is one thing but if people believe it, they believe it, but it is not right.Then there is the issue of fungibility, where again we are aware that it is not only at Old Mutual that certain investors were using these shares that are fungible for illicit behaviour. I should not say more on that because there is an investigation going on from the regulator and when we decided to suspend the shares, it was really in line with that investigation. Let me not say too much about it but you can see what I am saying. When a suspension happens, it does not mean that you then kill these so called implied rates because this is just a calculator calculation. There is a formula, a spreadsheet and it gives you a rate, so you can just do that regardless of whether anyone is trading on the back of it or not and transferring shares from one register to another, which is what fungibility means. So there it is, it is flawed and it is unfortunate that people believe in flawed methodology, there should not be. If they please, I ask them to take my advice and desist from following a methodology which is flawed but it is a hurtful for our economy. On that note thank you Hon. Speaker Sir, appreciate all the questions and comments.THE TEMPORARY SPEAKER: Before you leave the floor Hon. Minister there was a question that was raised by Hon. Paradza regarding the issue of whether the Government is actually financing Command Agriculture. Who is financing Command Agriculture?HON. PROF. M. NCUBE: Mr. Speaker Sir you were listening. Actually, I had written it down then I switched to the cost of input. It is a good question. The financing of Command Agriculture is a partnership between Government, the Central Bank and the bank. What we do as a first step is to offer a guarantee as Treasury, as Government to banks for them to on-lend to farmers. What we are doing there is to making sure that banks then do not worry about defaults from farmers by seeking collateral from farmers, they ignore that and just rely on a Government guarantee that is to facility Command Agriculture. You then get to a point where having disbursed the liquidity earmarked for agriculture in a bank, they need more liquidity because there is more demand. We are then able as Government to also extend liquidity for on lending to farmers. So far this has not happened, what has happened is that banks have been able to us their own liquidity on the back of our guarantee through the Central Bank to extend liquidity to farmers; this is a good thing. In the long run you want commercial agriculture to be funded by your private sector institutions and this is a transitional process towards that. There are banks though, in answering to Hon. Paradza’s question that does not require a Government guarantee. Let me be specific because these are agreements but there is one bank that does not require the Government guarantee they just wanted to be part of the ecosystem of Command Agriculture, they have been allowed to do that and they are lending money at commercial rates. The borrowers are very happy to borrow at those rates and they do not need a guarantee, they feel the high interest rates are able to cushion them against the fall, besides they have got rigorous processes for screening borrowers and they lower their credit risk from these borrowers by choosing the right quality of borrowers. I thank you very much. THE TEMPORARY SPEAKER: Thank you very much indeed for the way you have actually responded to the issues that were raised by Hon. Members. I think you might have noted your presence in the House is highly appreciated. May you move for the adjournment of the House – [HON. MEMBERS: Mota, mota, mota] – He will respond to that next week, procedurally, maybe if he has one or two words I will give him the floor.HON. PROF. M. NCUBE: We are working on it Hon. Colleagues, I must say colleagues when I speak about cars. We are working on it and frankly to be honest - what has been a challenge for us is multifold. If you recall we had agreed in Victoria that we are going to put in place some letters of credit in order to access the cars. We did a first round, maybe half of a second round and did not even complete. We then ran into the demand of forex for importation of grain so we were squeezed. Now that we are seeing some deliveries from local farmers I think things will improve.Now we are stuck in COVID and we need to import PPEs, medicines and so forth. We have been unlucky in the sense that we have had these two competing needs for forex and certainly citizens when they see us in shiny cars when they are looking for medicines and food - I think our priorities should be clearer than that. You can be sure we are working on it and I think the situation will improve, I see the tobacco sales are also improving. All that helps, when we see more forex coming in - we will reinstate the facility again and import more cars. We are working on it, please bear with us. We just have these demands then we have to prioritize and see what should come first. ____________________ ................
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