‘Deflation, a correction of prices’

Harare Bureau Business Reporter
ZIMBABWE’S economic outlook is not all “doom and gloom” and the so-called deflation in the economy is more a correction of prices than the economy shrinking, FBC Holdings group chief executive John Mushayavanhu said on Wednesday. “If you look at our inflation, I believe that is a correction of past mischief and for me it is a good thing,” said Mushayavanhu at the launch of the 2014 CASE Handbook.
Zimbabwe’s deflation thawed substantially after the annual inflation rate gained 0,65 percentage points to minus 0,26 percent in April as revenue from tobacco eased the liquidity crunch.

According to the Zimbabwe National Statistical Agency the annual rate of inflation improved from minus 0,91 percent in March 2013 to minus 0,26 percent in April.

This means that prices, as measured by the all items CPI decreased by an average of 0,26 percentage points between April 2013 and April 2014, ZimStat said.

“I believe that what we are seeing in this country is not deflation, but a correction of pricing caused by the depreciation of the rand and increased competition.

“Unfortunately many people hung on to those huge margins from the hyperinflation era and dollarisation has allowed us to understand what the price should really be.

“In the past people were used to making higher margins but I think now that we have adopted the US dollar, many have realised that there is still an opportunity to make money with lower margins. This is why we have seen prices falling and that does not necessarily mean that the country is headed towards deflation.

“The message that I want to say is that if you can’t make it in the US dollar then you cannot make it.”
Mushayavanhu, whose institution is the main sponsor of the CASE Handbook, said economic outlook may not be as poor as pronounced by some sections of the media.

“Firstly, Zimra collected two percent more revenue in the first quarter of this year – this is no mean feat.
“Secondly, trading on the ZSE in the first quarter was in line with 2013 activity – foreigners dominated.
“Thirdly, fuel consumption has nearly tripled since dollarisation . . . you need money to drive a car.

“Fourthly, we have an RBZ Governor (Dr John Mangudya) who is respected by the local business community.
“And lastly, we have a negative inflation rate, which is a good thing. We do not control money supply, so I would find it hard to accept that the economy is shrinking. Deposits have remained stable at $4 billion, which is as much as they have in Zambia, which statistically has an economy twice our size.”

Mushayavanhu said local entrepreneurs have “spotted” opportunities to drive down the prices of certain goods and services “and that is a good thing for this country”.

“If we cannot make it using dollars, then we are not global players. Much is said about the state of manufacturing in Zimbabwe, but some companies like Cafca and Zimplow’s Mealiebrand have consistently made profits since dollarisation,” he said.

FBC Bank continued to sponsor the CASE Handbook – now in its fourth year – because it was an invaluable resource for the business community, Mushayavanhu said, adding it had captured an important space not only in Zimbabwe but in the region as well.

The CASE Handbook profiles over 120 companies listed on four stock exchanges – Botswana, Malawi, Zambia and Zimbabwe.
Turning to FBC’s performance on the ZSE, Mushayavanhu noted the group once again recorded a rise – 13,5 percent – significantly ahead of inflation.

“This is a real return to investors that those in the West would be impressed with as inflation ended the year at 0,33 percent.
“If we exclude shares suspended in the year and penny stocks, FBC had the sixth best performance in the year.”

He noted the share price gain came despite a 12 percent increase in the number of shares in issue after FBC bought out NSSA’s share in FBC Building Society.

FBC also set up a Leasing division.
“FBC continues to roll out its housing projects in Glaudina and Waterfalls allowing hardworking Zimbabweans access to the property market.”

Despite General Beltings posting the best share price gain in 2013, TSL Limited won the Company of the Year Award as it continued to unlock value for its shareholders under the leadership of Washington Matsaira.

Finance director Peter Mujaya accepted the award on Matsaira’s behalf.
Contacted for comment, Matsaira said: “We feel privileged and honoured to be receiving this recognition.
“This achievement would not have been realised had it not been for our people, our biggest off balance sheet asset.

“Our core team comprising different but complementary skills and experiences are at the ready and have the dynamism to drive the corporate vision forward.”